Kleinwort Benson Ltd v Barbrak Ltd (Myrto) (No 3)

JurisdictionUK Non-devolved
JudgeLord Keith of Kinkel,Lord Brandon of Oakbrook,Lord Brightman,Lord Templeman,Lord Oliver of Aylmerton
Judgment Date08 April 1987
Judgment citation (vLex)[1987] UKHL J0408-2
CourtHouse of Lords
Date08 April 1987
Kleinwort Benson Limited
Barbrak Limited
(First Respondents)
Kleinwort Benson Limited.
T. Choithram & Sons London Limited.
(Second Respondents)
Kleinwort Benson Limited
Chemical Importation and Distribution State Enterprises
(Third Respondents)
Kleinwort Benson Limited
Shell Markets (Me) Limited
(Fourth Respondents)
(Consolidated Appeals)

[1987] UKHL J0408-2

Lord Keith of Kinkel

Lord Brandon of Oakbrook

Lord Brightman

Lord Templeman

Lord Oliver of Aylmerton

House of Lords

Lord Keith of Kinkel

My Lords,


I have had the opportunity of reading in draft the speech to be delivered by my noble and learned friend Lord Brandon of Oakbrook. I agree with it, and for the reasons he gives would allow these appeals.

Lord Brandon of Oakbrook

My Lords,


These appeals arise in an Admiralty action in personam in which Kleinwort Benson Ltd. ("the bank") are the plaintiffs and 164 parties are named as defendants. The writ in the action was issued on 4 November 1982. It has been assumed throughout that the causes of action on which the claims made in the writ are founded arose early in November 1977 and it is not in dispute that the relevant period of limitation is six years. It follows that when the writ was issued the claims made in it were not yet time-barred but they would become so after the expiry of twelve months, that is to say early in November 1983.


The writ not having been served on any of the defendants its validity was twice extended by the Admiralty Registrar. The first extension was granted on 20 October 1983 and was for a period of 12 months from 4 November 1983 to 3 November 1984. The second extension was granted on 19 October 1984 and was for a further period of three months from 4 November 1984 to 3 February 1985. Both applications for extension were made some two weeks or more before the original period of validity of the writ in the first case, and its extended period of validity in the second case, had expired. Because of this, if either extension had been refused, the bank would have had sufficient time in which to serve the writ before its validity expired.


The writ was ultimately served on all the defendants on 24 January 1985. Five of the defendants then applied to the Admiralty Registrar to set aside the two extensions of the validity of the writ previously granted by him. The Admiralty Registrar dismissed their applications and appeals by four of them to Sheen J. ( The Myrto (No. 3)) [1985] 2 Lloyd's Rep. 567 were also dismissed. These defendants appealed to the Court of Appeal (Sir John Donaldson M.R. and Dillon L.J.) which by three orders dated 13 December 1985 allowed the appeals and set aside the two extensions. The bank now appeals with the leave of your Lordships' House against the three orders of the Court of Appeal. The appeal raises questions of general importance with regard to the proper principles to be applied by a judge of the High Court in the exercise of his discretion to extend the validity of an unserved writ in cases where questions of limitation of action are involved.


My Lords, the case has a long history which it is necessary to set out in some detail. In 1974 the Greek ship Myrto ("the ship") was twice mortgaged to the bank to secure substantial dollar loans. In January 1977 the bank brought an Admiralty action in rem against the ship to enforce the mortgages and arrested her in that action. On 4 March 1977 ( The Myrto) [1977] 2 Lloyd's Rep. 243 an order was made by me, then a judge of the Admiralty Court, that the ship should be appraised and sold pendente lite. At that time she was laden with a part cargo of general merchandise, shipped under 259 bills of lading, destined for various Middle Eastern and Indian ports of discharge, and owned by about 200 different cargo-owners. In order to enable the ship to be sold by the Admiralty Marshal it was necessary that the cargo should first be discharged.


There was a dispute between the bank and certain of the cargo-owners (not the respondents) who had intervened in the action as to whether the costs of discharging the cargo should be paid by the bank or the cargo-owners. On 17 May 1977, without deciding that difficult question, I ordered that the cost of discharge should form part of the Admiralty Marshal's expenses of sale. The bank's claim exceeded the expected value of the ship and the practical effect of my order would therefore have been to put the cost of discharge on the bank, subject to any right of recovery from the cargo-owners which they might later be able to enforce. Under the order which I made the bank, even assuming it to be entitled to recover the cost of discharge from the cargo-owners, would have had no security in respect of such recovery.


On 27 May 1977 the Court of Appeal (Lord Denning M.R. and Roskill and Shaw L.JJ.) ( The Myrto) [1978] 1 Lloyd's Rep. 11 varied my order in such a way as to ensure that the bank would have security for any rights of recovery from cargo-owners which they might later be held to have. Under the order as varied the Admiralty Marshal was to discharge the cargo at the expense, initially, of the bank. Thereafter each owner of cargo, if he wished to obtain delivery of it, was to make a cash deposit, or to give an undertaking (backed by a guarantee by a bank or insurance company) to indemnify the bank in respect of the cost of that cargo's discharge in the event of his being held liable for payment of it. Any cargo not collected was to be sold by the Admiralty Marshal. The question whether the bank or the cargo-owners were ultimately liable to bear the cost of discharge was left over to be decided later.


Pursuant to the order of the Court of Appeal the cargo was subsequently discharged under arrangements made by the Admiralty Marshal. Some cargo-owners abandoned their cargo. Others made cash deposits or gave undertakings backed by guarantees up to a specified limit and later paid the cost of discharge of their cargo voluntarily. 141 cargo-owners gave undertakings backed by guarantees up to a specified limit but did not pay voluntarily.


The cost of discharging the cargo came to over £161,000. This was much more than had been expected and exceeded the total amounts of the cash deposits and undertakings. It also exceeded the proceeds of sale of the ship. The bank did not know what the total cost of discharge had been until January 1979 when all the relevant accounts were available. The bank was then faced with two problems: first, finding a means of having decided the question whether it or the cargo-owners were ultimately liable for the cost of discharge; and, secondly, apportioning to each of the 141 cargo owners who had not paid voluntarily his proper share of the total cost of discharge, so that the bank could claim a specific sum from each of them individually.


The bank first tried to negotiate a settlement of all the claims. But since there were 141 cargo-owners concerned, most of them in the Middle East, negotiations proved difficult, and by 25 February 1980 it became apparent that a negotiated settlement could not be reached.


The bank and its advisers were concerned to minimise the costs of any recovery which it might be able to make. If the liability of the cargo-owners could be established in principle, there were a few of them from whom substantial sums could be recovered. From most of the cargo-owners, however, only relatively small sums (say £200 or less) would be recoverable, and any more than minimum expenditure per claim would render recovery unprofitable.


The bank was unable to persuade all the relevant cargo-owners to agree to be bound by a test case properly so called. The bank therefore, on legal advice, decided on the following plan. First, the bank would bring proceedings against the cargo-owner who owned the greatest amount of cargo, and seek to establish in those proceedings the principle that all cargo-owners, including that one, were liable to repay to the bank their proportionate shares of the total cost of discharge. Secondly, on the assumption that such principle could be established, the bank would carry out the extensive task of calculating the shares of the total cost of discharge repayable by each of the cargo-owners concerned. This would enable the bank to present to each cargo owner or his guarantor the precise sum claimed, together with the basis on which it was calculated, and, in the event of the bank being required to prove the amounts of any claims, put it in a position to do so. By this means the bank hoped to persuade the other 140 cargo-owners to pay without the need for them to be sued at all, or at least, if suing them became necessary, without causing more than the minimum legal costs to be incurred.


In accordance with this plan the bank on 5 June 1980 began proceedings in the Admiralty Court against Sherkate Sahami Sakht, the owner of the greatest amount of cargo. By the beginning of 1982 these proceedings ("the Sahami proceedings") were approaching readiness for trial. Unfortunately, however, it became apparent, on the hearing of a summons for directions, that the earliest date of trial which the court could give was in January 1984. By then the bank's claims against the other 140 cargo-owners would have become time-barred, and it was therefore necessary for the bank to protect its position by issuing a writ against all of them. Accordingly on 4 November 1982 the bank issued the writ in the present action ("the omnibus writ"). Of the 164 defendants named in it the first 140 were all the cargo-owners, other than Sherkate Sahami Sakht, against whom claims were outstanding, and the last 24 were banks or insurers who had backed the cargo-owners' undertakings with guarantees.


The omnibus writ could easily have been served on all...

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