On 23 August 1993, the Kafur Mamedov and the Goldpath collided in Hong Kong waters. Subsequently, correspondence and negotiations commenced between the solicitors acting for the two shipowners took place, with the last correspondence in February 1995.

On 22 August 1995, the owner of the Kafur Mamedov (the plaintiff) commenced proceedings against the owner of the Goldpath (the defendant). That was the last day before the expiration of the two-year limitation period under the Maritime Conventions Act 1911 (Imp) (the Act). On 28 November 1995 the Goldpath was arrested in Hong Kong waters. On 5 December 1995 the defendant issued a writ against Kafur Mamedov and 68 sister ships, and entered an appearance to the plaintiff's writ. On 12 December 195, the defendant filed notice of a counterclaim to the plaintiff's action although no statement of claim had been served. The defendant's solicitors issued two applications by motion for extensions of time under s 8 of the Act.

Section 8 of the Act (which gives effect to art 7 of the Collision Convention 1910 in Hong Kong) provides:

No action shall be maintainable to enforce any claim ... against a vessel or her owners ... unless proceedings therein are commenced within 2 years from the date when the damage or loss ... was caused,... provided that any court having jurisdiction to deal with an action ... may, in accordance with the rules of court, extend such period to such an extent and on such conditions as it thinks fit, and shall, if satisfied that there has not during such period been any reasonable opportunity of arresting the Defendant vessel within the jurisdiction of the court, or within the territorial waters of the country to which the Plaintiff's ship belongs or in which the Plaintiff resides or has his principal place of business, extend any such period to an extent sufficient to give such reasonable opportunity.

At first instance, Waung J said that 'it was assumed by the parties that the counterclaim which the defendant[s] wish to bring against the plaintiff[s] is subject to s 8 of the Act and that therefore if time was not extended by the court under s 8 of the Act, the counterclaim … and the claim in the writ … would be struck out or stayed on the basis that the claims therein are not properly maintainable', and refused an extension.

The defendant appealed.

Held: Appeal allowed.

Godfrey JA and Nazareth V-P:

The usual practice in collision cases is to issue cross-actions. A cross-action by The Goldpath would be caught by s 8. A counterclaim should be no different. The Judge below thought the parties had assumed that a counterclaim would be caught by s 8. Before the reforms in civil procedure effected by the Judicature Act 1873 (UK), there was no such thing as a 'counterclaim'. The point on the construction of s 8 of the Act does not arise for the first time. In The Fairplay XIV [1939] P 57 and The Gniezno [1958] P 148, it was held that s 8 applied to counterclaims. In The Malandorian, 27 May 1993, Unreported, the English Court of Appeal proceeded on the basis that a counterclaiming defendant would be caught by s 8, and, if out of time, would therefore need to obtain an extension. This Court should treat this point as settled and follow the earlier authorities, even though not bound to do so.

Therefore, the Court must ask itself whether 'the interests of justice demand' that the counterclaim go forward. The defendant must show that it would be manifestly unjust and unfair if it was deprived of the right to counterclaim in the proceedings which the plaintiff has begun. On the facts of this case it would be unjust and unfair to deprive the defendant of its counterclaim.

Accordingly, the appeal is allowed and the order of Waung J is set aside. There will be an order nisi extending the time within which the defendant may file its counterclaim, to expire one month after the date of the handing down of this judgment.

Seagroatt JA:

The limitation in s 8 of the Act does not extend to counterclaims. The Khedive (1882) 7 App Cas 795 concerned a counterclaim brought in an action in rem in the Admiralty Division by the owners of the other ship. The decision was after the Judicature Act 1873 (UK) but before the Maritime Conventions Act 1911 (Imp). The result was both vessels were held to blame. Lord Selborne spoke of the 'new procedure under the Judicature Acts by claim and counterclaim' and said '[t]he two claims arise out of one and the same accident'.

There can be no prejudice to a plaintiff faced with a counterclaim in an action which they have initiated. If a plaintiff leaves the commencement of their action until the last minute, and serves the writ after the last minute, the counterclaim may weaken its position if the tactic was deliberately to try and take advantage of s 8. But such a lottery is not what the courts will countenance or what any statute was intended to permit.

The playing field for an action must be level. If a defendant were to be deprived of their counterclaim, the 'goal posts' would be moved to its significant disadvantage. An action by the plaintiff in which the defendant can counterclaim for their damage arising from the same incident (the collision) entitles a court to have the chance of doing justice to both parties. It would be unconscionable to sanction a situation where it would be prevented from doing that.