THE OWNERS OF CARGO LATELY LADEN ON BOARD THE SHIP OR VESSEL 'BRIJ' v. THE OWNERS AND/OR DEMISE CHARTERERS OF THE SHIP OR VESSEL 'BRIJ'

HCAJ 147-9/93
(Consolidated)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. 147-9 OF 1993

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HCAJ 147/93

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J U D G M E N T

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1. By this Action, the Plaintiff Glory Products Co. Ltd. ("Plaintiff") claims against the Defendants sea carriers ("Defendants") for the misdelivery of 5 shipments of goods under 5 different sets of Bills of Lading, being:-

CAVN Bill HKMA-11 shipped on the vessel Murter
	(Talent Bill TEL/MAR-5575A & 5575B)
CAVN Bill HKMA-12 shipped on the vessel Murter
	(Talent Bill TEL/MAR-5579A & 5579B)
CAVN Bill HKMA-13 shipped on the vessel Murter
	(Talent Bill TEL/MAR-5572A & 5572B)
CAVN Bill HKMA-16 shipped on the vessel Al Salimiah
	(Talent Bill TEL/MAR-5518)
CAVN Bill HKMA-6 shipped on the vessel Brij
	(Talent Bill TEL/MAR-5561)

For the sake of convenience I will refer to:-

(a) the above CAVN Bill 11, 12, 13, 16 and 6 collectively as the CAVN Bills;

(b) the above Talent Bills collectively as the Talent Bills.

FACTS

2. The Plaintiff was a seller and exporter of garments in Hong Kong for export to South America. The garments were made in China, put into containers and then shipped from Chinese ports to Hong Kong where they were transhipped on vessels operated by CAVN (but owned by the Defendants) for carriage from Hong Kong to Venezuela. The goods in question were sold to buyer, Acetex International SA ("Buyer") who operated in the Venezuela ports by its agent Francisco Amaya ("Amaya") and its customs agent Oran ("Oran").

3. The Plaintiff effected its shipment of the goods from China to Venezuela by going to a freight forwarder, Wing Tung Wei (China) Ltd. ("WTW") which also operated its shipping side under the name of Talent Express Line ("Talent"). The arrangement between WTW and the Plaintiff was for WTW to issue to the Plaintiff, Talent bills of lading, such as the Talent Bills in this case, which were then used by the Plaintiff as documents of title through the bank to obtain payment from the Buyer under the appropriate letters of credit. The Talent Bills were all issued with the Plaintiff as the shipper and the consignee to order and with Amaya as the notify party.

4. Unknown to the Plaintiff, by arrangement between WTW and Hong Kong Maritime Co. Ltd., the Hong Kong agent of CAVN, CAVN issued to WTW as shipper, bills of lading of CAVN evidencing the shipment of the goods to Venezuela corresponding in most particulars to the shipment under the Talent Bills, except that the Shipper under the CAVN Bills was WTW and the Consignee under the CAVN Bills was Amaya. However, these bills of lading of CAVN (such as the CAVN Bills in this case) were never meant to be given by WTW to the Plaintiff, let alone be negotiated by the Plaintiff to some other third person and the relevant CAVN Bills were in fact found in the drawer of the office of CAVN long after the misdelivery. The main and most important dispute in this case is whether these CAVN Bills are Non-negotiable direct consignment bills or straight bills ("Straight Bills") intended for delivery by carrier directly to consignee without production of the original bills of lading or are the ordinary negotiable bills of lading which can be transferred to a third party by indorsement and require the production of the original bills for delivery.

5. When the goods in question arrived in Venezuela, the goods were required under Venezuelan law to be handed to the Venezuelan Customs. This was done and the goods were stored in warehouses controlled by the Venezuelan Customs and were then released by the Venezuelan Customs to Oran, who was acting as customs agent on behalf of Amaya, the Consignee under the CAVN Bills. Amaya's principle, the Buyer did not pay for the goods and the Talent Bills were never in fact given to the Buyer or Amaya.

6. It was in fact a long time after the delivery of the goods by the Venezuelan Customs to Amaya that the Plaintiff started to make inquiries about the goods. Inquiries were made by those acting for the Plaintiff in Hong Kong and in Venezuela. The existence of the CAVN Bills was discovered. Eventually these proceedings were instituted against the Defendants, the owners of the vessels and the case was brought on the basis of the CAVN Bills and also in tort.

7. The Defendants contend that they are not liable because:-

(1) the Plaintiff is not a party to any of the CAVN Bills;

(2) the CAVN Bills are Straight Bills being non-negotiable with delivery to named Consignee without production of the CAVN Bills;

(3) CAVN and the Defendants had not facilitated the delivery of the goods to the Buyer by any issue of duplicate CAVN Bills;

(4) by the terms of the CAVN Bills and under Venezuelan law, the carrier had carried out its duties by delivering the goods to the Venezuelan Customs and it was the Venezuelan Customs which released the goods to the Buyer and by Clause 7 and 10 of the CAVN Bills, the Defendants were protected from all liabilities for such misdelivery.

PLAINTIFF NOT PARTY TO CAVN BILLS

8. The case of the Plaintiff is that although it was not named as Shipper in the CAVN Bills, it was nevertheless a party to the contract because of the agency of WTW. How this agency arose was not pleaded nor is it said in the pleading whether the agency was express or implied and whether it was a case of disclosed or undisclosed principal. It is in the context of this lack of pleading that one has to consider the validity of the Plaintiff's case that it was a party to the contract.

9. The evidence clearly shows that at the material time the Plaintiff did not know of the existence of the CAVN Bills. How could a contract be entered for the Plaintiff when the Plaintiff did not know about that contract or its existence or could authorise its creation without knowledge of the existence of the other party or the terms of such CAVN Bills.

10. The fact that the Plaintiff did not authorise any CAVN Bill contract can be seen from the total lack of any reference to the Plaintiff in the relevant CNAV documents such as the CAVN Bills (WTW was named as Shipper without any qualification), the shipping orders and Export FCL Collection/Acceptance Orders (WTW named as Shipper without qualification).

11. WTW itself obviously did not consider that the CAVN Bills were entered into between the Plaintiff and CNAC. In the most revealing answers to the questions of Mr. Fok for the Defendant, Mr. Raymond Kwok the former Assistant General Manager of WTW gave the following answers:-

"FOK	These CAVN Bills were contracts between WTW and CAVN, they are not contracts between the Glory Products and CAVN
RK	No, they are not.
FOK	Who were the contractors?
RK	WTW and CAVN.
FOK	Not Glory Products?
RK	WTW was the named shipper.
FOK	You agree that it is not Glory Products?
RK	Yes I agree."

12. The financial arrangement made by the parties clearly indicate that WTW was acting as principal and not as agent of the Plaintiff. Thus the payments made by the Plaintiff to WTW shows that the payments covered a range of services rendered by WTW (not just the freight to CAVN) and the payment covered not just the subject matter of these services but also include profits of WTW. Therefore between the Plaintiff and WTW it was principal to principal with payment being made by the Plaintiff to WTW on the basis of the invoice of WTW and it was also principal and principal between WTW and CAVN (WTW enjoying a special freight rate offered to WTW and not to the Plaintiff by CAVN's Hong Kong agent) with the CAVN Bills as evidence of the contract between WTW and CAVN.

13. The authority of WTW to contract as agent for the Plaintiff with CAVN was never properly explored in evidence by the Plaintiff. The Plaintiff only knew about the Talent Bills and was never in a position to authorise WTW to enter into a contract with CAVN on fright terms unknown to the Plaintiff. I cannot conceive, if the position had been reversed by CAVN suing the Plaintiff for freight under the CAVN Bills, that it could be successfully maintained that WTW had the authority of the Plaintiff to enter into carriage contract at whatever freight which WTW had accepted from CAVN and that therefore the CAVN Bills contracted by WTW with CAVN would be binding on the Plaintiff .

14. The true position as I see it is that between the Plaintiff and WTW they regarded Talent as the carrier under the Talent Bills and that the Talents Bills were the negotiable documents of title and the operative important carriage contracts. WTW took that view and it is for this reason that WTW kept the CAVN Bills in the drawer of the office of WTW. How else could WTW explain why WTW did not give the CAVN Bills to the Plaintiff, if these contracts were the contracts of the Plaintiff. WTW kept the CAVN Bills because they were the contracts of WTW and not the contracts of the Plaintiff. In my judgment, the Plaintiff was not a party to the CAVN Bills and it therefore follows that the claim of the Plaintiff in contract must fail.

STRAIGHT BILLS OR NOT

15. It is of course accepted by Mr. Fok for the Defendants that bills of lading are generally of the kind which are negotiable by indorsement and where therefore the original document is vital because negotiability (transferring to third parties by indorsement) as well as delivery depends on the production of such original document.

16. However Straight Bills are also very much known to the shipping world and the essence of Straight Bills is that they are not negotiable and the contractual mandate is to deliver to named consignee without the production of the original document. In Benjamin on Sale of Goods, 5th ed. at page 900 in describing the Straight Bills, it was said:-

"Two things follow from the fact that a document of this kind is not transferable by indorsement and delivery. First, the consignee (if in possession of the document) cannot, by purporting to transfer it in this way, impose on the carrier a legal obligation to deliver the goods to another person. Secondly, the shipper cannot oblige the carrier to deliver the goods to a different consignee from the one named merely by indorsing and delivering the bill to that other person; for under a straight bill the carrier is entitled and bound to deliver the goods to the originally named consignee without production of the bill, so that, when he deliver the goods, he may have no means of knowing of the purported transfer of the bill. This difficulty cannot arise in the case of an order bill, under which the goods are deliverable only on production of the bill."

17. The evidence adduced which I accept is clearly that the CAVN Bills were not meant to be negotiable or to be negotiated. There were kept in a drawer and not meant to be used. What the parties meant to be used were the Talent Bills which were considered to be documents of title and the originals of which were given to the Plaintiff so that they could be negotiated for payment by the Buyer. With the existence of the Talents Bills as document of title, it is difficult to see the CAVN Bills as another document of title for the same goods. The actions of WTW and the Plaintiff speak clearly that they did not regard the CAVN Bills as documents of title.

18. The evidence also clearly shows that not only were the CAVN Bills not documents of title but that WTW in the person of Raymond Kwok regarded the obligation of CAVN under the CAVN Bills being to deliver to the named consignee Amaya and to no one else. What Raymond Kwok would not agree to in his evidence is on the matter of necessity for Amaya to produce the original of the CAVN Bills. This is absurd in the context of his saying that there was no obligation on WTW to give the original CAVN Bills to the Plaintiff. If these CAVN Bills were sitting in the drawers of WTW, how would it be possible for Amaya to produce the originals of the CAVN Bills upon taking delivery. This is the major dispute in the evidence of Raymond Kwok, who I find to be a very poor witness and whose evidence where it matters such as here, I have no hesitation in rejecting. For me he was not a credible witness. He took a position and dug in no matter how absurd that position was. He was not bright and he was perhaps relying too much on what was fed to him by the lawyers and by his former boss who told him to be very cautious because the Plaintiff was threatening to hold WTW legally responsible for what happened. He is also not reliable because much of what he asserted in evidence were not matters of personal knowledge but came from what he had been told or heard. In my judgment, what the HK Agent of CAVN and WTW had agreed was the issue of CAVN Bills as Straight Bills as described by Mr. K.C. Lam of Hong Kong Maritime Co. Ltd. in his Statement and not as said by Mr. Raymond Kwok in his evidence or in paragraph 26 of his Witness Statement.

19. The position taken by Mr. Raymond Kwok in evidence is that delivery was to be given only to the Consignee Amaya and to no one else but Amaya must also produce the original CAVN Bills. It is therefore neither a position of a Straight Bill nor a situation of a normal negotiable bill of lading. This is indeed a strange hybrid animal. As I understand him, Mr. Smith for the Plaintiff contends for a purer position because he relied on the presence of the words "or order" in the consignee box of the CAVN Bills and the words "one of which being accomplished the other to stand void" at the top of the CAVN Bills. Those pro forma words in very small print in a printed document do not change my view that the true intention of the parties to the contract was that the CAVN Bills were to be non-negotiable Straight Bills. The delivery of the goods to Amaya is therefore in accordance with the CAVN Bills contract and not in breach of it.

20. I conclude on this vital issue in favour of the Defendants and it therefore follows that the Action must be dismissed because the Plaintiff must fail in contract since there was no breach because the CAVN Bills were Straight Bills and the Plaintiff must also in tort because there would be no breach of duty of care since the duty of the carrier under the CAVN Bills was only to deliver to the named Consignee, Amaya.

ISSUE OF DUPLICATE CAVN BILLS

21. In the light of my above finding in favour of the Defendants on the Straight Bills, strictly speaking it would not be necessary for me to consider the alternative claim in tort of wrongful issue of duplicate CAVN Bills because there could be no breach of duty of care of misdelivery to that Consignee by the issue of the duplicate bills when the contractual duty was to deliver to that Consignee without the CAVN Bills. However if I am wrong on the Straight Bills question, then having decided in favour of the Plaintiff on the contract claim (Plaintiff not proper party in contract) it will be necessary for me to also consider the alternative claim in tort on the allegation that duplicate CAVN Bills ("Duplicate Bills") were issued by CAVN which caused the misdelivery to Amaya.

22. The first and immediate answer to this allegation of issue of Duplicate Bills is that even if CAVN issued the Duplicate Bills that does not make the Defendants liable because the Defendants the owners of the vessels in question are not CAVN. There is no evidence that the Defendants issued the Duplicate Bills which caused the misdelivery. This alternative claim can therefore be seen to be immediately not sustainable.

23. The matter however goes considerably further. The documents against which the goods were released by the Venezuelan Customs are those specified:-

(a) in the Statement of Mr. Jorge Ferrro-Albert, the lawyer for Oran, the Customs agent of Amaya (pages B219-226);

(b) in the Statement of Mr. Eugenio Moreno, lawyer for CAVN (pages B/251-296).

No Duplicate Bills were mentioned in these Statements as having been issued by CAVN which led to the release of the goods by the Venezuelan Customs to Amaya. The Statement of Mr. Moreno is particularly relevant because he was present at the inspection of the relevant files of the Venezuelan Customs and if there was any Duplicate Bills issued by CAVN which led to the release of the goods by the Customs to Amaya then these Duplicate Bills would be in the inspected files and he would have said so in his Statement.

24. The Plaintiff sought to attack the truthfulness of the Statement of Mr. Ferrero-Albert by resorting to a June 1994 statement of Mr. Ferror-Albert in relation to different bills of lading in respect of a different ship "Verdura". (see Fax from Mr. Ferrero-Albert to Mr. Moreno dated 7th December 1999). The attack does not assist the Plaintiff.

25. The Plaintiff's thin case on Duplicate Bills rested on two other allegations:-

(1) the alleged confession of Mr. Ferrero-Albert to Dr. Cova and

(2) the alleged statement of Mr. Juan Carlos of Oran to Mr. Sharma of the Plaintiff stated in paragraph 37 of the Statement of Mr. Sharma that CAVN provided certified CAVN bills of lading to Oran which Oran presented to the Venezuelan Customs to obtain release of the goods.

I do not accept either of these two allegations.

26. So far as the alleged confession of Mr. Ferrerro-Albert to Dr. Cova is concerned, I reject this for two reasons: because it is contrary to everything that Mr. Ferrerro-Albert said and secondly it is inherently improbable that Mr. Ferrerro-Albert would make such an important confession to a lawyer such as Dr. Cova. Dr. Cova is a very distinguished lawyer but is also a very excitable person who is sometimes susceptible to jumping to unnecessary conclusions. In my view, Dr. Cova was mistaken when he believed that a confession had been made to him by Mr. Ferrerro-Albert.

27. As for the alleged information given to Mr. Sharma by Mr. Juan Carlos, I have little confidence as to its truth firstly because Mr. Sharma as an interested party (not a reliable witness) did not strike me as a person who could be relied upon and secondly because Mr. Carlos was not a person who was shown to have intimate personal knowledge of this matter and thirdly because it is inherently unlikely that Mr. Carlos would be making a confession of this sort to the Plaintiff in circumstances where everyone else in Oran were saying something totally different.

28. In my judgment, the truth of this matter is that there were obviously many photocopies of the CAVN Bills and there were also certified copies by the Venezuelan Customs of photocopy CAVN Bills in the files of the Venezuelan Customs but that is totally different from saying that CAVN had issued original Duplicate Bills or had certified photocopy of CAVN Bills and had given these to either Oran or to the Venezuelan Customs which then enabled Oran to obtain delivery of the goods from the Venezuelan Customs. The weight of the evidence for me is simply to the contrary. As Mr. Fok pointed out in his submission it is most probable that the receivers procured some form of bank guarantee to obtain the release of the goods from the Venezuelan Customs. Or which is not unknown in South America, the relationship between the Customs authorities and the receivers' customs agents are such as to enable goods to be released by the Customs to the receivers's customs agents without full and formal documentation. I therefore conclude that the claim of the Plaintiff in tort against the Defendants for wrongful issue of Duplicate Bills also fails.

29. In the light of my above findings, it is unnecessary for me to go into the very difficult and vexing questions which divided the parties and the distinguished experts on the scope of the contractual duties and exemptions in the light of what each side contended to be the correct Venezuelan law.

30. The conclusion I have reached is that the claim of the Plaintiff against the Defendants in each of the three Admiralty Actions fails in both contract and in tort. These Actions therefore must be dismissed with costs.