MAINTEK COMPUTER (SUZHOU) CO LTD AND OTHERS v. BLUE ANCHOR LINE AND OTHERS

HCAJ 106/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY JURISDICTION ACTION NO. 106 OF 2008

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J U D G M E N T

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I.   INTRODUCTION

1.  I previously refused ECT’s application to set aside the interlocutory judgment on liability entered against it by the Plaintiffs.  I have now heard the parties on the assessment of the Plaintiffs’ damages.  This is my judgment on quantum in relation to the Plaintiffs’ claim against ECT. 

2.  The facts have been summarised in my Judgment of 25 February 2010 refusing ECT’s setting aside application.  I will use the abbreviations defined in that Judgment.  By way of damages, the Plaintiffs claim the invoice value (Euros 950,071.20) of the Sony Play Stations stuffed in Container X.

II.  DISCUSSION

A.  Limitation of liability under the ECB

3.  There is no dispute that the type of carriage involved in this case was what the ECB calls a “combined transport”.  In this respect, insofar as material, the ECB provides as follows:-

“17(B).    Combined Transport

1.1) The Carrier shall be liable for loss or damage to the Goods occurring between the time when the Carrier received the Goods into its charge and the time of delivery.

2)    The Carrier shall, however, be relieved of liability for any loss or damage if such loss or damage arose or resulted from:

...

k)    any other cause or event which the Carrier could not avoid and the consequences whereof it could prevent by the exercise of reasonable diligence.

....

11.   Notwithstanding anything provided for in other clauses of these Conditions, if it can be proved where the loss or damage occurred, the Carrier and the Merchant shall, as to the liability of the Carrier be entitled to require such liability to be determined by the provisions contained in any International Convention or National Law which provisions

i) cannot be departed from by private contract to the detriment of the claimant, and

ii)    would have applied (if the Merchant had made a separate and direct contract with the Carrier in respect of the particular stage of transport where the loss or damage occurred and received as evidence thereof any particular document which must be issued if such International Convention or National Law shall apply.

18.   Limitation Amount

18.1 When the Carrier is liable for compensation in respect of loss or damage to the Goods, such compensation shall be calculated by reference to the invoice value of the Goods plus freight charges and insurance if paid.

18.2 If there be no invoice value of the Goods, the compensation shall be calculated by reference to the value of such Goods at the place and time they are delivered to the Merchant in accordance with the contract or should have been so delivered.  The value of the Goods shall be fixed according to the commodity exchange price or current market price, by reference to the normal value of the Goods of the same kind and quality.

18.3 If in case of Combined Transport it can contrary to 17(B) II above not be proved where the loss or damage occurred compensation shall not exceed US$2.— per kilogram of gross weight of the goods lost or damage unless a higher compensation is provided by applicable compulsory law.

If it can be proved where the loss or damage occurred and if no compulsory law applies, compensation shall not exceed US$2.— per kilogram of gross weight of the goods lost or damaged.

18.4 Higher compensation may be claimed only when, with the consent of the Carrier, the value of the Goods declared by the Merchant has been stated in the Bill of Lading and the ad valorem freight rate is paid to the Carrier.  In that case the amount of the declared value shall be substituted for the limits laid down in this clause.  Any partial loss or damage shall be adjusted pro rata on the basis of such declared value.

18.5 The Carrier shall not, in any case, be liable for an amount greater than the actual loss to the person entitled to make the claim.”

4.  The principal submission of Ms. Janet Ho (appearing for ECT) is that ECT is entitled to rely on the 2^nd paragraph of ECB cl.18.3.  She suggests that ECT is so entitled by reason of ECB cl.1.3 which defines the expression “Carrier” to include Transpac’s “agents, servants and subcontractors”.  If cl.18.3 applies, then the Plaintiffs would only be entitled to damages of US$24,392 (that is, US$2 per kg. x 12,196 kgs.).

5.  I shall assume that Ms. Ho is right in reading “Carrier” as encompassing ECT.  Even then, I do not think that the 2^nd paragraph of cl.18.3 is sufficiently unambiguous to cover the present situation.

6.  First, it is unclear whether the words “loss or damage” in the 2^nd paragraph:-

(1) only refer to loss or damage occasioned through no-fault of a Carrier; or,

(2) also extend to loss or damage occasioned through the Carrier’s negligence, recklessness or deliberate fault.

7.  It would be remarkable if, where a Carrier was at fault through negligence or recklessness, the Carrier could limit its compensation to a sum which has no bearing to the actual value of the goods lost or damaged.  Here, for instance, the US$2 per kg limitation in the 2^nd paragraph produces a compensation which is derisory in relation to the actual value of the goods lost.

8.  Despite cl.18.1 which refers to compensating a party by reference to the invoice value of goods lost or damaged, could the 2^nd paragraph of cl.18.3 really be clawing back on cl.18.1 by only offering a minimal sum even when the Carrier is at fault?  It is possible.  But, given the principle of reading a contract contra preferentem, much clearer words would need to be inserted into cl.18.3 before the Court can construe the provision as having the effect for which Ms. Ho contends.  Ambiguities in the clause are to be construed against the Carrier seeking to rely on the same.

9.  Therefore, just read in isolation, cl.18.3 does not seem wide enough to cover the situations where loss or damage has been caused through the negligence or recklessness of a Carrier.

10.  Second, cl.18.3 cannot be read in isolation.  The conclusion just reached above is confirmed (at least as far as recklessness is concerned) by ECB cl.23.2.

11.  Cl.23.2 states that the Carrier:-

“shall not be entitled to the benefit of limitation of liability provided for in clause 18.3, if it is proved that the loss or damage resulted from an act or omission of the Carrier itself done with intent to cause damage or recklessly and with knowledge that damage would probably result”.

12.  In my previous Judgment, I indicated that I thought that ECT through its employee Jimmy was not just negligent, but reckless in ignoring its own internal procedure.   That remains my view.

13.  Jimmy ought to have checked that Container X had been transferred from ECT’s barge system to its trucking system.  Because of the volume of containers having to be processed at the time, Jimmy did not so check.  He took a short-cut and simply re-routed Container X to the trucking system.

14.  ECT must have envisaged that there would be a probable risk of misdelivery in such situations.  Otherwise, why did its internal procedures require a check?  ECT did not adduce evidence suggesting that Jimmy was unaware of the risk of misdelivery involved in doing what he did or that ECT was oblivious to the real possibility of misdelivery if the internal procedure of a check was not followed.   In those circumstances, the Court can be bold and presume that ECT must have been fully aware of a probable (and I believe self-evident) risk of misdelivery to an unauthorised person if no check with its barging system staff was undertaken.

15.  It appears that short-cuts similar to that which Jimmy took were routinely taken by ECT staff without mishap in the past.  But that slack practice was only postponing the inevitable day when the obvious risk of misdelivery to an unauthorised person would materialise.  That ECT got away with slackness in the past does not make what it did less reckless.  The evidence is that, not surprisingly, since the events of the present case ECT has modified its procedures.

16.  Third, I do not read the expression of an exception to cl.18.3 in cl.23.2 as implying that negligence by the Carrier is covered by the limitation in cl.18.3.  The more plausible reading of cl.23.2 is that it merely emphasises that cl.18.3 does not cover the extremely serious situation where the Carrier has been reckless.  In other words, I do not think that this is a situation of expressio unius exclusio alterius.

17.  If cl.18.3 was truly meant to cover fault situations (such as negligence), one would at least expect comprehensive expressions such as “loss or damage whatsoever” or “loss or damage howsoever arising” to appear in the provision.

18.  Ms. Ho refers me to cl.17(B)(2)(k) which excludes liability for “loss or damage” due to some unavoidable cause or event “the consequences whereof [the Carrier] could not prevent by the exercise of reasonable diligence”.  She suggests that since, by cl.17(B)(2)(k) the Carrier is absolved of liability altogether where it is not at fault, cl.18.3 must at least have been intended to operate in the different situation where the Carrier is at fault by reason of negligence.

19.  I am unable to accept this argument.  In particular, I do not think that cl.17(B)(2)(k) absolves liability in all no-fault situations.  Clause 17(B)(2)(k) seems to me only to concern situations of frustration or force majeure.

20.  Where there is “loss or damage” due to such unavoidable circumstances, the Carrier is not to be liable.  The expression “the consequences whereof [the Carrier] could not prevent by the exercise of reasonable diligence” merely stresses that the relevant force majeure event must be truly unavoidable or unforeseeable.  I do not think that cl.17(B)(2)(k) goes so far as to absolve a Carrier in all situations where there has been a lack of fault on the Carrier’s part, even in the absence of frustration or force majeure.

21.  Thus, for example, conversion is a tort of strict liability.  One might commit conversion innocently, despite having taken all reasonable care, by (say) surrendering cargo to a fraudster who has presented a skilfully forged bill of lading.  I do not think that on its wording cl.17(B)(2)(k) excludes the Carrier’s liability in such case wherethere is no question of force majeure.

22.  It follows that cl.18.3 may possibly simply apply to no-fault situations (such as the one just posited) which are not covered by cl.17(B)(2)(k).

23.  In summary, ECT having been not just negligent but also reckless, cl.18.3 does not apply to limit its liability to the Plaintiffs.  Even if I were wrong about ECT having been reckless, I would still decline to treat cl.18.3 as limiting liability where (as here) ECT has at the very least been negligent.

B.  Limitation under the Hapag Lloyd Sea Waybill

24.  Transpac shipped the Plaintiffs’ containers (including Container X) from Shanghai to Rotterdam through Transpac’s agents Kuehne Nagel.  Kuehne Nagel engaged Hapag Lloyd for the voyage and received a Sea Waybill as evidence of the contract of carriage.

25.  Sea Waybill cl.5(1) provides:-

“Port to Port Shipment

(a) When loss or damage has occurred between the time of loading of the Goods by the Carrier at the Port of Loading and the time of discharge by the Carrier at the Port of Discharge, the responsibility of the Carrier shall be determined in accordance with German law, making the Hague-Visby Rules compulsorily applicable to a Bill of Lading....

(b) Howsoever the Carrier shall be under no liability whatsoever for loss of or damage to the Goods occurring, if such loss or damages arises prior to loading on or subsequent to the discharge from the vessel....

....”

26.  In the alternative, Ms. Ho submits that ECT is entitled to rely on cl.5(1)(b) of the Sea Waybill.  She says that this is possible by reason of a Himalaya clause found in cl.4 of the Sea Waybill.  On that basis, the misdelivery of Container X having taken place after its discharge from the vessel in Rotterdam, Ms. Ho contends that ECT is not liable for anything at all.

27.  Sea Waybill cl.4 confers on the Carrier’s agents or bailees the benefit of exemptions and limitations accorded to the Carrier by the Sea Waybill.  I shall assume for the purposes of argument that cl.4 allows ECT to rely on provisions in the Sea Waybill.  Despite that, I do not think that cl.5(1)(b) applies to give ECT the wholly surprising result of total immunity from liability.  Whatever it might mean, cl.5(1)(b) cannot be conferring total immunity for any loss howsoever caused following discharge.

28.  Cl.5(1)(b) needs to be read in the context of the Sea Waybill as a whole.

29.  Sea Waybill cl.3(2) provides:-

“(a)   The Goods ... will be delivered after payment of freight and other charges to the consignee, or to such person who identifies himself as being a representative of the consignee, and such delivery shall constitute the performance of this contract.

(b) The Carrier shall be under no liability for wrong delivery if he can prove that he has exercised reasonable care to ascertain that the party claiming delivery is in fact entitled.”

30.  Logically, delivery to a consignee must follow discharge from a vessel.  Since cl.3(2)(b) provides that the Carrier is liable for misdelivery where it has not “exercised reasonable care to ascertain that the party claiming delivery is in fact entitled,” cl.5(1)(b) (whatever it might mean) cannot be granting immunity in such situation.  Notwithstanding its apparently wide wording, cl.5(1)(b) must have a significantly more restricted ambit.  On pain of contradiction and incoherence, the Carrier cannot rely on cl.5(1)(b) to cut down on the plain meaning of cl.3(2).

31.  It is unclear just what the restricted ambit of cl.5(1)(b) was intended to be.  But for the purposes of these proceedings, it is not necessary to determine the term’s scope.  That is because here (as already discussed) ECT did not take all reasonable care to ascertain that Nico was entitled to receive Container X on the Plaintiffs’ behalf.  On the contrary, ECT acted recklessly in releasing Container X without first checking with its barge system personnel.

32.  Mr. Edward Alder (appearing for the Plaintiffs) observes that, insofar as cl.5(1)(b) purports to absolve ECT of liability altogether, it should have been (but was not) raised in the course of ECT’s application to set aside the interlocutory judgment on liability.  It is now (Mr. Alder urges) too late to rely on cl.5(1)(b).  While I agree with Mr. Alder’s submission, I have nonetheless dealt with the merits of ECT’s cl.5(1)(b) argument for the sake of completeness.

33.  Cl.5(1)(b) is not applicable to the present circumstances.

III. CONCLUSION

34.  ECT’s submissions for a reduced assessment of quantum fail.  There will be judgment in the Plaintiff’s favour for the invoice value of the goods in Container X (Euros 950,071.20).  As insurer, Mitsui Sumitomo (the 5^th Plaintiff) paid the invoice value of the goods plus a 10% uplift by way of compensation for the lost Sony Play Stations.  The rationale behind the 10% uplift is unclear on the evidence.  I therefore am not able to award more than the invoice value of the goods. 

35.  I will now hear the parties on interest, costs and consequential orders.