HECNY SHIPPING LIMITED v. WILY PRODUCTS COMPANY LIMITED

IN THE COURT OF APPEAL

1995, No. 61

(Civil)

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J U D G M E N T

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Litton, V-P:

1. This appeal comes to this court pursuant to Order 14 proceedings brought by the plaintiff Wily Products Company Limited (cargo owners) against the defendant Hecny Shipping Limited (the carriers).

2. On 21 February this year Mayo J gave judgment against the defendant under Order 14 r3 of the Rules of the Supreme Court in the sum of US$216,000, being the FOB value of a total of 2,500 cartons of cassette recorders plus freight amounting to US$30,000. The defendant now appeals seeking to argue that judgment for the plaintiff (the respondent) in that sum is wrong and that damages should be assessed.

3. We were told this morning that as far as the freight is concerned liability is no longer in dispute. What remains therefore is the claim based on the FOB value of the goods totalling US$186,000.

The bills of lading

4. The goods were received by the defendant for carriage from Hong Kong to Ciudad Del Este, Paraguay under five bills of lading issued by the defendant as carrier. They are combined transport bills of lading.

5. It is important to look closely at the bills of lading in order to construe their effect. The five are for all practical purposes identical. The defendant is the carrier. Over the defendant's signature is the usual statement to this effect:

"RECEIVED by the Carrier the Goods as specified above in apparent good order and condition unless otherwise stated, to be transported to such place as agreed ....

The particulars given above as stated by the shipper and the weight, measure, quantity, condition, contains [content] and value of the Goods are unknown to the Carrier."

6. The body of the bill of lading has five columns. Under the column "No. of Pkgs. or Shipping Units" is the statement "500 CARTONS". Under the column "Description of Goods & Pkgs." is the statement "2,000 PCS (RC-9000) AM/FM/SW1/SW2 4 BAND MINI COMPO CASSETTE RECORDER AS PER SALES CONFIRMATION NO. SC-1144 DD 15.07.1993". Under the column "Gross Weight" is the statement "9050 KGS". Under the column "Measurement" is the statement "59.90CBM".

7. Above the particulars as I have recited are these words:

"CY/CY ONE(1) X 40' (8½') CONTAINER ONLY

----------------------------------------

SHIPPER'S LOAD AND COUNT AND SEALED, STC:"

 

8. We are told by counsel that CY/CY means container yard to container yard and that "STC" is an abbreviation for "said to contain". The bill of lading goes on to recite Hong Kong as the port of loading, Santos as the port of discharge and Ciudad Del Este, Paraguay as the place of delivery.

The cargo was lost

9. The goods were duly transported by sea to the port of Santos where the cargo was discharged. The sea portion of the contract of carriage to the port of Santos had been sub-contracted by the defendant to the NYK Line as carrier. But before NYK Line had delivered the cargo to the land-transport carrier for carriage over-land from Brazil to Ciudad Del Este, Paraguay, the cargo was lost.

Defendant's case

10. The defendant accepts that it is liable in damages to the plaintiff but argues: (1) that it is entitled to claim the limit of liability under the Hague Rules; and (2) that in any case the judge was wrong to have awarded damages on the basis of the FOB value of the goods; instead, the defendant argues, if the limitation of liability point fails, the damages should have been assessed by the court and should not have been based upon the FOB value.

Limitation of liability

11. We have heard sophisticated arguments from Mr Cheung, counsel for the defendant, to the effect that the international rules which govern the relationship of the parties are the Hague Rules. Mr Kerr for the plaintiff argues that the rules which apply are the Hague-Visby Rules. The point is relevant in this way. In the Hague-Visby Rules Article 4(5)(c) states:

"Where a container, pallet or similar article of transport is used to consolidate goods, the number of packages or units enumerated in the bill of lading as packed in such article of transport shall be deemed the number of packages or units for the purpose of this paragraph as far as these packages or units are concerned. Except as aforesaid such article of transport shall be considered the package or unit."

12. It is clear that if this provision applies it removes all possibility of argument that, for the purposes of limiting the carrier's liability, it is the number of containers as stated in the five bills of lading which is relevant and not the number of cartons; and it is conceded that if the relevant shipping unit is cartons and not containers then whether the Hague Rules apply or the Hague-Visby Rules apply, no limitation can help the defendant. The Hague Rules therefore are only relevant for this purpose: that in those rules there is no deeming provision similar to Article 4(5)(c); and this, counsel says, leaves the defendant some room for argument on this appeal that the relevant unit for measuring the limitation on liability is containers.

Construing the bills of lading

13. In my judgment the argument as to which rules apply is wholly irrelevant. Here on the face of the bills of lading, the plaintiff as shipper has plainly declared the number of cartons, and this has then been incorporated into the bills of lading. It must be assumed that the defendant as carriers with their eyes open have accepted that, in relation to each bill of lading, 500 cartons constituted the relevant shipping units. Those are the applicable units whether the Hague Rules or the Hague-Visby Rules apply.

14. I cannot see how the statement in the bill of lading "CY/CY ONE(1) X 40' (8½') CONTAINER ONLY/SHIPPER'S LOAD AND COUNT AND SEALED, STC" shows that contractually the shipping unit is one container only and not the 500 cartons as declared. It is of interest to note that, in para 2 of the statement of claim, the plaintiff averred that the defendant as carrier had accepted 500 cartons containing 2,000 cassette recorders in each of the bills of lading for carriage and delivery to Paraguay: an averment which the defendant in its defence admits.

15. In my judgment there is no relevant limitation of liability in this case which can help the defendant.

Measure of damages

16. The FOB value of the goods amounted to US$186,000. This would in the absence of evidence to the contrary constitute good evidence of the market value of the goods at due delivery. Indeed, as a matter of common sense, the market value at the place of delivery would, as Mr Kerr argues, in the usual course of event be higher than the FOB price, but this point is irrelevant as the plaintiffs seek no more than their own actual loss.

17. Mr Cheung argues that in the plaintiff's affirmations they have not stated that the FOB price was in the fact the market value. I do not see why such a statement is necessary. The plaintiffs rely on their invoices to their overseas buyers showing the FOB price in support of their claim. In my judgment this is sufficient proof.

Conclusion

18. I would accordingly dismiss this appeal and affirm Mayo J's judgment.

Liu JA:

19. The facts are sufficiently stated in the judgment delivered by the Vice President.

20. There were five combined bills of lading issued in Hong Kong for carriage of goods by sea and land from Hong Kong. The cargoes so carried did not reach their destination. In fact, the cargoes were lost before they were delivered to the land carrier, and from such failure to hand over the goods for the remainder of the carriage a claim of US$260,000 arose. Of the claimed US$260,000, US$186,000 is outstanding for damages in conversion. The cargoes were in five separate containers. In these five combined bills of lading, shipment was undertaken by NYK up to Brazil. From then onwards, they were expected to be transported over land to destination, Paraguay.

21. It is not a matter in dispute that the cargoes were lost in Brazil after discharge from a vessel of NYK. The defendant holds the sea carrier NYK responsible for the loss of cargoes and has instituted proceedings, we are told, against NYK. The proper inference is, therefore, that the cargoes were lost before the commencement of the transport over land. However, they were lost after discharge.

22. Much has been said of the application of the Hague Rules or the Hague-Visby Rules but under either set of these Rules, liability limitation would be well over and above the plaintiff's claim in this action. The liability limitation per package in the Hague Rules is ￡ 100 sterling gold value, equivalent to over ￡ 6,000. The same in the Hague-Visby Rules is 666.67 units of account otherwise known as special drawing rights.

23. Mr Cheung directs our attention to Clause 6(1)(A) of each of the bills of lading, which provided for the application of the Hague-Visby Rules, failing which the Hague Rules. It is argued by Mr Cheung that on a proper construction of Clause 6(1)(A) of these bills of lading, the Hague-Visby Rules were not compulsorily applicable by reason of Article I(e) of those Rules and that consequently the Hague Rules would spring into operation and were thereupon deemed to be incorporated into the five bills of lading in question by Clause 6(1)(A). The relevant part of Clause 6(1)(A) reads as follows:-

"6. CARRIER'S RESPONSIBILITY

(1) CLAUSE PARAMOUNT

(A) Subject to clause 13 below, this Bill of Lading insofar as it relates to sea carriage by any vessel whether named herein or not shall have effect subject to the Hague Rules or any legislation making such Rules or the Hague-Visby Rules compulsorily applicable (such as COGSA or COGWA) to this Bill of Lading and the provisions of the Hague Rules or applicable legislation shall be deemed incorporated herein. ..."

24. Mr Cheung submits that since the cargoes were lost after discharge, their loss fell outside the period of "carriage of goods" as defined by Article I(e) of the Hague-Visby Rules and those Rules were not therefore compulsorily applicable. Hence, the Hague Rules applied by process of elimination under Clause 6(1)(A).

25. Article I(e) and Article II of the Hague-Visby Rules have been subject-matter of considerable litigation. Article I(e) and Article II are set out below:-

"Article I

(e) 'Carriage of goods' covers the period from the time when the goods are loaded on to the time when they are discharged from the ship."

"Article II

Subject to the provisions of Article VI, under every contract of carriage of goods by sea the carrier, in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities, and entitled to the rights and immunities hereinafter set forth."

26. On its face, Article I(e) defines the period of sea carriage as between loading and discharge. Does Article II extend that period beyond discharge? And if so, is Article II moderated or otherwise affected by Article I(e)? Further, if Mr Cheung's contention can be logically sustained, does Article I(e) put an end to the period of sea carriage immediately upon the discharge of the goods from the ship?

27. Suffice it, for the purpose of this appeal, to refer to The "Zhi Jiang Kou" (1991)1 Ll. L Rep. 493. It is an Australian case in which at p.516 RHC President Kirby observed as follows:-

"... art. II of the Hague Rules does not in my opinion establish a category limited to events arising from loading to discharge, strictly so confined. It also includes custody and care, loading and handling as well as the carriage and discharge of the goods. 'Custody and care' are apt to cover events after the discharge and until delivery of the goods. Any other construction would artificially narrow the operation of the Hague Rules. ... If there is an ambiguity, I should prefer to adopt the construction which gives the Hague Rules a sensible operation which does not artificially terminate their effect at the ship's rail." (Emphasis supplied. )

28. The inter-relationship between Articles I(e) and II is succinctly summed up by Devlin J, as he then was, in Pyrene Co. Ltd v. Scindia Navigation Co. Ltd (1954)2 QB 402 at p.411. The learned judge said:-

"The operation of the Rules is determined by the limits of contract of carriage by sea and not by any limits of time."

29. It is reasonably clear that for our purposes Article I(e) would not materially affect Article II. In other words, despite Article I(e) the period of "carriage of goods" by sea envisaged in Article II should not be strictly construed, limiting it to "events arising from loading to discharge". Article II would therefore extend the period beyond discharge. In the situation the parties faced, Article II is quite capable of standing on its own. The sea carriage did not therefore terminate after discharge and the Hague-Visby Rules still applied at the time of loss before the goods were handed over to the land carrier. In addition, Article X(a) and (b) of the Hague-Visby Rules would render these Rules compulsorily applicable. When, as in this case, the bills of lading in question were issued in the contracting state i.e. Hong Kong for shipment from the contracting state i.e. Hong Kong, the Hague-Visby Rules clearly applied. Article X(a) and (b) read:-

"The provisions of these Rules shall apply to every bill of lading relating to the carriage of goods between ports in two different States if:

(a) the bill of lading is issued in a contracting State, or

(b) the carriage is from a port in a contracting State, or

......................................................."

30. There is no substance in Mr Cheung's submission based on Clause 6(1)(A).

31. It is further submitted by Mr Cheung that by the words "said to contain" (STC) in each of the bills of lading, the defendant as sea carrier held itself out to be responsible only for the container accepted. Accordingly, the defendant as carrier could not be held liable for the contents of these five containers, which the defendant did not count, stuff or seal.

32. Before I come to Mayo J's decision, I would call attention to Article IV 5(c) of theHague-Visby Rules, which is set out below:-

" Where a container, pallet or similar article of transport is used to consolidate goods, the number of packages or units enumerated in the bill of lading as packed in such article of transport shall be deemed the number of packages or units for the purpose of this paragraph as far as these packages or units are concerned. Except as aforesaid such article of transport shall be considered the package or unit." (Emphasis added.)

33. The emphasis lies in the words "enumerated in the bill of lading as packed" in a container. From the New Shorter Oxford Dictionary, the word "enumerate" is defined as "specify as in a list, mention (a number of things) one by one; ascertain the number of". In the Concise Oxford Dictionary, it is simply: "count, specify, mention one by one (items)".

34. In Winkenson Impex Co. Ltd v. Haverton Shipping Ltd [1985] HKLR 141, Mayo J held that the normal prima facie presumption of a carrier having received all the goods set out in a bill of lading for shipment would be displaced by the use of the words "said to contain" (STC). That is what we have here.

35. The issue argued before Mayo J in Winkenson case is decidedly different. When a carrier issues a bill of lading, he thereby acknowledges the receipt of the goods described in it. After all, a bill of lading is a document of title. If a carrier acknowledges receipt of cargo in terms of "said to contain (STC) in a receptacle", it may be said, in fact it was held in Winkenson, that the carrier is not prepared to give a clear receipt for the cargo but would prefer to acknowledge only his acceptance of a container with cargo claimed to be sealed in it. By the words "said to contain in a receptacle", a carrier might wish to express some reservation on his usual responsibility arising from the issuance of a bill of lading for the cargo described in it. In other words, the carrier may not be willing to be saddled with what is normally the presumption, upon the issuance of a bill of lading, that the goods described in it have all been received for shipment. After all, the cargo shipped is merely claimed to be contained in a receptacle. The correctness or otherwise of the decision in Winkenson is not before this court but what is reasonably clear is that Winkenson was concerned with the rebuttal of a presumption but not with whether the goods as packed were mentioned one by one in the bill of lading. It dealt with the effect of a bill of lading term on which the cargo was accepted over the ship's rail.

36. This Court is not call upon to examine matters which may or may not displace the presumption arising from the issuance of a bill of lading. We are here to consider merely whether the quantity of "five hundred cartons" given in each of the bills of lading can be said to be packages "enumerated" as packed in the container, which "shall be deemed the number of packages" by Article IV 5(c) of the Hague-Visby Rules. The issues are different. The question considered in Winkenson is dissimilar from that before us today.

37. In all the five bills of lading, in the column for "No. of Pkgs. or Shipping Units", the following entry appears: "CY/CY ONE(1) X 40' (8½') CONTAINER ONLY SHIPPER'S LOAD AND COUNT AND SEALED, STC: 500 CARTONS". Paragraph 2 of the Statement of Claim pleads, inter alia: "By the 5 Bills of Lading ... the Defendant accepted 5 cargoes each comprising of 500 cartons containing 2,000 cassette recorders for carriage to and delivery at ... Paraguay". The defendant admits these pleaded facts.

38. The five hundred cartons stated in each bill of lading were, in my view, enumerated in the bill of lading as packed in the container, in the sense that they had been specified, mentioned one by one or even counted. Further, there is no requirement in Article IV 5(c) for the counting, if required at all, to be done by the carrier. In my view, one may legitimately conclude from each of the bills of lading that five hundred cartons were specified or mentioned one by one and counted within the meaning of paragraph 5(c). On each bill of lading, it is clearly stated: "Shipper's load and count and sealed". Article IV 5(c) is a deeming provision. When, as this was the case, packages to be shipped are enumerated as packed in a container, they are deemed by Article IV 5(c) to be the number shipped for the purposes of liability limitation.

39. In conclusion, the second submission of Mr Cheung also fails.

40. Lastly, I come to damages. The Vice-President has dealt with damages. Little more need be said. The FOB value in the circumstances was the only evidence before the judge on which the parties argued quantum. At the time when the matter was heard by the judge, it was the only piece of ready evidence for assessment.

41. It is quite unnecessary to consider the submitted modification to limitation.

42. For the reasons I have given, I, too, would dismiss this appeal and affirm the order of Mayo J.

P. Chan J:

43. I agree that at the heart of this case it is a question of what is the meaning of package for the purpose of deciding the quantum of the defendant's liability which has been admitted. I think it is quite clear from the face of the bills of lading that the parties intended package to refer to cartons and not containers. And whether it is the Hague Rules or the Hague-Visby Rules which are applicable is not of importance.

In my view the arguments of counsel for the appellant cannot be sustained. I do not have anything further to add to what have been said by my Lords. The learned judge was quite right in giving judgment for the amount claimed by the respondent/plaintiff and I too would dismiss the appeal.