HCAJ000306/1982
Admiralty action in rem against the ship or vessel "ANDERS MAERSK"
--------------------
HEADNOTE
--------------------
Carriage of Goods by Sea - Application of the Hague Visby Rules - What constitutes 'shipment' under the legislation and Rules - the necessity of having regard to the contractual documentation relating to the shipment rather than simply looking to the physical circumstances. Held. Where shipment is transhipment the Hague Visby Rules do not automatically become operative.
1982 Folio 306
IN THE SUPREME COURT OF HONG KONG
HIGH COURT
ADMIRALTY JURISDICTION
____________
BETWEEN
RYODEN MACHINERY COMPANY LIMITED
Plaintiff
and
THE OWNERS OF THE SHIP OR VESSEL "ANDERS MAERSK"
Defendant
____________
Coram: The Hon. Mayo, J.
Dates of Hearing: 20th and 21st January 1986
Date of Delivery of Judgment: 29th January, 1986
__________
JUDGMENT
__________
1. The Plaintiffs are the holders of a bill of lading. The cargo in question was two large steam boilers. The boilers were manufactured in the United States of America and were shipped by the Defendants in accordance with the terms of a through bill of lading.
2. The bill of lading incorporated the provisions contained in the Carriage of Goods by Sea Act 1936 (cogsa) of the United States of America. Clause 16 of the bill conferred upon the Defendant the right to tranship the cargo should they wish to do so. The ultimate port of destination for the boilers was Shanghai. The Defendants shipped the boilers from Baltimore to Hong Kong in November 1981. They then made arrangements for the transhipment of the boilers on the "Linjiang" shortly after their arrival in Hong Kong. During the voyage from Hong Kong to Shanghai, the Linjiang encountered adverse weather conditions and one of the boilers broke loose and fell into the sea and sank. The other boiler fell on the deck and was damaged. The Plaintiffs are endeavouring in this action to recover the losses they have sustained as a result of this.
3. The facts I have recited so far have been agreed by both parties. There is no agreement between the parties concerning the extent of the damage to the second boiler which fell on the deck. Amongst the documents which were agreed by the parties was a survey report which was prepared shortly after the damaged boiler arrived in China. Unfortunately this survey report is not a very satisfactory document. The expert who prepared the report referred to various items of damage. What he did not do was to include any meaningful material in the survey of the extent or consequences of the damage he referred to. It will, therefore, be appreciated that in the absence of any expert evidence it is impossible for me to assess the amount of damage to the boiler.
4. The summons for directions contained the standard provision relating to experts reports. Both parties were entitled to produce two experts reports in the usual way. Other than agreeing the limited survey I have referred to, nothing further was done by the parties. Mr. Tong who was representing the Plaintiffs called as a witness an employee of his clients who has apparently some engineering experience. This gentleman sought to give evidence that after the second boil arrived in China it was so badly damaged that it was worthless. Understandably, Mr. Sussex for the Defendant objected to this attempt to introduce expert evidence as the provisions of Order 38 rule 36 of the Rules of Supreme Court had not been complied with. In the light of this, he applied for leave to adduce expert evidence which would call in question the Plaintiffs' contention that the boiler was worthless. Having heard submissions from both counsel, I ruled that leave was granted to the Defendants to file such expert evidence as may be necessary and for the Plaintiffs to have leave to file expert evidence in reply. Both parties agreed that it would be possible for me to deal with the main issue which arose between the parties without having the extra expert evidence concerning the extent of the damage to the boiler. This being the case, I agreed to proceed with the trial, and I ordered that a separate issue of the extent of the damages should be adjourned to a future date. When the necessary evidence was available, I would myself assess the damages if this was necessary.
5. The main issue between the parties can be stated in simple terms. Section 4 of Cogsa entitles a carrier to limit the amounts of claims which are made upon them. The amount of the limitation is US$500 per package. It is the Defendants' contention that the Plaintiffs are bound by this limitation, and the total amount which can be claimed in this action is US$1000. The Plaintiffs argued that as the boilers were transhipped in Hong Kong, the Carriage of Goods by Sea (Hong Kong) Order No. 1508 of 1980 is applicable and has the force of law. This order incorporates the Carriage of Goods by Sea Act 1971 which in turn brings into effect the Hague Visby Rules. A carrier is not able to limit his liability for cargo in the same way under these rules. Accordingly, the Plaintiffs are entitled to recover substantial damages.
6. I was rather surprised to be advised by both counsel that their researches had indicated that there had not been any similar reported cases on this point either in Hong Kong or in the United Kingdom since the introduction of the Hague Visby Rules. It was, therefore, a matter of importance that there should be a satisfactory degree of certainty on this subject so that parties undertaking commercial transactions could know exactly what the position was. I agree that it is essential that there should be a clear determination of this point.
7. Mr. Tong placed consideable reliance on the provisions contained in Section 1 subsection 3 of the Carriage of Goods by Sea Act 1971 which is in the schedule to the order I have referred to.
"(3) Without prejudice to subsection (2) above, the said provisions shall have effect (and have the force of law) in relation to and in connection with the carriage of goods by sea in ships where the port of shipment is a port in Hong Kong, whether or not the Carriage is between ports in two different States within the meaning of Article X of the Rules."
Article X reads as follows:-
"
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 con-tracting State, or
(b)
the carriage is from a port in a con-tracting State, or
(c)
the contract contained in or evidenced by the bill of lading provides that these Rules or legislation of any State giving effect to them are to govern the contract,
whatever may be the nationality of the ship, the carrier, the shipper, the consignee, or any other interested person. "
Mr. Tong argued that there could be no doubt that the shipment of the boilers on the Linjiang from Hong Kong came within a scope of Article X(b) and was accordingly governed by Section 1(3). He urged me to have regard to the physical situation rather than focusing my attention on the documentation. He referred me to the entry in the third edition of the Shorter Oxford Dictionary Vol. 2 "shipment". There was nothing in this entry to exclude transhipment. It was accordingly clear that "shipment" would include transhipment.
8. It was evident from the judgment of Lord Denning and Ackner L. J. in the Morviken(1) that it was the intention of the legislature that the Hague Visby Rules should be applicable wherever possible, and that parties should not be permitted to contract out of the rules. Mr. Tong also contended that the court should adopt a liberal approach to the application of the rules. For this he called in aid a passage from the speech of Lord Diplock appearing on page 1116 of the Hollandia(2) (notwithstanding the different name, this was the Appeal in the House of Lords in the Morviken):
"
My Lords, the provisions in section 1 of the Act that I have quoted appear to me to be free from any ambiguity perceptible to even the most ingenious of legal minds. The Hague-Visby Rules, or rather all those of them that are included in the Schedule, are to have the force of law in the United Kingdom; they are to be treated as if they were part of directly enacted statute law. But since they form part of an international convention which must come under the consideration of foreign as well as English courts, it is, as Lord Macmillan said of the Hague Rules themselves in Stag Line Ltd. v. Foscolo, Mango and Co. Ltd.(3) :
'
desirable in the interests of uniformity that their interpretation should not be rigidly controlled by domestic precedents of antecedent date, but rather that the language of the rules should be construed on broad principles of general acceptation. '
They should be given a purposive rather than a narrow literalistic construction, particularly wherever the adoption of a literalistic construction would enable the stated purpose of the international convention, viz. , the unification of domestic laws of the contracting states relating to bills of lading, to be evaded by the use of colourable devices that, not being expressly referred to in the Rules, are not specifically prohibited. "
9. Perhaps not surprisingly Mr. Sussex urged me to adopt a rather different approach. He argued that it was clear from Section 1(4) of the Carriage of goods by Sea Act 1971 that the documentation was of paramount importance. The subsection reads:-
"(4) Subject to subsection (6) below, nothing in this section shall be taken as applying anything in the Rules to any contract for the carriage of goods by sea, unless the contract expressly or by implication provides for the issue of a bill of lading or any similar document of title. "
There is also judicial authority for attaching importance to the contract between the parties. Mr. Sussex referred me to part of Bingham, J.'s judgment which appears on page 320 of Mayhew Foods Limited v. Overseas Containers Ltd.(4) : -
"The answer to this problem is again to be found in the principle that the rights and liabilities under the rules attach to a contract. They do not apply to carriage or storage before the port of shipment or after the port of discharge, because that would be inland and not sea carriage. But between those ports the contract was, despite the wide language of cl. 21, for carriage by sea. If, during that carriage, OCL chose to avail themselves of their contractual right to discharge, store and tranship, those were, in my judgment, operations 'in relation to and in connection with the carriage of goods. by sea in ships', to use the language of the Act, or were 'within the contractual carriage', to use the language of cl. 21(2) of the bill of lading conditions. "
10. If reference is made to the bill of lading it will be noted that there is no reference whatever to Hong Kong. Equally it is mifest from the bill of lading that the port of shipment is Baltimore. The voyage referred to in the bill of lading is from Baltimore to Shanghai. The tnshipment in Hong Kong is undertaken by the Defendants pursuant to their rights under the bill of lading.
11. I have no doubt that Mr. Sussex's contention is correct. It is evident to me on perusing this legislation and the rules thereunder that it is essential to have regard to the contractual relations between the parties. It is not difficult to envisage the difficulties which would arise if tgis is. not-the case. What would the position be if the boilers had been loaded on other cargo which had to be discharged at a port en route. Possibly it may be necessary for the boilers to be unloaded for other cargo to be discharged. Would there be a shipment of the boilers when they were re-loaded on the ship again?
12. Unless reference is made to the contract between the parties, there would always be a likelihood that there would be an element of uncertainty. The shipper of goods may have no knowledge of the arrange-ments being made by the carrier, and it would put the shipper in an invidious position if he could only establish his rights by a subsequent re-construction of events which took place without his knowledge.
13. I entirely reject Mr. Tong's argument that shippment includes transhipment. All the references to shipment in the rules are consistent with shipment being confined to the initial shipment referred to in the bill of lading. The result of this is that the Plaintiffs cannot establish that the Hague Visby Rules are applicable to the shipment of these boilers. The cogsa provisions incorporated in the bill of lading are applicable to the contract with the consequence that the limitation I have referred to is operative. The Plaintiffs will only be entitled to the very small amount under the limitation. One result of my coming to this conclusion is to render irrelevant the assessment of damages I have referred to in this judgment. I will hear the parties on the most appropriate course to adopt in this connection. I will also hear the parties on costs.
(Simon Mayo )
Judge of the High Court
(1) [ 1982] Vol. Lloyd's Law Reports 325
(2) [ 1982] 3 W.L.R.111
(3) [ 1932] A.C. 328, 350
(4) [ 1984] Vol. 1 Lloyd's Law Reports 317
Representation:
Mr. Ronny Tong instructed by C.YS Kwan & Co. for Plaintiffs.
Mr. Charles Sussex instructed by Homan, Fenwick & Willen for Defendants.