ANBEST ELECTRONIC LTD v. CGU INTERNATIONAL INSURANCE PLC

CACV 123/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 123 OF 2008

(ON APPEAL FROM HCCL NO. 82 OF 2000)

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

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

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

REASONS FOR JUDGMENT

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

Hon Rogers VP:

1.  This was an appeal from a judgment of Stone J given on 3 April 2008 following a trial which had taken some six days.  The matter before the judge was a claim under a policy of marine insurance.  The judge gave judgment in favour of the plaintiff against the insurers in the sums of US$329,712.80 and HK$450,000.

2.  At the conclusion of the hearing of this appeal this court dismissed the appeal with the reasons to be given in writing.  This court also ordered that the costs be in favour of the plaintiff.

The history

3.  On 24 December 1998 some 600 cartons of electronic goods loaded in a container left Hong Kong on board the vessel ‘AL SABAHIA’, destined for Khor Fakkan in the United Arab Emirates (‘UAE’).  Khor Fakkan is a small town on the East Indian Ocean coast of the Emirate of Sharjah, outside the Straits of Hormuz, at which there is a port and a container terminal.  The goods were sold by the plaintiff to a company in the UAE named First Star Electronics (‘First Star’) pursuant to a sales contract negotiated in December 1998.  The sale was evidenced by a commercial invoice dated 23 December 1998.

4.  The bill of lading, No. SENUHKG552617, dated 24 December 1998 was issued by DSR-Senator Lines Gmbh; the plaintiff was the shipper, the Notify Party was named as First Star, and the Consignee was named as Habib Bank AG Zurich (Sharjah Branch).

5.  The contract of insurance, which is the subject of this action, was contained in and evidenced by an insurance certificate dated 23 December 1998, which was issued by the defendant insurer, then named General Accident Insurance Asia Ltd (now CGU International Insurance Plc) pursuant to Open Cover No. HK-B1789 dated 8 August 1997; that Open Cover named the plaintiff as one of the insured.  The insurance expressly covered all risks as per the Institute Cargo Clauses (A) dated 1 January 1982 (‘ICC (A)’), which incorporated the Institute Theft, Pilferage and Non-Delivery Clauses also dated 1 January 1982.

6.  There was a further term of the insurance policy contained in the Marine Open Cover Schedule which read:

“It is further agreed that notwithstanding the provision of clause 8 (Institute Cargo Clauses ‘A’) …. goods shall be considered to be in the ordinary course of transit in the following circumstances:

…………

(ii)  after arrival at country of destination whilst held at any warehouse or place of storage (not the property of the Insured or rented or leased by then) which the Insured elect to use for temporary storage, allocation or distribution prior to arrival at the consignee's or other final warehouse.”

7.  The plaintiff had not dealt with First Star before.  On 18 December 1998 First Star had remitted a deposit of US$10,000 in accordance with the sale contract that had been on D/P terms.  Payment for the goods was to be made by a bill of exchange drawn on First Star.  On 30 December 1998 the plaintiff sent the shipping documents to a finance house with which it had pre-arranged banking facilities, with a request that it purchase the bill of exchange drawn on First Star “subject to final payment”.  This was so that the plaintiff could obtain discounted payment on the bill of exchange drawn on First Star.  Amongst the documents sent to the finance house were 3 original bills of lading.

8.  On the same day the finance company sent the shipping documents to Habib Bank in Sharjah with the instruction that the bank should deliver the documents to First Star against payment.  After hearing the relevant evidence the judge was satisfied and found as a fact that the 3 bills of lading were indeed sent to the Habib Bank.  The plaintiff had been informed by First Star that Habib Bank in Sharjah were its bankers and had been given an account number.  Suffice it to say that the Habib Bank denied that First Star was its customer.

9.  Although the receipt of 3, as opposed to 2, bills of lading by the Habib Bank had been in issue, following on his acceptance of the evidence of the dispatch of the 3 bills of lading, the judge held that the Habib Bank in Sharjah did receive the shipping documents, and specifically the 3 original bills of lading, probably on 3 January 1999.

10.  As set out in the report of Henry Rawcliffe who was called on behalf of the defendant, it would appear that the container was discharged at Khor Fakkan on 4 January 1999 at about midday.  When it was discharged it was stacked in the open air in container stack S41.  About 5 hours later on the same day, the container was dispatched to Sharjah.  As the judge recorded in paragraph 13 of the judgment, there was no dispute that First Star obtained physical possession of the container from the Sharjah container terminal, it would seem on 7 January.  First Star obtained delivery of the goods dishonestly by means of the presentation of an original bill of lading obtained from within the Sharjah branch of the Habib Bank.

11.  Based on those facts, the judge held at paragraph 114 of the judgment that:

“...there is an overwhelming inference that this was a pre-planned theft carried out at the behest of First Star, acting complicitly with someone within the Habib Bank, a like inference legitimately may be drawn that the goods only can have been moved to Sharjah upon the specific instructions of First Star, and thus that in these circumstances the loss must be taken to have occurred upon the goods leaving Khor Fakkan, even though it appears that First Star only obtained actual physical possession of the container in Sharjah.”

12.  It was on that basis that the judge came to the conclusion that as a matter of commercial reality the loss of the container must be regarded as having occurred when the container left Khor Fakkan without the plaintiff’s knowledge and at the behest of First Star.

13.  The judge considered a number of arguments which had been put on behalf of the defendant on the basis of clauses 8 and 9 of the ICC (A) but rejected those and held that the insurance had not terminated at the time when the container had been removed from Khor Fakkan.  The judge also dealt with the matter on the basis that the theft of goods took place at Sharjah and came to the conclusion that the loss was still covered by the insurance.

This appeal

14.  On this appeal, it was clear that Mr Smith SC, who appeared on behalf of the defendant, was seeking to argue a case which might or might not be based upon the facts found by the judge or upon alternative facts.  At the request of the court Mr Smith set out the facts which he sought this court to hold.  They were as follows:

“1.  There was no pre-planned theft.

2.  Any theft took place at Sharjah and not Khor Fakkan.

3.  First Star was not in possession of the bill of lading prior to 5 January 1999.

4.  Khor Fakkan was the final warehouse.

5.  The movement of the goods from Khor Fakkan was not part of a theft.

6.  The forwarding of the goods to Sharjah was natural and inevitable.”

15.  In my view the judge was quite entitled to draw the inferences which he did and, indeed, the inferences which he drew appear to me to be logical and supportable.  The starting point must be the holding by the judge that the Habib Bank had received the 3 original bills of lading.  The judge reached that conclusion despite the fact that there had been proceedings in Sharjah that had failed, not least because the court there did not accept that the Habib Bank had received all 3, as opposed to 2, bills of lading.

16.  Logically, following from the judge’s finding as to the 3 bills of lading, the inevitable conclusion must be that somebody in the Habib Bank had passed one of the original bills of lading to First Star.  Given the fact that First Star did not have an account with the Habib Bank, the next logical conclusion must be that the passing of that bill of lading was done dishonestly.  That leads, inevitably, to the conclusion that the theft of the container was planned by those responsible in First Star with the complicity, or at the very least the assistance, of the person or persons in the Habib Bank.  Whether that person or persons was dishonest or was tricked into passing over the bill of lading matters not.

17.  Likewise, given the fact that First Star would not have been able to unload the container at Khor Fakkan and that it was, at the very least, much more convenient to do so at Sharjah, the forwarding of the container from Khor Fakkan to Sharjah, in circumstances where it is more than reasonable to suppose that that must have been arranged by First Star, must have been part of the process of First Star dishonestly obtaining the goods.  In this respect it appears to me to matter very little by what means First Star was able to arrange for the transfer of the goods to Sharjah.  Mr Smith was at great pains to try to establish that First Star had used a copy of the bill of lading that had been faxed by the plaintiff to First Star.  That may be so, but it does not seem to me to make any difference as to whether First Star used a faxed copy, that had been sent to it for its information, and not for its use, or whether it used a dishonestly obtained original bill of lading.

18.  Neither, it seems to me, does it make any difference that the container would have been forwarded to Sharjah even if the contents of the container were not eventually stolen.  The simple reason is that forwarding the container in the ordinary course of events would have been done legitimately on the instructions of those who were entitled to give those instructions.  It would not have been done for the purpose of dishonestly removing the contents once the container had reached Sharjah.  Hence, for similar reasons it does not appear that it would make any difference that First Star only obtained the original bill of lading on 5 January.  First Star certainly had the original bill of lading which was used to obtain the contents of the container at the time that it completed its thievery.

19.  There remains then the question as to whether it was open to the judge to hold that the theft took place at Khor Fakkan in circumstances where the goods were taken out of the container at Sharjah.  In my view, in the circumstances of this case, the theft of the contents of the container can be considered to be a continuous act starting at the time when First Star gave instructions in relation to the container as part of a process of stealing the contents.  That clearly happened when the container was at Khor Fakkan.

20.  The judge held that the place where the container had been parked, namely in the stack S41, could not legitimately be characterised as a “final warehouse or place of storage”.  As he said, it was no more than a temporary position in an open container stack.  Not only would I agree with him in this respect but the matter must fall within the further term of the insurance policy which has been set out in paragraph 6 above.  For those reasons I consider that there is nothing in the point raised on behalf of the defendant in this respect.

21.  Finally, Mr Smith sought to argue that even on the judge’s findings and even on the basis that the position of the container at Khor Fakkan in stack S41 was not the final warehouse for the container, its contents were not covered by the insurance.  It was said that the cover had come to an end under the terms of clauses 8 and 9 of the insurance.  For convenience those clauses are set out:

“8.1  This insurance attaches from the time the goods leave the warehouse or place of storage at the place named herein for the commencement of the transit, continues during the ordinary course of transit and terminates either

8.1.1  on delivery to the Consignees’ or other final warehouse or place of storage at the destination named herein,

8.1.2  on delivery to any other warehouse or place of storage, whether prior to or at the destination named herein, which the Assured elect to use either

8.1.2.1  for storage other than in the ordinary course of transit or

8.1.2.2  for allocation or distribution,

or

8.1.3  on the expiry of 60 days after completion of discharge overside of the goods hereby insured from the oversea vessel at the final port of discharge,

whichever shall first occur.

8.2  If, after discharge overside from the oversea vessel at the final port of discharge, but prior to termination of this insurance, the goods are to be forwarded to a destination other than that to which they are insured hereunder, this insurance, whilst remaining subject to termination as provided for above, shall not extend beyond the commencement of transit to such other destination.

8.3  This insurance shall remain in force (subject to termination as provided for above and to the provisions of Clause 9 below) during delay beyond the control of the Assured, any deviation, forced discharge, reshipment ortranshipment and during any variation of the adventure arising from the existence of a liberty granted to shipowners or charterers under the contract of affreightment.

9  If owing to circumstances beyond the control of the Assured either the contract of carriage is terminated at a port or place other than the destination named therein or the transit is otherwise terminated before delivery of the goods as provided for in Clause 8 above, then this insurance shall also terminate unless prompt notice is given to the Underwriters and continuation of cover is requested when the insurance shall remain in force, subject to an additional premium if required by the Underwriters, either

9.1  until the goods are sold and delivered at such port or place, or, unless otherwise specially agreed, until the expiry of 60 days after arrival of the goods hereby insured at such port or place, whichever shall first occur,

9.2  if the goods are forwarded within the said period of 60 days (or any agreed extension thereof) to the destination named herein or to any other destination, until terminated in accordance with the provisions of Clause 8 above.”

22.  The argument was that the transit had terminated once the container had been off-loaded at Khor Fakkan.  It was said that under clause 8 the insurance continued only “…during the ordinary course of transit…”.  However, that, in my view, is clearly to take the words out of context.  The full context is to be understood that the termination occurs when one of the events enumerated in 8.1.1, 8.1.2, 8.1.2.1, 8.1.2.2 and 8.1.3 occur.  What has to be noted in this respect is that the last of those clauses makes quite clear that the cover continues even after the goods have been off-loaded.  Again, I consider that the matter is also covered by the additional clause cited in paragraph 6 above.

23.  For these reasons I considered that there was no ground for interfering with the judgment of the judge below and that this appeal fell to be dismissed with an order of costs in favour of the plaintiff.

Hon Le Pichon JA:

24.  I agree.

Hon Burrell J:

25.  I agree.