Trafigura Beheer B.V. Amsterdam v. China Navigation Co. Ltd.
Read the full judgment text of HCCL 173/1998 on BabelCite. This HCCL judgment was delivered on 6 September 2000.
1. This case involves the misdelivery in Hong Kong of a cargo of copper cathodes, and the subsequent confiscation of these goods by the Public Security Bureau in China. The question at issue is which of the parties to these proceedings should bear responsibility for the loss.
Cited by 1 case · Cites 1 case
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HCCL173/1998 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMMERCIAL ACTION NO.173 OF 1998 ---------------
--------------- Coram: Hon Stone J in Court Dates of Hearing: 30 June, 3, 4, 6 and 7 July 2000 Date of Judgment: 6 September 2000 ____________________ J U D G M E N T ____________________ 1. This case involves the misdelivery in Hong Kong of a cargo of copper cathodes, and the subsequent confiscation of these goods by the Public Security Bureau in China. The question at issue is which of the parties to these proceedings should bear responsibility for the loss. The undisputed facts 2. The plaintiff ("Trafigura") is the parent company of a Dutch trading conglomerate. It is a substantial player in the world of physical metals trading. These proceedings involve a cargo of 159 bundles of copper cathodes, one of a number of shipments in nominal 500 tonne tranches made pursuant to a contract entered into between the plaintiff and Mount Isa Mines Limited of Brisbane, Australia ("Mount Isa"). The precise details of this contract do not greatly matter. Suffice to say that two such earlier Mount Isa shipments of about 500 mt each had been the subject of onward sale to a Chinese state entity, China Minmetals Materials Import and Export Co. Ltd, Beijing (referred to throughout this case as 'Minmetals'). Perhaps the only relevance of these two earlier contracts with Minmetals (Nos.309-98-12535001-S and 12535002-S) was that both such onward sale contracts had been concluded, and letters of credit duly issued, prior to the arrival in Hong Kong of the particular vessel carrying these shipments of copper. 3. This was not the situation in the present instance. Although negotiations were ongoing between the plaintiff and Minmetals for the sale of this particular lot, no contract had been concluded - there is in the papers a draft Contract No.309-98-12535.003-S, bearing the date 30 April 1998 - and no letter of credit had been arranged by Minmetals to finance this purchase. In the event this cargo of 159 bundles of copper cathodes, gross weight 498.10 mt, had been shipped on board the vessel "Explorer" on 17 April 1998 at Townsville, Australia under a New Guinea Pacific Line bill of lading No.PTSV/HKG 008, which is accepted by Mr Sussex SC, on behalf of the defendant herein, as a China Navigation bill. The Shipper is named as 'Mount Isa Mines Limited', the Consignee is 'To Order', and the Notify Party under this bill of lading is Harvest Fortune Shipping Limited, the Third Party herein. 4. The evidence is that the "Explorer" was due to arrive in Hong Kong from Townsville on 1 May 1998, but in fact she came in two days earlier, on 29 April. What happened shortly thereafter provides the key element in this case. As the result of that which Mr Sussex has accepted was a complete error, Swire Shipping (Agencies) Limited, the Hong Kong representative of the defendant shipping line, misdelivered the plaintiff's cargo of copper cathodes to the Notify Party under the bill of lading, the Third Party herein, Harvest Fortune Shipping Limited. The provenance of the error is not important, albeit it appears to have arisen due to crossed wires between Swire Shipping (Agencies) in Hong Kong and its Sydney counterpart. In any event, such delivery was made not against production of an original bill of lading but against a Letter of Indemnity signed for and on behalf of Harvest Fortune. This Letter of Indemnity is undated, although Ms Grace Li of Swire Shipping (Agencies), who gave evidence on the point, believes that it was obtained on 28 April or on the morning of 29 April 1998, given that the cargo would not have been released if this indemnity had not been provided. Ms Li further gave evidence that the cargo carried under bill of lading PTSV/HKG 008, which was break bulk cargo, was discharged midstream directly from the "Explorer" into a barge, the "Sui Gang Bo 14", arranged by Harvest Fortune; according to the relevant tally sheets, such discharge commenced at 1530 hours on 29 April and was completed at 0100 hours on 30 April 1998. 5. Knowledge that the cargo had been thus discharged to Harvest Fortune was not something that was discovered by the plaintiff until 4 May 1998, Ms Li recalling a telephone conversation with an officer of the plaintiff on that date during which she informed her of the release of the cargo. This in turn generated a stream of urgent fax correspondence, Ms Jessica Lichsteiner of the plaintiff writing to Ms Li by fax of the same day :-
whilst by a following fax of the same date, Ms Lichsteiner stated :-
6. Perhaps unsurprisingly in the circumstances, Harvest Fortune was also contacted by Ms Lichsteiner on that same day, 4 May, in the following terms :-
7. No response appears to have been received from Harvest Fortune to this fax, but in any event it is evident from the papers what thereafter occurred. A Harvest Fortune bill of lading dated 2 May 1998 records the transhipment, in 17 twenty foot containers, of the plaintiff's 159 bundles of copper cathodes. On the face of this bill of lading the Shipper is named as one 'S.K. Trading' (whose provenance and significance in this whole saga continues to escape me), the Port of Discharge is named as Lian Hua Shan, China, and the Consignee is named in Chinese characters, which, I am told, represents the name of the Panyu Bonded Warehouse (the business licence of which gives its full name as 'Bonded Warehouse of External Affairs of Panyu City'), wherein this cargo was indisputably stored upon completion of its journey up the Pearl River to Lian Hua Shan. 8. There can be no doubt, on the face of the internal correspondence, that so far as the plaintiff was concerned the situation that had arisen was most unhappy; one internal e-mail of 4 May 1998, addressed, inter alia, to Mr Mike Yue of the plaintiff's Beijing office, records simply :-
whilst later that same day, 4 May, a Mr Peter-Marc Waszkis of the plaintiff's head office in Lucerne further writes :-
9. This court has heard extensive evidence from Mr Mike Yue, who until recently worked as a metals trader for the plaintiff and was based in the plaintiff's Beijing office. To Mr Yue fell the task of sorting out the problem that had arisen as the result of the misdelivery of this cargo in Hong Kong. I accept Mr Yue's evidence, and refer to various aspects thereof later in this judgment. For narrative purposes, however, suffice to say that Harvest Fortune appears to have been acting upon the instructions of Minmetals which, so far as the plaintiff was concerned, was a prospective purchaser of the 159 bundles of copper which were now stored in the Panyu Bonded Warehouse. Accordingly, notwithstanding the misdelivery that had occurred, Mr Yue continued his negotiations with Minmetals. 10. What followed next is not a matter of contention. Mr Yue was permitted to inspect the cargo in the Panyu warehouse on 13 May 1998, and was able to verify its existence and condition during that visit. He was also able finally to negotiate a contract for the sale of this cargo with Minmetals, which contract, whilst bearing the date of 8 May, was actually signed by Minmetals on 12 May, and in turn was countersigned by the plaintiff on 25 May 1998. 11. In addition, Mr Yue was able to obtain from Minmetals two further documents : first, a "Holding Certificate of Contract No.309-98-12535.003-P" signed and stamped by Minmetals which, inter alia, purported to confirm that the goods held in the Panyu warehouse belonged to and were held for the benefit of the plaintiff - in particular, paragraph 3 of this Certificate held out that Minmetals "shall not part with possession of the goods except in accordance with the instructions of Trafigura". And second, a Letter of Undertaking addressed to the plaintiff and signed on behalf of Minmetals whereby Minmetals undertook to open an irrevocable letter of credit through an acceptable opening bank, negotiable at 90 days sight against presentation of shipping documents, by 5 June 1998. 12. In fact, no letter of credit was ever opened by Minmetals, and the plaintiff was neither paid for the copper pursuant to the concluded contract nor was it able to recover possession of this cargo. After the passage of the 5 June date for the opening of the credit, Mr Yue chased Minmetals on the telephone, and sent fax messages to Minmetals on 15 June asking that the letter of credit be immediately opened, the plaintiff at this juncture even offering to give a one month extension for the price selection period under the contract if the letter of credit were to be issued within the week. In fact, on learning that Minmetals, Beijing were having difficulty in opening the credit because Minmetals did not have the cash at hand to provide the necessary funds to the bank to underpin the issuing of the credit, Mr Yue even flew to Shanghai on 16 June to collect funds from Minmetals Shanghai to enable Minmetals Beijing to open the credit. Despite returning with a draft, the credit was not opened, and on 17 or 18 June Mr Yue began to receive indications that the credit would not be forthcoming. Further fax messages were sent on 19 June in an attempt to press Minmetals to change its stance, but to no avail. 13. Mr Yue's evidence was that the first time he became aware that the cargo might be lost was on 17 or 18 June, when he was led to understand during a telephone conversation that the cargo had been moved from the Panyu warehouse to somewhere in Shanghai, albeit he had no idea where, even though he then made enquiries of various Shanghai warehouses. What appears to have occurred - although neither the plaintiff nor the defendant is in a position precisely to know, even today - is that the cargo was moved from the Panyu warehouse in or about mid-June, and that subsequently it had been seized by the Public Security Bureau of the Chinese State. 14. This confiscation led to meetings in Guangzhou on 7 August and in Panyu on 18 August, which meetings also included representatives of the PSB and of the defendant's solicitors. These meetings were unsuccessful. Notwithstanding presentation to the PSB of all relevant documentation in a bid to establish the plaintiff's ownership of the goods so seized, the PSB apparently refused to permit the plaintiff to recover its cargo. Nor were the considerable efforts on the part of both the plaintiff and the defendant to find alternative buyers successful, in this regard Mr Yue observing, no doubt correctly, that as the result of this cargo of copper having been seized by the PSB apparently as the result of it allegedly having been smuggled into China, the copper was perceived as tainted and potential buyers were nervous about becoming involved. 15. Be that as it may. The efforts on the part of both the plaintiff and the defendant to remedy the situation ultimately failed to bear fruit, with the result that proceedings in the head action were formally commenced by the plaintiff on 17 July 1998. So far as the Third Party action is concerned, third party proceedings were issued on 23 September 1998, with Points of Claim in those proceedings issued on 27 January 1999 and Points of Defence being filed one month later. The Third Party defaulted on a discovery order made by this court dated 10 June 1999, and having failed to file any list of documents has taken no further part in these proceedings. Its solicitors of record were permitted to cease to act by consent order dated 14 May 1999, and Harvest Fortune has not attended nor been represented at the trial of this action. The plaintiff's claim 16. Whilst there is considerable disagreement on the question of primary liability to pay other than nominal damages, in itself the issue of the quantum of the plaintiff's claim has attracted little comment. 17. The plaintiff pursues its claim for misdelivery in terms of contract, conversion and bailment, and quantifies its primary loss in the sum of US$953,037.47, representing the agreed value of the cargo (US$1,913 per metric tonne x 498.190 tonnes) as at 29 April 1998, the date of the misdelivery. 18. There is a secondary claim pleaded in the sum of US$43,362.08 representing the loss, damage and expense incurred "including legal fees, disbursements and other costs involved in taking steps to mitigate loss". In this regard, counsel have indicated, absent agreement between the parties upon the figures, that in so far as liability be established in the head action, the appropriate course is for the assessment of this subsidiary claim to be adjourned for assessment on a reference to a Master. I concur with this approach. The issues 19. Mr Sussex SC, for the defendant, contended that this case could not simply be categorised as a "classic misdelivery", as the plaintiff had asserted. Notwithstanding the primary admission that the cargo had been delivered without presentation of an original bill of lading, it did not automatically follow, he said, that the plaintiff was entitled to recover substantial damages. To the contrary. Whether analysed in terms of contract, conversion or bailment, the defendant's position was that the plaintiff was not entitled to recover any more than nominal damages at best. Pursuant to this submission, Mr Sussex advanced arguments under a number of heads which in some instances overlap, and I adopt the following sub-headings for ease of reference. (1) Ratification 20. The key here, submitted Mr Sussex, lay in the entry by Trafigura into the contract of sale with Minmetals on 25 May 1998. This basic fact led to alternative arguments : first, that the conclusion of the contractual arrangements with Minmetals amounted to a constructive repossession of the cargo, and in fact constituted a transaction akin to recovery of the cargo; second, and alternatively, that by the entry into the contract with Minmetals, the plaintiff effectively ratified the misdelivery to Minmetals, so that Trafigura could not on the one hand contract with Minmetals and on the other seek to complain of the misdelivery. 21. I take the 'ratification' aspect first. In this instance, said Mr Sussex, the plaintiff could not approbate and reprobate, and what the plaintiff had in fact done was to waive the tort : see Verschures Creameries Ltd v. Hull and Netherlands Steamship Company Ltd, [1921] 2 KB 608 (CA). 22. In my view, this argument fails. I entertain no doubt that in entering into the contract with Minmetals, the plaintiff was in no sense ratifying the misdelivery, nor did the entry into the contract constitute a binding election serving to foreclose a suit in conversion. 23. Verschures Creameries, op.cit, upon which Mr Sussex relies in this part of his argument, does not give him the support he would wish. In United Australia Ltd v. Barclays Bank Ltd [1941] AC 3 at 31, Lord Atkin (who had delivered one of the judgments in the Court of Appeal in Verschures Creameries) explained this case thus :-
24. There is no question in the present case of a suit to judgment by Trafigura against Minmetals, and I decline Mr Sussex's invitation to consider entry into a new contract as being "akin to suing someone to judgment". Nor do I consider that he is right to suggest that "only on a strained analysis" can the entry into a new contract be considered "any form of mitigation". To the contrary. In my view this is precisely what the plaintiff was doing. Having lost control of the goods, and having had to chase them up the Pearl River to their repository in the Panyu Bonded Warehouse, the plaintiff in effect was having to play a constant game of 'catch-up'. From the plaintiff's standpoint, the pursuit of the cargo and subsequent entry into the Minmetals contract in the circumstances amounted to little more than 'Hobson's choice', and I see no basis for suggesting that what occurred constituted a waiver of the tort by the plaintiff. I am satisfied on the evidence that the plaintiff's entry into the Minmetals contract was perceived as the best available option in an entirely unexpected and unwelcome situation; as Trafigura expressed the position in its Letter of Claim dated 8 May 1998 to Ms Grace Li of Swire Shipping :-
25. Nor, it must be said, did those acting for the defendant apparently then consider that entry into the Minmetals contract constituted any form of ratification or binding election on the part of Trafigura, Messrs Richards Butler, in a letter dated 24 June 1998, noting that :-
whilst by letter of the following day, they observed further :-
26. Against this background, therefore, the ratification contention now put forward strikes me as not only legally unsustainable, but in the circumstances somewhat rich. 27. Nor in the circumstances do I accede to the alternative argument under this head, namely that the contract with Minmetals was akin to recovery of the cargo, thereby permitting the argument that where a defendant in an action for conversion demonstrates that the plaintiff has recovered the property so converted, whilst the conversion is not purged, nevertheless return of the goods stands in diminution of damages. 28. Mr Sussex here relied upon Hiort v. London and North Western Railway, (1879) 4 Ex.D. 188, a case in which the defendant warehouseman, charged with storing the plaintiffs' corn, were induced by the plaintiffs' agent to part with sixty quarters of that corn against the promise of a delivery order from the plaintiffs. As it happened, a third party subsequently contracted with the plaintiffs to purchase the like quantity of corn as had been improperly obtained by the agent, and having obtained a delivery order from the plaintiffs for this transaction, the purchaser endorsed it over to the agent, who thereupon forwarded it to the defendant as the delivery order he had promised to send. The third party purchaser could not pay for the corn, and the agent never accounted to the plaintiffs for the price of the corn he had obtained. 29. The plaintiffs sued the defendant in conversion, seeking to recover the value of the corn which had been predelivered to the agent, and failed, the Exchequer Division giving judgment for the defendant. On the plaintiffs' appeal, it was held by a majority that although there had been a conversion of the sixty quarters of corn supplied to the agent against the promise of a delivery order, the plaintiff was entitled to nominal damages only. Thesiger LJ observed (op.cit. at 199) :-
whilst Bramwell LJ was of the view that the third party's endorsement to the agent of the bona fide delivery order, which was then forwarded by the agent as the promised order against the unauthorized initial advance, was
30. I do not think that Hiort, upon which Mr Sussex "primarily relies" in this context, provides the support for which he contends. It is a curious case on its facts, and far removed from the present situation. In this argument Mr Sussex placed considerable reliance upon the obtaining by Trafigura of the Holding Certificate in respect of the cargo, which enabled him to argue that constructive possession of the cargo was thus resumed, and accordingly that there has been concluded a transaction akin to the recovery of the cargo. On the evidence, however, this contention does not succeed. I accept Mr Yue's evidence that the Holding Certificate as issued was plainly unsatisfactory in its terms in that, inter alia, Trafigura had no power to remove the cargo from the bonded warehouse and send it elsewhere, neither was it permitted to survey the cargo by its chosen surveyor, SGS, nor, for that matter, was it permitted any form of warehouse receipt. So that in the circumstances that prevailed, I find it difficult to accept the disarming submission that what had occurred was akin to 'recovery' of the cargo, since at no time did Trafigura regain (to adopt the term used by both Thesiger and Bramwell LJJ in Hiort) "dominion" over the goods in question. To the contrary, as Mr Kerr submitted, the plaintiff had never regained control of the cargo subsequent to the misdelivery - on the facts there was no question, for example, of Trafigura being in a position to move the goods from the warehouse - and, as he put it, "everything flowed" from this loss of control. 31. It follows from the foregoing, therefore, that I reject the defendant's assertion, persuasively though it was broached, that the Minmetals contract, as signed and countersigned on 12 and 25 May 1998 respectively, served to negate the effects of the admitted act of misdelivery in Hong Kong, thereby enabling the recovery of nominal damages only. In my judgment the plaintiff's actions subsequent to the misdelivery fall squarely within the ambit of making all reasonable efforts to mitigate their loss; in my view Mr Kerr's point is well-made that his client had never at any stage treated the goods as having rightly come into the hands of Minmetals. It is, perhaps, a wry reflection on events that had the plaintiff simply done nothing to attempt to rescue the position, and, without more, had stood simply on its cause of action in conversion and issued its writ forthwith, doubtless the contention then forthcoming would have been of the plaintiff's failure to mitigate - which, as the correspondence reveals, was one of the matters exercising the minds of the defendant's solicitors subsequent to receiving the plaintiff's notice of its claim. (2) Causation 32. A further significant plank within the defendant's attack on the plaintiff's claim is that of causation, the thrust of the argument being that the loss of the plaintiff's cargo arose not as the result of the misdelivery but as the result of Minmetals moving the cargo from the Panyu Bonded Warehouse, and its consequent confiscation by the PSB on or about 12 July 1998. This was, submitted Mr Sussex, "a classic case of intervention by a third party", and he maintained that there could be no doubt that the confiscation by the Chinese state agency must be considered the immediate or proximate cause of the loss. 33. An important element of this particular argument was that, for all practical purposes, the misdelivery itself made no difference to the cargo destination, and that it was plain in all the circumstances that the plaintiff was going to permit the cargo of copper to go into China, notwithstanding the absence of contractual agreement and absent a covering letter of credit in place, so that insistence upon production of an original bill of lading in Hong Kong would have made no difference whatever. In fact, Mr Sussex went so far as to argue that in the circumstances the plaintiff had received the "windfall" of a cause of action for misdelivery, and as at 13 May the plaintiff was in the same position as if the control mechanisms contemplated by the plaintiff (a transshipment bill of lading in its name, an SGS survey, and a warehouse receipt) had eventuated, so that at bottom the misdelivery had had no causal impact upon the loss at all. The control mechanisms were largely "window-dressing" for the financing bank, asserted Mr Sussex, the defendant's position being that they were "illusory", and he asked that the case be regarded with "a degree of commercial cynicism". The plaintiff was willing to turn a "Nelsonian" eye to the smuggling that was obviously going on, he suggested, maintaining that there was little difference between taking a warehouse receipt from a suspect warehouse in Panyu when compared with the position on 13 May, when the plaintiff was able to obtain a Holding Certificate from a "trusted client". A contract with Minmetals was inevitable, said Mr Sussex, the principal cause of the earlier impasse being interest-free periods, and on 13 May the plaintiff was in no worse a position than if a contract had been concluded prior to the misdelivery, or if delivery had occurred in proper course against presentation of a valid bill of lading. 34. I reject to this submission. I am unwilling to accept the defendant's invitation, in effect, to use a crystal ball and to re-run the sequence of events in order to decide what would or would not have occurred if the cargo had not been so misdelivered by the defendant. Mr Yue's evidence, which I accept, was that towards the end of April 1998 he was not only considering the position if the cargo indeed was to go into China, accompanied by the various acceptable and necessary protective mechanisms that the plaintiff desired (given that under existing licensing arrangements, the plaintiff was under constraint not to trade within nor import into China), but that at the same time he was also mulling over the question of sale to another prospective purchaser, namely, Hutterbirds, or alternatively a possible sale of the cargo on the Shanghai metals market. I further reject the unsubstantiated submission that the plaintiff was, in effect, prepared to be privy to the smuggling of this cargo absent a customs declaration, which the uncontroverted expert evidence on the point established had to be made before the cargo went into the bonded warehouse. 35. In my judgment, the defendant's causation argument cannot be sustained. I have earlier observed that, subject to argument as to failure to mitigate, the plaintiff need have done no more than stand upon its cause of action consequent upon the admitted misdelivery, and I have held, also, that in the circumstances there has been neither election nor ratification of the position by the plaintiff. Had, for example, the cargo remained unseized, albeit unpaid for by Minmetals, no causation argument consequent on the actions of the PSB would have arisen, and in this sense, absent the plaintiff's ratification of the misdelivery, the actions of the PSB do not strike me as other than a curious incident within the matrix of facts in this case. 36. In my view, the loss in this case was caused by and consequent upon the misdelivery, the cause of action vesting the plaintiff was not a "windfall", and the plaintiff is entitled to recover therefor. Nor do I consider there is any question of the loss being too remote, which was the other plank suggested by the defendant consequent upon the PSB's actions. 37. Accordingly, I reject the causation line of argument. (3) Conversion 38. Mr Sussex ran two arguments in relation to conversion. The first is that which was based on Hiort, op.cit., which I have earlier considered. 39. The second argument related to the plaintiff's title to sue in conversion. Mr Sussex accepted that since the plaintiff has in its possession the three originals of the bills of lading relating to this cargo, the plaintiff therefore has title to sue in contract by virtue of section 4(1) of the Bills of Lading and Analogous Shipping Documents Ordinance, Cap.440. He maintained, however, that the plaintiff had failed to prove its entitlement to a claim in conversion because all that the plaintiff had done was to produce the original bills of lading endorsed in blank, and that there had been no evidence about the financial arrangements for this shipment given that there were clearly financing banks involved. It was established that title to sue in conversion accrues only if a person had, at the time of the conversion, actual possession or the immediate right to possession, so that if the goods were pledged - as, for example, when bills of lading are delivered to a bank as security - the pledgee has the exclusive right to take possession, and consequently the sole right of action. 40. However, in this case, said Mr Sussex, this did not seem to be the plaintiff's position in that it appeared that three original bills of lading relating to this cargo were in the hands of the Swiss Bank Corporation throughout the time that the "Explorer" called at Hong Kong, with another bank subsequently appearing to become involved, namely BNP Basle, which was named in the Holding Certificate signed by Minmetals. Accordingly at the time when the conversion occurred - that is, between 3.30 pm on 29 April and 1.00 am on 30 April 1998 - it appeared likely, argued Mr Sussex, that SBC was a pledgee of the bills, and thus had immediate right to possession of the cargo, and it could be inferred that the bills were transferred to the plaintiff only when the pledge was redeemed. Without, therefore, explanation of the financing arrangements pursuant to which SBC and BNP Basle became involved, it could not be inferred in the plaintiff's favour that the plaintiff had the immediate right to possession at the time of the conversion. 41. This point achieved no profile in the pleadings, being buried within a non-admission (at paragraph 2 of the Defence), and Mr Kerr for the plaintiff was taken somewhat by surprise. In my view it is devoid of merit, and smacks somewhat of scraping the barrel. In terms of the oral evidence, Mr Yue knew little about the financing arrangements, albeit Mr Kerr pointed out that on the papers in evidence before the court his client was clearly the owner of this cargo, having had the purchase price of US$897,655.26 debited from its SBC current account; in point of fact, said Mr Kerr, references to the financing were to monies advanced against the on-sale pending payment from the anticipated letter of credit, and the fact remained that SBC was perfectly prepared to make available a bill of lading for discharge purposes in Hong Kong. 42. This is an unsatisfactory situation, and serves to reinforce the view that it is necessary in commercial litigation to require pre-trial preparation of an agreed list of issues to be ventilated at trial. In any event I am not prepared to accept the submission that the plaintiff has no locus to sue in conversion. On the evidence before the court the plaintiff had paid for these goods and had the right to, and was prepared to, present an original bill of lading to obtain delivery of this cargo, and I have no intention of speculating upon the plaintiff's financial arrangements with either SBC or BNP, nor of making the adverse inferences the defendant now invites the court to make. 43. To the foregoing I would add that I presently remain unpersuaded that it necessarily follows a party would not have a sufficient interest to maintain an action for a conversion even in a pledge situation. The case of Bristol and West of England Bank v. Midland Railway, [1891] 2 QB 693, to which Mr Sussex very properly drew my attention, tends to suggest that a transferee from a pledgee is entitled to sue in conversion, even though at the time of the conversion the immediate right to possession was vested in the transferor. Mr Sussex purported to distinguish this case on the facts as concerning a transfer by way of assignment by one pledgee bank to another, but in the circumstances and without evidence of the precise position - for which the plaintiff in my view is not to be criticized, given the way the point has emerged - I do not propose to take this issue further. The plaintiff has demonstrated payment for and ownership of the cargo, which in normal course attracts the usual incidents of ownership, and was clearly prepared to take delivery against production of an original bill of lading, and if the defendant had wished to raise a specific issue in rebuttal, the point should have been flagged on the pleadings. 44. I find that on the evidence before the court the plaintiff has locus to sue in conversion, and further that, on the facts of this case, the plaintiff is entitled to succeed in that cause of action. (4) Contractual exemptions 45. The last significant line of attack on the plaintiff's claim involved contractual exemptions. In this regard Mr Sussex placed reliance on two clauses, Clause 5 and Clause 7(5)(b) of the bill of lading. 46. Under the sequential headings "Carrier's Responsibility Port-to-Port Shipment", Clause 5 provides, inter alia, that "the Carrier shall be under no liability whatsoever for loss of or damage to the goods, howsoever occurring if such loss or damage arises prior to loading onto or subsequent to discharge from the vessel". 47. Whilst under the heading "Sundry Liability Provisions", and the sub-heading "Scope of Application", Clause 7(5)(b) provides :-
48. Mr Sussex SC relied upon both clauses in his argument. He submitted, in terms, that "the combined effect of clauses 5 and 7(5)(b) results in an exclusion of liability for the consequences of misdelivery". For his part Mr Kerr, on behalf of the plaintiff, argued that clauses of this nature do not apply to instances of misdelivery of goods by the carrier, a principle he asserted was recently reaffirmed by the English Court of Appeal decision in Motis Exports Ltd v. Dampskibsselskabet AF 1912 & Anor., [2000] 1 Lloyds LR 211 - and that, in any event, Clause 5 specifically applies only to events after discharge, and in the present case misdelivery (and hence the loss) took place either when the delivery order was handed over to Harvest Fortune on 28 April or when the cargo crossed the ship's rail, citing in this context the observations of Clarke J (as he then was) in The Ines, [1995] 2 Lloyds LR 144 at 152. 49. Mr Sussex responded by arguing that Motis, op.cit., was no authority for the proposition that liability for misdelivery cannot be excluded by a suitably worded clause or clauses, and the only question in the present case, wherein Clause 7(5)(b) extended Clause 5, was whether these words were clear enough to achieve the result his clients sought. 50. To this question the answer, in my view, must be 'No'. I have no doubt that the words are not clear enough. However many times these clauses be read, and whether read singly or together, I cannot attain a construction serving to exclude the liability of the contractual carrier for the misdelivery of the goods it has been engaged to carry. 51. With regard to the ambit of Clause 5, I have earlier rejected Mr Sussex's primary submission that the loss in this case occurred after discharge and as a consequence of the confiscation of the goods by PSB, whilst I am quite unable to ascribe to Clause 7(5)(b) the meaning the defendant now seeks to achieve. When read as a whole and in context, this clause does no more than to confirm the applicability of the provisions of the bill of lading to any carrier assailed with a suit for loss, damage or delay occurring to the goods transported. This seems to me to be a far cry from the result suggested by Mr Sussex, whether in conjunction with Clause 5 or otherwise. In my view the court's approach to this type of submission should be one of considerable caution. As Rix J at first instance observed in Motis, op.cit., when considering a clause not dissimilar to the present Clause 5 and in a case involving misdelivery against a forged bill of lading :-
a view with which the Court of Appeal in that case agreed, Stuart-Smith LJ stating (op.cit. at 215) :-
52. I reject the defendant's contentions under this head also. (5) Bailment 53. The plaintiff also advances a cause of action in bailment. Mr Sussex submitted that this added nothing to its claim in contract, and in any event contended that it was questionable whether there was any bailment in this case. The defendant was merely a contractual carrier, he said, and it was not suggested that the defendant ever had physical possession of the cargo. And if it was a bailment, it was a bailment for reward on the terms of the bill of lading. In reply, Mr Kerr submitted that his client was perfectly entitled to sue in bailment, in that it had the immediate right to physical possession of the goods immediately prior to the misdelivery, here citing the recent Court of Appeal decision in Hong Kong Hua Guang Industrial Co. (a firm) v. Midway International Ltd & Coastrand Shipping Ltd, CACV 207 of 1999. Mr Kerr suggested that the reason the defendant was anxious to avoid bailment was because the bailee effectively became the insurer of the chattels and had the burden of showing why it was not liable for the full cost of the goods - and this the plaintiff manifestly could not do in this case. 54. In the event, Mr Sussex reserved to the appellate court the issue of whether a high degree of control could give rise to bailment, and the issue was not developed further. In a sense, perhaps, the question is academic, since I have held earlier in this judgment that the plaintiff is entitled to succeed in this case in both contract and conversion. However, if I be wrong in these conclusions, I find in any event that on the facts of this case the plaintiff is entitled to succeed in bailment also. (6) Limitation 55. This line was no longer pursued by the defendant. Mr Sussex accepted the application of the Hague-Visby Rules, the effect of which was to preclude the taking of a package limitation point in terms of the carriage of this cargo. Order 56. The result of the foregoing, therefore, is as follows :-
The Third Party Proceedings 57. As noted earlier in this judgment, subsequent to the default by the Third Party upon a discovery order of 10 June 1999, Harvest Fortune has taken no further part in this action, nor has it appeared or been represented at this trial. 58. In the proceedings issued by the defendant against Harvest Fortune, the defendant in its Third Party Points of Claim seeks to pass on to Harvest Fortune by way of "an indemnity and/or damages and/or a contribution" the liability, if any, of the defendant to the plaintiff. 59. In his final address, Mr Sussex SC prayed in aid the terms of the Letter of Indemnity which had been issued by Harvest Fortune to Swire Shipping (Agencies) Ltd against which delivery was effected, which on the evidence of Ms Grace Li, which I accept, was received at the time of the release of the cargo on 28 or 29 April 1998. This Letter of Indemnity, contains, inter alia, the following provisions :-
60. In the event of his client being held liable to the plaintiff, Mr Sussex sought corresponding judgment against Harvest Fortune to encompass not only the sums due from the defendant to the plaintiff, but also to include within such financial indemnity the defendant's costs on the basis that the terms of the indemnity given were "all embracing". 61. In light of the terms of the indemnity, in particular paragraph 1 thereof, it is difficult to resist that conclusion. I have, of course, heard nothing from Harvest Fortune, which I note has alleged (in its Points of Defence dated 26 February 1999) that a Mr Choi of Harvest Fortune was told by Ms Grace Lee (sic) "that the letter of indemnity is a formality only and will not be enforced" (at paragraph 4(c)) and that "Based on Swire's representation, the Third Party signed the letter of indemnity ... which shall be void and of no effect" (at paragraph 5). This appears to be the only defence which is pleaded. 62. Ms Grace Li who gave evidence, has described this allegation as "absolutely untrue", and I accept her evidence on the point. I am, therefore, left with an indemnity in the broad terms in which it was given against delivery of this cargo absent production of an original bill of lading, and in the circumstances the court has little option but to accede to the submission made on behalf of the defendant in terms of the consequent third party liability of Harvest Fortune. Order
63. If such be necessary, I will hear the defendant as to the form of the Order. 64. I thank counsel for their assistance.
Representation: Mr John Kerr, instructed by Messrs Ince & Co., for the Plaintiff Mr Charles Sussex SC, instructed by Messrs Richards Butler, for the Defendant The Third Party was not represented and did not attend |
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