Cordial Manufacturing Co Ltd and Another v. Hong Kong-america Air Transport Ltd and Another

HCA002629/1972

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ACTION NO. 2629 OF 1972

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Coram: Trainor, J.

Date of Judgment: 4th June, 1976.

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JUDGMENT

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1. The background to this case is, to put it mildly, surprising.

2. In February 1971 goods were to be sent by air to America and an air waybill, "executed" on the 13th February, was issued by the defendant in respect of them. In a space provided for the purpose the place of departure is stated to be HKG, which I understand means Hong Kong, and the destination is N.Y.C., which I understand means New York City. The "first carrier" is stated to be the defendant. Space is provided for subsequent destinations and subsequent carriers but were left blank. It is stated in the air waybill that the goods were consigned to Irving Trust Co. of New York, and it was directed "also notify Outlander Group Ltd.", the second plaintiff. The first plaintiff was named as "the shipper". In a space provided the terms of payment of freight, U.S.$3,048.50, are endorsed: "as arranged collect".

3. The goods, in 65 cartons, were collected from the premises of the first plaintiff by the defendant and forwarded by Pan American Airways on a place which was chartered, but by whom I was never informed. There were local charges, including cartage, which were paid by the first plaintiff.

4. An air waybill issued by Pan American World Airways Inc. and "executed" on the 15/2/71 was produced with respect to 1280 cartons of varied goods. It was common case, at least between the plaintiffs and the defendant, that included in the 1280 cartons were the 65 referred to in the air waybill issued by the defendant. The shipper named is Messrs. Jillene Inc., 12th floor, Mirador House, Kowloon, and the consignee, Messrs. Thayer International Inc. c/o Hecny Transportation (U.S.A.) Inc., Los Angeles International Airport with a direction that the latter be notified at 5628, West Century Bouldvard, Los Angeles for the attention of a Mr. Chan.

5. In a space provided under the heading "Issuing Carriers Agent" there appears: HTL/HKG.ML." This I understand means the defendant. The air waybill stated Hong Kong to be the airport of departure and Los Angeles the destination. In this air waybill freight was "Prepaid as per charter rate arranged".

6. Another air waybill was produced, issued by Flying Tiger Line Inc., the third party to the proceedings, dated the 18th February 1971. The shipper is named as Hecny Transportation Inc. and the same company is named as the consignee. This air waybill is in respect of 497 Cartons of wearing apparel and the airport of origin is stated to be Los Angeles and the destination John F. Kennedy Airport, New York. There is an endorsement on it to the effect that the consignee is to be notified immediately. It was, again, common case that the 65 cartons referred to in the air waybill issued by the defendant were included in the 497 cartons.

7. The goods duly arrived in New York and on the 18th February were checked in by the third party and a carrier's certificate was issued by it to Messrs. Taub, Hummel & Schnall Inc. brokers acting on behalf of the second plaintiff.

8. On the 24th February the goods were released by the third party to a van, or lorry, driver who produced documents to justify delivery of the goods to him and who verified his identification by producing an identity card and a driving licence. He also submitted to being photographed.

9. Everything he produced was a forgery.

10. The goods in question were purchased from the first plaintiff by the second. The goods were sold F.O.B. and payment was by Letter of Credit drawn on the Irving Trust Co., the Consignee named in the defendant's air waybill. The first plaintiff has been paid for the goods and the second plaintiff has repaid the Irving Trust Co., so, in fact, it is the second plaintiff which is really the injured party.

11. On the 17th October, 1972 the plaintiffs issued a writ of summons with a Statement of Claim endorsed.

12. The Statement of Claim, which was, indeed, far from precise, pleaded that the defendant, a company carrying on the business of transportation by air, by an air waybill dated the 13th February, 1971 "issued by the defendant and executed by the 1st plaintiff" agreed to carry by air, on a freight collect basis, the 65 cartons to which I have earlier referred subject to the terms and conditions in the waybill and to the terms of the Warsaw Convention.

13. The Statement of Claim pleaded that in the waybill the first plaintiff was the Consignor, Irving Trust Co. was the consignee and the second plaintiff was "the Notify Party". It pleaded that "the 2nd plaintiff was at all material times and is the owner of the said goods". It went on to plead that the goods having been entrusted to the defendant on the 13th February, 1971, the defendant "in breach of its duties as carriers and of the contract contained in and/or evidenced by the said air waybill failed to deliver them to the consignee or the second plaintiff". The plaintiff pleaded further or alternatively that the defendant through its servants or agents, Flying Tiger Lines, failed to take reasonable care in the carriage of the goods by delivering them to an unauthorised party. The Statement of Claim pleaded further or alternatively that the defendant wrongfully converted the goods.

14. The claim is then set out as follows:

"And the 1st or 2nd plaintiff claims:-..... damages in the sum of $111,973.593".

That sum is the price of the goods, stated to be US$16,528.20, and the cost of freight stated to be US$3,116.29, converted into Hong Kong dollars.

15. A Defence which was delivered was amended at the hearing.

16. As a considerable part of the Defence raised was abandoned at the hearing and by reason of my decision I propose only to refer those parts of the Defence which I deem to be relevant. Where are only three such points: (1) The defendant made no admission as to ownership of the goods; (2) the defendant denied that either plaintiff was entitled to the relief claimed or any relief; and (3) that the defendant would rely on the terms endorsed on the defendant's air waybill.

17. Endorsed on the Air Bill issued by the defendant were certain "Conditions of Contract". In so far as I consider them relevant I quote from them:

18. The Law In Hong Kong Applicable To Carriage By Air

19. The Conditions of Contract stipulate that what is internationally known and referred to as the Warsaw Convention (referred to in the "Conditions of Contract" as "the Convention") shall apply to the contract. But that stipulation must be examined against the background of local legislation.

20. The desirability, for the unification of rules pertaining to international carriage by air which gave rise to the Warsaw Convention are too well known and, if I may say so with respect, so excellently set out by Greene, L.J. in Grein v. Imperial Airways Ltd. (1937) 1 K.B.D. 50 at 74/75 that I do not consider it necessary for me to dwell on the matter.

21. The Warsaw Convention was given the force of law in England by the Carriage of Air Act, 1932 and, with certain adaptations and modifications, that Act was extended to Hong Kong by an Order in Council, the Carriage by Air (Colonies, Protectorates and Trust Territories) Order 1953 (S.I. 1953/1474). It was amended by a Protocol signed at The Hague in 1955 and the amended Convention was made part of the law of England by the Carriage of Air Act, 1961. On the 18th September, 1961 a further convention was signed at Guadalajara and given the force of law in England by the Carriage of Air (Supplementary Provisions) Act, 1962. Power was given in each of the acts to Her Majesty to extend them to, among other places, Hong Kong. This was done by the Carriage by Air (Overseas Territories) Order, 1967 (S.I. 1967 No. 809). That Order came into affect on the 1st June, 1967 and it revoked the Carriage by Air (Colonies, Protectorates and Trust Territories) Order 1953.

22. As I shall frequently have to refer to "Articles" in the Schedules to the Orders in Council I shall, when referring to a part of the Order, refer to it as a "section" to avoid ambiguity.

23. Section 4 of the Order provides:

"The provisions of Section 1(1) and (sections) ..... of the Act of 1961, (the Carriage by Air Act, 1961) subject to certain adaptations and modification, as set out in Schedule 1 to this Order are extended to the territories mentioned in Schedule 3 to this Order". (Schedule 3 included Hong Kong).

24. Section 5 provides:

25. It is of interest, as it gave rise to certain argument in this case, that in both the Act of 1961 and the Act of 1962 it is provided that where there is any inconsistency between the English and the French texts of the amended Convention and the supplementary Convention of Guadalajara the French text is to prevail, whereas in the Order in Council "the amended Convention" and "the Guadalajara Convention" are said to mean the English texts.

26. The adaptations and modifications of the Act of 1961 as set out in Schedule 1 to the Order in Council, so far as I think it necessary to quote them, are:

27. The first Annex to schedule 1 is headed "The Amended Convention" which, by definition, means the Warsaw Convention as amended by the Hague Protocol.

28. The first chapter of the Annex is headed "Soope-Definition" and Article 1 reads:

29. International Carriage.

The first question is does the carriage of the goods consigned by the first plaintiff fall within the definition of "international carriage" given in Article 1(2).

30. The destination of the goods was in the United States of America. The United States although a signatory to the Warsaw Convention did not sign the Protocol of The Hague nor did it accede or ratify it and it is not, therefore, part of American domestic law. By reason of the definition of "High Contracting Parties" in Article 40 A in The Hague Protocol an interesting academic exercise might be had in the application of those words in the context of what I have just quoted. In Article 40A a High Contracting Party is defined: "In Article 37, paragraph (2) and Article 40, paragraph (1), the expression High Contracting Party shall mean State. In all other cases, the expression High Contracting Party shall mean a State whose ratification or adherence to the Convention has become effective and whose denunciation thereof has not become effective". If this were taken literally, and particularly when one remembers the preamble to the Protocol: "Protocol to amend the Convention for the unification of Certain Rules Relating to International Carriage by Air Warsaw, 12 October, 1929", and that America had signed the Convention one might easily conclude that the United States was a High Contracting Party. A further study of the Protocol would, however, suggest that the word "Convention" is used sometimes to refer to the Warsaw Convention and at other times to refer to that Convention as amended. However, the matter is, as I said earlier, academic because that usually ambiguous piece of drafting has not been reproduced in the Queen's Printer's Copy of the Act of 1961 nor in the Order in Council.

31. The position in Hong Kong is governed by the Order in Council and, as in England under the Act, Her Majesty may by Order in Council certify who are the High Contracting Parties. By the Carriage by Air (Parties to Convention) Order 1972 (S.I. 1972/970) the United States of America was certified to be a High Contracting Party to the Warsaw Convention but not to the Convention as amended at The Hague.

32. The result is, therefore, that the carriage with which this case is concerned is not international carriage within the definition of the amended Convention as the destination is not in the territory of a High Contracting Party and the Carriage by Air (Overseas Territories) order 1967 does not apply.

33. What Law Does Apply in Hong Kong.

By virtue and in exercise of the powers conferred by the Act of 1961 and the Act of 1962 Hor Majesty made a further Order in Council, the Carriage by Air Aots (Application of Provisions) (Overseas Territories) Order 1967 (S.I. 1967 No. 810), which also came into operation on the 1st June, 1967. It uses the terms "The Amended Convention" and "the Guadalajara Convention." in the interpretation section and states it is the English text of the Warsaw Convention as amended at The Hague, the provisions of which are set out in the first schedule to the Act of 1961, and the English text of the Guadalajara Convention as set out in the schedule to the Act of 1962 that is intended. By definition in the Order "the Warsaw Convention" means the unamended Convention.

34. Section 3 of the Order reads:

"This Order shall apply to all carriage by air, not being carriage to which the amended Convention applies."

35. Section 5 is as follows:

36. Schedule 3 to the Order is headed:

and continues

"2(1) Her Majesty may by Order in Council from time to time certify who are the High Contracting Parties to the Warsaw Convention....."

It is also provided that such an Order in Council shall, except so far as it has been superseded by a subsequent Order, be conclusive evidence of the matters so certified.

37. There has been an Order in Council subsequent to the Carriage by Air (Parties to Convention) Order 1972 (supra) but it does not alter the position as to the High Contracting Parties to the Warsaw Convention as set out in that Order so far as the United States is concerned.

38. Schedule 4 is headed:

"International Carriage under the Warsaw Convention"

and there then follows:

39. Article 1(1) of Part I applies the schedule to, inter alia,

"all international carriage of persons, baggage or cargo performed by aircraft for reward....."

40. Article 1(2) defines "international carriage" as

41. As the United States was certified by Order in Council to be a party to the Warsaw. Convention, and as carriage by air of goods between Hong Kong and the United States of America is carriage by air to which the amended Convention does not apply, such carriage is, therefore, governed by the provisions of the Carriage by Air Acts (Application of Provisions) (Overseas Territories) Order 1967. That means that the case under consideration is only subject to the amended Convention and the Guadalajara Convention as adapted and modified to the extent set out in Parts I and II to schedule 4 of the Order.

42. The Case.

43. Having regard to the pleadings and to the argument of Counsel initially it might, perhaps, be appropriate to note here Article 1(3) of Schedule 4:

"(3) A carriage to be performed by several successive carriers is deemed, for the purposes of this schedule, to be one undivided carriage if it has been regarded by the parties as a single operation, whether it had been agreed upon under the form of a single contract or of a series of contracts, ......''

44. Originally Mr. Chang for the plaintiffs and Mr. Dicks for the defendant approached this case as if Article 1(3) of Schedule 4 applied: Mr. Chang contending that as there was a single named carrier in the air waybill there were not successive carriers but only one, the first defendant; Mr. Dicks contending that as there were in fact a number of carriers there were successive carriers.

45. Mr. Chang contended that as the defendant was the only named carrier the third party was acting as the agent of the defendant which, therefore, was liable throughout. Mr. Dicks' contention was that as there were in fact two air carriers involved then, by virtue of Article 30(3) of Part I of the Schedule, the consignor had a right of action against the first carrier, the consignee had a right of action against the last carrier and each against the carrier at the time the loss was incurred. He contended that the consignor, the first plaintiff, had no interest in the goods at the time of the loss therefore it had no right of action at all or at the best only for breach of contract where, if successful, damages would be nominal; and that the second plaintiff was not the consignee named in the air waybill therefore it had no right of action against the defendant.

46. Later both Mr. Cheng and Mr. Dicks informed me that they believed their arguments had been based on a wrong interpretation of Schedule 4 of the Order and that in the circumstances the relationship between the parties is governed by the provisions of the adapted and modified Guadalajara Convention as set out in Part II of Schedule 4 of the Order. It was unfortunate that the case should have been pleaded, and argued for some days on the basis of "successive carriers". Having regard to the evidence of the only witness, to which I shall later refer, I agree with Counsel and I only refer to the matter to say that such would have been my decision had it been necessary to rule on the matter, and to introduce arguments later relied on by Counsel.

47. In the adapted and modified Guadalajara Convention, to which I shall hereafter refer to as the Guadalajara Convention, two terms are defined: "contracting carrier" and "actual carrier".

48. "Contracting Carrier" is defined in Article I of Part II of Schedule 4 as:

"(b) a person who as a principal makes an agreement for carriage governed by the Warsaw Convention (in this reference Warsaw Convention means the amended Warsaw Convention as applied) with a ..... consignor or with a person acting on behalf of the ..... consignor;"

and "Actual Carrier" as:

"(c) a person other than the contracting carrier, who, by virtue of authority from the contracting carrier, performs the whole or part of the carriage contemplated in paragraph (b) but who is not with respect to such part a successive carrier within the meaning of the Warsaw Convention. Such authority is presumed in the absence of proof to the contrary."

49. There can be no doubt that the defendant falls within the definition of a contracting carrier; indeed it is conceded.

50. Article II of Part II provides:

"If an actual carrier performs the whole or part of carriage which, according to the agreement referred to in Article I, paragraph (b), is governed by the Warsaw Convention, both the contracting carrier and the actual carrier shall, except as otherwise provided in the Guadalajara Convention as applied by this schedule, be subject to the rules of the Warsaw Convention, the former for the whole of the carriage contemplated in the agreement, the latter solely for the carriage which he performs."

51. It will be seen from that article that, whereas under Article 30(3) of Part I a right of action by the consignor, lies only against the first carrier or the carrier at the time of the loss, and by the consignee against the last carrier or the carrier at the time of the loss, the contracting carrier in a carriage by air subject to the Warsaw Convention is, by reason of the Guadalajara Convention, liable for the whole of the carriage.

52. Article 18 of Part I states:

"The carrier is liable for damage sustained in the event of loss of ..... any cargo if the occurrence which caused the damage so sustained took place during the carriage by air."

It was common case that the loss of the cargo in the instant case took place at a time and in circumstances that fell within the time comprising carriage by air as defined. The effect, therefore, of the Guadalajara Convention coupled with Article 18 is, in this case, to impose a liability for the loss of the goods on the defendant throughout.

53. Plaintiffs right to sue.

(a) The second plaintiff.

54. As the right of the plaintiffs or either of them to sue was a strongly argued issue I think the circumstances surrounding the shipment, if I may use that word in relation to conveyance of goods by air, might usefully firstly be considered.

55. Only one witness was called in the proceedings, a Mr. Lam who is employed by the first plaintiff as supervisor of the transport division and who has been in the first plaintiff's employment for 14 years. His evidence was to the effect that the first plaintiff sold the goods in question to the second plaintiff. The price of the goods was US$16,528.20 F.O.B. He said that his employer's customers usually nominate the carriers and this case was no exception; the second plaintiff stipulated that the goods were to be transported by the defendant. He said the goods were collected at the first plaintiff's premises by the defendant and that "a procedural fee" of $15 was paid and also $45 as cartage.

56. The witness was cross-examined at some length by Mr. Dicks as to the general position after he hands over goods for transport to a carrier nominated by a purchaser. In one answer he said that when he hands over the goods to the carrier he considers he has fulfilled his obligation to the customer. In another he said that when he hands over the goods to a nominated carrier he washes his hands off them. He said that in the instant case he did not bother to ascertain the flight number of the plane transporting the goods. As to the freight, which according to the air waybill was to be collected (I presume from the consignee before the goods were handed over) by the carrier, he said he was unaware if it had ever been paid, but that his firm had not paid it.

57. I pause there for a moment to deal with the point argued by Mr. Dicks without objection at the time from Counsel for the plaintiff viz: in whom did the property in the goods vest at the time of the loss.

58. I do not intend to dwell on the evidence and cross-examination of the only witness nor the argument of Counsel on this point. It was stated in the Statement of Claim that the second plaintiff was at all times the owner of the goods; it was established that the goods were sold F.O.B.; it was the uncontradicted evidence of the witness called on behalf of the plaintiff that the goods were sold to the second plaintiff and that when they were handed over for transportation he washed his hands off them; it was established, though not precisely when, that the goods were paid for. (The existence of a Letter of Credit would suggest the first plaintiff would be paid on presenting necessary documentation of transportation); and there was evidence that the second plaintiff had met its liability to the Bank by reason of the Letter of Credit. I have no hesitation in holding that at the time of the loss the property in the goods was vested in the second plaintiff.

59. It was Mr. Chang's contention in his closing address that by virtue of Article 18 of Part I of Schedule 4 and Article II of Part II there was a strict liability imposed on the defendant throughout the whole of the carriage contemplated in the air waybill signed by the first plaintiff and the defendant. He argued that the defendant should not be heard to say that the first plaintiff had no right of action because it had no interest in the goods as that had not been pleaded. However, he said, even if it had been pleaded there was no substance in the point. He referred to Article VII of Part II of Schedule 4:

"In relation to the carriage performed by the actual carrier, an action for damages may be brought, at the option of the plaintiff, against that carrier or the contracting carrier, or against both together or separately"

and relied on it to support his contention. He coupled with it. Article 14 of Part I of Schedule 4:

"The consignor and the consignee can respectively enforce all the rights given them by Articles 12 and 13, each in his own name, whether he is acting in his own interest or in the interest of another, provided he carries out the obligations imposed by the contract." (Article 14 is pleaded in the Statement of Claim: "..... the plaintiffs will rely in particular, on Article 14 of the Warsaw Convention.")

60. I think I might usefully deal with Article 14 at this point by considering the rights conferred on the consignor and consignee by Articles 12 and 13 respectively.

61. Article 12(1) confers on the consignor, subject to him carrying out all his obligations under the contract of carriage: the right to dispose of the cargo by withdrawing it at the aerodrome of departure or destination; or by stopping it in the course of the journey on any landing; or by calling for it to be delivered at the place of destination or in the course of the journey to a person other than the consignee named in the air waybill; or by requiring it to be returned to the aerodrome of departure. But Article 12(3) reads:

"The right conferred on the consignor ceases at the moment when that of the consignee begins in accordance with Article 13 ....."

62. Article 13 reads:

	"(1)	Except in the circumstances set out in the preceding Article, the consignee is entitled, on the arrival of the cargo at the place of destination, to require the carrier to hand over to him the air waybill and to deliver the cargo to him, on payment of the charges due and on complying with the conditions of carriage set out in the air waybill.
	(2)	Unless it is otherwise agreed, it is the duty of the carrier to give notice to the consignee as soon as the cargo arrives.
	(3)	..................................................................................................................................."

63. In considering such rights as are conferred by Article 12 on the first plaintiff it is quite clear that they ceased to exist "at the moment" the goods arrived at New York airport. Until that moment he could have exercised those rights and, for example, called for the delivery of the goods to a person other than the Bank, the consignee named in the air waybill, e.g., to the second plaintiff, but he did not do so therefore all his rights under the article ceased. However, Mr. Chang, as I understand him, argues that as Article 14 gives the consignor the power to exercise rights in his own name "whether he is acting in his own interest or in the interest of another", and as the defendant is liable for the whole of the carriage and the plaintiff can elect whether to sue the contracting carrier or the actual carrier or both the first plaintiff is entitled in this case to act in his own name in the interest of the second plaintiff and sue the defendant.

64. I do not think Article 14 enables a consignor to act in the interest of another except in circumstances which arise out of him exercising a right conferred by Article 12. Indeed, it is my opinion that Article 14 was introduced (inter alia) to enable a consignor who had no property in lost or damaged cargo, and, consequently, no right to sue for its loss or damage, to recover under the Warsaw Convention the loss sustained for the benefit of the real sufferer who had acquired an interest from the consignor but who could not sue by reason of not being a party to the contract of carriage. Suppose, for the sake of argument a vendor of goods consigned them by air and while the goods were in transitu called for them to be delivered to a person other than the named consignee and the carrier failed to deliver them. If the property in the goods had already passed to that person the consignor, ordinarily, would have no right of action for their loss as he had no interest in them, and the person to whom they should have been delivered would have lacked privity with the carrier. By reason of Article 14, however, the consignor could act in his own name on behalf of the person to whom delivery was directed.

65. Likewise in the case of a consignee who has transferred his interest in the goods. He is entitled in his own name to demand the goods from the carrier on their arrival and to put into force against the carrier the rights which flow from the contract of carriage if there is a failure to deliver within the prescribed time.

66. As to Article VII of Part II I do not think Mr. Chang can derive much support from it.

67. It must be remembered that Parts I and II of Schedule 4 are supplementary to each other. The former applies to an international carriage where there is a single carrier, or successive carriers as defined by Article 1(3) of Part I, the latter deals with the case where there are not successive carriers as defined but there is a contracting carrier and an actual carrier or carriers. Where Part II, the Guadalajara Convention, applies Part I also applies mutatis mutandis. That embraces the rights conferred by Articles 12, 13 and 14. Article 14 says who may enforce the rights conferred by Articles 12 or 13, the consignor or consignee. Article VII merely refers to the plaintiff using the word comprehensively to cover the consignor or the consignee, whichever of them has the right to sue. In other words, the Article adds nothing to support Mr. Chang's contention.

68. It is of interest to note that so far as cargo is concerned the parties to whom the Warsaw Convention and the Guadalajara Convention, as adapted and applied by the Order, refer are "the consignor" and "the consignee" on the one hand and the "carrier" (single, successive, contracting or actual) on the other. That it is clearly recognised that there might be others interested in the goods is indicated in Article 12, (where, for example, the goods may be ordered in transitu to be delivered to some one other than the consignee) and Article 14 (where the consignor or the consignee is empowered to enforce rights in his name whether acting in his own interest or in the interest of others) nevertheless, throughout it is the "consignor" or the "consignee" who is always named as the person who has the right to sue in the event of loss or damage.

69. This reference to the right of a consigner or a consignee to sue perhaps reflects the position created by the early articles of Part I of Schedule 4. Article 5 entitles "every carrier" to require "every consignor" to hand over a waybill, and "every consignor" has the right to require "every carrier" to accept such a waybill. Article 6 provides that the waybill shall be in three original parts: the first marked "for the carrier" to be signed by "the consignor"; the second marked "for the consignee" to be signed by "the consignor" and "the carrier"; and the third to be signed by "the carrier" and handed by him when he accepts the goods to "the consignor".

70. Nowhere in those articles is there a reference to any other party. But, again, the possibility of other parties existing is recognised by Article 15 which provides that Articles 12, 13 and 14 do not affect either the relations of the consignor or the consignee with each other or the mutual relations of third parties whose rights are derived either from the consignor or the consignee. Those articles clearly recognise the possibility of lost or damaged cargo being the property of a stranger to the contract of carriage.

71. It is also of considerable interest, I think, to note that Article 15(3) provides: "Nothing in this schedule prevents the issue of a negotiable waybill" which suggests that ordinarily it is not negotiable. This again, recognises the possibility of a stranger having the property in the damaged or lost cargo. The negotiability of a waybill, according to the 3rd edition The Law of the Air by Lord McNair 181/2 is in some doubt in England but in Hong Kong there does not seem to be any, having regard to the provision of Article 15(3). But although in Hong Kong a waybill may be negotiable under that sub-article nothing has been added in the other articles such as "or those deriving title from" to "consignor" or "consignee" to suggest that assignees acquire any right to act. On the contrary articles which recognise the possibility of interested parties other than the consignor or the consignee expressly refer to the rights of the consignor or the consignee to act for them. But be that as it may the air waybill in this case is clearly endorsed "not negotiable" and it is one of the endorsed conditions that the goods will only be delivered to the consignee named on the face of the air waybill unless otherwise specifically provided in the contract.

72. The carriage of the goods in this case is, as I have said governed by the provisions of the Carriage by Air Acts (Application of Provisions) (Overseas Territories) Order 1967 and in my opinion that order enables a consignor or a consignee of goods to institute proceedings for the recovery of loss sustained by them or by persons who have derived an interest in the goods from them; but it is the consigner or the consignee and they alone who are entitled to institute proceedings.

73. For the view I have just expressed I find support from an American case, Pilgrim Apparel Inc. v. National Unior Fire Insurance Company et Al., 1960 U.S. and Canadian Aviation Reports 373. The headnote to that case reads:

"The Warsaw Convention vests the rights to bring an action against the air carrier in the consignor or the consignee and in no others, ....."

74. In his judgment Quinn Ch. J. of the State of New York said:

	"The plaintiff is not named either as a consignor or consignee in the air waybill which was issued by the ........ defendant. That ...... defendant is therefore not liable to suit .....
	Articles 13, 14 and 15 of the Warsaw Convention vest the right to bring an action against the carrier in the consignor and the consignee and in no others; others having an interest in the goods must look to the consignor or the consignee."

75. There are two earlier cases to which I would like to refer.

76. In Manhattan Novelty Corporation v. Seaboard and Western Airlines Inc., 1958 U.S. and Can. Av. Reports 311 it was held that where carriage is governed by the Warsaw Convention, only the disclosed consignor and consignee may sue for the loss of the goods. Another party may not sue even if he has some proprietary interest in them.

77. In the other case, Halzer Watch Co. Inc. v. Seaboard and Western Airlines 1958 U.S. and Can. Av. Reports 142, Rivers J. said:

"Nor can I agree that the result here reached upon the authority of the Manhattan Novelty Corporation is unreasonable. It is reasonable that the carrier be subject to suit only by those whom it knowingly dealt with, that is the consignor or consignee named in the Air Waybill."

78. In Bart v. British West Indian Airways Ltd., (1967) 1 Ll. R.239, a decision of the Guyana Court of Appeal, it was held by the majority of the Court that a person other than the consignor or consignee had no right to sue.

79. That the third party in the case before me acknowledged, after the goods arrived in New York, in certain documents the existence of an interest of the second plaintiff in, and the right to delivery of the goods, and handed them over to a person it believed to be acting on behalf of the second plaintiff does not affect the issue. Indeed Article 26 recognises the possibility of a person other than the consignee being entitled to delivery. It provides that receipt by "the person entitled to delivery" is prima facie evidence of satisfactory delivery. The Article also provides that it is "the person entitled to delivery" who makes complaint.

80. An acknowledgment of an interest e.g. the right to delivery of the goods, in a person who is neither the consignor nor the consignee does not give that person a right to sue.

81. The second plaintiff is neither the consignor nor the consignee and has no right to sue. I dismiss its claim with costs.

(b) The first plaintiff.

82. Mr. Dicks has argued that the first plaintiff has no interest in the lost goods and therefore it has no right to sue for damages as claimed; or, at the best, should it be considered to have a right in contract, it is entitled to recover merely nominal damages.

83. Mr. Chang says that the defendant cannot be heard on this as it has not been pleaded.

84. There are two aspects to this question. The first is a matter of law and as such is not a matter which requires specifically to be pleaded: Is a consignor entitled under the Order in all circumstances to sue irrespective of his interest in the goods carried?

85. It is quite clear that in some circumstances he is. Article 12 of Part I of Schedule 4 expressly empowers the consignor to change the destination or delivery of goods up to the time they reach the destination stipulated in the air waybill and Article 14 authorises him to enforce those rights in his own name even if he is acting in the interest of another. So, clearly, the Warsaw Convention as applied to Hong Kong envisages proceedings by a consignor although he may have no interest in the goods which have been lost or damaged even after they have reached the destination stipulated in the air waybill if he has, under Article 12, directed their delivery to someone other than the consignee. Article II of Part II provides that the contracting carrier shall be subject to the Warsaw Convention for whole of the carriage contemplated in the agreement, and Article VII provides that an action for damages may be brought at the option of "the plaintiff" against the actual carrier or the contracting carrier. It follows then that the consignor may be "the plaintiff" and may sue the contracting carrier for any loss or damage to the goods by reason of the consignor having exercised a right vested in him by Article 12.

86. However, so far as the rights of the consignor arising under Article 12 are concerned they can only be exercised up to the time that those of the consignee arise. The question then arises: when the right of the consignee to delivery of the goods arises does the consignor to all intents and purposes of the Warsaw Convention pass out of the picture and lose the right to act; or does the right to act continue, even on behalf of one whose right to delivery of the goods arises by virtue of an act of the consignee?

87. To answer that question I think one might consider the common law position and the effect of the Warsaw Convention on it.

88. So far as the transaction between the first and second plaintiff is concerned there can be no doubt about the position: The first plaintiff had fulfilled all its obligations to the second plaintiff. Indeed, so far as the transaction was concerned the first plaintiff considered that apart from an obligation to pay the air freight if the consignee did not, it was finished with it when it handed over the goods to the defendant.

89. The common law position was stated very clearly in the case of Dunlop v. Lambert (1839) 6 Cl and Fin 600 H.L., a case which has been cited many times since. The headnote to the case reads:

"Though, generally speaking, where there is delivery to a carrier to deliver to a consignee, the latter is the proper person to bring the action against the carrier, yet if the consignor make a special contract with the carrier, such contract supersedes the necessity of showing ownership in the goods, and the consignor may maintain the action though the goods may be the property of the consignee."

90. In his speech Lord Cottenham, the Lord Chancellor at 620 said:

	"We have now to determine whether, in a question between a carrier and the person to whom the carrier is responsible in the event of the property being lost, the sending an invoice to the consignee, by which it appeared that the property had been insured and the freight paid by the consignor, and the amount of such freight and insurance charged by the consignor to the consignee, deprived the consignor of the power of suing, and of an interest to recover the value of the property.
	It is no doubt true as a general rule, that the delivery by the consignor to the carrier is a delivery to the consignee, and that the risk is after such delivery the risk of the consignee.
	This is so if, without designating the particular carrier, the consignee directs that the goods shall be sent by ordinary conveyance: ..... and it is still more strongly so if the goods are sent by a carrier specially pointed out by the consignee himself for such carrier then becomes his special agent."

91. The learned Lord Chancellor then goes on to say:

"But though the authorities all establish the general inference I have stated, yet that general inference is capable of being varied by the circumstances of any special arrangement between the parties, or of any particular mode of dealing between them. If a particular contract be proved between the consignor and the consignee, - and the circumstance of the payment of the freight and insurance is not alone a conclusive evidence of ownership, - as where the party undertaking to consign, undertakes to deliver at a particular place, the property till it reaches that place and is delivered according to the terms of the contract, is at the risk of the consignor. And again, though in general the following of the direction of the consignee and delivering the goods to a particular carrier, will relieve the consignor from the risk, he may make such a special contract, that though delivering the goods to the carrier specially intimated by the consignee, the risk may remain with him; and the consignor may, by a contract with the carrier, make the carrier liable to himself. In an infinite variety of circumstances, the ordinary rule may turn out not to be that which regulates the liabilities of the parties."

92. There is a much more recent case, The Albazero reported at first instance in (1974) 2 A.E.R., 906 and on appeal in (1975) 3 A.E.R., 21. On appeal the judgment of Brandon J. met with considerable approval from Roskill L.J. who delivered the principal judgment. In his judgment Brandon J., having found that the property in goods which were being carried in a ship which was lost had passed from the plaintiffs to a third party said (926h) :

"It follows that I decide the second question, namely whether the plaintiffs still had the property in the cargo at the time of its loss, and are entitled to sue for and recover substantial damages on that ground, against the plaintiffs."

However, the learned judge went on to hold that although the property had passed, the plaintiffs were entitled to recover by reason of special circumstances. He reviewed a number of cases: Davis and Jordan v. James, (1770) 5 Burr 2680, Moore v. Wilson (1787) 1 Term Rep. 659, Joseph v. knox (1813) 3 Camp 320, Dunlop v. Lambert (1839) 6 Cl. and Fin. 600 and Mead v. South Eastern Railway Co. (1870) 18 W.L.R. 735; and went on to say (921 b) :

"I do not think that there can be any doubt that the earlier cases dated from 1770 to 1870 which I have examined establish a principle of law under which a consignor can, in certain circumstances, sue for and recover substantial damages from a carrier for loss of, or damage to goods, whether the property or the risk in the goods was at the material time in him or not .....

(921 e) As regards the circumstances which are necessary in order to bring the principle into operation, it is clear that the essential circumstance is the existence of a contract, described in the authorities as a 'special contract' between the consignor as principal and the carrier for the carriage of the goods. The expression 'special contract' as used in the authorities does not appear to have meant a contract with special or unusual terms in it. It appears rather to have been used to distinguish the ordinary type of situation, where goods were delivered to a common carrier without anything being agreed as to the identity of the person for whom they were being carried and who would pay for the carriage, and for the special type of situation, where there was an agreement that the goods were being carried for the consignor and that the cost of the carriage would be paid for by him."

93. In all the cases which Brandon J. reviewed, some of which were again reviewed by Roskill L.J. on appeal, which held that the consignor was entitled to sue, the consignor was liable for the payment of the freight. In the Albazero case the ship which was lost was on a five years charter to the plaintiffs, and it was during the currency of the charter, while the plaintiffs were still liable for the charter fees, that it was lost. The plaintiffs were also the consignees of the goods named in the bill of lading, but in fulfillment of an agreement with a third party the property in the goods had already passed to the third party at the time of the loss.

94. In the Albazero case the basis for the principle that a consignor who no longer has the property in the goods lost or who is no longer entitled to possession of them may sue for substantial damages was categorically stated. Until then it was left somewhat in the air. In Davis and Jordan v. James (1770) 5 Burr 2680 Lord Mansfield, with whom Willes and Ashurst JJ. agreed, said:

"The vesting of the property may differ according to the circumstances of the case: but it does not enter into the present question. This is an action upon the agreement between the plaintiffs and the carrier. The plaintiffs were to pay him. Therefore the action is properly brought by the persons who agreed with him and were to pay him."

95. In Moore v. Wilson (1787) 1 Term Rep. 659 the declaration stated that the defendant undertook to carry goods, the freight to be paid by the plaintiff. The evidence, however, was to the effect that there was an agreement between the plaintiff and the consignee that the latter would pay for the carriage. Buller L.J. non-suited the plaintiff. Later, however, on a hearing to show cause why the non-suit should not be set aside, Buller L.J. reversing his earlier decision said:

"..... whatever might be the contract between the vendor and the vendee, the agreement for the carriage was between the carrier and the vendor, the latter of whom was by law liable."

96. In Joseph v. Knox (1813) 3 Camp 320 Lord Ellenborough had this to say:

"I am of the opinion that this action lies. There is a privity of contract established between these parties by means of the bill of lading. That states that the goods were shipped by the plaintiff, and that the freight for them was paid by the plaintiffs in London. To the plaintiffs, therefore, from whom the consideration moves, and to whom the promise is made, the defendant is liable for the non-delivery of the goods. After such a bill of lading has been signed by his agent, he cannot say to the shippers they have no interest in the goods, and are not damnified by his breach of contract. I think the plaintiffs are entitled to recover the value of the goods, and they will hold the sum recovered as trustees for the real owner."

97. Brandon J. sought to find in the decisions a basis for the principle and found it in the doctrine of estoppel. He said (921d) :

"I think it is clear that (the principle) is based in estoppel, which has the effect, as between the consignor and the carrier, of precluding the carrier from disputing that the consignor has a sufficient interest in the goods to maintain an action for substantial damages for loss of or damage to them."

98. This attractive basis of Brandon J. was not supported by Counsel for the plaintiff on the appeal nor did its attractions fascinate the Court. Roskill L.J. at 35 rejected estoppel and put the basis thus:

"I think Dunlop v. Lambert and the cases referred to in the speech of Lord Cottenham L.C. justify the submission that the crucial question every time the right to sue was in issue was not where the title or risk lay but between whom there was privity of contract. Only if there were privity of contract could the plaintiff sue. Questions of title and risk were relevant to determine questions of privity but once when privity was established neither title nor risk was a condition precedent to a successful claim for full damages if breach of contract and resultant loss and damage were proved."

99. There is one other case to which I would like briefly to refer which was reviewed by Brandon J., and Roskill L.J.: Mead v. South Eastern Railway Co. (1870) 18 W.R. 735. In that case the plaintiff, a miller who lived in Kent, bought flour from one, Buckmaster, who lived in Suffolk, for a sum exceeding £10. Buckmaster consigned the flour to the plaintiff in Kent. He sent it by Great Eastern Railways to Brick Lane goods station in London and paid the freight up to that point. Great Eastern then forwarded the flour to Bricklayers Arms goods station which belonged to South Eastern Railway to forward it to the plaintiff in Kent, the carriage being paid by the plaintiff. The flour was contaminated by tar and the plaintiff sued South Eastern Railway Co. The jury found for the plaintiff on the facts. On a motion for a non-suit the defendant argued that as the contract for sale between the miller and the plaintiff was oral the property in the flour had not passed to the plaintiff by reason of S.17 of the Statute of Frauds 1677. Bovill C.J. in his judgment said:

"If the case depended on whether the property had passed to the consignee, a rule ought to be granted to have that point discussed. But the point does not arise; for here, under the ciroumstances, there was a contract for carriage between the plaintiff and the South Eastern Railway Company ..... There was therefore evidence for the jury of a special contract between the plaintiff and the defendants for the carriage of the goods, and on that ground the verdict must be sustained."

100. Thus, in the Albazero case privity between the parties, which was first mentioned by Lord Ellenborough in 1813, is categorically stated by Roskill L.J. to be the basis of the principle that a party to a contract may recover substantial damages after property in the goods has passed. The other cases which were concerned with the point referred to "a special contract" or "special circumstances", but never expanded on the basis of the principle, but on analysis they were all really referring to matters which were evidence of privity between the carrier and the other party e.g. the payment of freight or insurance. Brandon J., e.g., in that part of his judgment which I have cited (921 e) said that as regards the circumstances necessary to bring the principle into operation it is essential there be in existence a contract "between the consignor as principal" and the carrier for the carriage of the goods.

101. In a very different case, Bayof Pneumatic Tyre Company v. Clipper Pneumatic Tyre Company (1902) 1 Ch. D. 146 Vaughan Williams L.J. said:

"..... no one denies that the case of a reversioner and an assignee of a lease is the only exception at law to the general rule that you cannot sue upon a contract persons who are not parties to it in some shape, either by name or by agency."

If I may say so with great respect: what a beautifully concise but full exposition of the law.

102. What is then the position of the first plaintiff? Is he a party to the contract either as principal or agent? I have already referred to the Statement of Claim as being far from precise. Nowhere in it is it expressed that there is a contract between the plaintiffs or either of them and the defendant. It refers to an Air Waybill issued by the defendant and "executed" by the first plaintiff. It states that in the Air Waybill the first plaintiff is named as the consignor, but adds that the goods consigned to the named consignee were "at all material times" the property of the second plaintiff. It states the goods "were entrusted to the defendant for carriage" but is silent as to by whom they were entrusted or what was the capacity of him who entrusted them. It states that in breach of duty as carriers and of the contract "contained in and/or evidenced by the said Air Waybill" the defendant failed to deliver the goods to the consignee. There again the Statement of Claim is silent as to the parties to the contract and to whom the duty is owing, and is most ambiguous as to whether the air waybill is supposed to be a contract between the first plaintiff and the defendant or is merely evidence of an already existing contract between unstated parties.

103. Putting an interpretation on the pleadings most favourable to the plaintiff, do the facts disclose a privity of contract between the first plaintiff and the defendant which would entitle that plaintiff to recover at common law substantial damages from the defendant, the property in the goods having passed to the second plaintiff as I have already held? The answer is a categorical no. Considering the evidence of the only witness called by the first plaintiff, that he handed over the goods to the defendant at the instance of the second plaintiff and washed his hands off them, I think no other conclusion can be arrived at. The delivery of the goods by the first plaintiff to the defendant seems to fit snugly into what Brandon J. said when dealing with "a special contract". Having said such a contract does not mean one with special or unusual terms went on to say: p.921(e)

"It appears rather to have been used to distinguish the ordinary type of situation, where goods were delivered to a common carrier without anything being agreed as to the identity of the person for whom they were being carried and who would pay for the carriage, and for the special type of situation, where there was an agreement that the goods were being carried for the consignor and that the cost of the carriage would be paid for by him."

The instant case is an example of a very ordinary situation where goods were given to a carrier for delivery to a named consignee, the freight to be paid for by someone other than the first plaintiff. In this case there do not exist circumstances which would even suggest that the first plaintiff was acting as an agent for the second plaintiff to make a contract with the defendant. It merely delivered the goods to the carrier stipulated by the second plaintiff and thereby put in train circumstances which gave rise to a contract between the carrier and another, be it Irving Trust Inc., the consignee or the second plaintiff. The first plaintiff was not a party to the contract; there was no privity of contract between it and the defendant. There was a contract, perhaps, between the first plaintiff and the defendant to take the goods from the first plaintiff's factory or warehouse in consideration of which the first plaintiff paid cartage and some "local payment" but that contract was fulfilled when the goods were transported to America. I am aware that the first plaintiff guaranteed the payment of the air charges and advances but that does not make him a party to the contract of carriage; it is a separate and distinot contract.

104. In the circumstances I hold that at common law the first plaintiff was not privy to the contract for carriage and would not be entitled at common law to sue for and recover substantial or any damage.

105. That is the common law position but it has been expressly altered, at least to some extent, by the Order in Council when it enacted Article 14 of the Warsaw Convention. Was it, however, the intention of the Order to interfere with the common law to the extent that a consignor who had no interest in goods and was not privy to their contract of carriage could still sue for their loss or damage at a time when all the rights of the consignee as contemplated by the Warsaw Convention as amended and adapted and applied by the Order had arisen?

(I am assuming for the purpose of this case that the party named in the air waybill as consignor may, by virtue of Article 14 of the Warsaw Convention, sue even though he is not in fact a party to the contract of carriage.)

106. It must be remembered that it is not the Warsaw Convention as amended or otherwise that affects the position but the legislation which applies it. What has been the law and has stood the test of time and been the object of judicial decisions down the years will not lightly be departed from. It is only when legislation expressly ordains such a departure, or an intention to depart can clearly be implied from it that a Court will hold such a departure to exist. In the instant case, the first plaintiff would not be entitled at common law to recover damages for the loss of the goods. Therefore any right to sue that it might have can only arise by virtue of the Order in Council. In Article 14 of Part I of Schedule 4 it is expressly provided that a consignor may enforce rights which he might not be able to enforce at common law, but the right to do so is, equally, expressly limited by Article 12(3) to the time when the rights of the consignee arise. Nowhere in Part I or Part II of the schedule is it expressly stated or to be implied that the power of a consignor and a consignee to enforce rights for the benefit of a third party co-exist. Indeed the effect of Articles 12, 13 and 14 is expressly to the contrary. The contracting carrier and the actual carrier may be jointly sued under Article VII but under the Article the action may be brought, at the option of "the plaintiff", not "plaintiffs".

107. The intention of Articles 12, 13 and 14 is, I think, obvious: to provide for a single, clearly identifiable plaintiff. Article 12 gives certain rights to the consignor in the exercise of which he can, pursuant to Article 14, institute proceedings in his own name whether acting for himself or another. But Article 13 extinguishes those rights of the consignor, and, therefore, the right to sue, at the moment the goods arrive at their destination. I say this for three reasons: Firstly because sub-article (2) imposes a duty on the carrier to notify the consignee as soon as the goods arrive: Secondly because sub-article (1) confers the right on the consignee to require the carrier to deliver the goods to him; and thirdly because sub-article (3) provides that if the carrier admits the loss of the cargo "..... the consignee is entitled to put into force against the carrier the rights which flow from the contract of carriage".

108. The right to sue either the contracting carrier, the actual carrier or both is to be found in Article VII of Part II of the Schedule. I do not think, however, that Mr. Cheng can derive any support from Article VII in that it provides that the contracting carrier, as he is liable throughout the contract, may be sued at the option of the "plaintiff". The use of the word "plaintiff" in the article rather than "consignor" or "consignee" clearly means the person entitled to sue, and, by implication the one or the other who is entitled to sue, but not both. Had the Order in Council intended to change the common law it would have expressly so stated, or it would be a necessary implication from its wording. It does not expressly do so nor is any implication to do so discernible.

109. The position then as I see it is this: The intention of those States responsible for the Warsaw Convention and as amended at the Hague and supplemented at Guadalajara was to limit the liability of carriers by air, and to facilitate the recovery of loss sustained during carriage by air. To this end they endeavoured to introduce rules which would simplify litigation and eliminate so far as possible conflicts that might arise from local law. That could embrace such things as might arise from the doctrine of consideration in a contract, no longer so well loved by common-law lawyers as of yore and not recognised in many legal systems, or the doctrine of privity or interest of parties. In their endeavours to that end it was their intention that there would be only one possible plaintiff, the consignor or the consignee, regardless of his interest or lack of interest in the goods. The right in the consignor to sue arose when the carriage by air as defined commenced and ceased when the right of the consignee came into existence. So long as his right existed the consignor could sue the first carrier or the carrier at the time of the loss under article 30(3) of Part I of schedule 4 if there were successive carriers as defined by Article 1(3), or the contracting carrier or the actual carrier if Part II of the Schedule applied. The right to sue would remain in the consignor no matter where the goods were lost or damaged if he had taken the necessary steps under Article 12 to retain it and had complied with the provisions of the Article. This right to sue would exist despite any common law inhibition. But once the rights of the consignee have arisen those of the consignor cease.

110. As I said earlier it is only as a result of express provision in legislation or by necessary implication from it that Courts will depart from the common law position and there is nothing in the Order in Council or the schedule to it expressly or by necessary implication altering the common law position and consequently I hold that the first plaintiff is not entitled to sue.

111. As to Mr. Chang's argument that this is a matter that should have been pleaded I would say that the point is a matter of law and not necessary to be pleaded. But I do not agree that the defendant has not raised the first plaintiff's right to sue. He certainly has not done so as he ought not do, simpliciter, but I think the pleadings do sufficiently raise the legal issue (the second aspect to which I earlier referred): the application of the Warsaw Convention; and in the Defence it is pleaded that in the premises neither the first plaintiff nor the second plaintiff is entitled to the relief claimed nor any relief.

112. Holding as I do that there was no privity of contract between the first plaintiff and the defendant, no consideration moved from it to the defendant, and that the property in the goods lost was at all material times vested in the second plaintiff, the first plaintiff has no right of action in contract against the defendant at common law; and that the Order in Council applying the Warsaw Convention as amended, supplemented and adapted to Hong Kong has not in the circumstances of this case altered the common law position, I dismiss the claim of the first plaintiff as based on contract. In so far as the claim is based on tort, having found that the first plaintiff had no interest in the goods nor was he entitled to possession of them after they arrived in New York, this too must fail.

113. The claims of both plaintiffs are dismissed with costs.

(J.P. TRAINOR J.)

Representation:

Mr. Dennis Chang (D.W. Ling & Co.) for the plaintiffs.

Mr. Anthony Dicks (Johnson, Stokes, & Master) for the Defendant.

Mr. R. Mills-Owens (Wilkinson & Grist) for 3rd party.