Carewins Development (China) Ltd v. Bright Fortune Shipping Ltd
Read the full judgment text of CACV 328/2006 on BabelCite. This Court of Appeal judgment was delivered on 13 July 2007.
1. Bright Fortune and Hecny (the Defendants) are freight forwarders. They issued 2 sets of bills of lading (Sets A and B) to Carewins (the Plaintiff). Both sets of bills named Artist Fashion as consignee. None of the bills were consigned “To order”. All bills were “straight” or non-negotiable bills of lading.
Cites 2 cases
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CACV 328/2006 AND CACV 329/2006 CACV 328/2006 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 328 OF 2006 (ON APPEAL FROM HCCL NO. 49 OF 2004) ____________ BETWEEN
____________ AND CACV 329/2006 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 329 OF 2006 (ON APPEAL FROM HCCL NO. 50 OF 2004) ____________ BETWEEN
____________ (Heard Together) Before: Hon Ma CJHC, Barma & Reyes JJ in Court Dates of Hearing: 4 and 5 July 2007 Date of Handing Down Judgment: 13 July 2007 _______________ J U D G M E N T _______________ Hon. Reyes J:- I. INTRODUCTION 1.Bright Fortune and Hecny (the Defendants) are freight forwarders. They issued 2 sets of bills of lading (Sets A and B) to Carewins (the Plaintiff). Both sets of bills named Artist Fashion as consignee. None of the bills were consigned “To order”. All bills were “straight” or non-negotiable bills of lading. 2.Both sets of bills of lading involved the carriage of goods by sea from Hong Kong to Los Angeles in California. Consequently, by section 3(2) of the Carriage of Goods by Sea Ordinance (Cap.462), the Hague-Visby Rules applied to the carriage under both sets of bills. 3.The Defendants delivered the goods covered by the Set A bills to Artist Fashion without production of original bills of lading. Burberry later seized those goods from Artist Fashion on the ground that they infringed Burberry’s trademark. 4.Artist Fashion eventually reached a settlement with Burberry in relation to the latter’s trade mark infringement suit. It is not known what Burberry and Artist Fashion agreed in respect of the goods which had been seized. However, Artist Fashion has never paid Carewins for the Set A goods. 5.Following settlement of the Burberry action, the Defendants discharged the goods covered by the Set B bills in Los Angeles. Artist Fashion refused to take delivery of those goods and has never paid for them either. 6.The Set B goods were instead kept in a Los Angeles warehouse until they were eventually sold. It is not known whether the sale proceeds were enough to meet any charges (including freight) incurred on the Set B goods. 7.These facts gave rise to 2 main issues of dispute between Carewins and the Defendants. Those issues are:-
8.In addition to the questions just mentioned, the Defendants raise 4 subsidiary issues. Those issues as follows:-
9.Separate actions were commenced by Carewins against Bright Fortune and Hecny, although the issues in both were largely similar. At first instance before Stone J, Carewins lost on Main Issue 2 in both actions (which were dealt with at the same time). Carewins now appeals against that decision. On all other issues (Main Issue 1 and Subsidiary Issues 3 to 6), the Defendants lost. They cross-appeal on those matters. The two appeals before us reflect the separate actions but as the same issues arise in both (save for Subsidiary Issue 3), they are dealt with together. II. DISCUSSION A. Main issue 1: Straight bills of lading A.1 The Defendants’ argument 10.Article I of the Hague-Visby Rules provides as follows:-
11.Article I of the Hague Rules is in nearly identical terms. I note that, for the purposes of this judgment, textual differences between the Hague Rules and Hague-Visby Rules are not material. 12.Mr. Colin Wright (appearing for the Defendants) accepts that the Hague-Visby Rules applied to the straight bills of lading issued here. 13.But his reasoning for so accepting, is obscure. 14.Initially, in response to a question from the Court, Mr. Wright acknowledged that a straight bill of lading fell within the words “any similar document of title” in the Hague-Visby Rules, Art.I(b). 15.Thus, Mr. Wright seemed to be accepting that for the purposes of the Hague-Visby Rules a straight bill of lading was a document of title. Such position would have been consonant with the House of Lords’ decision in The “Rafaela S” [2005] AC 423. 16.Later, Mr. Wright said that what he meant was merely that a straight bill of lading was a “bill of lading” (but not a “similar document of title”) within the terms of Art.I(b). Contrary to his original stance, Mr. Wright thereby seemed to be denying that a straight bill of lading was a “document of title”. 17.Given his position of a straight bill not being a document of title, Mr. Wright then disputed what he claimed were obiter dicta in The “Rafaela S” to the effect that a carrier should not deliver goods to a consignee under a straight bill of lading without production of the same. 18.Mr. Wright submitted that instead:-
19.Mr. Wright contrasted the situation with an order bill of lading (that is, a bill made out “To order”). 20.An order bill is a negotiable document of title. The bill represents the goods. It can be endorsed by a consignee or a endorsee and transferred to some person X. Depending on the nature of such transfer (for example, a transfer by way of sale, pledge or mortgage), X thereby obtains proprietary rights (for example, as buyer, pledgee or mortgagee) in the goods underlying the bill. 21.At any given time, the bill merely being made out “To order”, a carrier will not know to whom the goods underlying an order bill ought to be delivered without first having sight of the bill of lading. It consequently made sense (Mr. Wright stressed) to have a rule that goods covered by an order bill can only be delivered following initial presentation of the bill itself. 22.On the other hand, a straight bill is non-negotiable. It can only be transferred to the consignee identified in the bill. A carrier thus has no difficulty in knowing to whom he ought to deliver. He might wish for a consignee to identify himself before delivering the goods. But there is no reason why the consignee cannot identify himself by some document (such as a passport or letter of authority) other than the straight bill itself. 23.Production of a straight bill of lading to a carrier (Mr. Wright reasoned) was an unnecessary requirement. Any extension of the presentation rule applicable to order bills to the straight bill situation could only give rise to inconvenience. This is because it often takes time before a consignee can get hold of a bill of lading from a shipper. During that time, goods may needlessly incur storage and other charges pending collection and the carrier and consignee would thereby be exposed to additional financial risk. 24.In support of his argument, Mr. Wright relied on the The “Brij” [2001] 1 Lloyds Rep 431. There Waung J held that, where a straight bill was concerned, it was unnecessary for a carrier to demand sight of the original bill before delivering the underlying goods to the named consignee. 25.I do not think that Mr. Wright’s argument is correct. In my respectful view, Waung J wrongly concluded in The “Brij” that presentation of a straight bill was not needed. To see why, I propose to look at the question of presentation of a straight bill both as a matter of general principle and of the specific construction of the Set A bills. A.1 General principle 26.In The “Rafaela S” the House of Lords considered whether a straight bill was a “bill of lading or any similar document of title” within the meaning of Hague-Visby Rules Art.I(b). Their Lordships unanimously held that it was. 27.The straight bill issued in The “Rafaela S” included the following attestation clause:-
28.Lord Bingham of Cornhill stated:-
29.Lord Bingham examined the law relating to straight bills in England and other jurisdictions. He summarised the result of that investigation as follows:-
30.Lord Bingham accordingly reviewed the Hague Rules for any sign that the straight bills had been excluded from their ambit. He could find no such indication. He concluded:-
31.Lord Steyn reached the same conclusion as Lord Bingham. 32.Lord Steyn also thought (at §45) that the attestation clause “necessarily implies that delivery will only be made against presentation of the bill of lading”. 33.On the more general question of straight bill of lading as a document of title, Lord Steyn stated:-
34.Lord Rodger of Earlsferry delivered a concurring speech. He referred to the Privy Council’s decision in Henderson & Co. v. The Comptoir d’Escompte de Paris (1873) LR 5 PC 253. It was apparent from the language of the Privy Council’s opinion there that “[t]he general view of the mercantile world ... had come to be that ... [straight] bills were not negotiable – but ... they were regarded none the less as bills of lading”. 35.From this, Lord Rodger commented as follows:-
36.Lord Nicholls and Lord Brown agreed with the 3 speeches just mentioned. 37.Consequently, The “Rafaela S” establishes the following propositions (with which I respectfully agree):-
38.Once it is accepted that a straight bill is a bill of lading, it must be that a straight bill is a document of title in the same way that an order bill is a document of title. 39.It must also follow that, as a document of title, a straight bill has be produced before the named consignee can obtain delivery of the goods. This is because, just as with an order bill, a straight bill is a key to the goods or, as it is sometimes described, the key to the warehouse. To obtain the goods, one has first to produce the key. 40.This function of serving as a document of title or “key” distinguishes a straight bill at common law from a sea waybill. 41.The difficulty with Mr. Wright’s analysis is that it draws non-existent distinctions. If he contends (which he apparently does) that a straight bill is a “bill of lading” within the terms of Art.I(b), he cannot then deny (as he seems to) that a straight bill is a document of title. If he cannot deny that a straight bill is a document of title, then he cannot maintain that it need not be produced to obtain delivery of the goods underlying the bill. 42.Mr. Wright submits that, just because a consignee must produce a straight bill to obtain delivery, it does not mean that a carrier must require production of the straight bill before making delivery. 43.But I cannot accept such hair-splitting argument. The corollary of a consignee having to produce a bill to obtain delivery must be that the carrier has to require production before effecting delivery. Otherwise, there would be little point to the straight bill as a document of title. 44.In The “Brij” (decided before The “Rafaela S”) Waung J came to a different conclusion on the sole basis of a statement in Benjamin’s Sale of Goods (5th ed.) at p.900. That said that “under a straight bill the carrier is entitled and bound to deliver the goods to the originally named consignee without production of the bill”. Unfortunately, the passage cited no authority in its support. 45.By contrast, having had the benefit of the House of Lords’ decision in The “Rafaela S”, the 7th edition of Benjamin now acknowledges (at §18-071) that “the weight of current judicial opinion seems to favour the view that the consignee named in a straight bill is entitled to delivery of the goods only on production or presentation of the bill to the carrier”. 46.In my respectful view then, as far as the presentation rule in respect of straight bills is concerned, The “Brij” cannot be regarded as correct. I would perhaps add here that, had Waung J had the benefit (as we have) of The “Rafaela S”, he might well have decided the matter differently. 47.Nor can I accept Mr. Wright’s contention that there is no good reason for the presentation rule where straight bills are concerned. 48.It may be that, unlike the situation of an order bill, a carrier acting on a straight bill knows the identity of the consignee. But it is by no means the case that presentation of a bill of lading invariably serves only to identify the person to whom delivery should be made. 49.Presentation of a bill of lading can serve other functions. 50.For example, given that a straight bill is a document of title, seller (shipper) and buyer (consignee) will typically agree that property in goods is not to pass until the bill is delivered to the buyer following payment to the seller. Production of a straight bill by the consignee would prove to the carrier that the consignee has acquired a proprietary interest in the underlying goods and is entitled to possession. As far as the shipper is concerned, the requirement of production would ensure that the buyer who has not paid, cannot obtain delivery: see the judgment of Lord Bingham in The “Rafaela S” at paragraph 6 (see paragraph 28 above). 51.If the underlying goods can be delivered without production of a straight bill, the carrier would have no idea whether any condition relating to the passing of property in the goods has been fulfilled. The carrier may then become liable in conversion for delivering goods to a non-owner. Production of a bill would be his assurance that any condition relating to the transfer of property in goods has been met. He would have an assurance that, in delivering the goods to the consignee holder of the straight bill, he was not converting the goods. 52.I do not see how the application of the presentation rule with straight bills gives rise to any more inconvenience than there would be in the situation of order bills. It seems to me that the rule is an integral part of the usual documents against payment or letter of credit arrangements encountered in routine commercial practice. A.3 Specific construction of Set A bills 53.It will have been noticed that in The “Rafaela S” the House of Lords thought that, on a true construction of the attestation clause, the relevant bill was a document of title which had to be produced to obtain the underlying goods. A similar approach of construction was used by the Singapore Court of Appeal in Voss v. APL Co. Pte Ltd. [2002] 2 Lloyds Rep 707. 54.Here the Set A bills all bore the following attestation:-
55.I think that, just as in The “Rafaela S”, the attestation clause here clearly indicates that a Set A bill was a document of title which needed to be produced to obtain the underlying goods. There would be no point otherwise to having one effective and two void original copy bills of lading in respect of each straight bill in Set A. And, like the House of Lords in The “Rafaela S”, I would reject any argument along the lines that the attestation clause is to be ignored as being meaningless or inapposite in the case of a straight bill. 56.If a bill of lading did not have to be produced by a consignee as a condition of delivery, there would be no reason to “void” or render 2 original copies ineffective. The “voiding” of 2 of the original copies must mean that only the remaining original copy bill can serve as the document of title or key to delivery of the goods. 57.Mr. Wright submits that the attestation clause here should be distinguished from that in The “Rafaela S”. That is because the present clause does not expressly state that “One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order.” 58.But again I think that this is a distinction without a difference. As I have just explained, the voiding of 2 original copies, must have (and been intended to have) the effect that the remaining effective copy is to be surrendered in exchange for the goods. 59.I am fortified in this conclusion by the sale agreements between Carewins and Artist Fashion in respect of the goods shipped under the Set A bills. 60.Those sales agreements (as evidenced by the pro forma invoices for each consignment) included the following term:-
61.The term shows an intention on the part of Carewins (as seller) and Artist Fashion (as buyer) that the Set A bills were meant to serve as documents of title. The bills were to be delivered to Artist Fashion in exchange for payment and property in the underlying goods would only have passed then. 62.Mr. Wright accepted that the parties to a sale contract could agree between themselves that delivery of a straight bill of lading in respect of the goods could have a conveyancing effect. That means that the parties could agree among themselves that property in underlying goods was not to pass from the seller until a relevant straight bill was delivered to the buyer. 63.Mr. Wright suggested that such conveyancing effect required an express statement in the sale contract that property was not to pass until a straight bill was delivered. But I do not see why such an intention must be expressly stated and cannot be inferred from the language used in a sale contract. 64.By the payment term here the parties manifested a clear intention that the straight bills comprising Set A were to serve as documents of title to the goods. That intention is entirely consistent with my construction of the attestation clause in the actual bills. A.4 Conclusion on delivery without production of Set A bills 65.As a matter of general principle and on a specific construction of the attestation clause of the Set A bills, the Defendants could only deliver the goods to Artist Fashion (as consignee) upon production of the relevant straight bills. 66.The Defendants, however, delivered the goods to Artist Fashion without requiring the bills to be produced. Accordingly, the Defendants acted in breach of the contracts of carriage contained in or evidenced by the Set A bills. 67.At all times, the effective original copies of the Set A bills were in Carewins’ possession, custody or control. Carewins having reserved the right of disposal of the goods by the payment term examined above, property in the goods had not passed to Artist Fashion at the times of delivery by the Defendants. 68.It follows that in delivering the goods without production of the relevant bills, the Defendants acted inconsistently with Carewins’ rights as owner of the goods. The Defendants thereby committed the tort of conversion. B. Main issue 2: Exclusion of liability B.1 The Defendants’ argument 69.The reverse of the Set A bills provide as follows:-
70.The Hague-Visby Rules provide as follows:-
71.Article III(8) nullifies any clause in a bill of lading which provides for a lesser liability than that imposed by the Rules. But Art.III(8) is subject to Art. VII. The latter allows a carrier and shipper to agree lower limits of liability or to exclude liability altogether for the period “prior to the loading on” and “subsequent to the discharge from” the ship of goods. 72.Any limitation or exclusion clause must, of course, comply with the common law requirement of clarity. It must be clear and unambiguous what liability is to be limited or excluded by a clause. If not, any ambiguity in a clause will be construed against the party seeking to rely on the alleged limitation or exclusion. 73.Mr. Wright contends that cl.2(b) of the Set A bills of lading are wide and clear enough to exclude liability on the part of the Defendants for misdelivery of goods without production of bills of lading. In particular, Mr. Wright stresses the words “misdelivery ... however caused” in cl.2(b). 74.Any misdelivery without production of bills of lading must (Mr. Wright argues) have taken place subsequent to the discharge of the goods from a vessel, either after the goods were carried over the ships rail or after the ship’s tackle was removed, following unloading (discharge), from the containers stuffed with the goods. 75.I am unable to agree with Mr. Wright’s submission. This is because I believe that, on a true construction of clause 2 as a whole, it does not exempt the Defendants for the misdeliveries here. Put at its lowest, there are at least 2 ambiguities which are to be resolved against the Defendants. B.2 Ambiguity 1: True construction of clause 2(b) 76.Assume first that misdelivery must have taken place after “discharge”. 77.Clause 2(b) purports to exempt liability for “misdelivery ... however caused whether or not through negligence”. 78.Had the clause excluded liability for “misdelivery ... however caused” and stopped there, it might have been sufficiently clear that any misdelivery whatsoever was exempted from misdelivery. 79.But the words “however caused” have been qualified by the addition of the words “whether or not through negligence”. Thus, on one reading, exemption under cl.2(b) appears to be confined to either “misdelivery … however caused … through negligence” or “misdelivery … however caused ... not through negligence”. 80.Misdelivery can be committed in ways which do not involve any consideration of negligence or non-negligence. There can (as here) be a deliberate or intentional misdelivery of goods to a party despite non-production of a bill of lading. Such misdelivery constitutes the tort of conversion in respect of which considerations of negligence or non-negligence are irrelevant. 81.Clause 2(b) may be wide enough to cover the situation where, having (say) been instructed by the shipper to deliver to X without production of the bill of lading:-
82.But I do not think that cl.2(b) can be said to cover the situation here. In this case, having been instructed by the shipper to deliver only on condition of production, the carrier ignores that instruction and instead deliberately delivers without any production. 83.What has happened here is beyond a matter of negligence or non-negligence, it is an intentional disregard of a term of the actual contract of carriage. It is possible for a clause to exclude liability for such an intentional disregard, but the clause must be crystal clear. Such clarity is essential particularly where what is sought to be excluded is precisely what the Defendants had contracted to do, viz, make proper delivery of goods. 84.Some of the ambiguity inherent in cl.2(b) was manifest in Mr. Wright’s own submissions. 85.Possibly alive to the difficulty just highlighted, he suggested that the phrase “whether or not through negligence” could be read as qualifying the preceding word “damage” while the words “however caused” should be taken as referring to both the preceding words “misdelivery” and “damage”. 86.That reading appears to me to be convoluted and strained. It seems more appropriate to take “whether or not through negligence” as circumscribing the ambit of “however caused” and the whole expression “however caused whether or not through negligence” as qualifying the preceding references to “loss”, “misdelivery” and “damage”. 87.Given that it is not evident that cl.2(b) covers what happened here (namely, the deliberate misdelivery of goods without production of bills of lading, this amounting to conversion), cl.2(b) does not exclude the Defendants’ liability. B.3 Ambiguity 2: Correlation of clause 2 to the front of the bills 88.I have so far assumed in the Defendants’ favour that misdelivery took place after “discharge” from the vessel. But what does “discharge” mean? It is not a term defined by the Hague or Hague-Visby Rules. Accordingly, when does it begin or end? 89.In Pyrene Co. Ltd. v. Scindia Navigation Co. Ltd. [1954] 2 QB 403 (at 418), Devlin J pointed out that the Hague Rules left it open to the parties to define the content of obligations such as “loading” and “discharge” in relation to a carriage of goods. He said:-
90.It will be noticed that by cl.2(a) the Defendants accept liability (subject to limits in the US Carriage of Goods by Sea Act 1936 [COGSA 1936]) for what happens to goods “during the period commencing with their being loaded ... and continuing up to and during discharge...” Let me identify this range of time as Period A. 91.The initial words of cl.2(c) refer to the event of misdelivery “between the time that the Goods are received ... at the Place of Receipt and the time of delivery at the Intended Place of Delivery”. Let me identify this range of time as Period X. 92.Clause 2(c) goes on to say that the Merchant has the burden of showing that a misdelivery during Period X in fact took place within Period A. 93.Mr. Wright contends that Period A is a much narrower range than Period X. 94.According to Mr. Wright, Period A begins either when goods are hoisted on board over the ship’s rail or shortly before that time when the ship’s tackle is attached to a container of goods for hoisting on board. By the same token, Mr. Wright says that Period A ends upon discharge when the goods are hoisted over the ship’s rail and placed on the quay or shortly after that time when the ship’s tackle is removed from a container of goods deposited quayside. 95.That is one possible reading of cl.2 as a whole. 96.But it is not the only possible reading. It is necessary to read the contract as a whole. And in the present case, construed in the context of the whole of a Set A bill, cl.2 should, I think, be read as treating Periods A and X as equivalent. 97.To see how this arises (or, to put it another way, why there is ambiguity), it is necessary to look at the front of the Set A bills. There one sees that the “Port of Discharge”, the “Place of Delivery”, and the “Final Destination” are all described in identical terms, that is, “Los Angeles, CA”. The bills further identify the carriage as being “CY-CY”, that is, “container yard to container yard”. 98.The reference to “Los Angeles” as being the Port of Discharge is ambiguous in that it may be referring, on the one hand, to the port area of the city of Los Angeles. On the other hand, the reference may be to the entire of Los Angeles as a port city. 99.In the latter case, the place of “delivery” under the Set A bills would be the same as the place of “discharge”. Within the terms of cl.2 “discharge from that vessel” in sub-cl.(a) would then equate with “the time of delivery at the Intended Place of Delivery” in sub-cl.(c). As I have remarked earlier, the place of discharge and delivery are described in identical terms in the Set A bills. 100.If Periods A and X are treated as synonymous, cl.2(c) would be stipulating that the burden of proving that loss, damage or misdelivery happened within Period X (that period being the same as the range specified in cl.2(a)) is on Carewins. On such reading, the Defendants would only be excluded from liability where loss, damage, or misdelivery occurred before goods were received or after they were delivered. 101.The “CY-CY” reference does not take matters further. This is because it is not apparent where the end container yard is supposed to be. 102.Thus, the “CY-CY” term may concern “discharge” at a container yard somewhere in the port city of Los Angeles with “delivery” taking place at the same yard. Alternatively, “discharge” may be in the port area of Los Angeles with “delivery” ultimately taking place in a container yard somewhere else in Los Angeles. Mr. Wright’s reading would only be consonant with the latter, not the former possibility. 103.What actually happened on delivery by the Defendants to Artist Fashion is unclear. At first instance, the judge found as follows:-
104.By referring to cargo having been “fully discharged”, the judge was using “discharge” in the narrower sense advanced by Mr. Wright. As we have seen, it is possible to construe the contract evidenced by the Set A bills as defining the operation of “discharge from a vessel” more widely to encompass the entire process of getting the goods off a vessel and delivering them to a consignee. 105.The judge also refers in the passage to TUG. TUG had a non-exclusive agency agreement with Bright Fortune (see the Judgment below at §14). Nonetheless, at trial, Mr. Robert Wu of TUG accepted in answer to a question in chief from Mr. Wright that Artist Fashion was TUG’s client. Mr. Wu also said in answer to a question from the Court that TUG was acting as Artist Fashion’s forwarding agent. 106.It appears therefore that the judge regarded the misdelivery as having taken place at some point before Customs clearance in (presumably) the port area of Los Angeles. At that point, on the evidence, TUG acting on behalf of Artist Fashion apparently obtained delivery of the goods from the Defendants, cleared them through customs, picked them up from a port area terminal, and then took them straight to Artist Fashion in Long Beach. 107.If that is right, the circumstances of actual delivery corroborate the alternative reading of cl.2 proposed above. The port of discharge and place of delivery being in fact the same, it is plausible that the parties contractually regarded “discharge” and “delivery” as equivalent operations. 108.On Mr. Wright’s more restricted reading (which the judge below accepted), delivery would have taken place after “discharge” (narrowly construed) and the exclusion in cl.2(b) will bite. 109.On the alternative reading, which I believe for the reasons stated to be the correct one, delivery would have been within Period A in cl.2(a) and the US$500 per package limit in COGSA 1936 should apply. Although lower than the minimum 666.67 SDR limit in the Hague Visby Rules, the US$500 limit is sufficiently generous to cover the amounts sought to be recovered here. 110.Again at its lowest, there is an ambiguity as to which reading is the correct one and cl.2 must be accordingly construed against the Defendants who are seeking to rely on the provision to exclude liability. 111.Mr. Wright belatedly suggested on per package limitation that the US$500 COGSA 1936 limit should only be multiplied by the number of containers (23) covered by the Set A bills (as opposed to the number of packages or cartons stuffed into those containers). But that point neither having been pursued at trial nor raised in the Respondents’ Notice by the Defendants, was disallowed by this Court. 112.If necessary, I would in any event have held against Mr. Wright’s suggestion that a container is the operative package. 113.Given that, at least on one reading of the Set A bills, the parties contracted to treat “discharge” as including delivery, the operation of “discharge” referred to in the Hague-Visby Rules must be regarded as covering “delivery” in this particular case. This conclusion would be a consequence of Devlin J’s dictum, cited above, to the effect that the parties can agree precisely what activities are to constitute “loading” and “discharging” for the purposes of the Rules. 114.In the specific facts here, “delivery” would then not have been an event subsequent to “discharge”. If the Hague-Visby Rules accordingly apply, then following The “River Guara” [1998] 1 Lloyds Rep 225 (CA), the package limitation relates to the number of packages within a container and not to the container itself. B.4 Conclusion on exclusion of liability 115.Contrary to what Stone J concluded at first instance, I think that cl.2 is not in sufficiently clear terms to exclude the Defendants’ liability for misdelivery. C. Subsidiary issue 3: Hecny as carrier 116.Some Set A bills of lading expressly identified Bright Fortune as carrier. Others bills named Hecny as carrier. 117.Mr. Wright submits that the latter bills identified Hecny by mistake and should be ignored in that respect. Looking at the front of those bills (Mr. Wright says) it would have been evident that Bright Fortune was the carrier. This issue arises only in the action against Hecny. 118.Mr. Wright seeks to support this argument by reference to the shipping orders corresponding to the Hecny bills. Those shipping orders are headed with Bright Fortune’s name. 119.Mr. Wright reasons that the shipping orders evidence a contract between Carewins and Bright Fortune prior to the signature of the Hecny bills much later. The Hecny bills (Mr. Wright says) only evidence the terms of contracting with Carewins. The Hecny bills cannot substitute Hecny as the party with whom Carewins was contracting, if the original contract had been made with Bright Fortune. 120.There is nothing in this point and, in my view, Stone J was right to dismiss it. 121.I see no inconsistency between the front of the Hecny bills and their reverse. The front of the bills is signed by Bright Fortune solely “as agents”. To see for whom Bright Fortune was acting, one looks to the reverse of the bills and reads that Hecny is expressly named as carrier. 122.The shipping orders may have been on Bright Fortune headed forms. But that does not preclude the possibility of Bright Fortune only acting for Hecny as (say) an undisclosed principal. I therefore see no inconsistency between the Hecny bills and the shipping orders. There is no evidence supporting the suggestion that Hecny was wrongly substituted as a contracting party in place of Bright Fortune. D. Subsidiary issue 4: Passing of property 123.Mr. Wright suggests that property in the relevant goods had passed to Artist Fashion prior to any misdelivery. This is because (according to Mr. Wright) property would have passed when goods were unconditionally appropriated to the operative sale contracts and shipped freight collect to Artist Fashion. 124.I do not think that is right. As we have seen, Carewins implicitly reserved the right to the disposal of the goods by stipulating that bills would only be delivered to Artist Fashion following payment in full. This meant that property in the goods was not to pass until, having fully paid, Artist Fashion received original bills of lading. 125.Mr. Wright says that it would be odd if, Artist Fashion having paid in full, property would still not pass until Artist Fashion had received the bills of lading. But I see nothing strange in this. It is a consequence of the simple documents against payment arrangement which the parties agreed among themselves. 126.A more sophisticated arrangement whereby a letter of credit was employed and documents were released at the same time as payment could have been agreed between the parties. But they did not do so. 127.There is accordingly nothing in this point. The judge below was also right to dismiss it. I should perhaps just add for the sake of completeness, that even if property in the goods had passed, as long as there was privity of contract between Carewins and the Defendants, an award of substantial damages was possible: see Dunlop v Lambert (1839) 6 CL. & F. 600; The Albazero [1977] AC 774, at 844-849. E. Subsidiary issue 5: Liberty to discharge under clause 15 128.Clause 15 of the Set A bills entitles the Defendants to discharge illegal goods as they see fit at the shipper’s expense. 129.Mr. Wright submits that the Defendants are entitled to rely on that clause because the goods underlying the Set A bills infringed against Burberry’s trademark. 130.The judge dismissed this point because there was no evidence supporting the allegation of a trademark infringement. In my view, the judge was right. 131.Insofar as it was being alleged that the goods infringed Burberry’s mark, that mark was not even put in evidence before Stone J. 132.As evidence of infringement, Mr. Wright relies on the fact that Burberry sued Artist Fashion and seized the goods corresponding to the Set A bills. But that litigation was compromised on terms that were not placed before the judge in evidence. Burberry’s preemptive seizure was merely the outcome of an interlocutory application. No final judgment was ever handed down by any US Court. 133.Finally, Mr. Wright refers to an e-mail between Artist Fashion and Carewins referring to “wanting the Burberry in the pastel”. It seems to me that such correspondence can hardly be compelling evidence of an infringement. People often use a well-known brand name to refer to a product style by way of shorthand. A “Burberry pastel” might thus merely refer to a pastel colour similar (or even identical) to that used in Burberry products. But that is far from acknowledging that the rest of the product is to bear Burberry’s distinctive mark (as opposed to some other design). F. Subsidiary issue 6: Defendants’ counterclaim 134.The Defendants counterclaim for freight, storage and demurrage charges in connection with the goods covered by the Set B bills of lading. 135.In fact, the Defendants have not themselves paid any storage or demurrage charges in respect of the goods. They have not been asked to do by the ocean carrier engaged by them to ship the goods to Los Angeles. They instead seek a declaration of a right to be indemnified against any storage or demurrage charges payable. 136.On the declaration for storage and demurrage charges, the judge observed the following:-
137.The judge then refused (at §237) to grant any declaration “when very obviously the court is not in possession of all relevant information, and when the counterclaiming defendants appear to have made no effort to assist or to inform in this regard”. 138.Despite the time that had elapsed, there was no adequate evidence as to what storage or demurrage charges had accrued prior to the sale of the Set B goods. In those circumstances, the judge was plainly entitled in the exercise of his discretion to decide against making any declaration. 139.In respect of freight, the judge referred to the auction of the Set B goods. No evidence was produced at trial of the amount which such sale fetched. The judge therefore had “no idea if and to what extent all or any outstanding freight charges have been defrayed”. 140.The Defendants had a right, by themselves or through their ocean carriers as sub-bailees or sub-agents, to exercise a lien over the Set B goods. If any freight was left unpaid, the Defendants were entitled to sell the Set B goods to pay off the outstanding amount. 141.The ocean carriers sold the goods. But it is not known how much was fetched. It is therefore impossible to say whether the freight of US$24,436 claimed by the Defendants has or has not been fully recovered from the proceeds of sale. 142.In the circumstances, I think the judge was right to express doubt as to whether the Defendants had indeed suffered any loss in the form of unpaid freight. The evidence of such loss was absent. Consequently, I do not think the judge’s decision to refuse the claim for freight can be faulted. 143.The judge also held that freight was in any event not payable by Carewins because the bills had been endorsed “freight collect”. I doubt that the judge was right in this, since it seems to me that under the terms of the bills of lading Carewins as shipper was contractually obliged to pay freight. 144.Nonetheless, in light of the judge’s refusal of freight on the alternative ground of a lack of evidence of loss, it is not necessary for me to decide whether the judge rightly construed the “freight collect” endorsement. III. CONCLUSION 145.The Defendants delivered Carewins’ goods without production of the relevant straight bills. That amounted to a breach of the contract of carriage and the tort of conversion. Clause 2 of the Set A bills does not exclude the Defendants’ liability. 146.The result is that the Defendants have lost on all issues. I would therefore propose an Order along the lines sketched out in the paragraphs below. 147.Carewins’ appeals are allowed. 148.Carewins is entitled to US$111,788.10 (corresponding to the invoice value of the goods underlying the Bright Fortune bills) in HCCL 49 of 2004 and US$761,239.90 (corresponding to the invoice value of the goods underlying the Hecny bills) in HCCL 50 of 2004. 149.The parties are to have liberty to make further submission as the appropriate interest to be awarded on the said judgment sums. 150.The Defendants’ cross-appeals are dismissed. 151.There will be an Order Nisi that the Defendants are to pay Carewins’ costs on appeal and at first instance, such costs to be taxed on a party-and-party basis if not agreed. Hon. Barma J: 152.I agree. Hon. Ma CJHC: 153.For the reasons contained in the Judgment of Reyes J, I would allow the appeals. Accordingly it is ordered that:-
Mr Benjamin Chain, instructed by Messrs Ho, Tse, Wai & Partners, for the Plaintiff/Appellant in both appeals Mr Colin Wright and Mr George Hui, instructed by Messrs H H Lau & Co., for the Defendants/Respondents in both appeals |
Cases cited in this judgment
Further hearings and rulings under CACV 328/2006