Carewins Development (China) Ltd v. Bright Fortune Shipping Ltd

FACV No. 13 of 2008

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 13 OF 2008 (Civil)

(ON APPEAL FROM CACV No. 328 of 2006)

_______________________

Between:

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FACV No. 14 of 2008

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO. 14 OF 2008 (Civil)

(ON APPEAL FROM CACV No. 329 of 2006)

_______________________

Between:

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Court:  Mr Justice Bokhary PJ, Mr Justice Chan PJ, Mr Justice Ribeiro PJ, Mr Justice Litton NPJ and Mr Justice Gault NPJ

Dates of Hearing:  20 and 21 April 2009

Date of Judgment:  12 May 2009

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J U D G M E N T

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Mr Justice Bokhary PJ:

1.In each of the two instances concerned, the shipper had not been paid and the consignee did not have an original bill of lading but nevertheless received the cargo because the carriers made delivery without presentation of an original bill of lading.  When the unpaid shipper sued them, the carriers put forward two defences.  First, they said that since the bills of lading concerned were “straight” bills, presentation was unnecessary.  Secondly, they said that if presentation was necessary, they were protected by a clause which excluded liability for misdelivery whether or not negligent.  Holding against the carriers on the issue of presentation but in their favour on the issue of exclusion, the Commercial Court (Stone J) dismissed the shipper’s claim.  But the Court of Appeal (Ma CJHC and Barma and Reyes JJ) held in favour of the shipper on both issues, and entered judgment for it.  The carriers now appeal to us.

2.Whether a bill of lading is an “order” bill or a “straight” bill, delivery only upon presentation is, by the nature of the contract between shipper and carrier contained in a bill of lading, an incident of such contract and therefore an implied term thereof.  By the nature of the commercial arrangements of which bills of lading form an integral part, delivery only upon presentation of an original bill of lading is a main object (if not the main object) of the contract contained in a bill of lading, whether “order” or “straight”.

3.That is not to say that liability for delivery without presentation of an original bill of lading cannot be excluded.  But such exclusion is not necessarily achieved simply by excluding liability for misdelivery whether or not negligent.  After all, the natural assumption is that each party to a contract looks to the other party for performance or else compensation.  And the more serious that the consequences of a breach of contract would or might be, the clearer must the language of exclusion be before there can be attributed to the parties a consensus that the sufferer’s right to compensation is excluded.  Where a term goes to a main object of a contract, the surest way to exclude liability for its breach is of course to do so by a specific rather than general form of words.  As Devlin J (later Lord Devlin) stressed in Alexander v. Railway Executive [1951] 2 KB 882 at pp 892-893, what “misdelivery” means depends very much on the context.  The concept of misdelivery whether or not negligent can, as a matter of language, extend to delivery without presentation of an original bill of lading.  But it can also be fairly understood to mean something less radical.  It is, in the present context, not free from ambiguity.  And such ambiguity defeats the carriers’ reliance on the exclusion clause which they invoke.

4.For the foregoing reasons, I am of the view that in each instance the carriers were in breach, have not excluded liability and are liable to the shipper.  My reasons for dismissing the carriers’ appeals with costs can be stated as simply as that.  But I also wish to express my agreement with and admiration for the more elaborate analyses to be found in the judgment of Mr Justice Ribeiro PJ and in the judgment of Mr Justice Litton NPJ.

Mr Justice Chan PJ:

5.I agree with the judgment of Mr Justice Ribeiro PJ.

Mr Justice Ribeiro PJ:

6.Two main issues call for decision on these conjoined appeals.  First, where goods are shipped for carriage by sea under a straight bill of lading for delivery to a named consignee, does the carrier attract liability for delivering the cargo to that consignee without production and surrender of the bill of lading?  Secondly, if the answer is prima facie “yes”, are the carriers in the present case exempted from liability by the relevant exclusion clause in the bills of lading?

A.      The facts and the decisions below

7.The respondent in each appeal, namely Carewins Development (China) Limited (“Carewins”), is a Hong Kong exporter.  Each of the appellants, namely, Bright Fortune Shipping Limited and Hecny Shipping Limited, is a freight forwarder and acted as the contractual carrier in relation to the relevant shipments.  In the courts below, issue was joined as to whether Hecny was indeed one of the carriers but, that question having been answered in the affirmative, no distinction presently needs to be drawn between the two appellants and it will be convenient to refer to them together as “the carriers” unless the context requires otherwise.

8.Carewins entered into a contract for the sale of a large consignment of footwear to a corporation called Artist Fashion Inc (“AFI”).  It agreed to cause the goods to be manufactured on the mainland and shipped to AFI in Los Angeles.  The sale was on FOB terms with payment to be made by telegraphic transfer after shipment and with the original bills of lading to be sent to AFI by speed post after Carewins’ receipt of such payment.

9.This appeal is concerned with a total of 23 containers shipped by Carewins pursuant to the sale agreement with AFI.[1]  The terms of the bills of lading issued by each of the carriers (evidencing shipment on board on 29 March 2003 and 12 April 2003 respectively) are identical for all material purposes.  In each case, Carewins is named as the shipper and AFI as the consignee and also the notify party.  Since words like “or order” or “its assigns or order” were not inserted after AFI’s name entered as consignee, the bills are “straight bills of lading” and were not negotiable in the sense of being freely transferable to subsequent holders by indorsement and delivery.  It is this feature of the bills of lading that gives rise to the first main issue on the appeal.

10.On arrival, the containers were handled by Los Angeles freight forwarders called Trans-Union Group Inc (“TUG”).  They had a dual role.  Pursuant to a non-exclusive agency agreement with Bright Fortune dated 13 March 2002, they acted as the carriers’ agents in the handling of the containers.  TUG had also been appointed by AFI as their delivery agents with instructions to take delivery of the containers and to transport them to AFI’s premises.

11.It is not entirely clear what occurred when the goods arrived in Los Angeles.  However, it appears that the containers were discharged into the custody of TUG, cleared through US Customs by them and then transported by them to the premises of AFI situated about an hour’s drive inland.  In this way, AFI obtained the goods without having presented any bill of lading covering the consignments. 

12.Shortly after their delivery to AFI, the goods were seized by US Marshalls executing an order of the United States District Court for the Central District of California.  A fashion house named Burberry Limited had issued proceedings against AFI alleging that the footwear in question infringed its trade mark. 

13.Burberry’s action against AFI was later settled out of court and the goods disposed of on terms which were not revealed at the trial.  However, AFI never paid Carewins for the goods.  The present proceedings were brought by Carewins against the carriers alleging that their delivery of the goods to AFI without requiring production of the bills of lading constituted a breach of contract and conversion resulting in loss to Carewins in the total amount of US$873,028.00, representing the invoice value of the goods and their sound arrived value.

14.Stone J held[2] at first instance that delivery of the goods by the carriers to AFI without presentation of the straight bills of lading amounted prima facie to a breach of the contract of carriage but that the exemption clause contained in clause 2(b) of the bills of lading operated to exempt the carriers from liability.  He therefore dismissed Carewins’ actions.

15.The Court of Appeal[3] agreed with Stone J that delivery without production of the straight bills was a breach of contract and conversion.  However, it allowed the appeal and gave judgment for Carewins holding that the exclusion clause in the bill of lading did not exempt the carriers from liability.  This appeal by the carriers is brought by leave of the Appeal Committee.[4]

B.      Was delivery without production of the straight bills of lading unlawful?

B.1    The legal characteristics of bills of lading 

16.Bills of lading have been in use as mercantile documents essential to international trade for at least two centuries.  Thus, Lickbarrow v Mason,[5] decided at the end of the eighteenth century, contains a discussion of the negotiability of such bills.

17.As Lord Steyn points out in The “Rafaela S”,[6] the main characteristics of the modern bill of lading are threefold:

“It operates as: (a) a receipt by the carrier acknowledging the shipment of the goods on a particular vessel for carriage to a particular destination; (b) a memorandum of the terms of the contract of carriage, which will usually have been concluded before the signing of the document; (c) a document of title to the goods which enables the consignee to take delivery of the goods at their destination or to dispose of them by the endorsement and delivery of the bill of lading.”

18.The fact that a bill of lading is in law a document of title to the goods shipped is central to its use in international trade.  This was explained in a well-known passage from the judgment of Bowen LJ in Sanders Brothers v Maclean & Co,[7] in the following terms:

“A cargo at sea while in the hands of the carrier is necessarily incapable of physical delivery.  During this period of transit and voyage, the bill of lading by the law merchant is universally recognised as its symbol, and the indorsement and delivery of the bill of lading operates as a symbolical delivery of the cargo.  Property in the goods passes by such indorsement and delivery of the bill of lading, whenever it is the intention of the parties that the property should pass, just as under similar circumstances the property would pass by an actual delivery of the goods.  And for the purpose of passing such property in the goods and completing the title of the indorsee to full possession thereof, the bill of lading, until complete delivery of the cargo has been made on shore to some one rightfully claiming under it, remains in force as a symbol, and carries with it not only the full ownership of the goods, but also all rights created by the contract of carriage between the shipper and the shipowner.  It is a key which in the hands of a rightful owner is intended to unlock the door of the warehouse, floating or fixed, in which the goods may chance to be.”

19.The great majority of bills of lading discussed in the authorities are in the form of “order bills” designed to permit their transfer by indorsement and delivery down a chain of sub-buyers, if so desired.  This is achieved by the shipper specifying in the bill of lading (often at the consignee’s request) that the goods are consigned to the shipper’s or consignee’s order.  This is in contrast to the “straight bills” which were issued in the present case, as noted above.

20.Bills of lading, having the legal characteristics described above, operate to meet the needs of the export trade.  They enable the seller and the buyer to deal in the shipping documents as representing the goods which are the subject-matter of the sale.  A seller, and if the transaction is financed by a bank, his bankers, will generally wish to be assured that the overseas buyer will pay for the goods before they are released to him.  This can be achieved by transferring the bill of lading to the buyer only if and when payment is assured.  Conversely, the buyer will generally not wish to make payment unless he is assured that the goods have been shipped and that he will be entitled to take delivery from the carrier on their arrival.  He receives such assurance by the transfer to him of the bill of lading.  Once constituted holder of the bill he can require delivery from the carrier, or if it is in negotiable form, decide instead to on-sell the goods while they are still afloat by indorsing and delivering the bill of lading to the sub-buyer.  The bill of lading also protects the carrier who needs assurance that he is delivering to the person properly entitled to possession of the goods and that he will obtain a good discharge.  Such assurance is obtained by the receiver producing and surrendering the bill of lading.

B.2    The presentation rule

21.Given the crucial importance of the bill of lading in such transactions, it is not surprising that it has long been established law in relation to order bills that the carrier is both entitled and bound to refuse to release the goods shipped to a person claiming delivery save against production of an original bill of lading covering those goods.[8]  As Leggatt LJ points out in Kuwait Petroleum Corporation v I & D Oil Carriers Ltd, (The “Houda”): “It is an incident of the bill of lading contract that delivery is to be effected only against the bill of lading.”[9]  And as Lord Denning famously said:

“It is perfectly clear law that a shipowner who delivers without production of the bill of lading does so at his peril. The contract is to deliver, on production of the bill of lading, to the person entitled under the bill of lading.”[10]

22.This requirement has often been called “the presentation rule”.  It is stringently enforced.  Thus, where[11] a carrier delivered the goods without negligence against forged bills of lading as a result of a deception practised on it, this was held to afford it no defence against an action by the holder of the bills suing on the contract or in conversion.  As Rix J explained:

“If a shipowner was entitled to deliver goods against a forged bill of lading, then the integrity of the bill as the key to a floating warehouse would be lost.”[12]

23.The stringency of the presentation rule is well-illustrated by London Joint Stock Bank v British Amsterdam,[13] where the sellers of a cargo of oil caused the oil to be poured into the buyer’s drums and the bill of lading to be issued showing the buyers as the shippers consigning the oil to their own order, the sale being on FOB terms for cash against documents.  The sellers retained the bill of lading pending payment of the buyers’ draft.  However, the buyers obtained the oil without production of the bill of lading on giving the carriers an indemnity.  Channell J held that the sellers’ manner of shipping the oil resulted in the passing of the property in the cargo to the buyers.  Nevertheless, he held that the effect of the sellers retaining the bill of lading until the draft was paid was that they had a lien on the oil and that the buyers were not entitled to possession before payment. The carriers had therefore unlawfully released the same.  His Lordship stated:

“The object of [retaining possession of the bill of lading] was that Palmers should not be able to get possession of the goods until they had paid for them.  Therefore, the effect was that, notwithstanding the passing of the property, if the property had passed, the vendors were to have a lien upon the goods which they could give effect to by keeping, not possession of the goods, but possession of the bill of lading.”[14]

B.3    The applicability of these principles to straight bills of lading

24.Mr Colin Wright[15] submits that the presentation rule is necessary as a matter of business efficacy only in relation to order bills since one faces in such cases the possibility that the named consignee may have transferred the bill of lading to a subsequent holder so that the carrier cannot ascertain the identity of the person entitled to delivery without production of the original bill of lading.  In contrast, he argues, no such difficulty arises in relation to straight bills since they are not negotiable and identify on their face the person to whom the goods are consigned.  It follows, so the argument runs, that in making delivery to the named consignee without requiring production of the straight bill of lading, the carrier is doing no more than carrying out the shipper’s instructions in accordance with its contractual obligations.

25.Mr Wright contends:

“As the carrier’s obligation is to comply with the shipper’s delivery instructions, the carrier must deliver the goods to the named consignee.  A contractual requirement for production of the original bill of lading would be an empty formality; there would be no question as to the identity of the party to whom the shipper had required delivery to be made.”[16]

26.Reliance is placed on the decision of Waung J in The “Brij”,[17] in which his Lordship decided that “... the essence of Straight Bills is that they are not negotiable and the contractual mandate is to deliver to named consignee without the production of the original document”, citing a passage in the then current edition of Benjamin on Sale of Goods[18] in support.

27.In my view, the appellants’ argument is unsound and must be rejected.  In the first place, there is no valid reason why the essential characteristic of a bill of lading as a document of title should depend on whether it is negotiable and it is wrong to suggest that the absence of negotiability renders the requirement of production of the original bill an “empty formality”.  As noted above, the shipper’s ability to withhold the bill of lading – the metaphorical key to the warehouse – pending payment by the consignee is a highly important feature of the recognized mercantile arrangement.  This applies just as much to the relationship between shipper and consignee under a straight bill as between the parties to an order bill.  It is true that a carrier is able to see who is the intended consignee on the face of the bill, but that does not mean that he is justified in assuming that such person is entitled, as against the shipper, to possession of the goods.  If the named consignee is unable to produce the bill of lading it may very well be because he has not paid for the goods and is not entitled to possession, as numerous decided cases show. 

28.The fallacy of the suggestion that the presentation rule lacks a commercial rationale in relation to straight bills was recognized by Lord Bingham of Cornhill in The “Rafaela S”:[19] 

“I can see no reason not to give effect to the requirement that an original bill be surrendered in exchange for the goods. This provision is of course even more efficacious in the case of an order bill, since until such a bill is presented the carrier will not know the identity of the party entitled to delivery, and it has long been the ‘undoubted practice’ to deliver ‘without inquiry’ to the holder of such a bill of lading: Glyn Mills Currie & Co v East and West India Dock Co (1880) 6 QBD 475, 492; (1882) 7 App Cas 591, 603.  But the requirement does not lack a commercial rationale in the case of a straight bill: the shipper will not wish to part with an original bill to the consignee or buyer until that party has paid, and requiring production of the bill to obtain delivery is the most effective way of ensuring that a consignee or buyer who has not paid cannot obtain delivery.  In this case, therefore, as in the case of an order bill, the bill is ‘a key which in the hands of a rightful owner is intended to unlock the door of the warehouse, floating or fixed, in which the goods may chance to be’: Sanders Bros v Maclean & Co 11 QBD 327, 341, per Bowen LJ.”

29.Secondly, it is in my view clear that the terms of the bills of lading issued in this case demonstrate a contractual intention that delivery should only be made against presentation of the original bills, that is, that they should be treated no differently from order bills in that context. 

30.If the parties had intended that there should be no need for production of the bill, they could easily have chosen to utilise a sea waybill which permits delivery merely on proof of the recipient’s identity.  But an inspection of the bills issued by the carriers reveals that they are documents having all the features of a bill of lading intended to function as a receipt for the goods shipped, as a memorandum of the contract of carriage and, most importantly, as a document of title.  Each document calls itself a “bill of lading” with a bill of lading number.  It has the word “ORIGINAL” prominently on the form.  It sets out the details of the goods covered, the port of loading and the port of discharge with freight payable at destination.  On its reverse, it contains detailed terms regarding the conditions of carriage usually found in bills of lading.  And most significantly, it contains an attestation clause stating as follows:

“Received for shipment in apparent good order and condition.  Terms of this Bill of Lading continued on reverse side hereof.

In Witness Whereof, the carrier by its agents has signed three (3) original Bill of Lading all of this tenor and date, one of which being accomplished the others to stand void.”

31.Lord Bingham’s observations in The “Rafaela S” are again directly in point:

“It is always the task of the court to determine the true nature and effect of a legal document, and in performing that task the court is not bound by the label which the parties have chosen to apply to it. Where, however, the court is considering a bona fide mercantile document, issued in the ordinary course of trade, it will ordinarily be slow to reject the description which the document bears, particularly where the document has been issued by the party seeking to reject the description.  This document called itself a bill of lading. It was not a bill transferable by endorsement, and so was not ‘negotiable’ in the somewhat inaccurate sense in which that term is used in this context: Kum v Wah Tat Bank Ltd [1971] 1 Lloyd’s Rep 439, 446.  But if this document was a mere receipt or sea waybill there was no purpose in following the traditional practice of issuing more than one original, and the time honoured language used in the attestation clause ... was entirely meaningless.”[20] 

32.The last sentence of this passage from Lord Bingham’s speech bears elaboration.  The traditional practice has been for bills of lading to be drawn in a set of three originals.[21]  One bill from the set might be kept by the carrier as a record of the bills it has issued and as an aid to verifying that bills subsequently presented are indeed bills from the same set.  The shipper might send one of the other original bills to the receiver as the document of title entitling him to take delivery of the goods while keeping for himself the third original as a precaution against loss of the document sent abroad.  Being a document of title, loss of all the bills in the set (if they were not split up) might cause major difficulties in relation to getting delivery of or otherwise dealing with the goods.[22]

33.However, the existence of bills in a set of three poses potential problems.  What happens if after having delivered the goods to one receiver against production of one bill from the set, a second would-be receiver tenders another original bill from the same set and demands the goods?  The solution which has evolved is for an attestation clause to be incorporated in the bill of lading making it clear that the carrier obtains a good discharge upon “accomplishing” one original bill, with the other bills in the set thereupon standing void.  By “accomplishing” is meant completing performance of the contract of carriage by delivery against surrender of one original bill of lading.[23]

34.The attestation clause is therefore a contractual provision which only makes sense in a context where the parties intend the bills to be presented to the carrier as the justification for release of the cargo to the holder of the bill.  In SA Sucre Export v Northern River Shipping Ltd, (The “Sormovskiy 3068”)[24] Clarke J (as Sir Anthony Clarke MR then was) put this as follows:

“None of those cases is in my judgment inconsistent with the plaintiffs' case, namely that subject to the terms of the particular contract and save in exceptional circumstances a shipowner must not deliver the goods otherwise than against presentation of an original bill of lading. That seems to me to be implicit in the express provision quoted above that any one of the bills of lading being accomplished the others to stand void.  In my judgment it is implicit in that provision that, save perhaps in exceptional circumstances, one would expect one of the bills of lading to be ‘accomplished’ by being presented to the master or shipowner.”

35.This was also recognized by Mance LJ (as Lord Mance then was) in Motis Exports Ltd v Dampskibsselskabet Af 1912 Aktieselskab[25]:

“The ‘accomplishment’ of one of the original bills whereupon any other(s) stand void contemplates delivery against its presentation.”

36.It follows, in my view, that it is necessarily implicit in the parties’ incorporation of the attestation clause in the straight bills in the present case that they intended the bills to be produced as the basis for obtaining delivery of the goods and that accomplishment of one original rendered the others in the set void.  But I would add that, perhaps save in exceptional circumstances, the presentation rule would be an incident of the contract evidenced by a straight bill even if it contains no attestation clause.

B.4    The requirement of production as a matter of authority

37.The “Brij”[26] is a decision complicated by rather unusual facts involving two sets of bills.  It was also decided by Waung J without the benefit of the subsequent decisions discussed below.  In so far as it was held in “The Brij” that a carrier is entitled to deliver the goods to the consignee named in a straight bill without production of the bill of lading, that case was wrongly decided and must to that extent be overruled. 

38.That the presentation rule applies to straight bills was the conclusion reached both at first instance and in the Court of Appeal in Singapore in Voss v APL Co Pte Ltd.[27]  Chao Hick Tin JA pointed out that a requirement for delivery against production of a straight bill of lading:

“... has the advantage of providing such a seller, or in the case of documentary credit, the bank, with some security against default by the buyer, and the buyer of some assurance that the seller has shipped the cargo before he is required to make payment. In short, it gives both the buyer and the seller, where they, for their own reasons, want only a straight BL to be issued, a fair measure of protection.”

39.As we have already seen, in The “Rafaela S”,[28] Lord Bingham pointed to the commercial rationale for the existence of the rule.  His Lordship also pointed out that production of the straight bill of lading is a requirement for taking delivery in other jurisdictions including Germany,[29] Scandanavia,[30] the Netherlands[31] and France.[32]  In Beluga Shipping GmbH & Co v Headway Shipping Ltd,[33] the Federal Court of Australia also recognized the presentation rule, adopting the approach in The “Rafaela S”.  The United States exceptionally has a statutory provision which allows carriers to deliver to the consignee named in a straight bill without production of the bill.[34] 

B.5    The characteristics of straight bills of lading

40.The foregoing discussion leads to the conclusion that straight bills of lading share all the characteristics of order bills save only that after transfer by the shipper to the named consignee, straight bills are not “negotiable” in that they are not further transferable by indorsement and delivery so as to constitute third persons holders of the bill.  Straight bills therefore function, in my opinion, as the carrier’s receipt for the goods shipped; as a memorandum of the terms of the contract of carriage; and as a document of title to the goods, enabling the consignee to take delivery at their destination against production of the bill. 

41.It is my view, in line with the views of Stone J and the Court of Appeal, that as a matter of principle and in the light of persuasive authority, it is the law of Hong Kong that a carrier of goods shipped under a straight bill of lading is potentially liable for breach of contract or in conversion if it releases those goods without production of the original bill of lading.  In the present case, by delivering the goods to AFI without surrender of any bill of lading, the carriers are, unless exempted from liability by the exclusion clause relied on, liable to Carewins for breach of contract and conversion.

42.In his admirable submissions, Mr Alistair Schaff QC[35] also mentioned the possible existence of particular characteristics of straight bills in respect of the shipper’s right to redirect shipment, a matter discussed in the current edition of Benjamin’s Sale of Goods.[36]  This is not a matter arising on this appeal and I would prefer to express no view on the topic.

C.      Are the carriers exempted from liability by the relevant exclusion clause in the bills of lading?

C.1    “Discharge” and the scope of the Hague-Visby Rules

43.At the trial it was in dispute as to whether the alleged misdelivery took place before or after completion of discharge.  If before discharge, Art III r 8 of the Hague-Visby Rules, given force of law by section 3(2) of the Carriage of Goods by Sea Ordinance,[37] would deprive the carriers of the benefit of the exclusion clause.

44.Different views were taken on this question in the courts below with Stone J holding that misdelivery had occurred after discharge and Reyes J in the Court of Appeal taking the contrary view.  This is no longer a live issue as Carewins does not seek to support the Court of Appeal’s conclusion and concedes that delivery occurred after discharge.  The carriers are therefore not prevented by the Ordinance from relying on the exclusion clause.  The question is whether, on its true construction, it is effective in exempting them from liability for the misdelivery.

C.2    The exemption clause

45.Clause 2 of the bill of lading materially provides as follows:

“2. CARRIER’S RESPONSIBILITY

(a) Subject to Clause 8 and 9 hereof [relating to containers packed by the Merchant and the Carrier’s containers] the liability (if any) of the carrier in respect of the Goods during the period commencing with their being loaded onto any sea going vessel and continuing up to and during discharge from that vessel or from another sea going vessel into which the Goods shall have been transhipped shall be determined in accordance with the provisions of the Carriage of Goods by Sea Act of the United States of America approved April 16, 1936 which shall be deemed to be incorporated herein and in accordance with the terms and conditions of the Bill of Lading or other contract of carriage of the sub contractor responsible for the carriage of such Goods by sea, all of which terms and conditions to the extent that they are not in conflict with the express provisions of this Bill of Lading, are incorporated herein.

(b) Save as provided in (a) hereof the Carrier shall be under no liability in any capacity whatsoever for loss or misdelivery of or damage to the Goods however caused whether or not through the negligence of the Carrier, his servants or agents or sub contractors or for any direct or indirect loss or damaged caused by delay or for any indirect or consequential loss or damage.

(c) In the event of any loss or misdelivery or delay in deliver[y] of or damage to the Goods occurring between the time that the Goods are received by the carrier at the Place of receipt and the time of delivery at the Intended Place of delivery the onus of proving that such loss misdelivery delay in delivery or damage (or any part thereof) occurred during the period specified in Clause (a) hereof shall be upon the Merchant. In the event that the Merchant is unable to discharge such onus of proof the Carrier shall be under no liability for such loss misdelivery delay in delivery or damage to the Goods (or any part thereof) in accordance with (b) hereof.

46.The carriers rely on clause 2(b) and in particular on the words “... the Carrier shall be under no liability in any capacity whatsoever for ... misdelivery of ... the Goods however caused whether or not through the negligence of the Carrier, his servants or agents or sub contractors ...”  The contention is that these are exempting words of such a wide compass that they unambiguously exclude any possible liability for misdelivery on the part of the carriers in the circumstances of the present case, in particular, by delivery to AFI without presentation of a bill of lading.  That was in essence the construction accepted by Stone J.

C.3    The principles applicable to the construction of exclusion clauses

47.After having navigated through the now discredited doctrine of fundamental breach,[38] the English courts have settled on the principle that the effectiveness or otherwise of an exemption clause, especially involving a commercial contract where there is no inequality of bargaining power, is purely a matter of its construction.

48.The correct approach in this context was summarised by Lord Wilberforce in Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd,[39] in the following terms:

“Whether a clause limiting liability is effective or not is a question of construction of that clause in the context of the contract as a whole.  If it is to exclude liability for negligence, it must be most clearly and unambiguously expressed, and in such a contract as this, must be construed contra proferentem.  I do not think that there is any doubt so far.  But I venture to add one further qualification, or at least clarification: one must not strive to create ambiguities by strained construction, as I think that the appellants have striven to do.  The relevant words must be given, if possible, their natural, plain meaning.”

49.That position is very similar to that taken in Australia where the courts had spared themselves the fundamental breach diversion.  In Darlington Futures Ltd v Delco Australia Pty Ltd,[40] in a joint judgment of all its members, the High Court[41] described the proper approach as follows:

“These decisions clearly establish that the interpretation of an exclusion clause is to be determined by construing the clause according to its natural and ordinary meaning, read in the light of the contract as a whole, thereby giving due weight to the context in which the clause appears including the nature and object of the contract, and, where appropriate, construing the clause contra proferentem in case of ambiguity.”

50.Two related aspects of the principle so expressed should be underlined.  First is the emphasis it lays on the requirement that the exempting words be devoid of any ambiguity, with the clause being construed against the person relying on the exemption.[42]  Secondly, the principle stresses the need to construe the clause in the context of the contract as a whole, taking into account its nature and object.  As Lord Wilberforce pointed out in the Suisse Atlantique case,[43] the principle is “that the contractual intention is to be ascertained ... not just grammatically from words used, but by consideration of those words in relation to commercial purpose ...”

51.It will often be the case that an exemption clause uses very broad words which, viewed simply as a matter of language, may be thought apt to exclude all conceivable liability.  But the process of construction does not stop there.  Wide words of exemption will often cover a whole range of possibilities, some of which will be consistent with maintaining the contractual obligations which reflect the main purpose of the parties’ agreement, and some of which would negate those obligations and effectively deprive the contract of any compulsory content.  In such cases, the clause is construed contra proferentem to ascribe the narrower meaning to it in order to sustain the purpose and legal effect of the parties’ contract.

52.As Lord Diplock pointed out in Photo Production Ltd v Securicor,[44] the court’s premise in the construction exercise is that the parties intended their agreement to have contractual force:

“Parties are free to agree to whatever exclusion or modification of all types of obligations as they please within the limits that the agreement must retain the legal characteristics of a contract ...”

Such legal characteristics embrace well-established implied incidents of commercial (and other) contracts:

“Since the obligations implied by law in a commercial contract are those which, by judicial consensus over the years or by Parliament in passing a statute, have been regarded as obligations which a reasonable businessman would realise that he was accepting when he entered into a contract of a particular kind, the court's view of the reasonableness of any departure from the implied obligations which would be involved in construing the express words of an exclusion clause in one sense that they are capable of bearing rather than another, is a relevant consideration in deciding what meaning the words were intended by the parties to bear.”[45]

However, emphasising that the matter is ultimately a question of construction, his Lordship added:

“But this does not entitle the court to reject the exclusion clause, however unreasonable the court itself may think it is, if the words are clear and fairly susceptible of one meaning only.”[46]

53.The last passage just cited contains a reference to the rule that ambiguities will be resolved against the contract breaker.  The exemption clause is given effect as excluding liability for the breach only where the words are “clear and fairly susceptible of one meaning only”.  If it is also fairly susceptible of a meaning which does not exclude liability for the breach in question, it is that narrower, contra proferentem meaning which the court will ascribe to the term.

54.The application of this principle may be illustrated in the context of a charterparty exclusion clause by the decision of the House of Lords in Tor Line AB v Alltrans Group of Canada Ltd (“The TFL Prosperity”).[47] That case involved the charter of a vessel to operators of a roll-on roll-off liner service.  One of the clauses specified certain physical attributes of the vessel including free height on the main deck consistent with her intended use.  The vessel delivered did not meet those specifications but the owners sought to rely on a clause exempting liability in very broad terms.[48]  Lord Roskill pointed out that if a literal meaning were to be given to the clause relied on, it would mean “that the owners would be under no liability if they never delivered the vessel at all for service under the charter or delivered a vessel of a totally different description from that stipulated in the preamble.”  Such a construction was rejected:

“In truth if clause 13 were to be construed so as to allow a breach of the warranties as to description in clause 26 to be committed or a failure to deliver the vessel at all to take place without financial redress to the charterers, the charter virtually ceases to be a contract for the letting of the vessel and the performance of services by the owners, their master, officers and crew in consideration of the payment of time charter hire and becomes no more than a statement of intent by the owners in return for which the charterers are obliged to pay large sums by way of hire, though if the owners fail to carry out their promises as to description or delivery, are entitled to nothing in lieu. I find it difficult to believe that this can accord with the true common intention of the parties and I do not think that this conclusion can accord with the true construction of the charter in which the parties in the present case are supposed to have expressed that true common intention in writing.” [49]

55.The principle was applied to a bill of lading in Motis Exports Ltd v Dampskibsselskabet Af 1912 Aktieselskab,[50] where Stuart-Smith LJ stated:

“I also agree with the Judge that even if the language was apt to cover such a case, it is not a construction which should be adopted, involving as it does excuse from performing an obligation of such fundamental importance.  As a matter of construction the Courts lean against such a result if adequate content can be given to the clause.”

Like Lord Diplock, his Lordship accepted that the exemption might be effective if suitably drafted but that it would be construed to be inapplicable if it was possible to ascribe to the term “adequate content” consistent with maintaining the basic purpose of the contract.

56.It is this approach which I apprehend the Australian authorities to have in mind when they speak of “reading down” such clauses.  Thus, in Kamil Export (Aust) Pty Ltd v NPL (Australia) Pty Ltd,[51] Marks J stated:

“The first question then is whether the words of exemption should be interpreted to mean what they seem in clear language to say or whether they should be read down in accordance with the relevant authorities, not to apply to loss due to conduct which would defeat the main object of the contract of carriage, namely delivery to the consignee on his proof of payment, as evidenced by production of the bill of lading.”

C.4    The proper construction of the exemption clause in this case

57.My conclusion in Section B of this judgment is that, save for the absence of onward negotiability, a straight bill of lading has the same characteristics as an order bill.  It is in my view clear that the requirement of delivery only against production of the bill of lading is a cardinal purpose of both straight and order bills.  This is so since the presentation rule underpins the ultimate purpose of the contract which is for the cargo to be delivered to the person properly entitled to receive it.  It would hardly be performance of the contract for the carrier to take the cargo all the way to the destination only to deliver it there to someone  not authorized to receive it, having failed to require that person to produce the “key to the warehouse”.

58.That the presentation rule represents one of the main purposes of the bill of lading contract in the context of construing an exemption clause was recognized by Clarke J in The “Ines”:

“One of the key provisions of the bill of lading, so far as the shipper is concerned, is the promise not to deliver the cargo other than in return for an original bill of lading. That principle protects the shipper from fraud. It also protects the ship owner. The parties would not in my judgment be likely to have contracted out of it.  Thus clear words would be required for them to be held to have done so. The clause should be construed so as to enable effect to be given to one of the main objects and intents of the contract, namely that the goods would only be delivered to the holder of an original bill of lading.” [52]

59.It may be noted that this is a principle which Stone J had previously recognized and applied in Hong Kong.  In Center Optical (Hong Kong) Ltd v Jardine Transport Services (China) Ltd,[53] he stated:

“At bottom, I decline to hold that the plain wording of Clause 14 is sufficiently clear to impinge upon the cardinal principle requiring delivery by the owner or his agent only against production of an original bill of lading ...”

And in Vastfame Camera Limited v Birkart Globistics Limited,[54] his Lordship held:

“It is well settled that exemption clauses are to be construed strictly, and that very clear wording is necessary to escape liability for breach of an obligation considered to be of fundamental importance to the contract.  As Clarke J (as he then was) noted in The ‘Ines’ [1995] 2 Lloyd’s LR 144, at 154, the proposition that the requirement to deliver goods only against an original bill of lading is one of the main objects of the contract supports the further proposition that it is permissible, as a matter of construction, to limit the ambit of a particular clause in light of that fact.”

60.How then does clause 2(b) fare upon application of this principle?  The clause materially provides as follows:

“Save as provided in (a) hereof the Carrier shall be under no liability in any capacity whatsoever for ... misdelivery of ... the Goods however caused whether or not through the negligence of the Carrier, his servants or agents or sub contractors ...”

61.As Mr Schaff accepts, purely as a matter of language, the words of clause 2(b) are apt to excuse misdelivery of the goods by releasing them to AFI without presentation of the bill of lading.  However, as stated above, the construction exercise does not stop there.  The language of clause 2(b) must be construed taking into account the contract’s nature and purpose. 

62.An essential purpose of the contract is, as previously discussed, that the goods should be delivered by the carrier only against surrender of an original bill of lading.  If, therefore, clause 2(b) is given a construction reflecting the full width of the words used, it would mean that the carrier could with impunity consciously disregard that primary contractual purpose by releasing the goods well knowing that the recipient has not provided any bill of lading relative to the cargo.  That is a construction which the court inclines against as it would deprive the shipper of an essential protective obligation and seriously undermine the purpose of bills of lading.

63.One must therefore ask whether clause 2(b) is wholly unambiguous in conferring such a purported exemption on the carrier.  Is it clear and fairly susceptible of that one meaning only?  Or is it also fairly susceptible of a meaning which does not result in the negation of that primary contractual purpose?

64.In my view, it is plain that clause 2(b) is susceptible to more than one meaning and that it can be given adequate content as an exemption clause which operates without nullifying the cardinal obligation embodied in the presentation rule.  Given its natural and ordinary meaning, the word “misdelivery” is capable of covering a range of situations which all involve the cargo being delivered to the wrong person.  But many of those situations will not involve a conscious disregard of the presentation rule on the carrier’s part. 

65.Thus, as we have seen, a carrier might be deceived into releasing the cargo without negligence against a well-executed forgery of the bill of lading, as occurred in the Motis Exports case.[55]  As the court there held, such a misdelivery attracts liability.  It is accordingly one category of misdelivery in respect of which a clause like clause 2(b) might exclude liability without involving any negation by the carrier of the basic contractual purpose. 

66.One can think of various other situations where a cargo is misdelivered by some mishap to the wrong recipient, possibly through the negligence of the carrier, but again without consciously violating the presentation rule.  Examples discussed during the hearing include misdeliveries resulting in loss where, for instance, the carrier delivers the wrong cargo against presentation of a bill of lading or where, having been presented with the correct bill of lading, the goods are then released to the wrong delivery agent or delivered to a wrong address, and so forth.  Cases such as these constitute a separate category of misdelivery, this time involving negligence on the carrier’s part, but still without involving any conscious disregard of the presentation rule.

67.Construing clause 2(b) contra proferentem would involve attributing to the parties the limited intention of exempting the carrier from liability in cases like those mentioned above, being a construction giving adequate content to the exclusion clause while maintaining the central contractual purpose.  Such a construction would hold the clause to be insufficiently explicit to cover the breach of the presentation rule in the present case to avoid depriving the contract of carriage of one of its essential purposes and to avoid a result which the parties are inherently unlikely to have intended.  It is my view that such a construction is warranted in the present case.

68.One can also arrive at the conclusion that clause 2(b) is materially ambiguous by another route.  As has been pointed out in certain bailment cases, the word “misdelivery” contains within itself a linguistic ambiguity.  Thus, in Alexander v Railway Executive,[56] goods were accepted for deposit in a railway parcels office on terms which included a clause exempting the defendant from “loss, misdelivery or detention of, or damage to .... property” worth more than £5 unless a declaration of value was made at the time of the deposit.  An unauthorised person was given access to the plaintiff’s goods without production of the deposit ticket.  To the extent that the decision was based on the fundamental breach doctrine, it is obviously not good law.  However, Devlin J relevantly went on to identify an ambiguity in the word “misdelivery”, distinguishing between mistaken or inadvertent misdelivery on the one hand and a deliberate misdelivery on the other, construing the exclusion clause contra proferentem as applying only to the former class of “misdelivery”.  His Lordship stated:

“... the question which arises is whether a delivery to Colmar, in the circumstances of this case, can rightly be regarded as a ‘misdelivery’ within the meaning of that word as it is used in condition 2.  No doubt, if ‘misdelivery’ means any delivery to the wrong person and includes a deliberate delivery to the wrong person, then the case is covered.  It may well be true to say that in many cases that is the right meaning of the word ‘misdelivery’ and it appears to be a dictionary meaning. There is no authority which is directly in point.

The alternative argument is that misdelivery, in its natural and ordinary meaning, conveys to the ordinary man that there has been some mistake or inadvertence.  ... I am disposed to think that, while in certain contexts the word ‘misdelivery’ may bear the wide meaning, it is restricted in its more natural and popular meaning to a wrong delivery involving some form of mistake or inadvertence, and that it is intended to cover the sort of situation where a package is delivered to the wrong address by error or inadvertence, or where the wrong article is handed out over a counter or in a cloakroom.  No principle is more firmly settled than that, when one is construing exceptions to the general liability of a carrier or a bailee, those exceptions are to be construed strictly, so that if a word is capable of bearing two meanings, the narrower meaning should be adopted.  I think that where ‘misdelivery’ is used in an exception designed to protect a bailee, it does not cover more, and would not be regarded by the ordinary man who read such conditions as covering more, than what might be called accidental misdelivery by mistake or error. Consequently, if a bailee in such circumstances wants to protect himself against every sort of wrongful delivery, however deliberately made, he must use clear and express terms to that end.”[57]

69.This approach was also adopted by Sachs J in Hollins v J Davy Ltd,[58] where, having held that there had indeed been a “delivery” of a car in a car park to an unauthorised person, his Lordship stated:

“What, upon that footing, is the meaning of the word ‘misdelivery’ in condition (B)? To my mind a reasonable man reading it in this contract would interpret it as referring to any delivery made in error to a wrong person or to a wrong place.  Equally, he would exclude from its meaning deliveries to a wrong person or a wrong place made deliberately.”

70.Adopting this line of reasoning, the word “misdelivery” in clause 2(b) is capable of being read to mean a delivery made in error to a wrong person or to a wrong place, expressly extended by the clause to cover negligent errors, but not covering a conscious delivery to a recipient without presentation of an original bill of lading. 

71.It is accordingly my view that applying the foregoing principles, clause 2(b) does not exempt the carrier from misdelivery in the present case.

Conclusion

72.I would therefore dismiss this appeal with costs.

Mr Justice Litton NPJ:

Introduction

73.There are two main issues on this appeal :

(1)     Whether the delivery by the ocean carrier of 23 containers of footwear to the agent of the consignee named in the bill of lading, without presentation of an original bill of lading, was a wrongful act;

(2)     If the answer to the question above is “yes”, whether the terms of the bill of lading exempted the carrier from liability.

The “straight” bill of lading : The first issue :

74.The bill of lading, headed as such, named the plaintiff as the shipper and Artist Fashion Inc. of California USA as the consignee.  The “notify party” was “same as consignee”.  The place of receipt of the goods was Hong Kong.  The “place of delivery” was “Los Angeles, CA, USA destination”.  The bill of lading contained a clause on its face as follows :

“Received for shipment in apparent good order and condition.  Terms of this Bill of Lading continued on reverse side hereof.  IN WITNESS WHEREOF, the carrier by its agents has signed three (3) original Bill of Lading all of this tenor and date, one of which being accomplished the others to stand void.”

75.There were no words on the face of the bill of lading such as “to order” to indicate that the bill of lading was negotiable; that is to say, that the property in the goods was transferable by indorsement and delivery of the bill of lading.  This made the document a “straight-consigned” or “straight” bill of lading. 

76.What, then, is the legal effect of such a bill?  In the hands of the shipper, it represents the goods and is, in that sense, a document of title.  Although the straight bill of lading is not negotiable and cannot be transferred down a series of transferees, it can be (and is intended to be) transferred once, to the named consignee.  The consignee then in turn holds the bill of lading as a document of title.

77.The question which arises on this appeal is simply this : can the carrier lawfully deliver the goods to the named consignee without presentation of the bill of lading?  Counsel for the carrier says “yes”.  By delivering the goods to the named consignee, the carrier has done what he is contractually obliged to do; hence he cannot be held to have misdelivered the goods.

78.A similar question was considered by the Singapore Court of Appeal less than five years ago in Voss v. APL Co. Pte Ltd. [2002] 2 Lloyd’s Rep 707 where the bill named a consignee without the words “to order” and, above the signature of the carrier, the following words appeared :

“A set of 3 originals of this bill of lading is hereby issued by the Carrier.  Upon surrender to the Carrier of any one negotiable bill of lading, properly endorsed, all others shall stand void”.

The shipowner carried a valuable car from Hamburg to Busan in South Korea under the bill of lading.  The carrier delivered the car without production of the bill of lading.  The shipper, unpaid, sued the carrier for damages. 

79.The Singapore Court of Appeal, upholding the trial judge, concluded that the delivery of the car in question to the named consignee in Korea, without production of the bill of lading, was unlawful and the carrier was liable in damages.

80.That court commenced its review of authorities by citing the well-known passage in Lord Denning’s judgment in Sze Hai Tong Bank v. Rambler Cycle Co. [1959] AC 576 at 586 to the effect that a shipowner who delivered without production of the bill of lading did so “at his peril”. That was a case where the bill was on its face negotiable; it was stated to be “unto Order or their assigns”.  What if those words were omitted?  In other words, is Lord Denning’s dictum in the Sze Hai Tong Bank case one of general application, referring to both straight bills and order bills, or is it simply confined to order bills?  And if it applied to straight bills as well, how does the duty arise?  By operation of law?  By agreement of the parties?  By convention?  Those were the questions the Singapore courts had to consider.

81.After citing the Sze Hai Tong Bank case, the court referred to two academic works, Benjamin’s Sale of Goods (5th ed.) and Carver on Bills of Lading (1st ed.), where the author Prof. Guenter Treitel said that a straight bill was not “a symbol of the goods” because the carrier was “entitled and bound to deliver the goods to the named consignee without production of the bill”.  But, as can be seen, it begged the question in this case : If the carrier is entitled to deliver the goods to the named consignee without the bill, then plainly the bill is not “a symbol of the goods”.  But is the assumption correct?

82.At the time the Singapore court was hearing the appeal, the first instance judge (Langley J) across the globe in The “Rafaela S”, J I MacWilliam Co Inc v. Mediterranean Shipping Co SA [2005] 2 AC 423 had just given his judgment.  The case had not yet gone on appeal.  The question before Langley J was whether a straight bill of lading was a “document of title”.  Following the reasoning of Prof. Treitel in the two textbooks referred to earlier, he said “no”.  Waung J in Hong Kong, adopting the same reasoning, likewise had held in The Brij [2001] 1 Lloyd’s Rep 431 that the carrier could lawfully deliver to the named consignee without production of the bill of lading.  

83.The Singapore court in Voss, after an exhaustive review of the authorities, concluded that the carrier, in delivering the car without production of the bill of lading, was liable in damages : Adopting the words of Clarke J in the The Sormovskiy 3068 [1994] 2 Lloyd’s Rep 266 at 274, it made “commercial sense” to have a simple rule that the master must only deliver the cargo to the holder of the bill, thereby avoiding confusion which might arise as to whether the document was a straight bill or an order bill.

84.In Voss the bill on it’s face contained the words “Upon surrender to the Carrier of any one … bill of lading … all others shall stand void.”  This made it easier for the court to conclude that, contractually, the parties intended that the master would only deliver the car “upon surrender” of the bill.  In the present case, the words “upon surrender” do not appear; there are no express words requiring presentation of the bill against delivery; but, as it seems to me, the words on the face of the document “one of which being accomplished” have the same effect : Such form of words has been used for a long time in bills of lading : See Glyn Mills Currie & Co. v. East and West India Dock Co. [1882] 7 App Cas 591 at 599 where Earl Cairns, in relation to the word “accomplished”, said it meant that if the bill was produced to the carrier in good faith he was required “to act upon that and not to embarrass himself by considering what has become of the other bills of lading.”  This point is elaborated upon more fully in Ribeiro PJ’s judgment in paras 30-36 with which I agree.

85.As Rix LJ observed in the Court of Appeal in The Rafaela S [2004] QB 702 at 737-C, it has only been in the last decade or so that the straight bill cases have come in numbers before the courts.  There cannot now be any doubt, in my view, that a straight bill of lading is a document of title.  The proposition has the strong backing of both the English Court of Appeal and the House of Lords in The Rafaela S [2005] 2AC 423.  The shipowner would act at his peril by releasing the goods without the production of the bill.  I accept Mr Schaff QC’s submission before us that this duty arises as an incident of the instrument itself.  Hence, it would take very strong words to negate this duty.  As Lord Steyn said at p. 457-H, in The Rafaela S the issue of a set of three bills of lading, with the provision “one of which being accomplished, the others to stand void” necessarily implies that delivery will only be made against presentation of the bill.  There are good policy reasons behind such a rule.  The master would not have to resolve ambiguities as to whether the document is a straight bill or an order bill (there were such ambiguities in the Voss case itself, as the attestation clause spoke of “negotiable bill of lading”).  He would not have to be concerned with the authority of the person claiming to be entitled to take possession of the goods when dealing with a limited company : For example, in a situation like that in the Voss case, what might be the position in Korean law if an individual calling himself “Vice-President” claimed to represent the named consignee “Seohwan Trading Co.” demanding possession of the goods?  Is “Seohwan Trading Co.” a limited company?  The master would need a lawyer at his elbow at every port he enters, if he was required to resolve such issues.

86.Certainty is an important factor in international trade.  Both courts below resolved this issue in the plaintiff’s favour.  They have done so by a thorough and illuminating analysis of the authorities.  It would be otiose for me to attempt a similar exercise for the third time.

Exemption clause : The second issue

87.I intend to be brief on this issue.

88.The relevant words in clause 2(b) of the bill of lading are these :

“… the Carrier shall be under no liability … for loss or misdelivery of or damage to the Goods however caused whether or not through negligence of the Carrier his servants of [sic] agents or subcontractors …”

89.Clause 2(b) does not stand in a vacuum.  It must be construed in the context of the bill of lading seen as a whole.  Putting the case for the carrier at its highest, in terms of clause 2(b), the carrier is not liable for “misdelivery of … the Goods … caused whether or not through negligence”.  Take this example.  Assume that a container was opened for inspection by US Customs and then improperly re-sealed.  The consignee comes along with an original bill of lading to take delivery and finds that some cartons of footwear have been stolen from the container.  By virtue of clause 2(b) the loss falls on the consignee.  The carrier had undertaken to deliver the cartons set out on the face of the bill and is liable for “misdelivery of the Goods” irrespective of whether the failure to seal the container after inspection by US Customs was due to the carrier’s negligence or not.  Here the situation is totally different.  Fundamental to the tripartite arrangement between the shipper, the carrier and the consignee was that the carrier would only deliver the 23 containers on  production of the bill of lading.  The question then is : Are the general words in clause 2(b) precise enough to exempt the carrier from liability in such a case?  It would seem very odd if that were so.  On the face of the document the carrier acts at his peril by delivering the goods without production of the bill of lading; turn the document over, and it says the carrier acts with impunity by so doing.  The parties cannot be deemed to have achieved such a bizarre result, by the general words used in clause 2(b).  In my judgment the words in clause 2(b) are not precise enough to exempt the carrier from liability when, with eyes open, it delivers the 23 containers without production of the bill of lading.

90.I have had the advantage of reading in draft Ribeiro PJ’s judgment and, in particular, his statement of principle regarding the proper construction of exemption clauses.  I agree with everything he has said.

Conclusion

91.I would uphold the judgment of the Court of Appeal and dismiss the appeal.

Mr Justice Gault NPJ:

92.I agree with the judgment of Mr Justice Ribeiro PJ.

Mr Justice Bokhary PJ:

93.The appeal is unanimously dismissed with costs.

Mr Colin Wright and Mr George Hui (instructed by Messrs HH Lau & Co) for the Appellants

Mr Alistair Schaff QC and Mr Benjamin Chain (instructed by Messrs Ho, Tse, Wai & Partners) for the Respondent