Star Line Traders Ltd v. Transpac Container System Ltd t/a Blue Anchor Line and Another

HCAJ 180/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. 180 OF 2008

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BETWEEN

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Before: Hon Reyes J in Chambers

Date of Hearing: 4 September 2009

Date of Judgment: 4 September 2009

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J U D G M E N T

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I. INTRODUCTION

1.Transpac carries on the business of transporting goods under the trade name “Blue Anchor Line”.

2.By 14 Bills of Lading issued between March and July 2008, Transpac as carrier acknowledged the receipt from Star Line as shipper of various cargoes. Under the Bills of Lading, the cargoes were to be carried by sea from Hong Kong or ports in the Mainland to Vostochny and then carried by land to Izhevsk. The Bills of Lading were consigned “To Order”. At all material times Star Line was (and remains) the holder of the original Bills of Lading. Versia was identified as Notify Party in the Bills of Lading.

3.Transpac’s Russian agents released the relevant cargoes to Versia without presentation of the Bills of Lading. By the present action, Star Line claims against Transpac for such release. It is Star Line’s case that Transpac should only have released the cargoes against the presentation of the Bills of Lading. Star Line now seeks summary judgment against Transpac for the invoice value of the goods released together with interest.

II. DISCUSSION

4.A carrier who releases goods without presentation of a Bill of Lading does so at its peril. Such release is wrongful and would in the ordinary course of events entitle the shipper of the goods to sue the carrier for damages in conversion and for breach of the contract evidenced by the Bill of Lading.

5.But Mr. Colin Wright (appearing for Transpac) submits that Transpac should not be held liable here for a variety of reasons. In my view, none of the grounds raised by Mr. Wright has merit.

6.First, Mr. Wright suggests that Star Line acquiesced in the delivery of the cargoes without production of the relevant Bills of Lading. This is because (according to Transpac) on 128 previous occasions goods had been released to Versia without presentation of original bills. Mr. Wright argues that Star Line had actual or constructive knowledge of such deliveries without bills. If so, according to Mr. Wright, by not complaining about the past misdeliveries, Star Line must be taken to have waived the right to object to future misdeliveries by Transpac.

7.The argument is nonsense. Star Line denies knowledge of the past misdeliveries. But assume that it knew of them. I cannot see how knowledge of the past misdeliveries without making complaint can logically amount to a representation by Star Line that Transpac could in the future misdeliver goods without presentation of a Bill of Lading.

8.Second, Mr. Wright argues that Star Line is not the owner of the misdelivered goods. He suggests that property in the goods had passed to Versia before the same arrived in Izhevsk. Mr. Wright bases his suggestion on an alleged Master Sales Agreement between Star Line and Versia stipulating that “the Buyer becomes the owner of the goods at the shipment date specified on the waybill”.

9.Assume (without accepting) that property had passed to Versia. I do not see how such fact would absolve Transpac.

10.As bailee and as holder of the Bills of Lading, Star Line was entitled to require Transpac to deliver the goods to Star Line or its order. By misdelivering the goods, Transpac acted contrary to such entitlement. Star Line would therefore have causes of action against Transpac for breach of the contract or terms of bailment evidenced by the Bills of Lading. As a person with the right to demand possession of the goods (regardless of whether Versia owned the same or not), Star Line would also have a cause of action against Transpac in conversion for interfering with such right of possession.

11.The relevant cargoes having been sold on D/P terms, the Bills of Lading were to be released to Versia by Star Line’s bank only against payment. Even if Star Line were no longer the owner of the goods by the time of their arrival in Izhevsk, Star Line retained a security interest in the consignments. This is because Star Line maintained actual or constructive possession of the goods as a result of the D/P arrangement. Such security interest would enable Star Line (for example) to exercise a lien over the goods until payment. As a result of the misdelivery, Star Line lost that security interest. Prima facie, the value of the security interest is the invoice value of the goods misdelivered.

12.To bolster his argument, Mr. Wright submits that Star Line, although named as shipper, may only have been an agent for Versia. He supposes that, the relevant goods having been sold FOB, Star Line would merely have arranged for their shipment as Versia’s agent.

13.This submission is equally nonsense. It is pure speculation. There is no evidence of any agency. In any case, the argument (if correct) would make just about every seller of goods under a FOB contract the agent of the buyer. Mr. Wright is effectively saying that an FOB seller who takes out a Bill of Lading in his name must surrender the same to the buyer as principal even where the latter has failed to pay. As Mr. Paul Shieh SC (appearing for Star Line) points out, the absurd result of Mr. Wright’s argument is that an FOB seller would have absolutely no protection in the event of a release without presentation of a Bill of Lading.

14.Third, Mr. Wright says that by cl.18.3 of the Bills of Lading damages are limited. The clause provides that in the case of Combined Transport, if it “[can]not be proved where the loss or damage occurred compensation shall not exceed US$2 per kilogram”. US$2 per kg of the misdelivered goods would amount to less than their invoice value.

15.I disagree with Mr. Wright. Clause 18.3 is ambiguous. It must therefore be construed “contra preferentem”, that is, against Transpac on whose standard form cl.18.3 appears.

16.By its terms, cl.18.3 only applies where cargoes have been “lost or damaged”. The goods have certainly not been “damaged”. Have the cargoes been “lost”? That depends on what “lost” in cl.18.3 means. Does “lost” in cl.18.3 only refer to the inadvertent loss of goods or does it also include the loss of goods to Star Line through their being deliberately handed over to a third party without presentation of Bills of Lading? Given that by the Bills of Lading Transpac undertook to hand over the cargoes to the holder of the Bills of Lading, it is hard to see how “lost” in cl.18.3 could extend to a deliberate misdelivery of goods contrary to the Bills of Lading. It would need far clearer words if cl.18.3 was intended to have such perverse effect.

17.Accordingly, at best “lost” in cl.18.3 can only cover the inadvertent loss of cargoes. That is not the situation here where the goods were deliberately lost through misdelivery without presentation of Bills of Lading. It follows that cl.18.3 cannot apply here.

III. CONCLUSION

18.None of the proposed defences has merit. There is no arguable defence to Star Line’s Claim. Summary judgment is granted for the invoice value of the goods misdelivered (US$1,320,935.20). Interest will run on that amount from the date of the Writ until today at 1% over US$ prime. Thereafter interest will accrue at the judgment rate until payment.

Mr Paul Shieh, SC, instructed by Messrs Richards Butler, for the Plaintiff

Mr Colin Wright, instructed by Messrs Stephenson Harwood & Lo, for the 1^st Defendant