In Minmetals South-East Asia Corporation Pte Ltd v Nakhoda Logistics,(1) the plaintiff contracted with the respondent (defendant-carrier) to carry a cargo comprising several consignments of timber. The plaintiff had paid in full for the timber and became the legal and beneficial owner thereof. However, there was no physical purchase of timber, only the purchase of the 25 sets of bills of lading (House B/Ls), which would enable the plaintiff to sell the timber to other buyers – Jiangsu Sopo and Shanghai Unidev. The House B/Ls were issued by the defendant-carrier. The ocean liner Yang Ming Marine Transport Corporation issued ocean bills of lading (Ocean B/Ls) for the cargo in favour of the shipper to the defendant-carrier for the voyage from Port Klang to Shanghai Port. Both bills of lading had the same terms.
In the House B/Ls, Jiangsu Sopo was listed as the notifying party. However, issues arose and payments could not be made by Shanghai Unidev. The original House B/Ls were returned to the plaintiff by its bank and the plaintiff remained the owner of the cargo. Subsequently, the plaintiff decided to collect the cargo itself, as it remained the owner and held the original bills of lading, which were blank endorsed.
When the original House B/Ls were checked, it was found that they bore no particulars of the carrier or agent in Shanghai from which the plaintiff should collect the cargo. It was also discovered that the bills of lading were House B/Ls and that there should have been a corresponding set of Ocean B/Ls. There was no information of the ocean carriers or Ocean B/Ls to be exchanged with the House B/Ls so that the plaintiff could collect the cargo. The plaintiff thus commenced an action seeking damages for the defendant-carrier's failure to deliver the cargo despite the demands made on the presentation of the original House B/Ls.
The plaintiff claimed that the defendant-carrier's failure, refusal or neglect to deliver the goods when the original bills of lading had been presented amounted to a fundamental breach of the underlying contract to carry goods, which subjected the carrier to liability for breach of the contract of carriage and/or conversion.
In the High Court, it was held that the defendant-carrier had not breached the contract by refusing to facilitate the exchange of the master bills of lading for the House B/Ls because the plaintiff was the party which had failed to take delivery of the cargo through the proper procedure and had failed to plausibly explain the seven-month delay from the discharge of the cargo in Shanghai Port. In the event that the High Court had erred in its decision and the defendant-carrier was liable for breach of contract, the plaintiff was entitled only to RM2,256,968.70 as losses suffered, Article III, Rule 6 of the Hague Rules would apply and the plaintiff's claim would be barred by the one-year limitation period.
The plaintiff was allowed to appeal to the Court of Appeal based on liability and quantum.
The plaintiff moved the court to decide whether:
- the plaintiff was the owner of the cargo and/or person entitled to take delivery or possession of the cargo and/or the lawful holder and/or the person in possession of the House B/Ls to whom property in the cargo passed or by reason of the endorsement;
- the defendant-carrier's duty to deliver the cargo on presentation of the original House B/Ls had been discharged once the goods landed in Shanghai;
- the defendant-carrier was in breach of its duty in contract or tort in its failure to deliver the cargo at Shanghai on presentation of the original House B/Ls by the plaintiff or its agent and in the same order and condition as shipped;
- the plaintiff's claim under the House B/Ls against the defendant-carrier was time-barred by law;
- the plaintiff had proved the quantum of its claim of $13,591,622.65; and
- the defendant-carrier's liability was limited to RM2,256,968.70, which was the cargo's declared value if it were to be found liable.
Having considered the facts and the High Court's decisions, the Court of Appeal found as follows:
- The High Court had erred in concluding that the plaintiff had failed to make sufficient attempts to procure delivery of the cargo. The position in law was that the defendant-carrier's was obliged to deliver the goods carried only against the production of the original House B/Ls.
- The original House B/Ls represented title to the cargo. The defendant-carrier was obliged, albeit in contract or in tort, to ensure that delivery of the goods was against the original House B/Ls, which were in the plaintiff's possession. A sell on to Jiangsu Sopo had been arranged, but it should not have been able to take delivery of the cargo as the intermediate purchaser (Shanghai Unidev, which had wanted to sell on to Jiangsu Sopo) had not paid the plaintiff for the timber. Both Jiangsu Sopo and Shanghai Unidev did not possess and could not produce the original House B/Ls. Therefore, the plaintiff remained the legal and beneficial owner of the cargo, as it held the original House B/Ls. The defendant-carrier had allowed delivery without production of the original House B/Ls and was thus in breach of the contract of carriage.
- It was not for the party holding the original B/Ls to establish why there had been a delay in initiating collection. The defendant-carrier could claim for the demurrage, wharfage and storage costs that arose as a result of any delay caused by the plaintiff as long as the claim was measurable and compensable, but could not allow delivery to a party other than the holder of the original House B/Ls. Such action, if allowed, would make safeguarding the title to goods in the shipping industry difficult as any collection could theoretically be taken by any party claiming ownership, albeit without production of the original bills of lading.
- By requiring the plaintiff to have exchanged the original Ocean B/Ls for the original House B/Ls from the notifying party (Jiangsu Sopo) rather than the defendant-carrier, the High Court had erred in imposing an onerous duty on the plaintiff, which was contrary to the well-established position in law, as set out in Rambler Cycle. The stance taken by the High Court contradicted its confirmation of settled case law.
- In law, the duty of the defendant-carrier extended to a duty to exchange the Ocean B/Ls (which were in its possession) with the original House B/Ls, so that the plaintiff, through its agent, could take delivery of the cargo. The failure to do so amounted to a fundamental breach.
- It was clear that the defendant-carrier was liable for the losses suffered by the plaintiff.
- Article III, Rule 6 of the Hague Rules provides that the one-year limitation period comes into effect one year after the delivery of goods. 'Delivery' should be understood to mean the delivery of cargo to the party or consignee correctly entitled to such receipt. The defendant-carrier in the case at hand only discharged the cargo, but did not deliver it to the plaintiff, which was entitled to possession and had legal ownership. In the absence of delivery against the production of the original House B/Ls to the plaintiff, the one-year limitation period could not be triggered.
- The price (RM2,256,968.70) stipulated in the customs declaration form (K2 Form) was relied on by the High Court as the true price of the cargo and the true measure of the plaintiff's loss, but it did not provide conclusive proof of the timber's value.
- The K2 Form was premised on an alleged sales contract between the shippers and Jiangsu Sopo, which had not been presented in evidence. The form did not operate as a limit to the quantum of the claim sought by the plaintiff by virtue of the breach of contract or in tort. In order to do so, the form should have comprised part of the contract of carriage, but it did not.
- The Court of Appeal was satisfied that the plaintiff had suffered a loss of $13,591,622 as per their statement of claim. The appellate court considered the actual evidence which showed that the sum had been paid out under the various sales contracts for the timber. Further, the evidence, remittance and payment advice documents had not been specifically challenged by the defendants.
- It was affirmed that the limitation of liability as pleaded by the defendant-carrier would normally be set out in the House B/Ls which would have evidenced the contract of carriage. In this case, Clause 26 of the House B/Ls stated that the alternate figure that the defendant-carrier wished to rely on was to be stipulated and inserted in the bill of lading. However, the value of the cargo was not stated.
- Further, limitation should not have been available to the defendant-carrier, which was in fundamental breach of its clear obligations under the law, unless such limitation fell within recognised categories such as tonnage limitation or limitation under the Hague Rules in contract.
- The High Court had erred by concluding that the plaintiff's claim was limited under Article III, Rule 6 of the Hague Rules. This finding was contrary to the clear legal position that Article III, Rule 6 is inapplicable in the context of delivery under Article II of the Hague Rules, which provides that the scope of such limitation exists only up to the point of discharge and does not extend to delivery.
- The High Court had failed to properly consider alternative ways to measure damages and the evidence of full payment had been provided by the plaintiff, notwithstanding that it represented a true measure of the actual loss that the plaintiff had suffered.
- The High Court had erred in imposing a limitation of liability on the defendant-carrier in light of the clear evidence of the quantum paid out by the plaintiff. This had amounted to an error of law.
In conclusion, the Court of Appeal made the following rulings:
- The High Court had erred in respect of its findings with respect to liability and quantum.
- Appellate intervention was warranted.
- The appeal was allowed and the High Court judgment set aside.
- Judgment was granted to the plaintiff in terms of prayer 1 of the statement of claim with interest and costs.
- The Court of Appeal further awarded RM70,000 by way of costs.
- The deposit was to be refunded.
Endnotes
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