Cheong Yuk Fai and another v China International Freight Forwarders (HK) Ltd

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DMC/SandT/10/03

Hong Kong

Cheong Yuk Fai and another v China International Freight Forwarders (HK) Ltd

Hong Kong SAR Court of Appeal: Cheung and Yuen JJA and A Chung J: CACV No. 463 of 2002: 26 January 2005: [2005] 4 HKLRD 544 (English translation; judgment handed down in Chinese)

http://www.hklii.org/hk/jud/eng/hkca/2005/CACV000463X_2002-47015.html

The Plaintiffs/Appellants (cargo owners), Cheong Yuk Fai and Wong Wai Ching, in person

Mr Raymond Chow (instructed by Robert Wong Solicitors) for the Defendant/Respondent (carrier)

CARRIAGE OF GOODS: CLAIM AGAINST CARRIER FOR WRONGFUL DELIVERY OF GOODS: CONVERSION: LIMITATION UNDER HAGUE-VISBY RULES AND BILL OF LADING

Summary

The Court of Appeal reversed the decision of the District Court and held that the Hague-Visby Rules were not applicable to a dispute arising from the “land transport” section of a carriage contract involving both sea and land transport. Therefore, the cargo owners’ claim was not time-barred under the Hague-Visby Rules, but the case should be remitted to the District Court for retrial to determine whether the limitation period provided for in the bill of lading applied.

This note has been contributed by Ken Lee To-ching, LLB(Hons), PCLL (University of Hong Kong), BCL Student at Oxford University.

Background

The Plaintiffs/cargo owners were garment manufacturers. In 1995, they entered into a contract to sell 158 cartons of garments to Goldentex on “D/P” (documents against payment) terms, and delivered the goods to the Defendant’s agent for delivery to Moscow.

The shipment was loaded onto the “Ming Star” and a bill of lading was given to the cargo owners. The Hague-Visby Rules were incorporated into the bill of lading under the Clause Paramount in Clause 8 of the bill:

“The Hague Rules contained in the International Conventions for the unification of certain rules relating to Bill of Lading dated Brussels 25 August 1924 or in those countries where they are already in force the Hague-Visby rules contained in the protocol of Brussels dated 23 February 1968 as enacted in the country of Shipment, shall apply to all carriage of goods by sea and where no mandatory international or national law applies to the carriage of goods by inland waterways also and such provisions shall apply to all goods whether carried on deck or under deck.”

The Hague-Visby Rules apply in Hong Kong under the Carriage of Goods by Sea Ordinance (Laws of Hong Kong, Cap.462).

Clause 20 of the bill of lading provided that:

“Failure to effect delivery within 90 days after the expiry of a time limit agreed expressed in a CT Bill of Lading or where no time limit is agreed and so expressed, failure to effect delivery within 90 days after the time it would be reasonable to allow for diligent completion of the combined transport operation shall in the absence of evidence to the contrary, give to the party entitled to receive delivery the right to treat the goods as lost.”

Clause 21 of the bill of lading further provided that:

“The freight forwarder shall be discharged of all liability under the rules of these Conditions unless suit is brought within nine months after: (i) the delivery of the goods or (ii) the date when the goods should have been delivered or (iii) the date when in accordance with cl.20 failure to deliver the goods would in the absence of evidence to the contrary give to the party entitled to receive the right to treat the goods as lost.”

It was common ground between the parties that the goods were discharged from the ship at Hamburg and then carried by land to Moscow.

In November 1995, the cargo owners sent the bill of lading to their bank to collect payment, but the bank sent it back as it had not been paid. They then attempted to locate the goods. They were informed that the goods had not been collected, and were being stored by the carrier in a warehouse in Moscow. The goods were eventually sold at an auction, and the proceeds were insufficient to cover the storage charges claimed by the carrier.

In 2001, the cargo owners sued the carrier for delivery of the goods or their value, alternatively damages for conversion. However, the carrier argued that the claim was time-barred by: (a) the Hague-Visby Rules as applied under Clause 8 of the bill of lading; and/or (b) Clause 21 of the bill of lading.

District Court Judgment

Deputy District Judge Sham held that the goods should have arrived in Moscow in November 1995. However, as the cargo owners only initiated proceedings in March 2001, this exceeded the limitation period set out in the Hague-Visby Rules and in Clause 21 of the bill of lading. Therefore, the cargo owners’ claim was time-barred.

The cargo owners appealed.

Court of Appeal Judgment

The leading judgment was given by Yuen JA, with whom other judges agreed.

In relation to the Hague-Visby Rules, Yuen JA was of the opinion that they did not apply to the present case. The Hague-Visby Rules only apply to the part of the carriage contract related to sea transport. This is reflected in the wordings of Articles I(b), I(d), II and III(6) of the Hague-Visby Rules, and was established in Pyrene Co Ltd v Scindia Steam Navigation Co Ltd [1954] 2 QB 402. While the Hague-Visby Rules could cover the wrongful delivery of goods, the question remained whether the wrongful delivery occurred during an operation related to carriage by sea.

The present case involved both sea and land transport. The goods had been discharged from the ship at Hamburg and the dispute only arose after the goods had arrived in Moscow via land transport. Therefore, loss or damage to the goods did not occur during an operation that was part of their carriage by sea, and the Hague-Visby Rules did not apply.

In relation to Clause 21 of the bill of lading, paragraph (i) was not applicable as there was no actual delivery of goods.

As for paragraph (ii), the “date when the goods should have been delivered” may or may not have been November 1995, as it depended on whether delivery was sought and whether conditions for delivery were met. As for paragraph (iii), while there was no expressly agreed time limit for delivery, its applicability depended on a finding of what was the reasonable time that should have been allowed for diligent completion of the combined transport operation from Hong Kong to Moscow. Yuen JA was of the view that there were no findings of fact enabling the court to determine whether paragraphs (ii) and (iii) were applicable, and thus whether the cargo owners’ claim was time-barred.

Therefore, the appeal was allowed, and the case was remitted to the District Court for retrial.