Center Optical (Hong Kong) Ltd. v. Jardine Transport Services (China) Ltd.
Hong Kong High Court: Stone J.:  HKEC 911: July 2001
Mr. David Stokes, instructed by Messrs. K W Leung & Co, for Center
Mr. Nigel Kat, instructed by Messrs. Clyde & Co, for Jardines
CARRIAGE BY SEA: BILLS OF LADING: DELIVERY WITHOUT PRODUCTION OF BILLS OF
LADING: IDENTITY OF CARRIER: EXCULPATORY CLAUSES: PERIOD OF RESPONSIBILITY:
FAILURE OF CONSIGNEE TO TAKE DELIVERY: DELIVERY TO BE GIVEN ONLY AGAINST
PRODUCTION OF ORIGINAL B/L: CAUSE OF LOSS: DUTY TO MITIGATE: WHETHER LEGAL
PROCEEDINGS SHOULD BE TAKEN AGAINST DEBTOR
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In this case, the cargo interests were held entitled to recover damages for
the delivery of their cargo at destination without production of the relevant
original bills of lading. The defendants, Jardine Transport, were held to be the
carrier under the bills of lading, despite their assertion that they were acting
only as agents for a third party. Exculpatory clauses 1) limiting the
responsibility of the carrier to the period from loading on to discharge from
the carrying ship, and 2) providing for the goods to be stored at the Merchant’s
risk if the consignee failed to take delivery of them when called upon to do so,
were held insufficient to override the cardinal principle that the carrier
should deliver the cargo only on production of an original bill of lading.
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Center Optical, a Hong Kong exporter, claimed US$301,100 from Jardines, a
freight forwarder based in Shanghai, in respect of two consignments (out of a
series of nine) of optical frames and sunglasses shipped from Shanghai to Miami,
which were there released to the ultimate consignee, a company called Center
Optical HK Inc. but not connected with the claimants, without production of the
original bills of lading. The consignments were sold on the basis ‘FOB’
Shanghai and were shipped under bills of lading on the form of Dynamic Container
Line, which was described as a ‘Jardine Pacific Business’ and bearing
the Jardine’s logo. The bills named Center Optical as the Shipper, the
consignee as ‘To Order’ and agents in Miami, Pronto Cargo Corporation, as
‘Forwarding Agent’. They were signed by Jardine Transport Services (China),
without qualification, although the printed form of the bills contained,
alongside that signature, the formula ‘As Agent for the Carrier - Dynamic
Container Line – Jardine Freight Services (HK) Ltd.’.
The two consignments were shipped from Shanghai in May and June 1998. On
their arrival in Miami overland from Long Beach, Pronto took possession of them.
The goods were unloaded from the containers in which they had been stuffed and
were held for delivery to Center Optical Miami on production of the bills of
lading once they had been paid for. Before this happened, however, an employee
of Pronto released the goods to Center Optical Miami without taking the bills of
lading in return. Center Optical Miami never paid for the consignments, although
they did accept their indebtedness to Center Optical Hong Kong for them.
Center Optical Hong Kong then claimed from Jardine’s the price that Center
Optical Miami should have paid them, although Center Optical Hong Kong had not
themselves paid their suppliers in China for these consignments. The claims were
for breach of the bill of lading
contracts and for conversion.
Jardines raised the following principal defences to the claim:
1 Under the bills of lading, the contracting carrier was not Jardine’s
but the British Virgin Islands company, Dynamic Container Line Ltd., with whom
Jardine’s had an agency agreement.
2 The carrier could rely on Clause 6(2) of the bills of lading as a
defence. This clause provided: "The responsibility of the Carrier is
limited to that part of the carriage from and during loading onto the vessel up
to and during discharge from the vessel and the Carrier shall not be liable for
any loss or damage whatsoever in respect of the goods… during any other part
of the carriage…. The Merchant constitutes the Carrier as agent to enter into
contracts on behalf of the Merchant with others for transport, storage, handling
or any other services in respect of the Goods prior to loading or subsequent to
discharge of the Goods from the vessel without responsibility for any act or
omission whatsoever on the part of the Carrier or others…"
3 The Carrier could also rely on Clause 14 of the bills, headed ‘Delivery
of the Goods’ and worded as follows:
"If delivery of the Goods… is not taken by the Merchant at the time
and place when and where the Carrier is entitled to call upon the Merchant to
take delivery thereof, the Carrier shall be entitled without notice to remove
from a Container the Goods… if stuffed in or on a Container and to store the
Goods… at the sole risk and expense of the Merchant. Such storage shall
constitute due delivery hereunder and thereupon the liability of the Carrier in
respect of the Goods…. shall cease".
4 The release of the consignments without production of the bills of
lading was not the cause of the loss, as it was probable that Center Optical
Hong Kong would have followed in this instance their previous practice of
authorising the release of the cargo to Center Optical Miami without production
of the relevant bills of lading.
5 Center Optical Hong Kong had failed to mitigate their loss by not
taking legal action in Miami to recover the goods whilst they were still in the
possession of Center Optical Miami.
The judge found in favour of Center Optical. On the specific arguments raised
by Jardine’s he ruled as follows.
1) The carrier was Jardine’s, not Dynamic Container Line
Ltd. Apart from the reference to ‘Dynamic Container Line’ on the face of the
bill, there was no reference in it to the company Dynamic Container Line Ltd.
and, on the evidence, that company had had nothing to do with the carriage of
these shipments. The manner in which Jardine’s had signed the bills of lading
failed to establish that they were a) not contracting as carrier and b) not
using the name Dynamic Container Line as a trade name. Further, if Jardine’s
had been an agent, they had acted as agent for an unnamed principal and would
thereby incur personal liability, because they had not made absolutely clear
that they acted as agent only. On this issue, noting that in evidence, the bills
of lading had been accepted as ‘house bills’, the judge concluded that
Jardine’s were the real principals to the contracts of carriage evidenced by
the two bills.
As regards points 2) and 3), the Judge adopted
the claimants’ argument that ‘the obligation of a carrier of the most
fundamental import is delivery of the goods only against production of an
original bill of lading and that delivery absent such production constitutes so
serious a breach of the contract of carriage that anything less than an express
exclusion of liability therefor should fail’. The judge declined to find that
clause 14, whether on its own or in conjunction with clause 6(2) was sufficient
‘to empower the carrier intentionally to deliver the goods to anyone he
wishes, without being subsequently called to account for his action’. This
finding was in part based on the decision of the English Court of Appeal in
Motis v. Dampskibsselskabet  1 LLR 211.
4) The judge rejected the Jardine’s
submission that it was ‘equally probable’ that Center Optical Hong Kong
would have agreed to release these two shipments without documents, as they had
done with others in the past, if they had been further pressed by the buyer to
do so. The court found this line of argument speculative and expressed itself
‘unwilling to accept the defendant’s invitation, in effect, to use a crystal
ball and to re-run the sequence of events in order to decide what would or would
not have occurred if the cargo had not been so misdelivered by the defendant’.
5) As regards the alleged failure of
Center Optical Hong Kong to mitigate their loss, the judge did not find their
conduct unreasonable. As regards their failure to instruct lawyers in Miami, the
judge said ‘The standard required from a claimant in these circumstances is
not high, and does not include an obligation to litigate against a third party’.
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