Starlight Exports v CTO (HK)

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DMC/SandT/07/07
Starlight Exports Limited and Star Light Electronics Company Limited v. CTO (HK) Limited
Hong Kong High Court, Court of First Instance, Commercial Action No. 255 of 2004. Reyes J. 19 July 2006
Mr. Nigel Kat, instructed by Messrs. Hon & Co., for the Plaintiffs
Mr. Paul Harris SC and Mr. Colin Wright, instructed by Messrs. Wilson Yeung & Co., for the Defendant
CARRIAGE OF GOODS BY SEA: SALE ON FOB TERMS: BILL OF LADING MARKED "TO ORDER OF SHIPPER": CARRIER INSTRUCTED NOT TO RELEASE GOODS SAVE ON PRODUCTION OF FULL SET OF BILLS OF LADING: CARGO RELEASED CONTRARY TO INSTRUCTIONS: LIABILITY OF CARRIER: 9 MONTHS TIME LIMIT UNDER BILL OF LADING: MEANING OF "DELIVERY"
Summary
In this case a contractual carrier was held liable for releasing cargo to a third party without production of the relevant bills of lading and contrary to specific instructions from the shipper plaintiffs. The defendant carrier had acted under a mistaken belief that in the case of a sale contract on FOB terms, the property in the goods automatically passed to the buyer upon shipment of the goods. Further, the carrier was not entitled to rely upon the nine-months time bar in the bill of lading. Under that clause, the nine-months period was expressed to run from the time the goods were delivered or should have been delivered. In this case, time did not begin to run until the plaintiffs instructed the carrier to return the goods to them. It did not run from the time that the carrier had wrongfully delivered the goods to the third party. The court left open the further question whether, had the nine-months time bar been relevant, it would have been struck down as contrary to Art.III Rule 6 of the Hague-Visby Rules, which apply to shipments from Hong Kong

DMC Category Rating: Confirmed

This case note has been contributed by Crump & Co, the international contributors to the website for Hong Kong

Background
This case concerned the shipment of electronic goods, in the period March to August 2003, from Hong Kong to Naples. Three Bills of Lading were issued on the FIATA Form, naming the Plaintiffs as Consignor. All the goods were consigned "To Order of Shipper". The "Notify Party" named under the bills was Hilevel Consumer Italia SpA, which had ordered the goods from the Plaintiffs. Under the sale contract the Plaintiffs retained the right to dispose of the goods. As Hilevel never paid the balance due on the goods shipped, the Plaintiffs never instructed the Defendant to deliver the goods to Hilevel and, in December 2003, the Plaintiffs told the Defendant to transport the goods back to Hong Kong. It was then discovered that the Defendantís agent in Italy had released the goods to Hilevel at some time or times between May and November 2003, without production of the bills of lading.

The Defendant denied liability and alleged that, as the goods were shipped on FOB terms, under which Hilevel was responsible for the freight charges, the contract of carriage was not between the Plaintiffs and the Defendant but between the Defendant and Hilevel. Moreover, under FOB terms, the property in the goods should have passed to Hilevel upon shipment from Hong Kong. Furthermore, the Defendant alleged that the action was not brought within time. According to clause 17 of the bill of lading, the liability of the carrier would be discharged nine months after date of delivery of the goods or the date on which they should have been delivered.

Judgment
In his judgment, the judge held that as the Plaintiffs specifically instructed the Defendant not to release the goods without their order and the presentation of the full set of the original bills of lading - notwithstanding that the goods had been shipped on FOB terms - the misdelivery had been due to the Defendantís fault in believing that the ownership of the goods had passed to Hilevel at the time the goods were shipped.

As to the time bar defence, the judge held that, as the Plaintiffs had no knowledge that the goods had been delivered to Hilevel at any time before they asked for their return in December 2003, time did not start to run until that date and therefore the action was brought within time. Delivery meant delivery in accordance with the bill of lading contract. It would not be right for the limitation period to start from the date of the wrongful release of the goods.

Thus, by acting against the instructions of the Plaintiffs and wrongly delivering the goods to Hilevel, the Defendant was held liable to reimburse the damages the Plaintiffs had suffered.

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