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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 Defendant’s 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 Defendant’s 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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