Trane v. Hanjin

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DMC/SandT/41/01
Trane Company v. Hanjin Shipping Co. Ltd.
Hong Kong High Court: Stone J.: July 2001
Mr. Colin Wright, instructed by Messrs. Clyde & Co., for Trane Company
Mr. Charles Sussex SC, instructed by Messrs. Holman Fenwick and Willan, for Hanjin Shipping
CARRIAGE OF GOODS BY SEA: DAMAGE: BILL OF LADING: SUBJECT TO LEGISLATION ‘COMPULSORILY APPLICABLE’ IN COUNTRY OF SHIPMENT: WHETHER COMPULSORILY APPLICABLE BY LAW OF COUNTRY OF SHIPMENT: WHETHER COMPULSORILY APPLICABLE BY PROPER LAW OF CONTRACT OF CARRIAGE: USCOGSA: HAGUE RULES 1924: CONFLICT OF LAWS: HONG KONG CONFLICT LAW: CLOSEST AND MOST REAL CONNECTION: US LAW

Summary
In this case the defendant shipowners were held entitled to rely on the US$500 package limitation in relation to a claim for damage to cargo carried on a voyage from the US West Coast to Hong Kong, under a bill of lading providing that it was subject to USCOGSA where that applied "compulsorily". The court held that, on the construction of the bill of lading in question, the issue of compulsory application was to be decided by reference to the law ruling in the country of shipment; even if the issue were to be decided by reference to the conflict laws of Hong Kong, the bill of lading would still have been held subject to USCOGSA, since US law was the law with which the contract of carriage had its closest and most real connection.

DMC Rating Category: Confirmed

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Facts
This case related to the trial of certain preliminary issues arising in the context of an action to recover compensation for damage to a piece of air-conditioning machinery carried in a flat rack container on board the ‘Hanjin Marseilles’ from Seattle to Hong Kong in November 1997. During the voyage, the machinery broke free from its lashings in the flat rack, tipped over and sustained damage. Hanjin defended the action on the ground that the damage was sustained by reason of the shipper’s inadequate lashing and therefore the carrier was not responsible. But Hanjin also maintained that, even if its liability was involved, the carriage was subject to the US Carriage of Goods by Sea Act of 1936, under which it could limit its liability to US$500 (the limitation applicable per package). This latter point was tried as a preliminary issue.

The relevant clauses in the bill of lading were as follows:
2. Clause Paramount
(a) This Bill of Lading shall have effect subject to the [Hague Rules of August 1924] as enacted in the country of shipment, unless the [Hague-Visby Protocol of 1968] or [the USCOGSA of 1936] apply compulsorily.
(b) When no such enactments are in force in the country of shipment, the corresponding Hague Rules, Hague-Visby Rules or USCOGSA legislation of the country of destination shall apply, but in respect of shipments to which no such enactments are compulsorily applicable, the terms of the Hague Rules shall apply…….
3. Litigation and Claim
(a) Disputes arising under the Bill of Lading shall be determined at the option of the Merchant by the courts and in accordance with the law (including choice of law) at
(i) the Carrier’s principal place of business, being Seoul, Korea…… or
(ii) the place of receipt of the Goods by the Carrier, or the port of discharge.

The issue was whether the words ‘apply compulsorily’ in the last line of Clause 2.(a) are directed to the status in the country of shipment of the legislation to which reference is made, and nothing else, or whether the words refer to the compulsory application of USCOGSA under the designated proper law of the contract, in this instance, Hong Kong law, as the law of the port of discharge. In the one case, the USCOGSA would apply, since it was applicable in the country of shipment; in the other, the Hague Rules would apply, since – under Hong Kong law – USCOGSA would not apply compulsorily to this shipment.

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Judgment
The judge held that the first interpretation, favoured by Hanjin, was the correct one. He accepted that under Clause 2.(a), the words ‘enacted’ and ‘apply compulsorily’ were used synonymously and that assistance as to the meaning of (a) could be found from the opening words of (b), namely ‘Where no such enactments are in force in the country of shipment…’

He further accepted the submission from counsel for Hanjin that the provisions of sub-clause (a) ‘are not "proper law sensitive" and that what is involved is simply an incidental question of foreign law, namely, whether as a matter of fact a relevant enactment is in force in the country of shipment.’

The judge did not consider that Clause 3 represented ‘a proper law clause as understood in the sense of providing an express choice of proper law of this contract of carriage. This is because…. Clause 3 expressly refers in the parenthesis to the choice of law rules of the law of the forum, that is, its conflict rules, so that if Hong Kong’s conflicts rules are applied to determine the system of law with which the contract has its closest and most real connection, that would inevitably point to US law in any event – and hence the application of USCOGSA.’

In coming to this conclusion, the judge bore in mind that the interpretation he favoured tallied with the approach adopted by other courts in the UK, New Zealand and Singapore, when faced with the problem of construing similar Clauses Paramount.

Judgment was accordingly given in favour of Hanjin, together with costs.

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Comment
The decision in this case should be contrasted with that in the English case of Parsons Corporation v. Owners of Happy Ranger, decided two weeks earlier in July 2001. In that case (shortly to be heard on appeal) Tomlinson J. held that the question of compulsory applicability was to be answered by reference to the proper law of the contract, and not – as determined by Stone J. in the Hanjin Marseilles case - by reference to the law in force at the port of loading, in this case Seattle, in the United States. A case note of the Happy Ranger decision is also on this website, at Shipping & Transport/Carriage of Goods/the Happy Ranger.

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