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1. Hong Kong - 'presentation rule' applies
to straight bills of lading |
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The
Court of Final Appeal of Hong Kong SAR has held on 12 May 2009 in Carewins v
Bright Fortune Shipping that the ‘presentation rule’ applies to ‘straight’
bills of lading like it does to ‘order’ bills. This confirms the judgments by
Stone J (2006) and the Court of Appeal (2007) (TT Talk Editions 90, 93 and
100). The ‘presentation rule’ means that, for delivery of the goods, the
consignee must surrender the ‘straight’ bill to the carrier. In
Carewins, the parties used ‘straight’ bills of lading (which name the
consignee) for the shipment of footwear products from Hong Kong to Los
Angeles. The goods were delivered to the consignee without presentation of
the bills. The Hong Kong shipper then sued the carrier for misdelivery. In
the leading judgment in the Court of Final Appeal, Mr Justice Ribeiro saw no
valid reason why the essential characteristic of a bill of lading as a
document of title to the goods should depend on whether or not the bill was
negotiable (i.e. ‘to order’). The shipper’s ability to withhold the bill of
lading pending payment by the consignee was ‘a highly important feature of
the recognised mercantile arrangement’, which applied just as much between
shipper and consignee under a ‘straight’ bill of lading as it did between the
parties of an ‘order’ bill. Mr
Justice Ribeiro found that the ‘straight’ bill of lading before him had all
features of a bill of lading, as it was entitled ‘bill of lading’, had a bill
of lading number and displayed prominently the word ‘Original’. Most
significantly, the bill included an ‘attestation clause’ (the text on the
front of the bill usually in the bottom-right corner) with the phrase ‘(...)
one of which being accomplished the others to stand void’. Yet the judge
added that (‘perhaps save in exceptional circumstances’) the ‘presentation
rule’ would apply to a straight bill of lading even if an ‘attestation
clause’ were missing. In any case, it did not matter that the ‘attestation
clause’ did not include the phrase ‘One of the original bills of lading must
be surrendered duly endorsed’. Confirmation
of the ‘presentation rule’ for ‘straight’ bills of lading by the highest Hong
Kong court is welcome news, because this endorses the now dominant global
industry understanding (Carewins flew in Alistair Schaff QC who had fought
for the ‘presentation rule’ in the ‘Rafaela S’). The one very important
exception on the application of the ‘presentation rule’ to ‘straight’ bills
of lading are the United States (where the ‘misdelivery’ in Carewins
occurred).The TT Club reiterates its advice to Members not to deliver goods
without presentation of a ‘straight’ bill of lading. Parties who prefer
delivery without the need to produce the sea carriage document should use a
simple sea waybill. Carewins
Development (China) Ltd v Bright Fortune Shipping Ltd, Court of Final Appeal
of Hong Kong SAR, 12 May 2009: http://www.hklii.org/hk/jud/eng/hkcfa/2009/FACV000013_2008-65720.html 2. Hong Kong - how can a carrier exclude liability for
misdelivery? The
other big issue in the Hong Kong case of Carewins v Bright Fortune Shipping
was the carrier’s attempt to exclude liability for misdelivery. Clause 2(a)
of the carrier’s bill of lading stipulated liability subject to US COGSA 1936
for the period between loading onto and discharge from a seagoing vessel.
Clause 2(b) excluded liability by saying: ‘Save
as provided in (a) hereof, the carrier shall be under no liability in any
capacity whatsoever for loss or misdelivery of or damage to the goods
howsoever caused whether or not through the negligence of the carrier (...)’. While
loss or damage can occur either during or before/after the period defined in
clause 2(a), misdelivery would not take place before discharge from the
vessel, i.e. is invariably subject to clause 2(b). Stone
J in the High Court (2006) held that the exclusion of liability protected the
carrier as it was ‘couched in clear terms, with express reference to
misdelivery howsoever caused’. He admitted that he did not find this
conclusion an attractive result ‘in light of the merits as I perceive them’, but
felt unable to ignore what these words said ‘clearly and unambiguously’. He
concluded that it was difficult to disagree with the carrier that if the
latter could not rely on the exemption in clause 2(b), ‘it is not easy to
conceive of any clause which could exclude liability for misdelivery’. The
Court of Appeal (2007) felt that clause 2(b) might have been sufficiently
clear in this case had it simply excluded liability for ‘misdelivery (...)
however caused’. However, it held that the further phrase ‘whether or not
through negligence’ qualified the words ‘however caused’, i.e. curtailed
their scope, because misdelivery could also occur intentionally, i.e. without
consideration of ‘negligence or non-negligence’. In
its judgement of 12 May 2009, the Court of Final Appeal of Hong Kong SAR
held, like the Court of Appeal, that the carrier could not rely on clause
2(b). For the proper approach of interpreting clause 2(b), Lord Justice
Ribeiro (in the leading judgement) cited Lord Wilberforce who said in Ailsa Craig
Fishing v Malvern Fishing (1983) that the effectiveness of a clause limiting
liability was ‘a question of construction of that clause in the context of
the contract as a whole’ and in Suisse Atlantique (1967) that contractual
intention was to be ascertained ‘not just grammatically from the words used,
but by consideration of the words used in relation to commercial purpose’. Then
Mr Justice Ribeiro cited Lord Diplock who held in Photo Production v
Securicor (1980) that a court was not entitled to reject an exclusion clause,
however unreasonable the court itself may think the clause was, provided the
words were ‘clear and fairly susceptible of one meaning only’. A following
case, Motis v Dampskibsselskabet af 1912 (2000), applied this to the context
of delivery against a forged bill of lading. There Stuart-Smith LJ held that
the court would lean against a clause excluding liability for a breach of
fundamental importance if ‘as a matter of construction (...) adequate content
can be given to the clause’. In
contrast to Stone J at first instance, who deemed the words of clause 2(b)
clear and unambiguous, Mr Justice Ribeiro held, in a rationale very similar
to the one used by the Court of Appeal, that clause 2(b) was ‘susceptible to
more than one meaning’, depending on whether or not there was a ‘conscious
disregard’ by the carrier of the presentation rule. Mr Justice Ribeiro did
this by considering three different ‘levels’ of misdelivery: (1)
No negligence on the part of the carrier, for example: a well executed
fraudulent bill; (2)
An ‘accident’ involving negligence on the part of the carrier, for example:
delivery under a bill to the wrong address; and (3)
Deliberate disregard by the carrier of its obligation to deliver against an original
bill, as was the case here. Mr
Justice Ribeiro considered that clause 2(b) could be given ‘adequate content’
if it was construed to allow the carrier to avoid liability in cases (1) and
(2) only, which were not breaches of fundamental importance. But clause 2(b)
with its qualification ‘whether or not through negligence’ was insufficiently
explicit to justify its extension to case (3) where the carrier delivered the
goods consciously, i.e. where the question was not whether or not the carrier
acted negligently. Mr
Justice Ribeiro reaffirmed the principle that, if wide words of exemption
would effectively deprive the contract of any compulsory content, the
exemption should be given a narrower meaning that sustains the purpose and
legal effect of the contract. As the requirement of delivery only against
production was a ‘cardinal purpose’ of a bill of lading, he held that
exempting the carrier in all circumstances of liability for misdelivery would
mean to seriously undermine the purpose of bills of lading (incidentally,
this ‘presentation rule’ based reasoning would naturally not directly apply
to sea waybills). Carewins
v Bright Fortune Shipping illustrates the very considerable difficulties
carriers face when drafting causes that exempt them from liability for
misdelivery. The phrase ‘whether or not through the negligence of the
carrier’ might have been added with the intention of making doubly sure that
the carrier escapes liability, possibly in knowledge of Lord Wilberforce’s
judgement in Ailsa Craig Fishing v Malvern Fishing (1983) that an exemption
clause had to be worded most clearly and unambiguously’ in order to exclude
liability for negligence. Unfortunately for the carrier, this additional
phrase in fact weakened clause 2(b). For
good measure, Mr Justice Ribeiro added that the word ‘misdelivery’ itself
could be seen as ambiguous, meaning either nothing more than inadvertent
misdelivery, or referring to any kind of incorrect delivery, including
‘deliberate misdelivery’. Should the carrier define the term ‘misdelivery’ in
the definition clause of his bill of lading, or would this create only more
ambiguities? It seems he is caught in the dilemma of ‘I’ve said too much, I
haven’t said enough’. This
case is a rather extreme application of the ‘contra proferentem’ rule; maybe
the carrier’s chances would have been better had his liability for
misdelivery not been excluded, but merely limited. Great thought must be
given to wording such clauses.
The
Club has recently become aware of a case of documentary fraud to the
detriment of a terminal in Europe. One morning, a temperature-controlled
trailer was checked into the terminal for shipment on the cross-channel
service that evening. In the afternoon, a man who claimed to work for the
terminal’s client called the terminal asking for the trailer not to be put
aboard the vessel but instead released for road carriage. The terminal
replied that a fax was required for the cancellation of the booking on the vessel
and for the container’s release to a vehicle. The
terminal then received a one page fax message with the client’s header
(contact details and logo). The hand written and signed fax message gave the
correct trailer number and requested release to a specified vehicle, which
duly arrived at the terminal only a few minutes after the fax. Within ten
minutes the vehicle left the terminal premises with the temperature
controlled trailer. The next day it became clear that the terminal’s client
was unaware of the fax message and that the trailer was taken by thieves. The
terminal is now facing legal action. The
TT Club’s sheet ‘Stop Loss 7 - Container loss’ states: ‘if customer checks
have been performed or the customer is well known to you but the haulier is
not, then contact the customer for verification of haulier’. Thus, in order
to establish whether the phone call and fax really did come from its client,
the terminal should have double-checked with its known contact person at its
client’s whether the changed instructions were genuine. The
sheet ‘Stop Loss 7 - Container loss’ is available free of charge from the
Club’s website in English, Russian and Chinese: http://www.ttclub.com/TTClub/public.nsf/HTML/CWOG-6Y6G9A?OpenDocument
4.
Conclusion We hope
that you will have found the above items interesting. If you would like to
have further information about any of them, or have any comments you would
like to make, please email the editor at tt.talk@ttclub.com . We look forward
to hearing from you. Peter
Stockli You
can also read this newsletter and past issues on our website: http://www.ttclub.com The
materials contained in TT Talk have been prepared for information purposes
only, and are not a substitute for legal advice. Whilst every care has been
taken to ensure the accuracy of the materials, the editor, any contributor or
the TT Club accept no responsibility for loss or damage which may arise from
reliance on information contained in TT Talk.
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