HONG KONG HIGH COURT ADMIRALTY JURISDICTION

 
Jan. 29, 1986
 
____________________

 
THE "ANDERS MAERSK"
 
Before Mr. Justice MAYO
 
Carriage by sea - Through bill of lading - Limitation of liability - Goods transhipped at Hong Kong - Damage to
goods - Whether carrier could limit liability - Whether Hague Visby Rules applicable to transhipment - United
States Carriage of Goods by Sea Act, 1936 - Carriage of Goods by Sea (Hong Kong) Order 1508 of 1980 - Hague
Visby Rules - Hong Kong.
 
Two large steam boilers which were manufactured in the United States were shipped by the defendants in accordance
with the terms of a through bill of lading. The bill of lading incorporated the provisions contained in the Carriage of
Goods by Sea Act, 1936 of the United States (COGSA) and cl. 16 conferred upon the defendants the right to tranship the
cargo. The ultimate destination of the cargo was Shanghai. The plaintiffs were the holders of the bill of lading.
 
The defendants shipped the boilers from Baltimore to Hong Kong in November, 1981 and made arrangements for their
transhipment on Linjiang.
 
During the voyage from Hong Kong to Shanghai, Linjiang encountered adverse weather conditions and one of the
boilers broke loose and fell into the sea and sank. The other boiler fell on the deck and was damaged.
 
The plaintiffs brought an action to recover the losses sustained. The defendants contended that s. 4 of COGSA entitled a
carrier to limit the amounts of claims which were made upon them. The amount of the limitation was U.S. $500 per
package. The defendants argued that the plaintiffs were bound by this limitation and the total amount which could be
claimed in this action was U.S. $1000.
 
The plaintiffs contended that as the boilers were transhipped in Hong Kong, the Carriage of Goods by Sea (Hong Kong)
Order 1508 of 1980 was applicable. That order incorporated the Carriage of Goods by Sea Act, 1971 which in turn gave
effect to the Hague Visby Rules. A carrier was not able to limit his liability for cargo in the same way under the rules and
the plaintiffs claimed to be entitled to recover substantial damages.
 
-Held by High Court of Hong Kong (MAYO, J.), that (1) it was essential to have regard to the contractual relations
between parties; it was clear from s. 1 (4) of the Carriage of Goods by
Sea Act, 1971 that the documentation was of paramount importance; there was no reference to Hong Kong in the bill of
lading and the voyage referred to therein was from Baltimore to Shanghai (see p. 486, cols. 1 and 2);
 
(2) shipment did not include transhipment; all the references to shipment in the rules were consistent with shipment
being confined to the initial shipment referred to in the bill of lading; the plaintiffs could not establish that the Hague
Visby Rules were applicable to the shipment of these boilers; the COGSA provisions incorporated in the bill of lading
were applicable and the plaintiffs were only entitled to the small amount under the limitation (see p. 486, col. 2).
 
____________________

 
This was an action by the plaintiffs Ryoden Machinery Company Ltd. claiming damages from the defendants, the
owners of the vessel Anders Maersk in respect of the loss of one of their boilers and damage to another while the said
boilers were being carried on a voyage from Hong Kong to Shanghai on the vessel Linjiang.
 
Mr. Ronnie Tong (instructed by Messrs. C. Y. Kwan & Co.) for the plaintiffs Mr. Charles Sussex (instructed by Messrs.
Holman Fenwick & Willan) for the defendants.
 
The further facts are stated in the judgment of Mr. Justice Mayo.
 
JUDGMENT
 
Mr. Justice MAYO: The plaintiffs are the holders of a bill of lading. The cargo in question was two large steam
boilers. The boilers were manufactured in the United States of America and were shipped by the defendants in accordance
with the terms of a through bill of lading.
 
The bill of lading incorporated the provisions contained in the Carriage of Goods by Sea Act, 1936 (COGSA) of the
United States of America. Clause 16 of the bill conferred upon the defendant the right to tranship the cargo should they
wish to do so. The ultimate port of destination for the boilers was Shanghai. The defendants shipped the boilers from
Baltimore to Hong Kong in November, 1981. They then made arrangements for the transhipment of the boilers
on Linjiang shortly after their arrival in Hong Kong. During the voyage from Hong Kong to
Shanghai, Linjiang encountered adverse weather conditions and one of the boilers broke loose and fell into the sea and
sank. The other boiler fell on the deck and was damaged. The plaintiffs are endeavouring in this action to recover the
losses they have sustained as a result of this.

The facts I have recited so far have been agreed by both parties. There is no agreement between the parties concerning
the extent of the damage to the second boiler which fell on the deck. Among the documents which were agreed by the
parties was a survey report which was prepared shortly after the damaged boiler arrived in China. Unfortunately this
survey report is not a very satisfactory document. The expert who prepared the report referred to various items of damage.
What he did not do was to include any meaningful material in the survey of the extent or consequences of the damage he
referred to. It will, therefore, be appreciated that in the absence of any expert evidence it is impossible for me to assess the
amount of damage to the boiler.
 
The summons for directions contained the standard provision relating to experts' reports. Both parties were entitled to
produce two experts' reports in the usual way. Other than agreeing the limited survey I have referred to, nothing further
was done by the parties. Mr. Tong who was representing the plaintiffs called as a witness an employee of his clients who
has apparently some engineering experience. This gentleman sought to give evidence that after the second boiler arrived
in China it was so badly damaged that it was worthless. Understandably, Mr. Sussex for the defendant objected to this
attempt to introduce expert evidence as the provisions of O. 38, r. 36 of the Rules of the Supreme Court had not been
complied with. In the light of this, he applied for leave to adduce expert evidence which would call in question the
plaintiffs' contention that the boiler was worthless. Having heard submissions from both Counsel, I ruled that leave was
granted to the defendants to file such expert evidence as may be necessary and for the plaintiffs to have leave to file
expert evidence in reply. Both parties agreed that it would be possible for me to deal with the main issue which arose
between the parties without having the extra expert evidence concerning the extent of the damage to the boiler. This being
the case, I agreed to proceed with the trial, and I ordered that a separate issue of the extent of the damages should be
adjourned to a future date. When the necessary evidence was available, I would myself assess the damages if this was
necessary.
 
The main issue between the parties can be stated in simple terms. Section 4 of COGSA entitles a carrier to limit the
amounts of claims which are made upon them. The amount of the limitation is U.S. $500 per package. It is the defendants'
contention that the plaintiffs are bound by this limitation, and the total amount which can be claimed in this action is U.S.
$1000. The plaintiffs argued that as the
boilers were transhipped in Hong Kong, the Carriage of Goods by Sea (Hong Kong) Order No. 1508 of 1980 is applicable
and has the force of law. This order incorporates the Carriage of Goods by Sea Act 1971 which in turn brings into effect
the Hague Visby Rules. A carrier is not able to limit his liability for cargo in the same way under these rules.
Accordingly, the plaintiffs are entitled to recover substantial damages.
 
 I was rather surprised to be advised by both Counsel that their researches had indicated that there had not been any
similar reported cases on this point either in Hong Kong or in the United Kingdom since the introduction of the Hague
Visby Rules. It was, therefore, a matter of importance that there should be a satisfactory degree of certainty on this subject
so that parties undertaking commercial transactions could know exactly what the position was. I agree that it is essential
that there should be a clear determination of this point.
 
Mr. Tong placed considerable reliance on the provisions contained in s. 1, sub-s. (3) of the Carriage of Goods by Sea
Act, 1971, which is in the schedule to the order I have referred to.
 
(3) Without prejudice to subsection (2) above, the said provisions shall have effect (and have the force of law) in
relation to and in connection with the carriage of goods by sea in ships where the port of shipment is a port in Hong Kong,
whether or not the Carriage is between ports in two different States within the meaning of Article X of the Rules.
 
Article X reads as follows:-
 
The provisions of these Rules shall apply to every bill of lading relating to the carriage of goods between ports in two
different States if:
 
(a) the bill of lading is issued in a contracting State, or
 
(b) the carriage is from a port in a contracting State, or
 
(c) the contract contained in or evidenced by the bill of lading provides that these Rules or legislation of any State
giving effect to them are to govern the contract,
 
whatever may be the nationality of the ship, the carrier, the shipper, the consignee, or any other interested person.
 
Mr. Tong argued that there could be no doubt that the shipment of the boilers on the Linjiang from Hong Kong came
within the scope of art. X (b) and was accordingly governed by s. 1 (3). He urged me to have regard to the physical
situation rather than focussing my attention on the documentation. He referred me to the entry in the third edition of the
Shorter Oxford Dictionary Vol. 2 "shipment". There was nothing in this entry to exclude transhipment. It was accordingly
clear that "shipment" would include transhipment.
 
It was evident from the judgment of Lord Denning, M.R. and Lord Justice Ackner in The Morviken [1982] 1 Lloyd's
Rep. 325 that it was the intention of the legislature that the Hague Visby Rules should be applicable wherever possible,
and that parties should not be permitted to contract out of the rules. Mr. Tong also contended that the Court should adopt
a liberal approach to the application of the rules. For this he called in aid a passage from the speech of Lord Diplock
appearing on pp. 5 and 1116 of The Hollandia, ([1983] 1 Lloyd's Rep. 1; [1982] 3 W.L.R. 1111 (notwithstanding the
different name, this was the Appeal in the House of Lords in The Morviken)):
 
My Lords, the provisions in s. 1 of the Act that I have quoted appear to me to be free from any ambiguity perceptible to
even the most ingenious of legal minds. The Hague-Visby Rules, or rather all those of them that are included in the
schedule, are to have the force of law in the United Kingdom; they are to be treated as if they were part of directly enacted
statute law. But since they form part of an international convention which must come under the consideration of foreign
as well as English Courts, it is, as Lord Macmillan said of the Hague Rules themselves in Stag Line Ltd. v. Foscolo,
Mango and Co. Ltd. (1931) 41 Ll.L.Rep. 165; [1932] A.C. 328 at pp. 174 and 350-
 
. . . desirable in the interests of uniformity that their interpretation should not be rigidly controlled by domestic precedents
of antecedent date, but rather that the language of the rules should be construed on broad principles of general
acceptation.
 
They should be given a purposive rather than a narrow literalistic construction, particularly wherever the adoption of a
literalistic construction would enable the stated purpose of the international convention, viz., the unification of domestic
laws of the contracting states relating to bills of lading, to be evaded by the use of colourable devices that, not being
expressly referred to in the rules, are not specifically prohibited.
 
Perhaps not surprisingly Mr. Sussex urged me to adopt a rather different approach. He argued that it was clear from s. 1
(4) of the Carriage of Goods by Sea Act, 1971, that the documentation was of paramount importance. The sub-section
reads:

(4) Subject to subsection (6) below, nothing in this section shall be taken as applying anything in the Rules to any
contract for the carriage of goods by sea, unless the contract expressly or by implication provides for the issue of a bill of
lading or any similar document of title.
 
There is also judicial authority for attaching importance to the contract between the parties. Mr. Sussex referred me to part
of Mr. Justice Bingham's judgment which appears on p. 320 of Mayhew Foods Ltd. v. Overseas Containers Ltd., [1984] 1
Lloyd's Rep. 317:
 
The answer to this problem is again to be found in the principle that the rights and liabilities under the rules attach to a
contract. They do not apply to carriage or storage before the port of shipment or after the port of discharge, because that
would be inland and not sea carriage. But between those ports the contract was, despite the wide language of cl. 21, for
carriage by sea. If, during that carriage, OCL chose to avail themselves of their contractual right to discharge, store and
tranship, those were, in my judgment, operations "in relation to and in connection with the carriage of goods by sea in
ships", to use the language of the Act, or were "within the contractual carriage", to use the language of cl. 21 (2) of the
bill of lading conditions.
 
If reference is made to the bill of lading it will be noted that there is no reference whatever to Hong Kong. Equally it is
manifest from the bill of lading that the port of shipment is Baltimore. The voyage referred to in the bill of lading is from
Baltimore to Shanghai. The transhipment in Hong Kong is undertaken by the defendants pursuant to their rights under the
bill of lading.
 
I have no doubt that Mr. Sussex's contention is correct. It is evident to me on perusing this
legislation and the rules thereunder that it is essential to have regard to the contractual relations between the parties. It is
not difficult to envisage the difficulties which would arise if this is not the case. What would the position be if the boilers
had been loaded on other cargo which had to be discharged at a port en route. Possibly it may be necessary for the boilers
to be unloaded for other cargo to be discharged. Would there be a shipment of the boilers when they were re-loaded on
the ship again?
 
Unless reference is made to the contract between the parties, there would always be a likelihood that there would be an
element of uncertainty. The shipper of goods may have no knowledge of the arrangements being made by the carrier, and
it would put the shipper in an invidious position if he could only establish his rights by a subsequent re-construction of
events which took place without his knowledge.
 
I entirely reject Mr. Tong's argument that shipment includes transhipment. All the references to shipment in the rules are
consistent with shipment being confined to the initial shipment referred to in the bill of lading. The result of this is that
the plaintiffs cannot establish that the Hague Visby Rules are applicable to the shipment of these boilers. The COGSA
provisions incorporated in the bill of lading are applicable to the contract with the consequence that the limitation I have
referred to is operative. The plaintiffs will only be entitled to the very small amount under the limitation. One result of my
coming to this conclusion is to render irrelevant the assessment of damages I have referred to in this judgment. I will hear
the parties on the most appropriate course to adopt in this connection. I will also hear the parties on costs.