A high court recently dismissed plaintiff Minmetals Southeast Asia Corp Pte
Ltd's claim against defendant Nakhoda Logistics Sdn Bhd (the carrier) for
breach of its contract to carry and deliver cargo to the plaintiff on the basis
that the plaintiff had failed to prove its claim. However, on appeal, the
Court of Appeal upheld the plaintiff's claim and found the defendant liable.
Facts
The plaintiff traded commodities and sold retail building materials. The
defendant provided freight and shipping services. The plaintiff and defendant
entered into a contract under which the defendant agreed to carry cargo from
Port Klang to Shanghai.
Yang Ming Marine Transport Corp is an ocean shipping company based in
Taiwan. It was authorised to issue bills of lading for the cargo. Trinity
Tripartners Private Ltd and Oriental Century Ltd sell cargo.
The plaintiff entered into purchase contracts with Trinity and Oriental for
timber. Having paid in full for the invoices issued under the purchase orders,
the plaintiff became the lawful legal and beneficial owner of the timber.
Jiangsu Sopo Group Shangai Co Ltd and Shanghai Unidev Import and Export Co Ltd
bought the plaintiff's cargo.
Between 10 December 2014 and 19 April 2015, the plaintiff entered into
contracts to sell timber to Shanghai Unidev. The plaintiff subsequently entered
into contracts of carriage with the defendant, following which the defendant
issued 25 bills of lading for carriage of the cargo from Port Klang to Shanghai
(house bills of lading). The plaintiff paid for the freight in full.
Shanghai Unidev's bank issued letters of credit to the plaintiff. When
discrepancies arose in the letters of credit, the plaintiff's bankers advised the
plaintiff that they could not use the letters. The plaintiff requested a direct
payment from Shanghai Unidev, but no such payment was provided. The plaintiff
subsequently decided to collect the cargo, as it was still the owner.
The plaintiff sent the original bills of lading to Minmetals Shanghai but
later found that these contained no information regarding which carriers or
agents in Shanghai the plaintiff should collect the cargo from. The plaintiff
initiated an action seeking damages from the defendant for failure to deliver
the cargo.
The high court accepted the plaintiff's submission that the defendant had a
duty to deliver the cargo only to persons in possession of the original bill of
lading and upon production thereof. As the holder of the house bills of lading,
the plaintiff was entitled to delivery and possession of the cargo and thus had
a right to sue the defendant for breaching the agreement.
However, the high court held that the plaintiff failed to prove that the
defendant had breached its duty, as no evidence was adduced regarding the
plaintiff's attempts to collect the cargo at the Shanghai port. The high court
accepted evidence from the defendant's witness, who stipulated that the cargo
had been discharged at the Shanghai port, but since the consignee had failed to
collect it, the cargo had been left there. Thus, the high court held that the
defendant had not breached its obligation to deliver the cargo.
Further, it took the plaintiff seven months from the date of discharge to
query the location of its cargo. The plaintiff did not explain this delay.
The high court found that even if the defendant had breached its duty, its
liability should be limited to RM2,256,968.70.
The Court of Appeal observed that the defendant was bound to deliver the
cargo to the person holding the bills of lading and that failure to do so would
subject the defendant to liability under both the contract and tort laws.
Further, the plaintiff's claim that the defendant had refused or neglected to
deliver the goods when the original bills of lading were presented amounted to
a fundamental breach. Thus, the defendant was liable for both breaches of
contract and conversion.
Although there was a delay in the collection, the defendant could be
compensated for demurrage, wharfage and storage costs. However, the defendant
could not deliver the cargo to a party that did not hold the original bills of
lading. According to the court, if this was allowed, the collection of cargo
could theoretically be carried out by any party without furnishing the original
bills of lading and it thus would be very difficult to protect the title to
goods.
In the case at hand, the plaintiff was in possession of the house bills of
lading and had made this known to the defendant. Despite this, the defendant
had failed to facilitate delivery of the cargo. The Court of Appeal held that
the defendant had a duty to exchange the ocean bills of lading with the
original bills of lading to ensure that the plaintiff could take possession of
the cargo. The Court of Appeal further held that the high court had failed to
apply this principle of law and instead had required the plaintiff to exchange
the ocean bills of lading for the house bills of lading from Jiangsu Sopo instead
of the defendant. In light of this, the Court of Appeal found the defendant
liable for the plaintiff's losses.
The defendant used the limitation defense under Article III, Rule 6 of the
Hague Rules, which states that carriers are discharged from liability if a suit
is brought more than a year after delivery of the goods. The question before
the Court of Appeal was whether there was in fact a delivery of the goods. The
court held that 'delivery' must be construed as the cargo being delivered to the
party entitled to receive such goods. The Court of Appeal found that such
delivery never took place.
The plaintiff also submitted that the one-year time bar applied to breaches
concerning the loading of goods in order to discharge them and not to delivery
thereof. According to the plaintiff, delivery does not fall within the scope of
Article III, Rule 6. This case did not concern the discharge of cargo, but
rather its delivery to the plaintiff; thus, the defendant could not rely on the
limitation defense. The Court of Appeal upheld the plaintiff's argument.
On the issue of quantum, the defendant argued that it owed only
RM2,256,968.70 on the basis that this was the amount stated in the customs
declaration form. The Court of Appeal held that the customs declaration form
did not represent the plaintiff's true losses.
Finally, the Court of Appeal held that the high court had erred in failing
to consider the plaintiff's actual loss, given that the plaintiff had already
paid Oriental and Trinity in full ($13,591,622.65) for the timber, but was not
in possession of the timber due to the defendant's omission.
