Court of Appeal, Malaysia

Zaharah Ibrahim JCA, Mohamad Ariff Yusof JCA, Varghese George JCA

5 August 2016

KEYWORDS

Bill of lading – Art. III(6) Hague Rules, one-year time limit – s. 29 of Contracts Act 1950 – Validity of statement or clause incorporating the Hague Rules into bill of lading, pursuant to legal requirement – Reg. 2 of Merchant Shipping (Applied Subsidiary Legislation) Regulations 1961 (Sabah) – ss. 277 and 278 of Merchant Shipping Ordinance 1960 (No 11/1960) (Sabah) – Reg. 2 and 4 of Merchant Shipping (Implementation of Conventions Relating to Carriage of Goods by Sea and to Liability of Shipowners and Others) Regulations 1960 (Sarawak) – s. 277 of Merchant Shipping Ordinance 1960 (Ord 2/1960) (Sarawak)

FACTS

In this case, steel was shipped from Penang to Kota Kinabalu (in Sabah, Malaysia) under a bill of lading. The bill stated that any action must be brought within one year of date of delivery or the date when the goods should have been delivered. The steel, according to the consignee, arrived in corroded state. The consignee sued the carrier, however more than a year after delivery. The carried applied to summarily strike out the action under Order 18 r. 19 of the then Rules of the High Court 1980 (now Rules of Court 2012) on the ground that the Art. III(6) one-year time limit had set it. The consignee challenged it relying on s. 29 of the Contracts Act that invalidates any agreement of parties to reduce time limit allowed by the law. The High Court refused to strike out the action. Hence, the appeal by the carrier to the Court of Appeal.

HELD (BY COURT OF APPEAL -UNAMIMOUSLY)

1. As the one-year time limit was already in the relevant legislation and was stated pursuant to applicable legislation, that did not contravene s. 29, hence valid.

• Appeal allowed with RM20,000 costs, the consignee’s action summarily struck out.

OBSERVATION

The s. 29 of the Contracts Act, which is materially identical to the s. 28 of the Indian Contract Act 1872, provides:

Every agreement, by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent.

However, Exception 1 to the section excludes arbitration from the its scope.

Regulations 2 – 6 of Merchant Shipping (Implementation of Conventions Relating to Carriage of Goods by Sea and to Liability of Shipowners and Others) Regulations 1960 (Sarawak), made under s. 277 of Merchant Shipping Ordinance 1960 (Ord 2/1960) (Sarawak) are materially identical to ss. 2 – 6 of the Carriage of Goods by Sea Act 1950 (applicable only in Peninsular Malaysia – s. 1(2)).

Reg. 2 of Merchant Shipping (Applied Subsidiary Legislation) Regulations 1961 (Sabah) made under ss. 277 and 278 of Merchant Shipping Ordinance 1960 (No 11/1960) (Sabah), incorporates the regulations 2 and 4 of the 1960 Sarawak Regulations (above).

Note: By the above said regulations, the Hague-Rules apply to Sabah and Sarawak, subject to a modification of the £100 liability limitation in Art. IV(5) to RM850 in value, currently – there is no corresponding modification in the 1950 Act.

The relevant provisions were regulations 2 and 4 of the 1960 Regulations of Sarawak, materially identical to ss. 2 – 4 of the 1950 Act. The said regulations read as follows:

2. Application of the Rules.

Subject to the provisions of this Part, the Rules set out in the Schedule (hereinafter referred to as “the Rules”), shall have effect in relation to and in connection with the carriage of goods by sea in ships carrying goods from any port in Sarawak to any other port whether within or outside Sarawak.

4. Statement as to application of the Rules to be included in bills of lading.

Every bill of lading or similar document of title issued in Sarawak which contains or is evidence of any contract to which the Rules apply shall contain an express statement that it is to have effect subject to the provisions of the Rules as applied to this Part.

The same result will be achieved whether under Sabah or Sarawak regulations or under the 1950 Act.

The validity of the RM850 limit can be subject of challenge on two grounds. First, the act of the state legislators fixing the value below the Art. IV(5) threshold may constitute a breach of sovereign obligation of Malaysia that has ratified the Rules. Second, seemingly the legislators acted under a misunderstanding that the £100 referred to the face value rather than gold value. The suitable mode of the possible challenge will be by judicial review. If such a challenge succeeds, that will nullify the Regulation 7 that has effected the modification, so that the £100 gold value in Art. IV(5) read together with Art. IX will apply at all times. See also Dr Irwin UJ Ooi, Quest for the ‘gold value’ of a ‘package’ or ‘unit’: Limitation of Liability under the Hague Rules, [2006] 4 MLJ xlvii: the author argues that fixing the liability limit at RM850 per package or unit was probably a result of misunderstanding by the legislators of the regulation as to what the £100 gold value meant. The author further argues fixing the sum as such is in breach of the Art. III(8). Legislators fixing the value below £100 gold value will not breach the Art. III(8) that catches only contractual contravention of the Rules.

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