Federal Court, Malaysia

Raja Azlan Shah CJ, Chang Min Tat FJ, Abdoolcader J

16 April 1980; 6 May 1980

KEYWORDS

Received for Shipment Bill of Lading – Goods not shipped on board the agreed vessel – Goods shipped on subsequent vessel -Six months delay in delivery, as a result – Liability under bill when cargo not shipped as per the bill – Bill of Lading exempted liability for delay – Effect of the delay-exclusion clause

FACTS AND DECISION

An arrangement was made with a carrier to carry a cargo of paper board from New York to Penang (in Malaysia). The carrier received the cargo and issued a bill of lading, seemingly a ‘received for shipment’ bill, to carry the cargo on board the vessel SS Priam. The bill of lading provided that the carrier was not to be liable for any delay. The carrier missed shipping the cargo on board SS Priam, but subsequently shipped it on board another vessel. This resulted in a delay of about six months.

The indorsee of the bill sued the carrier for non-delivery by SS Priam. The carrier challenged the action substantially on three gounds. First, the claim was for non-delivery could not be sustained as the goods were subsequently delivered having been shipped on board another vessel. Second, the carrier is not liable on the bill of lading as the goods were never shipped on board SS Priam. Third, the bill exempted liability for all delay.

As to the first ground, the court held that although the claim was for non-delivery by SS Priam, parties understood it actually meant delayed delivery, hence the court allowed the plaintiff (claimant) to proceed with claim as if it was for delayed delivery in the interests of justice. As to the second ground, the court held that it was not necessary for the goods to be shipped on board in order for the carrier to incur liability under contract of carriage. The court said the carriage contract came into existence when the goods were delivered. As to the third ground, the court agreed with the carrier and held that the carrier was exempted from liability.

OBSERVATION

A ‘received for shipment’ bill is or evidences a contract for carriage. It has been recognised as a document of title. It is transferable as much as a shipped bill, irrespective of whether the goods were actually shipped as per the bill. Accordingly, the carrier fails to perform the contract, i.e. fails to ship the cargo as per the bill, the carrier will be liable on the bill to the holder of the bill.

The transferability of the bill is provided for by s. 1 Bill of Lading Act 1855, applicable in Malaysia by virtue of s. 5(1) of the Civil Law Act 1956. In the case of the UK, it is now provided for by s. 2(1) of the Carriage of Goods Act 1992 and in Singapore by s. 2(1) of the Bills of Lading Act. In fact, s. 1(2)(b) of the 1992 UK Act and the Singapore Act expressly include ‘received for shipment’ bills into the definition of a bill of lading for purpose of transferability.

The court said that the contract for carriage came into existence when the goods were delivered. This may not be so in all cases. Sometimes, the contract may come into existence when the booking is made with an agent of the carrier. There cannot be a doubt that at least by the time the bill is issued the contract has come into existence.

The court held that the liability was exempted. This is a matter of construction. For two reasons, it would have been in line with authorities to refuse to allow the carrier to rely on the exclusion clause in this case. First, the exclusion clause did not relate to any breach of the obligation to ship on board the particular vessel SS Priam. If the goods were shipped on board this vessel and there was a delay in the arrival of the ship for whatever reason, then the exclusion clause could cover. The Asia Star [2007] SGCA 17; [2007] 3 SLR 1 will support this proposition, where the Singapore Court of Appeal held that a clause exempting liability for uncargoworthiness did not relieve the shipowner from liability when the ship did not answer the agreed description as epoxy coated. Second, the obligation to proceed with reasonable dispatch is one of the common law implied terms into contracts for carriage. Implied terms can only be exempted by specific exclusion clause. The exclusion clause here refers to delay and not to a failure to ship on board the agreed vessel that can amount to a failure to proceed with reasonable despatch. The Maori King (Owners) v Hughes [1895] 2 QB 550 (CA) will support this proposition, where the English Court of Appeal held that a clause excluding liability for “failure or breakdown of machinery, insulation and other appliances” did not cover where a cargo of frozen mutton was damaged as a result of refrigeration system that did not work properly since the start of the voyage. Such a construction will also be in line with the general principle that an exclusion clause will be narrowly construed against the person relying on it. This decision by the Malaysian Federal Court does not appear to represent the good law to be followed.

Overview by ARUN KASI