The plaintiff in this action is the holder of bills of lading relating to a shipment of goods despatched from Tuticorin to Colombo on a ship owned by the second defendant. The first defendant is a shipping agent and acted as the agent in Colombo of the second defendant. The goods in question were brought into Colombo and were duly landed ashore. The plaintiff alleged that it was the duty and business of the second defendant and/or the first defendant to give delivery of the goods in terms of the bills of lading to the plaintiff, but that this did not occur. Instead the plaintiff alleged that the first defendant by its servants or agents wrongfully or unlawfully gave delivery of the goods to persons other than the plaintiff and that the second defendant is therefore liable in law for negligence or fraud or breach of duty. A preliminary issue was raised as to whether the plaintiff's claim for misdelivery was time-barred. The trial judge held in favour of the plaintiff.

Held: Appeal dismissed.

The issue turned on the interpretation of art 3.6 of the Hague Rules which were given statutory effect by Ordinance No 18 of 1926. Art 3.6 of the Hague Rules was considered in the judgment of this Court in Sri Lanka Shipping Co Ltd v The Indian Bank Ltd (SC 441/64 F, SCM of 1 March 1968) (1968) 71 NLR 361 (CMI254) where it was held that the time limitation in art 3.6 of the Hague Rules does not apply in a case where there is only a misdelivery of goods, and not actual physical loss of goods.

Counsel for the second defendant argued that this case was wrongly decided by this Court, and in support of that argument relied on the decision of the House of Lords in the case of Admastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd. One of the matters which arose for decision in that case was the construction of statutory provision in United States law corresponding to the provision contained in art 4.1 and art 4.2 of the Hague Rules. In deciding this question Viscount Simonds approved and adopted the reasoning and conclusion of Devlin J in the lower Court that the words 'loss or damage' in arts 4.1 and 4.2 of the Hague Rules should not be limited to physical loss or damage. The only limitation to be put on them is that the 'loss or damage' must arise in relation to the 'loading, handling, stowage, carriage, custody, care and discharge of such goods' (art 2 of the Hague Rules). In GH Renton & Co Ltd v Palmyra Trading Corp of Panama (CMI2113) the House of Lords held that the words 'loss or damage to or in connection with goods' in art 3.8 were also not limited to actual loss of or physical damage to the goods.

The Court adopted the opinion of Devlin J that the 'loss or damage' referred to in art 4 of the Hague Rules must mean a loss or damage in relation to what is specified in art 2, that is, 'the loading, handling, stowage, carriage, custody, care and discharge of goods', and agreed that the expression 'loss or damage' in art 3.6 of the Hague Rules must have the same meaning. Since this aspect of the matter was not taken into account in the Sri Lanka Shipping Co case, art 3.6 had to be examined as read with art 2 of the Hague Rules. In the present case, however, as in the Sri Lanka Shipping Co case, the carriage contemplated in the bill of lading had been duly completed by the discharge of the shipment consigned to Ceylon. The Ioss or damage alleged by the plaintiff in this case was therefore not one in relation to any of the matters which are regulated by the Hague Rules. On this ground, the limitation in art 3.6 of the Hague Rules did not apply to the present action.

Although this finding was conclusive of the question whether the plaintiff's action is time-barred, further examination of art 3.6 of the Hague Rules had revealed additional reasons for its provisions being inapplicable to a case of alleged loss by misdelivery ashore. The first para of art 3.6 requires 'notice of loss or damage and the general nature of such loss or damage' to be given to the carrier or its agent before or at the time of the removal of the goods into the custody of the person entitled to delivery; and the second para states that the notice need not be given 'if the state of the goods as at the time of their receipt has been the subject of joint survey or inspection'. The fourth paragraph of art 3.6 affords to both the carrier and the consignee an opportunity for inspection and tallying, with a view obviously to ascertaining the nature and extent of loss or damage to goods. Hence, the first, second and fourth paras of art 3.6 when considered together are wholly applicable in a case in which a consignee is removing or about to remove the goods, and at that stage becomes aware of actual or apprehended loss or damage, in which event the consignee must immediately or within three days give notice to the carrier in order that the latter himself may by survey or inspection investigate the correctness of the consignee's complaint; and if a proper notice of alleged loss or damage is not given, the fact of removal becomes prima facie evidence of due delivery. There is nothing in these three paragraphs which is reasonably applicable in a case where no goods are available for removal by a consignee, for the reason that the carrier or its agent has caused a complete misdelivery to some person other than the person entitled to delivery.

The limitation clause which requires suit to be brought within one year after delivery or after due date for delivery is to be found in the third para of art 3.6, and that this third para is 'sandwiched' between paras, the terms of which are applicable only to actual physical loss or actual physical damage. There is thus very good reason for the opinion that the third para of art 3.6 was intended to apply only in case where goods delivered are alleged to be damaged or where there is an alleged short delivery. At the least it is doubtful whether the adoption by the legislature of a Rule in such uncertain terms can be regarded as having amended the provisions of the Prescription Ordinance in its application to a claim of the nature made by the plaintiff in the instant case. For these reasons the Court adheres in the construction placed by this Court upon art 3.6 of the Hague Rules in the case of Sri Lanka Shipping Co Ltd v The Indian Bank Ltd.