Bewise Motors Co Ltd (the plaintiff) imported four new left-hand drive cars, which it sold to an associated company in Shanghai on CIF terms for a total sum of USD 139,000. It entered into a contract with Fast Trans International Co Ltd (Fast Trans) to have them shipped in containers. Fast Trans had a set of standard terms of the contract, and the plaintiff conceded that it had sufficient notice of them and assented to them. Fast Trans, in turn, contracted with Hoi Kong Container Services Ltd (the defendant) to have the cars put into containers and loaded onto the ship. The defendant also had its own set of standard terms of the contract that Fast Trans had notice of and assented to. At the request of or on the instruction of Fast Trans the cars were delivered by the plaintiff's drivers to the defendant's No 1 depot in the afternoon of 5 November 1993. Later the same day, they were lashed into two containers by subcontractors of the defendant. In the early hours of the next day, some men entered the depot, overpowered the watchman, opened the containers and stole the cars. The plaintiff claimed USD 139,000 from the defendant. The defendant pleaded exemption from liability or alternatively limitation of liability.

In the Court of First Instance, the full sum was awarded in favour of the plaintiff, but this was reversed by a majority in the Court of Appeal. The Court of Appeal held that the defendant was not liable, and even if the defendant had been found liable, it would have been entitled to limit its liability to the sum of USD 500 for each car. The plaintiff appealed to the Court of Final Appeal against both parts of the judgment.

Clause 4(a) of the defendant's terms and conditions provided that:

The company shall not be liable

(1) for any loss or damage ... due to

(i) fire

(ii) explosion

(iii) theft (with exceptions)

(iv) riots, etc., or

(2) for any other loss unless it is conclusively proved that such loss or damage was due to the proven neglect or default of the company or its employees ... .

Clause 11 of the defendant's terms and conditions provided that:

Subject to the terms herein, in the event that the company is liable to compensate the Customer or Merchant, unless the Hague or Hague-Visby Rules are compulsory applicable in which case the relevant limitation amounts set out therein shall apply, the compensation shall not exceed in any circumstances whatsoever the following:

(a) In the case of physical loss or damage to the goods, not exceeding the least of

(i) the value of the goods lost; or

(ii) the reasonable costs of repair in the case of damage; or

(iii) US$2 per kilogram of the goods lost or damaged; or

(iv) US$500 per package.

The issues before the Court were:

(i) whether the defendant's terms were effective to exempt the defendant altogether from liability for the loss of the four cars; and

(ii) if not, whether the defendant could limit its liability to a small fraction of the total loss (USD 139,000) suffered by the plaintiff by invoking cl 11 of its terms of business.

Held (by a majority, Litton PJ dissenting): Appeal dismissed.

The majority of the Court agreed that the defendant was not liable. Thus, the Court found that it was unnecessary to decide the question of limitation of liability. The Court was far from satisfied that a motor car could be a package, but did not need to decide the issue.

Litton PJ held that the defendant's liability for the loss of the four cars by theft was not excluded by cl 4(a). Litton PJ therefore went on to discuss the issue of limitation of liability.

The word 'package' had no legal or technical meaning. For the purpose of cl 11(a)(iv), the limitation of liability to USD 500 per package depended upon how the goods were delivered to and accepted by the bailee. In its ordinary meaning, the word 'package' related generally to things packed, encased or bundled up in some way as a unit for bailment or carriage. In this case, the defendant assumed responsibility for safe-keeping of four cars driven into its depot. They were not packaged in any way. Thus, the limitation of 'US$500 per package' could not refer to the four vehicles. The majority of the Court of Appeal was wrong to have so held.