The respondent, Steel Industries (Sabah) Sdn Bhd, engaged the appellant, Chong Fui Shipping & Forwarding Sdn Bhd, to transport 2000 metric tonnes of steel bars from Penang to Kota Kinabalu, Sabah. The steel bars had corroded upon arrival in Kota Kinabalu. The respondent brought the suit one year and one month after the goods were received by the respondent. This was one month after the end of the limitation period set out in art 3.6 of the International Convention for the Unification of Certain Rules of Law relating to Bills of Lading 1924 (the Hague Rules) which provides that a suit for loss or damage must be brought within one year after delivery of the goods or the date when the goods should have been delivered. This provision is given domestic effect in Sarawak under s 277 of the Merchant Shipping Ordinance of Sarawak, by way of the Merchant Shipping (Implementation of Conventions Relating to Carriage of Goods by Sea and to Liability of Shipowners and Others) Regulations 1960 (‘Sarawak Regulations’). The Sarawak Regulations applied mutatis mutandis in Sabah via the Merchant Shipping (Applied Subsidiary Legislation) Regulations 1961 (the Sabah Regulations) upon the exercise of the power conferred on the Governor in Council under ss 277 and 278 of the Merchant Shipping Ordinance 1960 of North Borneo.

There were two issues which formed the subject of appeal. First, whether the limitation period in the bill of lading as provided for in the Hague Rules was inapplicable for being contrary to s 29 of the Contracts Act 1950. The respondent’s contention was that art 3.6 of the Hague Rules which was incorporated by agreement was contrary to s 29 of the Contracts Act 1950 because agreeing to the Hague Rules (including the provision on limitation of time to bring an action) restricted the respondent from enforcing its rights or limited the time within which it might enforce its rights. Furthermore, the respondent’s position was that the adoption of the Hague Rules through subsidiary legislation should not prevail over s 29 of the Contracts Act 1950. Second, whether the decision of the Court of Appeal reversing the interlocutory decision of the High Court case of Trengganu Forest Products Sdn Bhd v COSCO Container Lines [2007] 5 MLJ 486 (Trengganu Forest Products) (CMI464) and ordering the case to proceed to full trial was binding upon the High Court. The High Court judge in the present suit was of the view that the limitation period of one year in the Hague Rules applied based on the High Court decision in Trengganu Forest Products. However, the Court of Appeal in Trengganu Forest Products subsequently reversed the position by which the High Court judge in the present suit held that he was bound.

Held: The Court held that the respondent’s suit was barred by limitation under art 3.6 of the Hague Rules. The court found that the limitation period in the bill of lading as provided for in the Hague Rules applied notwithstanding s 29 of the Contracts Act 1950. The Court, agreeing with the High Court, suggested that s 29 of the Contracts Act 1950 only applied when the agreement limiting the time for a party to enforce its rights is formulated by the parties themselves. The court also found that the Court of Appeal decision in Trengganu Forest Products did not bind the High Court and the Court of Appeal in the present suit. The plaintiff in Trengganu Forest Products sued the defendant for the tort of deceit claiming that there was fraudulent misrepresentation in the bill of lading. The defendant made an application to have the claim struck out on the grounds that the claim was barred by limitation. The plaintiff resisted that application and submitted that the limitation period under the Hague Rules only applied to contractual liabilities and not tortious liabilities. The High Court held that the usage of the words 'all liability' is wide enough to cover the claims made by the plaintiff and granted the striking out application. While an appeal was made against the ruling, which was granted by the Court of Appeal, it appeared only to be based on ‘the tort of deceit by virtue of the fraudulent misrepresentation made by the defendant in the bill of lading' and there was little evidence to suggest that considerations made on the limitation issue had a part to play in the court's reasoning.