The appellant, Shun Cheong Steam Navigation Co Ltd, carried under a bill of lading two bales of raw medicine shipped by Pak Hing of Hong Kong for the respondent consignee, Wo Fong Trading Co, in Penang. Only one bale was delivered. The respondent sued the appellant for the invoice value of the missing bale which turned out to be by far the more valuable of the two.

The claim for the invoice value and disbursements was founded on cl 13 of the bill of lading which reads: 'Subject to the limitation expressed in cl 7 above, the Company's liability in case of loss or damage to goods for which they may be responsible within the limits of this Bill of Lading, to be calculated on and in no case to exceed the net invoice cost and disbursements'.

Liability was admitted at the trial and the only question before the High Court was the amount to be paid. Specifically, the defence denied that the invoice value was payable and relied on cl 7 of the bill of lading which reads: 'The owners of the vessel will not be accountable for money, documents, gold, silver, bullion, specie, jewellery, precious stones or metals, work of art or other precious articles, nor for any one package of cargo above the value of HK$300 (Hong Kong Dollars Three Hundred), unless the Bill of Lading be signed therefor with the nature and value therein expressed at the time of shipment and extra freight in respect of same agreed upon and paid. Delivery of specie and valuable shall be taken from the ship`s deck, where the carrier`s liability shall cease.'

Hong Kong is one of those countries which have adopted the Brussels Convention of 1923 and its Carriage of Goods by Sea Ordinance 1928 (HK COGSO) makes applicable the Carriage by Sea under Bills of Lading Rules, more familiarly known as the Hague Rules, in relation to and in connection with the carriage of goods by sea in ships carrying goods from any port in the Colony to any other port whether in or outside the Colony. Section 4 makes it a statutory requirement that every bill of lading or similar document of title issued in the Colony shall contain an express statement generally described as the paramount clause, that it is to have effect subject to these rules. The bill of lading in the instant case was clearly endorsed with the words that it was issued subject to the terms provisions and conditions of the HK COGSO in compliance with s 4 thereof. The law applicable is the law of Hong Kong.The HK COGSO is in all material particulars identical with the Malaysian COGSO 1950 and that the Hague Rules annexed to the Ordinance in each case are the contractual terms of the relationship between the parties: see Adamastos Shipping Co Ltd v Anglo-Saxon Petroleum Co Ltd [1959] AC 133, 152.

On a proper interpretation, where the shipper neither has declared the nature and value of the goods nor has it inserted in the bill of lading, the carrier shall not be liable to pay a sum exceeding GBP 100. It follows clearly that (1) where the value of the package is less than GBP 100, the shipper will be entitled to be reimbursed with the actual value of the package lost or damaged, (2) where it is worth exactly GBP 100, then this sum of GBP 100 and (3) where it is worth more than GBP 100, by however much, then GBP 100 and no more. If the shipper desires to claim more than GBP 100, either it has to agree with the carrier to fix a higher maximum or it has to declare the nature and value of the goods and to have it inserted in the bill of lading. The declaration, from the nature of things, must first come from the shipper. It serves as notice to the carrier of need for additional care in the carriage of the goods in question and must therefore be made before a higher liability can be fixed on the carrier. The respondents here had not declared the nature and value of the goods nor had it inserted in the bill of lading. The GBP 100 which art 9 declares to be of gold value is irreducible and art 3.8 enacts that any lessening of the carrier's liabilities under the rules shall be null and void and of no effect. The HKD 300 in cl 7 of the bill of lading is certainly much less than GBP 100 sterling.

The High Court in Penang (Arulanandom J) had no difficulty in coming to the decision that cl 7 is repugnant to the Hague Rules and is null and void and of no effect. Exemption of accountability for any one package above the value of HKD 300 of which the nature and value had not been declared or expressed in the bill of lading is clearly a lessening of liability under art 4.5 and is forbidden by art 3.8.

Held: Appeal allowed.

The trial Judge held that 'it follows, then, that the defendants have in no way limited their liability to the plaintiffs for loss or damage to the plaintiffs' goods and would therefore be liable to the plaintiffs for the full value of the goods lost'. How one offending clause in the bill of lading led consequentially and inevitably to avoiding the provisions of another clause which the former offended, or nullified a term of the contract of affreightment which was incorporated by statute and by contract, namely art 4.5, was never reasoned out, but reliance was placed on two cases, Anthony Hordern & Sons Ltd v Commonwealth & Dominion Line Ltd [1917] 2 KB 420, and a decision of the then Australian Court of Appeal in Foy & Gibson Proprietary Ltd v Holyman & Sons Pty Ltd (1946) 79 Lloyd's LR 339.

The Anthony Hordern case, a decision in 1917, that is before the ratification and accession by Hong Kong of the Hague Rules on 2 December 1930, is a decision clearly not on the Hague Rules but on the Harter Act, an Act of the Congress of the United States. The judgment under appeal sets out fully the headnotes. The first part of the headnotes summarises the Harter Act, the second part the decision which was to the effect that a clause in the bill of lading limiting the accountability or liability of the shipowner to not more than GBP 100 for any one package was null and void as against the Harter Act and judgment was given in favour of the shipper for the full value for the package that was not delivered.

In the Foy case, cl 14 in the bill of lading which provided that the carrier was not accountable beyond the mutually agreed value of GBP 5 for each package or parcel receipted unless otherwise stated in the bill of lading was held by all the five judges not to be in conflict with art 3.8 but to be repugnant to art 4.5 of the Hague Rules. The judgment of the Court of first instance in awarding the shippers the full value of the goods lost was therefore upheld.

These two cases were regarded by the High Court at Penang as authority for the simple and uncomplicated proposition that where the limitation clause is struck out, the carrier becomes liable for the full value of the goods lost or damaged. On the strength of the authority of these two cases the High Court therefore awarded the full invoice value of the package that was lost. It was considerably in excess of the ordinary limit of GBP 100 sterling in art 4.5.

Anthony Hordern is authority for a case involving the Hague Rules only if the Harter Act is in pari materia with or contains provisions similar to those in the Hague Rules. But it is clear from a reference to the text of the Harter Act, that while there was a provision in s 1 making it unlawful to relieve the shipowner from liability for loss or damage arising for negligence or default, there was no clause or provision similar to art 4.5 which limits the liability of the ship owner to a sum not exceeding GBP 100 unless the shipper had declared the actual value thereof or negotiated for a higher maximum. Anthony Hordern is therefore no authority whatsoever for a case on the shipowner`s liability under art 4.5. Clearly, cases like this brought about the realisation that the statutory provision invalidating any limit to the shipowner`s liability must be matched by a requirement on the part of the shipper to declare its goods if of an exceptional value and it is this realisation which sees the justice of limiting the shipper's claim if it fails to declare a value above the maximum and which is now enacted in art 4.5.

Foy, on the other hand, is a case on the Hague Rules but obviously, it is only an authority for what it actually decides on the facts pertinent to it. The bill of lading incorporated the paramount clause. The one glaring fact is that the value of the package lost was below GBP 100. It is therefore no authority for any proposition that where a limitation of liability clause in the bill of lading is repugnant to art 4.5 and therefore null and void, the shipper was entitled to recover the full and real value whatever the value of the goods lost, in the absence of any declaration of value and insertion in the bill of lading. This case does not aid the respondent in its claim for a sum grossly in excess of GBP 100.

Clearly, where the bill of lading contains a clause repugnant to the Hague Rules which are required statutorily to be, and which have by agreement been, incorporated in it, the repugnancy is only to the extent of this offending clause but the Rules are in all cases to be applied.

It only remains to consider whether the invoice value provision in cl 13 of the bill of lading justifies the judgment that has been given in favour of the respondent. It is unclear whether Hong Kong has followed other countries in declaring an invoice value clause null. Malaysia has not done so. But nevertheless the position is quite clear. This clause, in relation to the value of the missing bale, is not on the facts invalid under art 4.5 since it does not reduce the carrier's liability to less than the per-package limitation, but it is contrary to art 3.8, being a 'clause ... relieving the carrier or the ship from liability for loss ... otherwise than as provided in this Article', and is therefore void. This clause cannot justify a judgment for the full invoice value and override the Rules.