The plaintiff, Sing Yung Steel Sdn Bhd, brought a claim under an all-risks marine cargo insurance policy for damage sustained to its steel bars amounting to MYR 963,520.01. The insurance interests disputed the plaintiff's claim on the basis of a ROD clause in the policy, which excluded risks of rusting, oxidation, and discolouration, howsoever caused.

The plaintiff also brought a claim against the fifth defendant, YPK Shipping & Trading Sdn Bhd (the carrier and shipowner of the MV Bandar Baru) under the terms of their contract of carriage. The carrier disputed the plaintiff's claim, mainly on the ground that pursuant to art 4.2.c of the Hague Rules it was not liable for damage caused by perils of the sea.

Held: The claim against the carrier is dismissed.

The Court finds on a balance of probabilities that the insured cargo was shipped in the condition stated in the Mill Certificates and in compliance with Standard MS 146:2014. It was merchantable and fit for the purpose of reinforced concrete construction. The evidence shows that on arrival at Kota Kinabalu most of the steel bars were very rusty and corroded. They were not in the same condition as before shipment at Port Klang.

The carrier issued a bill of lading for the plaintiff's steel bars 'shipped under deck and stowed away from fertilisers, acid and other corrosive chemical compounds which cause oxidation'. The plaintiff pleaded that 'the Bill of Lading is subject to and/or incorporated the Hague-Visby Rules'. The carrier contended that the Hague Rules applied. This contract of carriage, being a shipment from a port in Malaysia to another port in Malaysia, namely from Port Klang to Kota Kinabalu, is subject to the application of the Hague Rules by virtue of the Merchant Shipping (Implementation of Conventions relating to Carriage of Goods by Sea and to Liability of Shipowners and Others Regulations 1960 (the Sarawak Regulations) and the Merchant Shipping (Applied Subsidiary) Regulations 1961 (the Sabah Regulations). The application of the Hague Rules to the contract of carriage is also provided in the clause paramount of the bill of lading. By virtue of the above, the Hague Rules apply.

Having established that the Hague Rules apply to this shipment, the carrier submits that arts 4.2.c and/or 4.2.q of the Hague Rules absolve it from all liability. In the alternative, the carrier argues that its liability is limited by art 4.5 of the Hague Rules and the LLMC 1957.

Article 4.5 of the Hague Rules provides:

Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connexion with goods in an amount exceeding 100 pounds sterling per package or unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.

Article 9 of the Hague Rules further defines the monetary unit provided in art 4.5 of the Hague Rules and states:

The monetary units mentioned in this convention are to be taken to be gold value.

Those contracting States in which the pound sterling is not a monetary unit reserve to themselves the right of translating the sums indicated in this Convention in terms of pound sterling into terms of their own monetary system in round figures.

By virtue of reg 7 of the Sarawak Regulations, which is imported by the Sabah Regulations:

Value of £100 in local currency.

For the purposes of the Rules, the amount of eight hundred and fifty dollars, lawful currency of Sarawak, shall be deemed to be the amount equivalent to one hundred pounds.

Here, the cargo value is not stated on the face of the bill of lading. As the number of packages or units of the cargo is described by the number of bundles on the face of the bill of lading, the carrier contends that 'bundles' are the applicable 'package or unit' for the purposes of calculating the limitation amount. Hence, based on the formula given, the maximum liability of the carrier would be MYR 259,250 (ie MYR 850 x 305 bundles).

Alternatively, the carrier submits that pursuant to reg 11(1)(b)(ii) of the Sarawak Regulations, its liability is limited to 1,000 gold francs for each ton of the ship. According to reg 11(2)(c) of the same Regulations, the MYR equivalent figure for 1,000 gold francs is MYR 203.07. The tonnage of the carrier's vessel for the purposes of limitation is 1,266 tons. Therefore, the limitation amount, calculated based on the tonnage of the vessel, is MYR 257,086.62 (i.e. MYR 203.07 x 1,266 tons).

It has been proven that the seawater entered the cargo hold due to boisterous weather and heavy wind and waves which are perils of the sea, ie a fortuitous accident or casualty. It was not caused by the inevitable or ordinary action of the wind and waves which results in what may be described as wear and tear. Under the Hague Rules, the shipowner is exempted from liability for cargo damage caused by, among other things, perils of the sea.

As the damage to the insured cargo arose from perils of the sea, pursuant to art 4.2.c of the Hague Rules, the carrier is exempted from liability. See 'The Benoi VI'; Sindo Timber Enterprises (Pte) Ltd v 'The Benoi VI', (Owners) [1987] 2 MLJ 123 and Sarawak Electricity Supply Corp v MS Shipping Sdn Bhd [2000] 2 CLJ 256 (HC) (CMI493). Thus, the plaintiff’s claim against the carrier is dismissed with no order as to costs.