This dispute arose over the delivery of a consignment of 388 bundles of sawn timber (the 388 cargo). The 388 cargo was shipped by Weeluk (S) Pte Ltd (the plaintiff) to Yong Swatt Wood Supply Co Ltd of Bangkok (the consignee) on 10 October 1991 on board the Taveechi Marine (the vessel) at Sandakan in the state of Sabah, Malaysia. The vessel was owned by Poon Sri Sutharom, who was the managing director of Tavee Thong Marine Co Ltd (the defendant), who was the charterer of the vessel. On 2 November 1991 the 388 cargo was discharged in Bangkok onto lighters and taken to the godown of Sub Poon Tavee Warehouse Ltd. On 18 December 1991, the plaintiff arrested the vessel in Sandakan.

The plaintiff asserted that the defendant had in breach of duty and/or contract under the bill of lading and/or by its negligence, delivered the 388 cargo to the consignee without production of the bill of lading and therefore had converted the cargo causing damage to the plaintiff of MYR 388,410.80 (the sale price of the 388 cargo).

The defendant pleaded that the 388 cargo was never delivered to the consignee but was still in the warehouse and that the defendant had repeatedly asked the plaintiff to take delivery of it but the plaintiff refused. Further, the 388 cargo was discharged from the vessel in accordance with the customs of the port of Bangkok and pursuant to the contract of carriage. The defendant submitted that the plaintiff’s loss was attributable to its breach of the sales contract with the consignee. Finally, the defendant maintained that its liability was limited to the extent of the Merchant Shipping (Implementation of Conventions Relating to Carriage of Goods by Sea and to Liability of Shipowner and Others) Regulations 1960 (The Hague Rules). The defendant counterclaimed for damages for wrongful arrest of the vessel.

On 21 February 1991, the plaintiff had entered a sales contract with the consignee for 2200 tons of 50 cu ft of sawn timber. The consignee obtained a letter of credit for the benefit of the plaintiff in the amount of MYR 2 million. The letter of credit had an expiry date of 15 June 1991 and required that the shipment must be made by 31 May 1991. These dates were subsequently extended to 15 August 1991 and 31 July 1991 respectively.

On 15 August 1991 David Wong, the managing director of the plaintiff, telexed Pornchai Larppracha, the owner of the consignee, to request the letter of credit be extended for the 388 cargo to 15 October 1991. The consignee replied on the same day in the following terms:

As our previous telecom, the L/C has been extended once, so it is inconvenient to extend again. The further shipment, please present the discrepancy of the expiry date through your banker to our banker for us to sign acceptance.

The plaintiff took this to mean that the consignee had agreed to a late shipment and loaded the vessel with the 388 cargo along with 493 bundles of timber (the 493 cargo) on 10 October 1991 and telexed the consignee to confirm this had been done. The plaintiff then despatched the shipping documents comprising of the invoice, packing list, grading summary, certificate of origin and a copy of the bill of lading.

Before the vessel arrived in Bangkok, Poon Sri Sutharom asked the consignee to pay all the customs dues on both cargoes so that they could be unloaded quickly. The evidence showed that the consignee paid the dues on 1 November 1991. On 8 November 1991, the bank in Bangkok informed the plaintiff that the consignee had rejected the shipping documents. On 21 November 1991, David Wong flew to Bangkok and met with Pornchai Larppracha who took him to the warehouse to see the timber where the two cargoes had been mixed up. David Wong asked Pornchai Larppracha to accept the 388 cargo, but he refused because the agreement had expired and instead asked for a 50% reduction in the asking price. The plaintiff did not agree to a reduction in price and issued the writ for the arrest of the vessel on 14 December 1991. The vessel was arrested on 18 December 1991.

Held: Judgment for the plaintiff in the amount of MYR 388,410.80 with interest. The defendant’s counterclaim is dismissed.

The defendant had agreed not to deliver the 388 cargo unless the consignee produced the bill of lading. By delivering the 388 cargo to the consignee without production of the bill of lading the defendant is guilty of conversion. The evidence shows that the consignee had agreed to late delivery and was dealing with the cargo by breaking up the bundles and mixing them with the 493 cargo. Lorries were seen carting away sawn timber from the warehouse.

The defendant sought to rely on art 4.2.g of the Hague Rules which says: ‘Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from any other cause arising without the actual fault or privity of the carrier or without the fault or neglect of the agents or servants of the carrier’. This article cannot be relied upon to exempt the defendant from liability. A contract between parties cannot be interpreted so widely as to exclude the liability of the defendant for its own fault. A shipowner who delivers without production of the bill of lading does so at its peril. In delivering the goods without the bill of lading to a person who, to its knowledge was other than the one entitled under the bill of lading to receive them, the defendant was liable for breach of contract and conversion (see Sze Hai Tong Bank Ltd v Rambler Cycle Co Ltd [1959] AC 576).