Judgment

[Please note that this case has not been edited in accordance with the current Singapore Law Reports house style.]

                                                                                                                                                               Judgment reserved.

GP Selvam JC:

The issue

1             This judgment is on a preliminary point of law which is whether the carriage of certain goods carried from Taiwan to Singapore under an ocean bill of lading issued in Taiwan was governed by the law of Taiwan or the law of Singapore.

2           The alleged circumstances under which the question arose are as follows. There was shipped on board the Malaysian mv Prima Satu, a cargo of 40 reels of power cable at Keelung for carriage to and delivery at Singapore. The carriage was evidenced by a combined transport bill of lading issued in the name of the defendants. The shippers named in the bill of lading were Pacific Electric Wire and Cable Co Ltd. It was a consignee bill of lading as distinct from an order bill of lading. It was, accordingly, not transferable by endorsement and delivery. The consignees named were Sigma Cable Co (Pte) Ltd of Singapore. The cargo was delivered to the consignees in a damaged condition. The loss and damage is quantified as S$541,917.70.

3           One of the bases of the claim asserted by the plaintiffs is that the bill of lading is subject to the Hague Visby Rules as scheduled to the Singapore Carriage of Goods by Sea Act (Cap 33) (‘the Act’).

4           The defendants are Neptune Orient Lines Ltd of Singapore. Their defence states that the shipment was not subject to the Hague Visby Rules as scheduled to the Act and that the Hague Visby Rules had no application to the carriage. The defendants have pleaded limitation of liability as follows:

9 If (which is denied) the defendants are liable to the plaintiffs for the alleged damage caused to the said goods, the defendants say that the shipment and carriage of the said goods are subject to the laws of the Republic of China (Taiwan) which laws provide that the liability of the defendants is limited to the sum of NT$9,000 per package and the defendants rely on the said limitation and say that their total liability shall not exceed the sum of NT$360,000.

5           The approximate equivalent of NT$360,000 is S$22,500. 

6           It is now necessary to set out two provisions in the bill of lading.

3    Paramount clause. This bill of lading shall have effect subject to any national law as enacted in the country of shipment, making the Hague Rules or the Hague Rules as amended by the Protocol signed at Brussels on 23 February 1968 (the Hague Visby Rules) compulsorily applicable to this bill of lading. If any term of this bill of lading be repugnant to the said legislation to any extent, such terms shall be void to that extent, but no further. Neither the Hague Rules nor the Hague Visby Rules shall apply to this contract where the goods carried hereunder consist of live animals or cargo which by this contract is stated as being carried on deck and is so carried. If no such national law shall be compulsorily applicable the carrier shall be entitled to the benefit of all privileges rights and immunities contained in the United Kingdom Carriage of Goods by Sea Act 1924, but without prejudice to his right to rely on the terms, conditions and exceptions set out herein notwithstanding that they may confer wider or more beneficial rights liberties or immunities upon the carrier than those set out in the said Convention.

21   The contract evidenced hereby or contained herein shall be governed by Singapore law. Any claim or other dispute thereupon shall be solely determined by the Singapore courts unless the carrier otherwise agrees in writing.

7           The limitation of liability under the Hague Rules is as follows:

Article IV

Rule 5

Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding 100l 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 IX

The monetary units mentioned in these Rules are to be taken to be gold value.

8           The limitation of liability under the Hague Visby Rules is as follows:

Unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading, neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the goods in an amount exceeding the equivalent of 10,000 francs per package or unit or 30 francs per kilo of gross weight of the goods lost or damaged, whichever is the higher.

9           The Singapore dollar equivalents of 10,000 francs and 30 francs are $1,563.65 and $4.69 respectively: see The Carriage of Goods by Sea (Singapore Currency Equivalents) Order 1982 (S172/82).

10       The defendants do not rely on the limitation under the Hague Rules or the Hague Visby Rules. The applicability of Taiwanese law and in particular Taiwanese limitation is therefore of crucial importance.

Basic principles

11       Before embarking on the main issue it is necessary to touch on certain matters of general principle and application.

12       First, a claim in contract will be decided according to the terms of the contract (both express and implied) and the proper law of the contract which as a general rule is the law the parties intended to apply to the transaction.

13       Secondly, the forum and all those before it are presumed to have knowledge of its laws. But foreign law, by a legal fiction, is treated as fact. Accordingly a party raising foreign law as the proper law of the contract must prove it unless it is admitted. The court otherwise will proceed on the assumption that foreign law is the same as domestic law.

14       Thirdly, the Singapore court, as required by s 5 of the Civil Law Act (Cap 43), in all commercial matters such as contracts for sale of goods and carriage by sea, will decide the matter by applying English law as domestic law. As this is a commercial case, English law will be considered to be Singapore law.

15       Fourthly, whenever a contract of affreightment is concluded between a shipper and a carrier in the expectation that a bill of lading will be issued, that contract is deemed to include from its inception the terms contained in the usual bill of lading of the carrier. And in the hands of the consignee or indorsee who is given delivery the only contract is that contained in the bill of lading. See Pyrene Co Ltd v Scindia Navigation Co Ltd.

16       The right of the receivers of the cargo to bring this action and the right of the parties to rely on the terms contained in the bill of lading accordingly must be determined by English law because no Taiwanese law has been raised on these aspects of the case. The applicable law is the English Bills of Lading Act 1855, the relevant provision of which reads as follows :

1    Every consignee of goods named in a bill of lading, and every indorsee of a bill of lading, to whom the property in the goods therein mentioned shall pass upon or by reason of such consignment or indorsement, shall have transferred to and vested in him all rights of suit, and be subject to the same liabilities in respect of such goods as if the contract contained in the bill of lading had been made with himself.

17       In this case there is no question that the carriage was intended to be governed by a bill of lading and that bill of lading would be the defendants’ usual form which in the event was issued and which is the contract both parties have relied on. Lastly, effect of the consignee being given delivery is that the shipper loses the right of action and ceases in effect to be a party to the contract: see ‘The Albazero’.

18       The real issue therefore is whether as between the carriers (the defendants) and the cargo interests (the plaintiffs) the choice of law stated in the bill of lading is binding on them. To decide the point, a historical review of the relevant authorities is necessary.

1889 — The Missouri case

19       The first case is Re Missouri Steamship Co decided by the English Court of Appeal. Under bills of lading issued at Boston, Massachusetts, cattle were carried from USA to England. The bills of lading exempted shipowners from liability for the negligence of the master or crew of the ship. There was no express choice of by the parties. The ship was wrecked through the negligence of the master and crew and the cattle were drowned. Under the law of the United States any clause in a contract exempting the carrier from responsibility for the negligence of the carriers or their servants was null and void. The question was whether the bill of lading contract was to be governed by the law of the United States or England. There was no choice of law by the parties. However, from surrounding circumstances, Chitty J held that the proper law of the contract was the law of England and that the exemption clause was valid. The matter went to the Court of Appeal. Between the time of the decision of Chitty J and the hearing before the Court of Appeal, it was decided by the Supreme Court of the United States of America that by Federal law as well as the law of Massachusetts the provision in question was void. That decision notwithstanding, the English Court of Appeal upheld the decision of Chitty J. This case is an excellent example of the reality of courts in different jurisdictions reaching opposing conclusions in the realm of conflict of laws. And the decision of the Court of Appeal has endured as authority for the following propositions:

When a contract is made in one country to be performed wholly or partially in another, prima facie the contract is to be construed and enforced according to the lex loci contractus. But the court will look at all the circumstances to ascertain by the law of which country the parties intended the contract to be governed, and will enforce the contract accordingly, unless it should contain stipulations contrary to morality or expressly forbidden by positive law. Lord Halsbury LC who presided said in his judgment at p 336: … there may be stipulations [in a contract] which one country may enforce and which another country may not enforce, and that in order to determine whether they are enforceable or not you must have regard to the law of the contract, by which I mean the law which the contract itself imports is to be the law governing the contract. Lord Halsbury LC then added the following to emphasize the supremacy of the chosen law: Where a contract is void on the ground of immorality, or is contrary to such positive law as would prohibit the making of such a contract at all, then the contract would be void all over the world, and no civilized country would be called on to enforce it. Nor does Sir Walter Phillimore contend that the contract now in dispute is a contract coming within that category. But, assuming for the moment that the law which the parties contemplated as the law of the contract is one which can prevail — and for that not only is there a very considerable body of English authority, but the very judgment which is invoked here as the judgment to which we are to bow, recognizes the fact that the validity of this contract, if the law of the contract is to be the law of England, may be affected by the intention of the parties, or, more strictly speaking, the intention of the parties as seen through the contract — it would seem to leave the only question to be determined, the question what was the law which the parties contemplated as being the law governing this contract.

1932 — the Torni case

20       In ‘The Torni’, bills of lading issued at Jaffa, Palestine in respect of cargo carried from there to England contained the following clause: ‘This bill of lading wherever signed is to be construed in accordance with English law.’

21       The Palestine Carriage of Goods by Sea Ordinance 1926 adopted the Hague Rules. Clause 4 of the Ordinance was in the following terms:

Every bill of lading … issued in Palestine which contains or is evidence of any contract to which the Rules apply shall contain an express statement that it is to have effect subject to the provision of the said Rules as supplied by this Ordinance, and shall be deemed to have effect subject thereto, notwithstanding the omission of such express statement.

22       The bills of lading contained no reference to the Hague Rules. In an action against the shipowners in respect of damage and/or short delivery the defendants set up various exceptions in the bills of lading which were in derogation of the Hague Rules. The cargo owners pleaded in reply that the contracts were governed by the Palestine Ordinance and, accordingly, notwithstanding the omission of a statement to that effect, the Hague Rules should be deemed to be written into contracts, and, therefore, the exceptions relied on were of no avail. The question whether the bills of lading were subject to the provisions of the Ordinance was set down for trial as a preliminary issue as was done in this case.

23       Langton J and the Court of Appeal held that the law of Palestine should be applied for the intention of the shippers must have been that the shipments were subject to Palestine law under which the goods obtained the protection of the Hague Rules. The shipowners had no right to exclude the Hague Rules. The proviso that the bill of lading was to be construed in accordance with English law merely meant that the court would apply English rules of construction and not English substantive law.

24       The central plank on which the decision rested was that the Hague Rules were enacted in Palestine and in England pursuant to an international convention (the Brussels Convention), and it was not open to shipowners to defeat the purpose of the convention by the insertion of a clause in the bills of lading that they were to be construed according to English law.

25       Slesser LJ viewed the relevance of the Brussels Convention as follows:

I would therefore add the observation which has been cited to us from Salmond on Contracts that the matter may be regarded as a question whether the exclusion or insertion of a particular obligation is or is not contrary to the comity of nations. I find it very difficult to think that where there has been an international Convention to which various nations have agreed, it would not be contrary to the comity of nations not to give force to these provisions and allow particular individuals to make a special provision for themselves and contract out of the international obligation and agreement.

26       According to ‘The Torni’, therefore, parties are not entitled to contract out of the Hague Rules which must be read into the contract and the attempt to contract out of them would, by the law of Palestine, have been illegal.

1937 — Lord Atkin’s dictum in the International Trustee case

27       Then came R v International Trustee for the Protection of Bondholders AG in which the question for determination was the proper law for the discharge of liability under bonds issued by the British government in the United States. The House of Lords ruled that the proper law on the facts of the case was that of the United States. Lord Atkin dealing with the choice of law by the parties said, obiter, at p 529 [emphasis supplied] :

The legal principles which are to guide an English court on the question of the proper law of a contract are now well settled. It is the law which the parties intended to apply. Their intention will be ascertained by the intention expressed in the contract, if any, which will be conclusive. If no intention be expressed the intention will be presumed by the court from the terms of the contract and the relevant surrounding circumstances.

1939 — the Vita Food case

28       Vita Food Products Inc v Unus Shipping Co Ltd was an appeal to the Privy Council from Nova Scotia. Newfoundland was not part of Canada. Herrings were shipped in Newfoundland under bills of lading which did not contain the statement required by s 3 of the Newfoundland Carriage of Goods by Sea Act 1932 that every bill of lading ‘shall contain an express statement that it is to have effect subject to the provisions of the Hague Rules as expressed in this Act.’ The bills of lading by their terms provided for exemption from liability for master’s negligence in navigation which exemption was also part of the Hague Rules. The Hague Rules further provided that any clause or agreement in the bills of lading relieving the carrier from liability for negligence imposed by the Rules was void. There was a further provision in the bills of lading that, in the case of shipment from the United States, the Harter Act 1893, should apply and that, save as so provided, the bill of lading was subject to the terms of the Canadian Water Carriage of Goods Act 1910. Finally the bills of lading contained the following clause: ‘This contract shall be governed by English law.’ On the voyage the ship ran ashore in Nova Scotia, admittedly through the negligence of the master in navigation. The herrings suffered damage.

29       It was contended by the cargo interests before the Nova Scotia courts that, as there was no paramount clause including the Hague Rules in the bills of lading as required by the Act of 1932, the bills of lading contracts were illegal and accordingly the exceptions did not avail the shipowners and they were subject to the liabilities of common carriers. The provisions of s 3 were imperative and not merely directory and failure to comply with them rendered the bills of lading void.

30       The shipowners, on the other hand, submitted that the Hague Rules applied even though the paramount clause was not expressly incorporated. They further submitted that the rights of the parties under the bills of lading must be worked out under English law. The Hague Rules, they said, were imported by the clause that the contract shall be governed by English law with the result that the English Carriage of Goods by Sea Act applied.

31       The courts in Nova Scotia held that the Rules applied even though there was no paramount clause as required by the Act. The shipowners were accordingly exempted from liability under the Rules.

32       The Privy Council, with Lord Atkin as a member of the Board, affirmed the decision in favour of the shipowners but on a different logical basis. The Privy Council gave effect to the express words of the bill of lading that the contract was governed by English law and gave effect to the bill of lading exemption and not the exemption under the Newfoundland Carriage of Goods by Sea Act 1932 or the British Carriage of Goods by Sea Act 1924. The latter Act applied only to cargo carried from Britain. Lord Wright speaking for the Council said:

It is now well settled that by English law (and the law of Nova Scotia is the same) the proper law of the contract is the law which the parties intended to apply. That intention is objectively ascertained, and, if not expressed, will be presumed from the terms of the contract and the relevant surrounding circumstances.

33       He then cited the statement of Lord Atkin in the International Trustee case and added that some qualifications were necessary. He said that:

… in questions relating to the conflict of laws rules cannot generally be stated in absolute terms but rather as prima facie presumptions. But where the English rule that intention is the test applies, and where there is an express statement by the parties of their intention to select the law of the contract, it is difficult to see what qualifications are possible, provided the intention expressed is bona fide and legal, and provided there is no reason for avoiding the choice on the ground of public policy. Connection with English law, is not as a matter of principle essential.

34       Lord Wright went on to say that the bills of lading could not be regarded as illegal by reason of non-inclusion of the Rules. The Act did not in terms provide that a bill of lading was to be deemed illegal and void merely because it contravened s3, nor did it in terms expressly prohibit the non-inclusion. The inconveniences that would follow from holding bills of lading illegal in such cases as that in question were very serious. A foreign merchant or banker could not be assumed to know or to inquire what the Newfoundland law was, at any rate when the bill of lading was not expressed to be governed by Newfoundland law and still less when it provided that it was governed by English law, and it would seriously impair business dealings with bills of lading if they could not be taken at their face value and as expressing all the relevant conditions of the contract. Section 3 accordingly was directory and not obligatory. This was the true construction of the statute, having regard to its scope and its purpose and to the inconvenience which would follow from any other conclusion.

35       Lord Wright disagreed with the reasoning of the Court of Appeal in ‘The Torni’. According to him a provision in bills of lading providing that they were ‘to be construed in accordance with English law’ meant that they ‘shall be governed by English law’. The Privy Council dissented from ‘The Torni’ for it contravened the fundamental principle of the English rule of conflict of laws that intention as to what law should apply was the paramount test.

36       The true principle was established by the Privy Council in the following statement: English law will recognize and give effect to an express choice of law by the parties to the contract provided the choice is bona fide and legal and provided there is no reason for avoiding the choice on the ground of public policy.

37       The principle stated above has received adverse comments. But The Conflict of Laws by Dicey and Morris (10th Ed), at p 755 says that: ‘There appears to be no reported case in which an English court refused to give effect to an express selection by the parties, merely because the other facts of the case showed no connection between the contract and the chosen law.’ Indeed an immeasurable volume of international business is transacted on the assumption that the choice of law by parties is supreme. It would now be unwise to upset the apple cart.

The aftermath of the Vita Food case

38       After the Privy Council’s decision in the Vita Food case, it became a practice for shipowners to expressly incorporate the Hague Rules in varying forms. The UK Carriage of Goods by Sea Act 1971 deliberately abandoned the ‘clause paramount’ technique which had failed to give the force of law to the Hague Rules and the Hague Visby Rules were made applicable as a matter of law. It has been held that the Vita Food case6 has no application to the construction of the 1971 Act and that any clause in bills of lading contracting out of the Hague Visby Rules made applicable under the UK Act would be null and void: see ‘The Hollandia’.

39       The Hong Kong and Singapore Carriage of Goods by Sea Acts which adopt the Hague Visby Rules continue to employ the ‘clause paramount’ technique which enables parties to contract out of the Hague Visby Rules and be governed by the law chosen by the bill of lading: see Chellaram & Co Ltd v China Ocean Shipping Co where the bill of lading issued at Hong Kong provided for Chinese law. Carruthers J applying the Vita Food case held that the bill of lading had contracted out of the Hague Visby Rules and that there were no grounds of public policy which would militate against the choice of Chinese law and the incorporation of the liabilities, responsibilities, rights and immunities contained in the Hague Rules.

Conclusion

40       Applying the principles contained in the above authority I come to the following conclusions:

(1)    The rights of the parties must be determined y the law of Singapore and not the law of Taiwan. Reason: The law that was the law agreed to by the parties is Singapore law. It was a bona fide choice necessary for smooth trade and there is no reason for avoiding it on the ground of public policy. On the other hand public policy reasons favour the upholding of the choice of Singapore law as even on an objective test, Singapore law was the proper law of the contract.

(2)    The Hague Visby Rules and the Hague Rules have no application to this case. Reason: The Singapore Carriage of Goods by Sea Act has application only to cargo loaded in Singapore and no application to cargo discharged in Singapore.

(3)    The Hague Rules and the Hague Visby Rules do not apply by incorporation. Reason: The incorporation or clause paramount imports the Rules only if there is in Taiwan legislation compulsorily applying the Rules. There is no evidence of such legislation in Taiwan. The defendants are nevertheless entitled to raise limitation under the Hague Rules because the bills of lading expressly reserve to the carrier ‘all privileges, rights and immunities contained in the United Kingdom Carriage of Goods by Sea Act 1924’.

41       The defendants shall pay the costs of the proceedings relating to the determination of the preliminary point. No order as to costs is made against the third party and the fourth party in favour of the plaintiffs.

Order accordingly.

Reported by Tan Chuan Thye