Shanghai Higher People

Cases

Shanghai Higher People’s Court

June 12, 1997

Ningbo Textile
v.
Blue Anchor
and
Kuehne & Nagel

Time of limitation for claim should start
On the day of receipt of documents returned from bank

Note: This is an edited English translation of one case from Selected Cases of People’s Court (No.47 of Volume 24), including a true introduction to the facts and trial.

Facts:

Plaintiff: Ningbo Textile United Import & Export Co., Zhejiang Province, China (“Ningbo Textile”)

1^st Dependant: Blue Anchor Line, HK (“Blue Anchor”)

2^nd Dependant: Kuehne & Nagel (Hong Kong) Ltd. (“K&N”)

On June 19, 1993 Ningbo Textile and C&D International Ltd. (“C&D”) concluded a contract of purchase-and-sale of garments. In Sept. of same year Ningbo Textile delivered the cargo to carrier Blue Anchor for carriage according to the order of C&D, K&N, acting as the agent of Blue Anchor, issued a B/L. It was indicated on the B/L that loading port was Shanghai, discharging port was Hong Kong, shipper was Ningbo Textile, and Hong Kong laws should be applied to the disputes arising from the B/L. After obtaining the B/L, Ningbo Textile presented all documents to Bank of China, Ningbo Branch (“Ningbo Bank”) for settlement of exchange. But Ningbo Bank on Apr. 4, 1995 sent out a notice of dishonor and returned the whole set of documents to Ningbo Textile.

After the cargo arrived at Hong Kong, K&N delivered the cargo to C&D as per the instruction by Blue Anchor without recovery of original B/L.

On Apr. 2, 1996 Ningbo Textile lodged an action in Shanghai Maritime Court and alleged that Ningbo Textile, before the whole set of documents was returned back, did not know C&D had not obtained the documents against payment, but C&D acknowledged receipt of the cargo. Therefore, Ningbo Textile requested the defendants to compensate for the cargo loss of USD 103,333.34 plus interests occurred to Ningbo Textile due to the delivery by the defendants without recovery of the original B/L in breach of international practices, which made Ningbo Textile, the bearer of original B/L, not be able to control the cargo thereunder.

The 1^st defendant Blue Anchor contested that:

Blue Anchor distrusted the fact of returning of documents from the bank as stated by the plaintiff, and it passed the time of one year prescripted by Maritime Law of PRC when the plaintiff sued. Even if the time of prescription suspended by the reason that the plaintiff was unable to exercise its claim before being returned of the documents, continuous calculated time of prescription was only 6 months at most from the day of being returned the documents, on which the reason for suspension was eliminated. 6 months’ time of prescription had passed when the plaintiff sued because that it was almost one year from Apr 4, 1995 on which the documents was returned to Apr 2, 1996 on which the plaintiff instituted the action.

The 2^nd defendant K&N not only shared the above contesting reasons but also contested that Blue Anchor should undertake the civil liability (if any) arising from the act of K&N because it was the agent of Blue Anchor.

Trial:

Shanghai Maritime Court confirmed the above facts and held that:

The parties to a contract might chose the law applied to the contract, thus the clause of law application on the B/L was valid. Because both the plaintiff and defendants did not present the relevant law of Hong Kong and the Court had no way to find it, applied to the case should be the laws of PRC. The contract for carriage of goods by sea was valid according to the provisions of Article 41, 42 of Maritime Law of PRC. As the carrier, Blue Anchor should correctly deliver the cargo against original B/L following the order of the shipper. But Blue Anchor instructed its agant K&N to deliver the cargo without recovery of the original B/L so as that the bearer of B/L Ningbo Textile neither collected the payment nor controlled the cargo, for which Blue Anchor should undertake the liability and was not entitled to the benefit of limitation of liability provided by law due to its willful wrongdoing. K&N should undertake joint and several liabilities because that K&N knowingly followed the illegal order of Blue Anchor to deliver the cargo, not performed its lawful obligation of being agent.

It was provided by Article 297 of the Maritime Law that the time of limitation for filing a claim against a carrier of carriage of goods by sea for indemnity should be one year, counting from the day on which the carrier delivered or ought to have delivered the cargo. The carrier did not performed its obligation of delivery of cargo to bearer of original B/L, so the time of limitation for filing the claim against the carrier should count from the day on which the obligee was aware or ought to have been aware of its rights being infringed but from the day on which the carrier delivered or ought to have delivered the cargo. It did not pass the time limit for Ningbo Textile to file a action on Apr. 2, 1996 to which one year of limitation had not passed from Apr. 4, 1995 on which the obligee was just aware of its rights being infringed as receiving the notice of dishonor. It was not tenable for the defendants to hold the reason that the time of limitation might suspend and the time run over the limit from the day on which the cause for suspension ceased to the day of filing the action. No solid evidence was supplied by the defendants to reverse the fact of being returned of documents from the bank, so their reason for distrusting the fact was not accepted.

In accordance with the provisions of Article 46, 48, 55, 59 of Maritime Law of PRC and Article 67 of General Principles of Civil Law of PRC, Shanghai Maritime Court gave on Sept. 20, 1996 a judgement as follows:

(1) Blue Anchor was to compensate Ningbo Textile for USD 103,333.34 plus interest.

(2) K&N, together with Blue Anchor, were to undertake joint and several liabilities.

Two defendants refused to accept the judgement and brought an appeal in Shanghai Higher People’s Court. Blue Anchor alleged that the law was misrepresented in first instance by compounding the carrier’s improper delivery as non-delivery actually so as to exclude application to the time of limitation counting from the day of delivery. The interruption of limitation could only be caused by legal acts of the parties, whereas the suspension of limitation was only the result of causes beyond volition, so the bank’s returning of documents constituted the suspension of limitation. 6 months’ time of limitation had passed when Ningbo Textile sued. In addition to above appeal reasons alleged by Blue Anchor, K&N still insisted that Blue Anchor should undertake the civil liability (if any) arising from the act of K&N because it was the agent of Blue Anchor.

Shanghai Higher People’s Court held that:

Ningbo Textile could not exercise its claiming right till the day on which it received the whole set of documents from Ningbo Bank. From the Apr. 4, 1995 one year’s time provided by the Maritime Law did not pass when Ningbo Textile sued on Apr.2, 1996, therefore the carrier was certainly liable for indemnity for losses caused to the bearer of the original B/L by delivery of cargo without recovery of documents. Not supported were the reasons of appeal by Appellants that the time of limitation should started on the day of improperly delivery and the bank’s returning documents could only constituted suspension due to being lack of legal basis. It is provided by the General Principles of Civil Law of PRC that a agent should undertake joint and several liability where the agent still executed the activities authorized, which was illegal ones to the knowledge of the agent, thus the reason of appeal by K&N was not tenable. The facts held and application of law in the original trial were not unjust. Shanghai Higher People’s Court, in accordance with the provision of Item 1 of Paragraph 1 of Article 153 of Civil Procedure Law of PRC, gave on June 12, 1997 a judgment as follows:

The appeal was to be dismissed and the original judgment was to be affirmed.

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