P&O NEDLLOYD B.V., P&O NEDLLOYD B.V. China Shipping Company Ltd. v. ADILAN S.A. Corp. Ltd.

Updated：2004-03-16 Views：1949 
HIGHER PEOPLE??S COURT OF SHANDONG PROVINCE

PEOPLE??S REPUBLIC OF CHINA

CIVIL JUDGEMENT

No.Lu-Jing-Zhong- 39(2001)



Appellant (defendant in the trial of first instance): P&O NEDLLOYD B.V.

Address: No.3001 Pangjies, Amsterdam, Holland.

Legal Representative: RUTGER PAUL MARIE VAN SLOBBE, Board Chairman.

Agent ad litem: Xu Jie, solicitor from Shanghai DUAN & DUAN Law Firm.

Agent ad litem: Gao Jun, solicitor from Shanghai DUAN & DUAN Law Firm.

Appellant (defendant in the trial of first instance): P&O NEDLLOYD B.V. China Shipping Company Ltd.

Address: 20th Floor of Liberation Daily Building, No.300 Hankou Road, Shanghai.

Legal Representative: Pan Xiangde, Board Chairman.

Agent ad litem: Xu Jie, solicitor from Shanghai DUAN & DUAN Law Firm.

Agent ad litem: Cao Fang, clerk of P&O NEDLLOYD B.V. China Shipping Company Ltd.

Appellee: (plaintiff in the trial of first instance): ADILAN S.A. Corp. Ltd.

Address: No.1321 Saint Nicolas Street, Montevideo, Republic of East Bank Uruguay. 

Legal Representative: Chunhuilichen, deputy General Manager.

Agent ad litem: Sun Fanglong, solicitor from Wincon Law Firm, Shandong Province.

Agent ad litem: Zhu Qing, solicitor from Haida Law Firm, Dalian city.

The appellant P&O NEDLLOYD B.V. and P&O NEDLLOYD B.V. China Shipping Company Ltd., refusing to accept the civil judgment of Qing-Hai-Fa-Hai-Shang-Chu-223(1999) determined by Qingdao Maritime Court on a dispute over a maritime transportation contract with ADILAN S.A., made an appeal to this court. This court duly organized a collegial bench and held open hearings. The appellant??s agents ad litem Xu Jie, Cao Fang and the appellee??s agent ad litem Sun Fanglong appeared in court. The cases has now been concluded.

After the hearing, the following facts were affirmed: on June 10, 1998, ADILAN S.A. and China Textile Material Co., Ltd. (hereinafter referred to as China Textile) entered into two purchase contracts, namely contract No.98RIK??007UY and contract No.98 RIK??008UY. The purchase contract No.98 RIK??007UK stipulated: the name of the goods was greasy mestiza wool (raw wool), the thinness was 27??29 micron, the length was 65??69Hm, the quantity was net-wool weight 19,000 kg  (permission +/-15%), unit price was net wool US$2.65/kg, dampness rate was 16% according to IWTO standard, CNF Yantai, China. The purchase contract No.98RIK??008UY stipulated: the name of goods was raw wool, the thinness was 30??32 micron, weight of net wool was 50000kg (permission +/-15%), unit price was net wool US$3/kg, dampness rate was 16% according to IWTO standard, CNF Yantai, China. The purchase contract also stipulated: the place of production of goods was South America, period of shipment was May-June of 1998, the port of destination was Yantai, China. Goods should be press-packed and baled as per export packing instruction (container transportation). In addition, annotation to the two contracts recorded: ?°according to the shipping route nominated by the seller on which the ship ??PICTOR CHALLENGER??s voyage No.0006B should sail, the goods under these contract will go through two ports, viz. Singapore and Pusan before they reach Yantai. The seller was responsible for shipping the above mentioned goods to Pusan in 60 days at most, the period of transshipment at Pusan shall not exceed 10 days.?±

After that, ADILAN S.A. put the raw wool bought from FOWLER Co. (hereinafter referred to as Fowler) into 180 polythene bales which were press-packed according to the contract standard, loaded the goods on to PICTOR CHALLENGER owned by P&O at Buenos Aires port in Argentina, separately packing them into three 40 ft containers. Agencia Maritime Dodero S.A.??the agent of P&O at Montevideo, signed and issued bill of lading No.BUEFR241 on behalf of P&O, and collected US$3450 for freight from ADILAN S.A. The bill of lading indicated:  consignor: Fowler; consignee: to order; port of discharge: Yantai, China; goods: raw wool from South America contained in three 40 ft containers separately marked FL 3M 27MC, FL18 29/31MC and FL17 29/31MC; the numbers of the containers were NDLU400240??7, POCU117981??8 and TRIU537178??0. ADILAN S.A. held the bill of lading after Fowler transferred it by means of endorsement in blank, it then handed it over to China Textile. 

Before the above mentioned goods were loaded on board, ETI Lab Wool Laboratory (an independent wool laboratory in Argentina, member of International Wool Inspection Organization) made a survey of the goods and produced three survey certificates respectively and one certificate of quality. The three survey certificates stated respectively as follows: gross weight of raw wool marked FL 3M 27MC: 22048 kilos, net weight: 21868 kilos, average content: 1.11 percent, average thinness: 27.5 micron, net wool rate: 61.71 percent; gross weight of raw wool marked FL18 29/31MC: 25180 kilos, net weight: 25000 kilos, average content: 1.03 percent, average thinness: 29.8 micron, net wool rate: 59.55 percent; gross weight of raw wool marked FL17 29/31MC: 25180 kilos, net weight: 2500 kilos, average content: 1.26 percent, average thinness: 29.8 micron, net wool rate: 57.97 percent. The quality inspection certificates specified: gross weight of the raw wool: 72408 kilos, net weight: 71868 kilos, fiber average thinness: 29.1 micron, fiber extensity coefficient: minimum 15 grams, maximum 45 grams, average coefficient: 24.5 grams. Inspection of the humidity of raw wool indicated that the commodity was in completely normal condition and conformed to quality standard of raw wool, that there was not any sign of brittleness and mildew.

The goods under bill of lading No BUEFR 241 were originally destined for Yantai, China after transshipment at Singapore. Because the employee of P&O at the transshipment port (Singapore) wrote Yantai as Yantian by mistake, the goods were erroneously transported to Yantian, China (in Shenzhen) by P&O??s NEDLLOYD TOKYO voyage No. EN29 on July 20, 1998, and unloaded there on July 21.

The office of P&O Nedlloyd B.V. in Shenzhen notified Hua Hong Company--the agent of ADILAN S.A. in China--of the wrong shipment on September 3, 1998. P&O applied to Dapeng Customs of Shenzhen for transshipment. As wool was a commodity subject to import license, Dapeng Customs required checking the duly issued import certificate of the goods. P&O asked ADILAN S.A. to provide the legitimate import certificate. As the goods suffered a long delay before arriving at the port of destination, China Textile and ADILAN S.A. agreed to rescind contracts No 98 RIK??007UY and No. 98 RIK??008UY. ADILAN S.A. agreed to compensate China Textile for the losses arising from the suspension of production and to pay the big difference in purchase prices of raw materials between that paid under purchase contract and the one paid for urgent purchase. As the bill of lading had been returned to ADILAN S.A, ADILAN S.A. could not provide the import license to P&O within the prescribed time. Later, ADILAN S.A. borrowed an import license from some other company, and Dapeng Customs approved the transshipment of the goods at the end of September. On Oct.11, the goods were transported to Yantai by the ship ZIYULAN, voyage No.544.

On November 23, 1998, ADILAN S.A. and China Textile signed two new purchase contracts: contract No 98RIK---007 UYB and contract No 98RIK---008 UYA pertaining to the raw wool already arrived at Yantai. The unit price of the goods was amended as: net wool U.S.$ 1/kilo under contract 98RIK----007UYB, net wool U.S.$ 1.23/kilo under contract 98RIK----008UYB. On December 23 and 24, under the authorization of China Textile, the port of Yantai and International Logistics and Cold Storage Co.,Ltd. respectively took delivery of the goods stowed in the three 40ft containers. The containers were unpacked, and the goods were transported to Beijing Nankou railway station by railway. On January 4, 1999, the goods reached Nankou railway station, Beijing. On behalf of China Textile, Beijing Tuo Pu Wool & Textile Co., Ltd. transported the goods to its own warehouse. During the period from unpacking at Yantai to the time of warehousing in Beijing Tuo Pu Co., Ltd., the evidence provided by Yantai port, International Logistics and Cold Storage Co., Beijing Nankou railway station and Beijing Tuo Pu Co., Ltd. indicated that the packing was good, with no sign of damage, not damaged by rain, and ventilation of the warehouse was good. On Jan.20, 1999, Beijing Import and Export Commodity Inspection Bureau made a survey of the goods at the warehouse of Beijing Tuo Pu Co., Ltd., weighed the damaged wool separated and selected from the raw wool, and produced survey report and survey notification sheet. The result of inspection was as follows: net weight of the raw wool under contract No98RIK??007UYB: 22407 kilos; invoice net wool rate: 55.66 percent; net wool rate after inspection and acceptance: 59.22 percent; net wool weight: 13269 kilos, average thinness: 26.8 micron; net weight of the raw wool under contract 98RIK??008UYB: 49183 kilos; invoice net wool rate: 55.65 percent; net wool rate after inspection and acceptance: 60.04 percent; net wool weight: 29529 kilos. The raw wool under the two contracts was damaged by water, the goods were covered tightly and soaked by rain for a long time, so the extensity diminished, and was unfit for normal use. The coefficient of extensity of the raw wool under contracts 98RIK---007UYB and 98RIK---008UYA respectively reduced to 7.7 grams and 8.1 grams (normal extensity should be 23.1 grams at least). 17.54 percent of the raw wool (3836 kilos) and 17.8 percent of the raw wool (8900 kilos) respectively became mildewed and unfit for use.

On January 15, 1999, China Textile and ADILAN S.A. entered into a supplement agreement in respect of the two purchase contracts No. 98RIK---007UYB and No.98 RIK---008UYA. The parties agreed: (1) as per the final result of commodity inspection, China Textile should not pay for the mildewed and rotten wool while ADILAN S.A. was to be responsible on its own; (2) as to the remainder, because its extensity was diminished and it was rotten, with no possibility of spinning, and little demand from the customers, also the price was very low. China Textile may help ADILAN S.A. to sell it on the principle of assisting ADILAN S.A. to reduce loss in a friendly way, but China Textile was not responsible for the loss arising from lower selling price than the contract price. Finally the price fixed between China Textile and ADILAN S.A. was in conformity with that at which China Textile sells such wool to the purchasers. As the sale price was calculated in RMB, China Textile would pay ADILAN S.A. US dollars at the exchange rate of 8.3 after deduction of customers duty and value added tax, but the lowest price paid by China Textile to ADILAN S.A. should not be lower than US$ 0.4/kilo; (3) the term of payment was the same as that under the sales contract between China Textile and the users. (4) the freight rate, sorting fee, packing fee, road transport freight, charge for commodity inspection and port charges were all for ADILAN S.A.'s account .

On January 18, 1999, China Textile (supplier) and Beijing Ke-Te Industrial Development Company (buyer) signed a purchase contract on industrial and mineral products(No. 99XSHT001). The contract stipulated: for the raw wool to be used to produce low-grade rough textile, quality was subject to the confirmation of the buyer after checking the bulk, the supplier was responsible for the mildewed and rotten wool (subject to result of inspection by Beijing Commodity Inspection Bureau). The price of this portion of wool was fixed on the basis of bulk: RMB 5.2 per kilo (net wool), payment was to be made ten months after taking delivery, the supplier agreed to bear the separation and selection fee, repacking fee and charge for commodity inspection. On March 23, Beijing Ke Te Industrial Development Company received 59132 kilos of wool transported from China Textile.

The court also found out that in January 1999, on behalf of ADILAN S.A., with respect to the wool involved in this case, Beijing Sida Wool and Textile Import and Export Company made inquiries to Beijing Qiu Zi Trade company, Beijing Hua Hong Science and Trade Center, Beijing Tuo Pu Wool Textile Co., Ltd., Beijing Ke Te Industrial Development Company respectively. The replies of the above mentioned companies were that they thought that it was impossible for the raw wool to be used for spinning, and it could only be used as waste material. Beijing Qu zi Trade Company was not willing to buy, while Beijing Hua Hong Science and Trade Center offered RMB900---1200 Yuan per ton, Beijing Tuo pu Wool & Textile Co. Ltd. assessed the price of the wool at about RMB3000 per ton, Beijing Ke Te Industrial Development Company showed willingness to buy, but the price was subject to face-to-face talk.

The court also found out: The invoices used by the owner of the goods for declaration to the Customs showed the price was fixed on the basis of contract No98RIK----008UYA and net wool rate of 55.65 percent. But RMB7624.42 Yuan for Customs duties was levied by the Customs of Yantai on the owner of the goods on the basis of the price assessed by the Customs (about net wool US$2.3 per kilo) and value added tax of RMB100174.23 Yuan was levied. The following expenses also incurred from the time when the original wool was transported to Yantai port to the time the goods were sold to Beijing Ke Te Industrial Development Company: overdue Customs declaration fee RMB6324 Yuan, various port charges RMB7480.30 Yuan, rail freight RMB15200 Yuan, road freight RNB10800 Yuan, charge for commodity inspection RMB1060 Yuan, sorting fee RMB143736 Yuan, repacking fee RMB43120.80 Yuan. The invoice for sorting fee and repacking fee indicated this expense was paid by Beijing Ke Te Industrial Development Company on April 2, 1999, the invoice for other expenses showed that the payer was China Textile.

On December 14,1998, on behalf of P&O Nedlloyd B.V., Shanghai Branch of Hong Kong Shanghai HSBS provided a guarantee of maximum amount of US$350000 to ADILAN S.A. with respect to the compensation for damage to the goods in the three 40ft containers under the bill of lading NoBUEFR241. The term of validity was from December 14, 1998 to December 13,1999. Later the term of validity was extended for one year.

The documents provided by Shenzhen Meteorological Service Co. Ltd. proved: in the last 10 day period of July in Shenzhen, the average temperature was 30.7 degrees centigrade, average relative humidity 74 percent; in the first ten day period of August, the average temperature was 30.3 degrees Centigrade, relative humidity 74 percent; in the middle ten day period of August the average temperature was 29 degrees Centigrade, relative humidity 76 percent; in the last ten day period of August, the average temperature was 29 degrees Centigrade, relative humidity 81 percent; in the first ten day period of September, the average temperature was 27.7 degrees Centigrade, relative humidity 84 percent; in the middle ten day period of September, the average temperature was 28.3 degrees Centigrade, relative humidity 74 percent; in the last ten day period of September, the average temperature was 28 degrees Centigrade, relative humidity 66 percent.

In addition, ADILAN S.A. claimed that it had paid the attorney fee in the amount of RMB50000 Yuan for the case, but didn??t receive relevant evidence.

The existing evidence showed that P&O Nedlloyd B.V. said in a letter sent to Shenzhen Dapeng Customs that the consignor had formally filed a claim. This was the earliest record about the time when ADILAN S.A. lodged a claim.

The facts set forth above were proved by the following evidential documents and the court affirmed them:

1. The purchase contracts No.98RIK---007UY and 98 RIK---008UY, agreement on cancellation of these contracts, contracts No.98RIK---007URB and 98RIK---008UYA, and supplement agreement, indicating the contractual relationship between ADILAN S.A. and the buyer of wool;

2. Bill of lading UEFR241, invoice of freight collected by Agencia Maritima Dodero S.A, and the certificate produced by Fowler S.A. showing the contractual relationship between ADILAN S.A. and P&O;

3. Reference and inspection certificate by Etilab Wool Laboratory, notice of commodity inspection by Beijing Import and Export Commodity Inspection Bureau and its report, illustrating the commodity inspection of import and export of the goods.

4. Correspondence and faxes between the two parties, relevant letters of P&O collected by the court of first instance from Dapeng Customs, delivery order, records of delivery and Customs declaration: all showing the fact that the carrier P&O, by mistake, transported the goods to Yantian, rather than Yantai. They also showed the situation regarding declaration at Customs and taking delivery of the goods by the consignee. 

5. Evidence provided by the port of Yantai and International logistics and Cold Storage Co., Ltd. proving the situation of the goods from the time of delivery to commodity inspection.

6. Certificate of receipt of the goods by Beijing Ke Te Industrial Development Company and the contract between China Textile and the former, showing the final result of sale of the wool.

7. Reply by Beijing Hua Hong Science and Trade Center to the fax of Beijing Si Da Wool & Textile Import and Export Company, showing the inquiries about the price of the wool after the damage.

8. Customs duty, special V.A.T payment receipt, Customs receipt for penalty for overdue declaration, commodity inspection fee, rail and road transportation fee, invoice for port charges and sundry expenses and invoice for sorting and bale packing fees respectively indicating the payment of duties and expenses.

9. Letter of guarantee issued by Shanghai Branch of Hong Kong Shanghai HSBS evidencing the guarantee provided by P&O shipping company for P&O Nedlloyd B.V..

10. Relevant meteorological records and documents by Shenzhen Meteorological Service Co., Ltd., indicating the climate conditions from July 21, 1998 to the end of September, 1998.

The court of first instance held: This case was about a foreign-related transportation contract dispute. Although the contract was signed abroad and the overleaf clauses of the bill of lading issued by P&O stipulated that settlement of disputes arising from the bill of lading should be under the jurisdiction of English law, the place of destination stated in the contract was in China, and one of the defendants, P&O shipping company as an enterprise, was a Chinese legal person. ADILAN S.A. filed a lawsuit before this court not basing on the bill of lading issued by P&O. Both ADILAN S.A. and P&O Nedlloyd B.V. claimed their rights on the basis of Chinese law during the litigation. So  the settlement of dispute under this contract should be under the jurisdiction of the law of China to which the contract was most closely connected.

According to the relevant provisions of the Maritime Code of the PRC, ADILAN S.A. booked space with P&O for shipping the goods and paid freight, therefore P&O Nedlloyd B.V. was the carrier and ADILAN S.A. the consignor. The two parties thus established the relationship of the contract of carriage. Fowler Company was no more than the deliverer of the goods to the carrier during the performance of the transportation contract. As the dispute occurred during the performance of the contract, ADILAN S.A. brought an action according to the contract as an appropriate party to this case.

During the performance of the contract of carriage, the goods were originally destined for the port of Yantai after transshipment at Singapore. Because of the negligence on the part of P&O, the goods were carried to Yantian after transshipment. The act of carrying the goods to a wrong port of destination by P&O Nedlloyd B.V. constituted the breach of contract. P&O Nedlloyd B.V. should be held liable for the breach of contract. Although P&O Nedlloyd B.V. transported the goods to the port of destination through a good deal of efforts after discovering the mistaken transportation, P&O Nedlloyd B.V. should still be responsible for the loss caused thereby. The allegation of ADILAN S.A. that the act of the carrier constituted an unreasonable deviation was not correct, for in legal sense unreasonable deviation must be an intentional act of the carrier, but in this case, the wrong transportation by the carrier was the result of the negligence of the carrier.

ADILAN S.A. provided to the court the reports on export commodity inspection and on import commodity inspection which proved the wrong transportation led to the damage to the goods. From the perspective of evidence the export and import commodity inspection reports were genuine. There was no evidence showing that ADILAN S.A. counterfeited the reports for the sake of litigation, but because of the fact that the goods involved in the case were loaded onto the ship of the carrier on June 10, 1998, and on November 24, 1998, the consignee took delivery of the goods, then the consignee transported the goods to Beijing, and, on January 20, 1999 the goods went through commodity inspection, so the following questions arose which became the focal points of dispute between the two parties: firstly, whether or not the goods under import commodity inspection were the goods transported by the carrier? Secondly, whether or not it was reasonable for the goods to be inspected in Beijing rather than in the port of destination Yantai? Thirdly, after a long time of transportation and storage, whether or not the carrier should be entirely responsible for the damage to the goods?

For the first question, the inspection report of the foreign professional wool inspection institution proved the goods (raw wool) were in entirely normal condition, up to quality standards, and had no sign of brittleness and mildew. But after the goods were transported to Yantai from Argentina, the owner of the goods transported it from Yantai to Beijing of his own accord. Beijing Import and Export Commodity Inspection bureau tested and confirmed that the goods were damaged by water and covered tightly and soaked by rain for a long time, their extensity diminished, rendering them unfit for normal use, and a large portion of the wool became mildewed and unfit for use any more. P&O Nedlloyd B.V. thought that either the goods under import inspection were not the goods involved in the case, or they had quality problem. This position was not well-founded: firstly, evidence proved that although the goods transported went through several ports from taking delivery to commodity inspection, yet the raw wool under inspection and that transported by the carrier were the same goods, so there was no change. Secondly, as the inspection of wool was only sample survey, the result of export inspection and import inspection on wool thinness were not totally identical. What was more, the smaller the thinness, the better the quality. Therefore, for the same kind of wool, the fact that the wool proved to be thinner under import inspection than that under export inspection should not be used to explain that the wool under such inspections was not the same, nor could it show that the wool was not up to the requirements under the contract. Thirdly, as the raw wool was primary product of wool unwashed, with various oil stains on it, the findings of survey on one item of wool quality was inherent in normal wool itself, and should not be used to show the goods had serious quality problems. Lastly, the defendant did not provide sufficient proof in respect of the position as he put forward, so the position was only conjectural, and without basis .

On the second question, the reason for the goods involved in this case being inspected in Beijing where the owner of the goods was located rather than the port of discharge Yantai, was due to the particular character of the wool: firstly, raw wool must be press-packed for transportation in containers, when the port of discharge was not the place where the consignee was located, and if the bales were unpacked for inspection at the port of discharge, it would cause great inconvenience for later transportation of the goods. Secondly, the goods must be transported to Beijing in original package form and subject to quarantine at the specially designated factory under the approval and examination of National Bureau for Quarantine of Animals and Plants. Thirdly, the goods were registered with the commodity inspection agency, and the agency agreed to have the goods inspected in Beijing . Therefore it was reasonable for the goods to be inspected in Beijing. This was not in violation of the relevant regulations. The result of survey of Beijing Import and Export Commodity Inspection Bureau provided by ADILAN S.A. should be used as the basis on which the case was to be decided.

On the third question, although the report didn??t indicate what caused the damage to the goods, yet, considering wool??s nature of absorbing moisture and hosting a lot of microbes in raw wool (unwashed wool), the raw wool began to deteriorate after it was transported to Yantian by mistake. Because the wool stowed in containers was put in open air at Yantian for 80 days when it was just in the season of high temperature and high humidity, and under such climate conditions, wool absorbed moisture from the air easily, and promoted reproduction of microbes, and so the wool began to deteriorate. The carrier should be responsible entirely for the loss. The reasons were as follows: 

The transportation of the goods to wrong port of destination and the failure to notify ADILAN S.A. of the situation in time by the carrier compelled ADILAN S.A. to cancel the contract with the buyer, as a result, ADILAN S.A. could not provide the wool import license to the Customs in time after it had known of the wrong shipment. So the carrier should be held liable from the time the goods were shipped to Yantian by mistake (July 7, 1998) to the time of carrying them from Yantian to Yantai (October 11). Based on the fact of long period of transportation and storage of the goods, professional people could presume by common sense that the goods had deteriorated. In addition, import license was required in order to purchase the wool, and this resulted in ADILAN S.A.??s failure to find new buyers soon after canceling the contract. So the carrier should be responsible for what happened durig the time from which the goods arrived at Yantai till the signing of the new trade contract between ADILAN S.A. and China Textile (November 23). On November 24, ADILAN S.A. applied to the Customs for declaration. ADILAN S.A. didn't get permission to take delivery of the goods until December 23. There was no evidence that the delay attributed to the owner of the goods occurred during that period, so this was a reasonable and necessary period for which the carrier should also be responsible. As stated above, it was reasonable to transport the goods to Beijing for inspection. Furthermore, there was evidence that the goods were not obviously delayed, the packing of the goods was unchanged, and there was no damage to the goods from the time of delivery, transportation by rail and road to the packing up of the damaged wool and inspection. Therefore the carrier should be responsible for the final consequence of damage. Of course, damage to the wool was related to its properties to some extent, but if the goods had not been wrongly transported and placed and stored for a long time (mostly under high temperature and high humidity), the damage wouldn't have occurred under normal transportation and standard of packing required.Therefore, legally speaking there existed a causation between the damage to the goods and the act of wrong transportation by the carrier, but not between the damage to the goods and the inherent nature of wool.

According to article 55 of the Maritime Code of the RPC, the carrier, P&O Nedlloyd B.V. should compensate ADILAN S.A. for the loss of the goods pursuant to the difference between the actual values of the goods before and after the damage, where the actual value of the goods before damage was US$1157243 calculated on the basis of the trade contract between ADILAN S.A. and China Textile as well as net wool rate of 55.65 percent quoted by ADILAN S.A. As the goods were damaged during the course of transportation, part of it suffered total loss, the rest had to be sold at a reduced price. The damaged wool was sold at the price of RMB307,486.40 based on the agreement reached between ADILAN S.A. and China Textile on January 15, 1999 and the sales contract between China Textile and Beijing Ke Te Industrial Development Company. Considering this portion of the wool had virtually become wasted wool after serious damage, the court held that it was reasonable that the wool should have been sold at the price of RMB5.2 per kilo at last, the amount sold could be taken as the basis on which the actual value of the goods after damage was to be calculated, so the difference between the actual values before and after the damage was RMB650699.23. ADILAN S.A. requested to calculate the loss in RMB after investigation, and, on August 18, 2000, the mean rate of exchange between US$ dollars and RMB promulgated by State Foreign Exchange Administration was US$100 to RMB827.99 Yuan. The actual value of the goods before the damage was RMB958185.63 Yuan. The carrier P&O Nedlloyd B.V. should be liable for the loss and interest (starting from September 21, 1998).

As damage happened to the wool, it was necessary to separate and sort out the mildewed and rotten wool and repack the bales, only by doing so could the wool be sold out, so RMB143736 Yuan for separating and sorting fees and RMB43120. 80 Yuan for repacking fee were also the losses resulting from the wrong transportation by the carrier. Although the invoices for separating and sorting fees and repacking fee indicated that the payer was Beijing Ke Te Industrial Development Company, ADILAN S.A. already undertook the expenses based on the agreement on January15, 1999 between ADILAN S.A. and China Textile and the sale contract on Jan.18, 1999 between China Textile and Beijing Ke Te Industrial Development Company. According to the relevant provisions of ??the General Principles of the Civil Law of the PRC?·, P&O Nedlloyd B.V. should pay the expenses and interest (starting from April 3, 1997).

ADILAN S.A.'s request for the compensation for the attorney fee was reasonable according to the relevant provisions of the ??Administrative Regulations for Charging Fees by Lawyers and the Rates Thereof?·and the ??General Principles of the Civil Law of the PRC?·. P&O should pay RMB30000 Yuan for attorney fee.

As to ADILAN S.A.??s other requests, this court does not give its support. First, as wool was an item of import commodity subject to inspection under law, commodity inspection should be carried out, and inspection fee should be paid whether damage happened or not. Secondly, Customs duty, value added tax, port charges, rail and road freight arising from the wool had no cause and effect relationship with the carrier??s wrong transportation. Although ADILAN S.A. and the owner of the goods agreed that these expenses should ultimately be for ADILAN S.A.??s own account, this was nothing more than an undertaking by ADILAN S.A. to the buyer, while the carrier did not have the obligation to pay. Thirdly, the overdue Customs declaration fee was related to the wrong transportation by the carrier, the fee was paid by China Textile, not by ADILAN S.A.. Therefore ADILAN S.A had no right to request the fee. Lastly, as to the loss caused by the suspension of production, ADILAN S.A. did not provide evidence in support of its request, and, on the other hand, a maritime cargo carrier was not in a position to foresee that damage would happen to ADILAN S.A., so the carrier should not pay for such loss.

In the course of settling the dispute, with respect to ADILAN S.A.??s claim, P&O Shipping Company provided a guarantee to ADILAN S.A. through the bank. Therefore, within the valid term of the guarantee, the defendants P&O Shipping Company and P&O Nedlloyd B.V. undertook joint and several liability for the loss.

Pursuant to article 269 and article 55 of the Maritime Code of the PRC and article 111 of the General Principles of the Civil Law of the PRC, this court decides as follows: (1) P&O (NEDLLOYD B. V.) should compensate ADILAN S.A. for the following losses within 15 days after the judgment becomes effective: RMB650,699.23 Yuan for cargo damage, together with interest calculated on the basis of the loan interest rate of the corresponding period issued by the People??s Bank of China;attorney fee in the amount of RMB30000 Yuan; separation and sorting fees, plus packing fee in the total amount of RMB 186856.80 Yuan; (2)P&O China Shipping Company and P&O NEDLLOYD B. V. should undertake joint and several liability within the valid term of the guarantee for ADILAN S.A.??s losses; (3) dismiss the other claims of ADILAN S.A. The legal cost in respect of this case being RMB20384 Yuan, of which P&O Shipping Company should pay RMB 9886 Yuan, while ADILAN S.A. should pay RMB10498 Yuan.

P&O Nedlloyd B.V. refused to accept the decision of the first instance trial, and made an appellate alleging: (1) ADILAN S.A. was not the consignor under the contract of carriage. The bill of lading evidencing the contract of carriage involved in this case specified clearly that the consignor was FOWLER Company, the place of issue was Buenos Aires. The facts affirmed by the court of first instance that ADILAN S.A. bought the raw wool from FOWER company, that the place of issue of bill of lading was Montevideo, and that ADILAN S.A. had already paid freight when China Textile handed the bill of lading back to ADILAN S.A., were all allegations without being supported by evidence. The bill of lading had only the endorsement of FOWLER company. The consignor should be FOWLER company, rather than ADILAN S.A.. The court should dismiss the appellate or dismiss its claims. (2) ADILAN S.A. counterfeited the contracts No98RIK---007UY and 98RIK---088UY between ADILAN S.A. and China textile for the sake of bringing an action. (3) It was the consignee rather than the consignor who had the right to lodge the claim against the carrier for the damage occurred in the course of carriage of goods by sea, and China Textile was the consignee. If the consignor wished to assign its rights and obligations to ADILAN S.A., it should first obtain the consent of the carrier, otherwise the assignment should not be binding on the carrier. (4) The wrong shipment of the goods in this case delayed the time of transportation but the delayed time was not the sole and necessary cause of loss of goods, the immediate cause of the damage to the goods was the particular nature and inherent defects of the goods. Pursuant to the relevant provisions of the Maritime Code, the carrier is not responsible for the loss of the goods arising from its particular nature and inherent defects. Moreover, the fact that the consignee??s delay in submitting import license to the Customs prevented the goods from being transported out of Shenzhen in good time. The delay of the consignee in getting the goods inspected and properly handled was also one of reasons causing the damage to the goods. (5) The consignee did not give a notice of claim to P&O Nedlloyd B.V. in time after receiving the goods. (6) The judgment of the court of first instance ordering P&O Nedlloyd B.V. to pay the attorney fee of the opposing party was not supported by strong evidence. P&O Nedlloyd B.V. requested the court of second instance to vacate that judgment, dismiss ADILAN S.A.??s appellate or its claims.

P&O Shipping Company refused to accept the judgment of the court of first instance, P&O Nedlloyd B.V. made an appellate and alleged: P&O Shipping Co. was the agent of the carrier P&O in China, ADILAN S.A. ought to take legal action against the carrier whose name was indicated in the contract, and to sue P&O Shipping was obviously incorrect. In addition, before the lawsuit, ADILAN S.A. wanted P&O Shipping to provide bank guarantee in order to avoid further losses, P&O Shipping provided a guarantee to ADILAN S.A. but the provider of the guarantee was a bank. The court of first instance regarded P&O Shipping as the guarantor and decided that P&O Shipping undertake joint and several liability. This was mistaken. The court of second instance was requested to vacate the judgment of the court of first instance, dismiss ADILAN S.A.??s appeal or dismiss its claims.

The Respondent ADILAN S.A. argued: (1) ADILAN S.A. was the consignor of the goods in this case, and gave P&O Nedlloyd B.V. an instruction to book space, stating ADILAN S.A.??s requirements with regard to the contents of the bill of lading and paid freight right. The listing of FOWLER as a consignor was at the request of ADILAN S.A., which did not affect the status of ADILAN S.A. as the consignor to book space. ADILAN S.A. became the consignee after the goods were wrongly transported. The bill of lading in this case was one endorsed in blank, thus it could be negotiated after endorsement. This meant that the holder of the bill of lading was the consignee. In this case, after the goods had left the port of shipment, FOWLER handed the bill of lading over to ADILAN S.A., ADILAN S.A. delivered the bill of lading to China Textile. As the goods could not arrive at the port in time, China Textile and ADILAN S.A. cancelled the contract, the bill of lading was returned to ADILAN S.A. Thereafter ADILAN S.A. was all along the holder of this bill of lading, until ADILAN S.A. once again handed the bill of lading to China Textile in order to go through the formalities for delivery. After P&O Nedlloyd B.V. had transported the goods to a wrong destination port, it was ADILAN S.A. who had gone to Shenzhen with the original bill of lading and coordinated with the Customs and carried on negotiations with P&O. Nedlloyd B.V. The selling of the damaged goods to China Textile by ADILAN S.A. was an act of the holder of bill of lading to dispose of the damaged goods. So ADILAN S.A. should not be deprived of the right to lodge claims against the carrier. (3) the action of wrong transportation by P&O Nedlloyd B.V. was the fundamental cause of the damage to the goods. After such erroneous transportation, P&O Nedlloyd B.V. didn't rectify the mistake in time, so the goods were held up at Yantian port for over 70 days exposing to strong sunshine and high temperature, finally resulting in the damage. Inspection of the goods in Beijing was entirely in conformity with the provisions of law. (4) the negligence of the carrier was gross which was not within the scope of exemption from the liability of the carrier as prescribed by law. ADILAN S.A. requested the court of appeal to uphold the judgment of the court of first instance.

This court held that the case was a dispute arising from a claim of damage to goods carried by sea resulting from the carrier??s wrong shipment. Although the overleaf clauses of the bill of lading issued by P&O Nedlloyd B.V. stipulated that the Law of the U.K. shall apply to the settlement of disputes arising from the bill of lading, yet the port of destination stated in the contract was in China. One of the appellants, P&O Shipping Company, was a Chinese legal person, ADILAN S.A. and P&O Nedlloyd B.V. claimed their rights on the basis of Chinese law. Therefore, the court of first instance??s finding that Chinese law was applicable to this case was correct in that the contract was most closely connected with the law of China. The main issues of dispute in this case were as follows: whether or not ADILAN S.A. was the consignor under the contract of carriage? Whether or not there was a contractual relationship between ADILAN S.A. and FOWLER arising from the sales contract? Whether or not ADILAN S.A. was the legal holder of the bill of lading and had right to claim damages against the carrier? What was the reason of the damage to the goods? Whether or not ADILAN S.A. had notified P&O Nedlloyd B.V. in time of the situation of the damaged goods, and whether P&O Shipping Company should take joint and several liability with P&O Nedlloyd B.V. for the losses of ADILAN S.A.? 

On the issue of whether ADILAN S.A. was the consignor under the contract of carriage and its relationship with FOWLER, the fact was that the consignor under the bill of lading in this case was FOWLER, the consignee was to order, ADILAN S.A. held the bill of lading after FOWLER's endorsement in blank. FOWLER and ADILAN S.A. both recognized that there was a contractual relationship on the sale of raw wool between them. Judging from the purchase contract signed by ADILAN S.A. and China Textile, ADILAN S.A. was the supplier to China Textile, rather than FOWLER. The freight was paid to the carrier by ADILAN S.A. directly, FOWLER did not pay the freight. In the box for inserting the name of the actual consignor under the Bill of Lading, the carrier wrote the name of FOWLER with the consent of ADILAN S.A. The letter sent by FOWLER to ADILAN S.A. on June 15, 2000 proved that FOWLER had sold the wool involved in this case to ADILAN S.A. on F.O.B. term, and proved that matters regarding booking space for the wool involved in this case were arranged by ADILAN S.A., not FOWLER.i According to the relevant provisions in the Maritime Code of the PRC, consignor was not limited to the one inserted in the B/L. ADILAN S.A. booked space with P&O Nedlloyd B.V. and transported the goods and paid freight. P&O Nedlloyd B.V. transported the goods from Argentina to China and collected the freight from ADILAN S.A., the two sides had established contractual relationship of carriage of goods by sea. ADILAN S.A. was the consignor of the contract. Its bringing an action against the carrier P&O Nedlloyd B.V. was legally well-founded. P&O Nedlloyd B.V.??s denial of the existence of contractual relationship between ADILAN S.A. and FOWLER was not in conformity with fact, so this court does not support its view. 

  On the issue of whether ADILAN S.A. was the legal holder of the bill of lading and had the right to claim against the carrier, as the holder of the bill of lading endorsed in blank, the buyer in the contract ADILAN S.A. gave the bill to China Textile. Because China Textile could not receive the goods under the bill of lading in time (due to shipment to wrong port of destination by P&O Nedlloyd B.V.), it had to cancel the contract with ADILAN S.A. after the holding of bill of lading, and return the bill of lading to ADILAN S.A. According to the nature of the bill of lading, once the bill of lading endorsed in blank was negotiated through endorsement, any one legally in possession of such bill of lading was the legal holder of and has the right to take delivery of the goods against presentation of the bill of lading. Under the circumstances where China Textile could not receive the goods in time, China Textile's act of returning the bill of lading to ADILAN S.A. was not in breach of the provisions of law. Even judging from the nature of an endorsed bill of lading, China Textile didn??t have the obligation to notify the carrier of its returning the bill of lading to ADILAN S.A. before doing so. The view of P&O Nedlloyd B.V. that the returning of the bill of lading to ADILAN S.A. by China Textile was null and void was in lack of proper legal basis. ADILAN S.A. was the legal holder of the bill of lading, so it had the right to claim against the carrier with respect to the damage happened to the goods under the bill of lading it possessed. 

  On the issue of the reason for the damage to the goods and whether ADILAN S.A. had notified P&O Nedlloyd B.V. of the damage in time, P&O Nedlloyd B.V. attributed the primary reason for the damage of the goods to the inherent defects of wool. P&O Nedlloyd B.V. did not think the damage was due to the delay caused by the shipment to the wrong port of destination. In addition, after the carriage to the wrong port of destination, ADILAN S.A. didn??t provide the import license to the Customs in due time and delayed in carrying the goods back, so P&O Nedlloyd B.V. should be exempt from liability. Objectively wool is apt to absorb moisture by nature, therefore slight change of quality may occur under certain conditions. But the wool under this case was surveyed by the inspection agency which showed part of the wool was completely damaged, the rest deteriorated. According to the established fact, because of the wrong transportation to Yantian by the carrier P&O Nedlloyd B.V., the wool hitherto stowed in the containers was placed in  the open air for about 80 days at Yantian, and it was just the season of high temperature and high humidity. Under such climate conditions, wool absorbed moisture from the air and promoted its reproduction of microbes, so the wool began to deteriorate. The transportation to a wrong port of destination and failure to notify ADILAN S.A. of the situation in time by the carrier compelled ADILAN S.A. to cancel the contract with the buyer. This resulted in ADILAN S.A.??s inability to provide the wool import license to the Customs in time, so the carrier should be held liable for the losses incurred during this period of time.

On the issue of whether P&O Shipping Company should take joint and several liability with P&O Nedlloyd B.V. for ADILAN S.A.??s losses, at the request of P&O Shipping Company, Shanghai Branch of HSBS Hong Kong provided a guarantee of a maximum amount of US$350000 to ADILAN S.A.  The guarantee was clear in that P&O Shipping Co. and P&O Nedlloyd B.V. should be jointly and severally liable to ADILAN S.A. for compensation within the term of the said guarantee. This court does not accept the argument of P&O Shipping that it should not be a party to this case, as the said argument was not well- founded.

In summery, during the performance of the contract, P&O Nedlloyd B.V., because of its negligence, transported the goods to a wrong destination by mistake, as a result the goods was seriously damaged. P&O Nedlloyd B.V. should be responsible for all losses. The argument of P&O Nedlloyd B.V. that the main reason for damage to the goods was caused by the nature of the product and that it should not undertake the responsibility was without merit. This court doesn??t give its support to such argument. The arguments of the appellant made at this appeal were without merit. In the judgment of the court of first instance the finding of facts was clear, and the application of law was correct. According to Clause 1 of Article 153 of the Civil Procedure law of the PRC, this court decides as follows:

The judgment of the court of first instance is affirmed, and the appeal of the appellant is rejected.

The cost for this appeal, in the amount of RMB20384, shall be borne by P&O Nedlloyd B.V. and P&O Shipping Company.

This judgment is final.



                                Presiding judge: Sun Danyi

                                 Acting judge:  Zhao Tong

Acting judge:  YU Quan

Nov.27, 2001

Certified true copy

                                 Acting Clerk:  Zhao Man