Chang Min Tat FJ (delivering the judgment of the Court):

The appellants as shipowners carried under a bill of lading two bales of raw medicine shipped by Pak Hing of Hongkong for the respondents, the consignees, in Penang.Only one bale was delivered.The respondents sued the appellants for the invoice value of the missing bale which turned out to be by far the more valuable of the two, being valued at HK$51,170.90 as against HK$5,115.63 for the other bale.Converted at the prevalent exchange rate at the time of the non-delivery and adding to it the survey fees, the sum claimed was M$25,595.13.

The claim for the invoice value and disbursements was sounded on cl. 13 of the bill of lading which in its relevant parts reads:

13 .... Subject to the limitation expressed in cl 7 above, the Company's liability in case of loss or damage to goods for which they may be responsible within the limits of this Bill of Lading, to be calculated on and in no case to exceed the net invoice cost and disbursements.

Liability was admitted at the trial and the only question before the High Court was the amount to be paid.Specifically, the defence denied that the invoice value was payable and relied on cl. 7 of the bill of lading which reads:

7. The owners of the vessel will not be accountable for money, documents, gold, silver, bullion, specie, jewellery, precious stones or metals, work of art or other precious articles, nor for any one package of cargo above the value of HK$300 (Hong Kong Dollars Three Hundred), unless the Bill of Lading be signed therefor with the nature and value therein expressed at the time of shipment and extra freight in respect of same agreed upon and paid.Delivery of specie and valuable shall be taken from the ship's deck, where the carrier's liability shall cease.

For the contention that the appellants were only liable to pay HK$300 in view of the failure, which the respondents had never denied, on their part to declare the nature and the value of the goods.

Hongkong however is one of those countries which have adopted the Brussels Convention of 1923 and its Carriage of Goods by Sea Ordinance, 1928 (HK COGSO) makes applicable the Carriage by Sea under Bills of Lading Rules, more familiarly known as the Hague Rules, in relation to and in connexion with the carriage of goods by sea in ships carrying goods from any port in the Colony to any other port whether in or outside the Colony. Section 4 makes it a statutory requirement that every bill of lading or similar document of title issued in the Colony shall contain an express statement generally described as the paramount clause, that it is to have effect subject to these rules.The bill of lading in the instant case was clearly endorsed with the words that it was issued subject to the terms provisions and conditions of the HK COGSO in compliance with s. 4 thereof.The law applicable is therefore the lex loci contractus and is the law of Hongkong.It is however common to both parties and we ourselves are satisfied that the HK COGSO is in all material particulars identical with our Malaysian COGSO, 1950 and that the Hague Rules annexed to the ordinance in each case are the contractual terms of the relationship between the parties: see Adamastos Shipping Co. Ltd. v. Anglo-Saxon Petroleum Co. Ltd. [1959] AC 133 at p. 152.

We now set out the rules relevant to this case.

Article II entitled Risks reads as follows:

Subject to the provisions of art. VI, under every contract of carriage of goods by sea the carrier, in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities, and entitled to the rights and immunities hereinafter set forth.

As we read it, the carrier is entitled to expect from the shipper compliance with the requirements of the Hague Rules before he is subject to the responsibilities and liabilities set out in the rules.

Next, art. IV, r. 5, which reads:

5.(1) Neither t