HCCL 36/2006
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
COMMERCIAL ACTION NO. 36 OF 2006
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BETWEEN
SUNRICH TRADERS LIMITED Plaintiff
and
POLYCOTTON SL 1st Defendant
SCANWELL CONSOLIDATORS LIMITED 2nd Defendant
SCANWELL CONTAINER LINE LIMITED
3rd Defendant
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Before: Hon Stone J in Court
Date of Hearing: 25, 26, 27 May, 19 June 2009
Date of Judgment: 30 September 2009
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J U D G M E N T
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This action
1. This is an action brought by the plaintiff, Sunrich Traders Ltd (‘Sunrich’), a Hong Kong garment exporter, against the 2nd defendant, Scanwell Consolidators Ltd, a freight forwarder, and the 3rd defendant, Scanwell Container Line Ltd, a non-vessel owing ‘container line’, for damages for breach of contract and/or bailment.
2. It is not in dispute that the 2nd and 3rd defendants (collectively ‘Scanwell’) are related Hong Kong companies which are in the business, inter alia, of organizing/arranging the transport of goods ex Hong Kong. For the purposes of this action no practical distinction has been drawn between these defendants.
3. The subject-matter of this claim is the loss of three (3) containers of garments which had been sold by the plaintiff to the 1st defendant, Polycotton SL under three sales confirmations.
4. The containers in question have been identified and referred to in this case as ‘C7, C6 and C3’.
5. They were shipped by Sunrich from Hong Kong and carried by the 3rd defendant, qua contractual carrier, from Hong Kong to Barcelona in January 2003 under three (3) bills of lading marked ‘Freight Collect’.
6. The garments within these containers had been purchased by the 1st defendant, Polycotton SL, and the genesis of this claim against the 2nd and 3rd defendants lies in the failure of the purchaser to pay for the goods and to uplift the shipping documents from the plaintiff’s correspondent bank in Barcelona.
7. The 1st defendant never presented the relevant bills of lading nor took delivery of the goods, and the action against Polycotton, which I assume became insolvent, was discontinued by Order of 7 July 2006.
8. Hence the pursuit of this claim by the unpaid plaintiff, Sunrich, against the freight forwarder and the contractual carrier, respectively the 2nd and 3rd defendants, for the value of the goods in question, together with ancillary expenses.
The factual background
9. Factually this is a curious case. Such objective facts as are known, if not wholly common ground, are substantially undisputed, but there remains an element of mystery as to what precisely happened to the goods, as shipped, when they arrived at Barcelona. Because they disappeared, and it is not immediately apparent who took them, and when.
10. It is clear that the plaintiff sold the goods on FOB and D/P terms to the putative purchaser, Polycotton, and it was the same Polycotton which, albeit indirectly, had put the plaintiff in touch with the Scanwell group.
11. What had happened was that Polycotton had had a pre‑existing relationship with a local Spanish forwarding agent, Maritima Del Estrecho (Gib) Limited (‘Maritima’), and Maritima and Scanwell regularly had worked together as each others’ mutual agents. Hence, when Maritima was involved in the shipment of goods to Spain, it was natural to use Scanwell’s services in Hong Kong.
12. In any event, the plaintiff, Sunrich, shipped the goods under “to order” bills of lading issued by the 3rd defendant, which was using the agency services of Maritima for the handling of arriving cargo, although the plaintiff shipper had had no knowledge of any such Spanish agency arrangements.
13. Another entity, one Wings Cargo SL (‘Wings’) was Maritima’s sub-agent in Barcelona, and appears to have operated a bonded warehouse there.
14. It also seems reasonable to assume, as I so do, that the cargo as shipped by the 3rd defendant was placed in Wings’ warehouse on arrival.
15. Under clause 10.3 of the bills of lading “delivery” of the sealed containers was to be delivery with seals intact, although when in fact the sealed containers went into the warehouse, and when the containers were destuffed (as subsequently became obvious was the case) is not known.
16. The plaintiff, however, knew nothing of the detailed arrangements for the cargo on arrival; Polycotton appears never to have issued any notice of rejection of the goods, nor did it take up the goods on the anticipated D/P basis, and for their part the 2nd and/or 3rd defendants gave no notice to the plaintiff either notifying as to collection, nor requiring the plaintiff to make arrangements for re-delivery.
17. What happened was that when the plaintiff became aware that the bills of lading, which had been indorsed and delivered to the plaintiff’s bank, had not been taken up on payment by the purchaser, from about April 2003 the plaintiff began to make inquiries as to the whereabouts of its uncollected goods.
18. No satisfactory response was received from the 2nd/3rd defendants, and in October 2003 the plaintiff instructed the defendants to return the uncollected goods to Hong Kong. These instructions were accepted, and arrangements were made so to do.
19. In fact, the defendants issued, and the plaintiff accepted, a quote for the return carriage of the goods to Hong Kong via COSCO.
20. There is a dispute about who bore responsibility for this return carriage, but it seems tolerably clear that the return carriage was to be pursuant to the original bills of lading which had been issued for the outward voyage; the ocean carrier for the return leg would, of course, issue a separate ocean bill, because the defendants had no vessel of their own, and it was no doubt anticipated that the plaintiff would surrender the original bills of lading to the defendants upon taking physical redelivery in Hong Kong.
21. In the event it was not COSCO which undertook the ocean carriage on the return trip but NOL; it is not known why this change of ocean carrier took place, but this was nothing to do with the plaintiff, which never had had anything to do with the return carriage arrangements, all of which were made via the defendants’ agents.
22. Significantly it appears that neither the plaintiff nor the defendants had prior knowledge that the NOL bills of lading had been drawn with the plaintiff named as Consignee, and thereafter were dispatched directly to the plaintiff.
23. In connection with this return carriage, the plaintiffs were passed a letter by the defendants dealing with Maratima’s requirement for the issue of that which in this trial has become known as the ’19 April 2004 letter’, to which document I refer later in this judgment.
24. As matters transpired, when the containers arrived back in Hong Kong, and were delivered to the plaintiff, these containers contained wholly different goods from those initially shipped to Spain by the plaintiff.
25. It is unclear precisely how this situation came about. On the probabilities the likely scenario is that after the vessel carrying the 3 containers ex Hong Kong arrived in Barcelona, the containers were sent to Wings’ warehouse in the normal course of events to await Polycotton’s purchase of the documents of title, and thus taking possession of the goods.
26. This did not occur. That which almost certainly did happen was that at some point the 3 containers, as originally stuffed and sealed, were destuffed by persons unknown, and that at some stage – either before or after the plaintiff’s instructions to return the containers to Hong Kong – Wings permitted the plaintiff’s goods therein to be removed and stolen (on the overwhelming probabilities by Polycotton, which appears also to have met Wings’ costs) and that replacement garments then were stuffed into 3 replacement containers (‘the substitute containers’) differing from the 3 original containers sent on the outward journey, in a short-lived attempt to conceal what had transpired, albeit such artifice could last only until the returning substitute containers were opened by the plaintiff, at which point the reality would (and indeed did) become all too clear.
27. Accordingly, it is against this unusual factual backdrop that the plaintiff sues for the landed value of the original goods as at the time such goods ought to have arrived back in Hong Kong, which is taken to be August 2004, namely US$215,472.50, less the sum of US$20,000, which represents an earlier deposit remitted by Polycotton, and an additional sum of US$20,000, apparently paid by Polycotton in August 2003, for which sums the plaintiff is prepared to give credit.
The viva voce evidence
28. For the plaintiff a total of six witnesses were called into the witness box: three executives, namely Mr Jairam Gidwani, director and owner of the plaintiff, Mr Dinesh Gidwani, a director of the plaintiff (and son of Jairam Gidwani), Mr Srinivasan Prasad, the plaintiff’s financial controller, together with three non-executive employees: Ms Anita Chan Lai-Han, a merchandiser, Mr Wong Hing-Kwong, the plaintiff’s shipping manager, and Ms Wendy Lee Wai-Ling, another merchandiser of the plaintiff.
29. For the defendants, two witnesses of fact were called: Mr Eddie Chan, an operation supervisor of the defendants, and Edward Kwok Wing Keung, a general sales manager of the 2nd and 3rd defendants.
30. It is fair to say that neither of the latter two gentlemen added significantly to the sum of knowledge in this case, and both were but relatively briefly cross-examined.
31. It is worth noting that witness statements as originally served by the defendants were those of a Mr Rafael Gallart Grau, an Administrator of Wings, and a Mr Juan Luis Segalerva Gonzales, an Administrator of the 1st defendant, Polycotton; however neither gentlemen attended court, and thus in accordance with normal Commercial Court practice these statements were accorded no weight. It is unfortunate that neither of these witnesses came from Spain to give evidence, if only to enable the court to ascertain, with rather more certitude, what precisely did happen to the goods as originally had been shipped by the plaintiffs.
32. So far as the plaintiff’s witnesses were concerned, I found them to be witnesses of truth.
33. I was particularly impressed with the manner and content of the evidence of Mr Prasad, the plaintiff’s financial controller, who amply demonstrated that he was wholly on top of the facts of this case and, if I may say so, had an excellent grasp of English: I have no doubt but that his account of events was the most authoritative, both in chief and under cross-examination, and I accept his evidence, together with that of the other witnesses of the plaintiff.
34. Mr Prasad emphasized that the substitute containers were not the containers which the defendants had agreed to ship back to the plaintiff, and that the contents of these substitute containers were unknown to the plaintiff and “remain unclaimed by their true owners”. He said that the plaintiff had stored the goods found to be in the substitute containers from the date of delivery thereof, and indeed that these substituted goods thereafter had remained in storage with the plaintiff.
35. This witness also left the court in no doubt that on or about 19 April 2004 he had agreed with Mr Kwok, on behalf of the 2nd and 3rd defendants, to arrange for the return shipment to Hong Kong of the original 3 containers containing (it then was presumed) the plaintiff’s original shipment of garments, and that, again it then was assumed by both parties, that these containers were unopened and were to remain under the supervision of the defendants.
36. Mr Prasad also stated that in reliance upon this arrangement, the plaintiff paid the defendants the return freight in the sum of HK$53,891.47 with regard to the return shipment of these 3 containers, and that he asked that the relevant paperwork (invoices and packing lists) be consolidated into one document.
37. As Mr Prasad recounted the situation, however, that which ultimately was returned represented neither the containers nor the garments as originally had been shipped by the plaintiff from Hong Kong to Spain.
38. Hence this claim against Scanwell.
The argument
39. The plaintiff’s case, as adumbrated by its counsel, Mr Alder, was tolerably straightforward.
40. These goods had been sold on FOB terms, and at all material times the plaintiff was the owner of the goods. It was named as shipper on the bills of lading, which were made out ‘to order’, and the plaintiff clearly was both consignor and bailor thereof.
41. Mr Alder stated that the plaintiff’s primary claim was on the bills of lading, whereunder the defendants had taken possession of the goods, and had issued the bills of lading as carriers and also as bailees for reward; accordingly, he said, the defendants were bound under the bills of lading as issued to deliver the goods only against presentation of original bills of lading, alternatively they were under a duty to take all reasonable care of the goods.
42. The goods in the 3 original containers had been carried to Barcelona, and upon their non-collection by Polycotton, as Notify Party, the plaintiff, as it was entitled to do, had ordered the defendants to return the goods to Hong Kong, and that the defendants had accepted instructions so to do.
43. It was settled law, counsel submitted, that a bailor of goods for carriage is entitled to give instructions for the goods to be returned to the original load port – see, for example, Starlight Exports Ltd & anr v CTO (HK) Ltd, HCCL 55 of 2004, per Reyes J at para 20 – albeit the bailor is liable for any additional freight thereby incurred: in this instance, he said, his case was that instructions had been given and accepted, and the return freight duly paid by the plaintiff.
44. However, the defendants clearly had failed to return the goods to the plaintiff as instructed; as Mr Alder submitted, it did not practically matter whether this obligation was couched in terms of being in accordance with the original bills of lading or in terms of the relevant terms of the bailment.
45. The hard fact, he said, was that the defendants manifestly had failed in their obligation, some other goods of an entirely different nature had been shipped back to the plaintiff, and in the circumstances the shipping to the plaintiff of completely different goods from those it originally had shipped was little different from shipping back nothing at all: quite simply, the plaintiff had lost its goods which had comprised the original shipment.
46. It is fair to say that the defence position comprised something of a movable feast, although in so saying I do not wish to be taken to be critical of the efforts of Ms Diana Cheung, counsel for the defendants, who struck me as having a difficult brief in resisting the plaintiff’s claim.
47. On the face of the pleadings at least the defendants had put the plaintiffs to proof that the containers as shipped had contained the goods for the loss of which the claim now was mounted.
48. The plaintiff’s case is that the goods were as described in the Schedule to the Amended Points of Claim, which document reflected sales confirmations and packing lists.
49. As to this issue, I had no difficulty in accepting the plaintiff’s evidence; Mr D Gidwani gave evidence regarding the sourcing of the goods from the factories in China, and noted that both pre-sale and pre‑shipment samples had been approved by Polycotton, whilst Ms Wendy Lee gave evidence that different factories were engaged for jeans, shirts and pants.
50. In this connection I note that there was a misdescription on the face of the relevant bill of lading issued regarding shipment of containers C6 and C3, but it was expressly accepted by Mr Kwok that C3 contained mens’ shirts and not jeans as stated, and he also accepted that the like logic applied to C6.
51. All the other documents relied on by the plaintiff are consistent in this regard, and on the probabilities I readily infer, and so find, that the goods as sold to Polycotton were the goods as shipped; accordingly this defence, if the point seriously be taken, must fail.
52. It also is pleaded by the defendants that whilst the defendants admit that they received the containers for carriage for reward, nevertheless bailment is denied. For my own part I fail to understand this plea in the circumstances of this case, and to be fair to Ms Cheung it appears that it now is accepted to have been a bailment for reward; this certainly is not the type of case where it can be said that the goods had been lost despite the exercise of reasonable care.
53. Package limitation initially seems to have been in the frame, but it seems that this no longer is relied upon; moreover Articles IV.2(i) and IV.2(q) of the Hague-Visby Rules, whilst pleaded (Defence, para 19), again do not appear to be pursued.
54. At the end of the day two specific lines of argument seem to be maintained by the defendants: first, the issue of time bar, and second – and more important, and essentially a fact-sensitive matter – whether the defendants indeed were involved in the agreement with the plaintiff to return to Hong Kong what then was assumed to be the plaintiff’s goods in the 3 original containers as had been shipped ex Hong Kong.
55. It is to these two points, which appear to be the only ‘live’ issues remaining in this case, to which I now turn.
(a) Time bar
56. Paragraph 19(c) of the Defence invokes the time bar in the Hague Visby Rules, Article III.6, and within Clause 18 of the bills of lading, which provides that the Carrier shall be discharged from all liability for loss of or damage to goods unless suit is brought within 9 months after “delivery of the goods or the date upon which the goods should have been delivered”.
57. At a pre-trial review held on 2 April 2009 Ms Cheung stated to the court – in response to a direct request from the plaintiff – that the date thus relied upon in this regard (albeit unpleaded) was 30 May 2003, and that since the writ in this action was issued on 20 June 2005 it followed that the claim was time-barred.
58. However, in his submissions at trial Mr Alder argued, successfully in my view, that this falls “woefully short” of a correct invocation of clause 18, which requires the defendants to identify, as a matter of evidence, the events said to constitute ‘delivery’ of the goods, and/or the basis underlying the alleged date upon which it is said that the goods “should have been delivered”. It is also worth noting that in this context the concept of what does, or does not, amount to ‘delivery’ under the regime of the Hague-Visby Rules was not a matter which was explored in this case.
59. In the event the Defence as pleaded cast no light on these matters, nor indeed did the evidence at trial, and thus, said Mr Alder, the court properly could take this issue no further. Moreover, he argued, ‘delivery’ within clause 18 simply connoted delivery in accordance with the bills of lading – see, for example, Starlight Exports, op cit., at para 84 – and as at 30 May 2003 the goods clearly were in Barcelona, and thus the defendants had no right to cause/permit delivery to be made to anyone, absent presentation to them or their agent of an original bill of lading.
60. I agree. In these circumstances I fail to see how a time bar point is successfully made out, whether under Article III, rule 6 or under Clause 18 of the bill of lading, on the basis of the evidence and in terms of the argument before this court.
61. Thus, I reject this defence, if indeed I am correct in thinking that it continued to be maintained by the end of this trial: I hope it is not unfair to say that Ms Cheung did not seem to be pressing this point by the conclusion of this case.
Cessation of responsibility: return carriage arrangements
62. In my view resolution of this dispute comes down to this issue, and to this issue alone, and undoubtedly this is the aspect of this case about which the defendants appear most aggrieved.
(i) The factual sequence
63. There is history to this, and for present purposes it may be worth descending to some detail.
64. The starting point for this saga revolves around the efforts of the plaintiff to get some information out of the defendants as to the whereabouts of their goods; they knew that Polycotton had not taken up the documents upon the contractual D/P basis, but equally in late April 2003 the plaintiff had no idea of what had happened to the goods that had been shipped to Barcelona, and which should have been subject to such payment.
65. Maritima appears to have informed the defendants that the ‘containers’ were still in its Barcelona warehouse as at 15 May 2003, and on 9 October 2003 Mr J Gidwani notified Polycotton that the goods must be returned to Hong Kong.
66. In November 2003 the plaintiff sent solicitors’ letters demanding that the goods be returned to Hong Kong, to which there was no response from the defendants.
67. On 19 December 2003 an email from Mr Kwok of Scanwell to a Mr John Alvarez at Maratima stated that he had been informed by Sunrich that they had requested that the goods be shipped back to Hong Kong, and sought advice as to the freight cost ex Barcelona to Hong Kong.
68. In this context the plaintiff’s case – which I accept on the evidence before me – is that the defendants not only had received but had accepted the plaintiff’s instructions to ship the three containers of goods back to Hong Kong; in cross-examination Mr Kwok agreed with the proposition that the defendants would earn additional freight by so doing, and that that was the reason for accepting these instructions. I also accept that it always was the plaintiff’s position that it would have to be responsible for the freight charges for the back freight – as in fact occurred.
69. By letter dated 29 January 2004 the plaintiff sent a ‘chaser’ to the defendants and asked what documents were required for the defendants to bring the goods back to Hong Kong, and on 4 February 2004 Polycotton emailed the plaintiff and stated that instructions must be given to Maritima to release the ‘containers’ to Wings Cargo, although, of course, at this stage the ‘containers’ almost certainly were in Wings’ physical possession in their warehouse. Mr Dinesh Gidwani gave evidence about this email, and he said, and I accept, that he did not recall it coming to him, but that if he had read it he simply would have passed it on to his shipping department.
70. Mr Prasad, whose authoritative evidence I have accepted, told the court that he had spoken about this matter to Mr Kwok of the defendants on 5 February 2004, and that Mr Kwok had agreed to make the necessary arrangements. On the same day by email the plaintiff had reminded the defendants that if the goods at destination are not released to the consignee and remain lying at the port, it was their duty to take “the necessary action as a Carrier” and that “We have already instructed you to bring the goods back in October and through our Lawyer’s notice in Nov”, but that “no responsible reply” had been received; this message requested that the defendants check with their agent and advise of the outcome at the earliest.
71. On the following day, 6 February 2004, the plaintiff asked the defendants to “instruct your agent in Barcelona …to do whatever is needed to ship the goods back to Hong Kong”, which message Mr Kwok noted with thanks and apologies, referring to a “communication problem” with the defendants’ agent in Gibraltar and stating that: “We will be following closely on this issue and will make sure the problem is immediately resolved by our agent in Gibraltar…”
72. On 12 February 2004 Mr Prasad thanked Mr Kwok for the follow up, noting that the matter is “so overdue” and that “already we have lost the value of our merchandise”; in this email Mr Prasad made it clear that the plaintiff would hold the defendants responsible for losses incurred “as explained in our earlier emails and telecon”.
73. By email response dated the same day, Mr Kwok stated that this situation was not Scanwell’s fault, and advised that the shipments are still at destination and “our Gibraltar agent advised the consignee to confirm it can be returned back to you”, absent which confirmation the defendants could take no action.
74. With regard to this last exchange, it remains unclear why the defendants thought that the consignee in “to order” bills should be in a position to issue any instructions in the situation which then prevailed, but in the event, on 26 February 2004 Maritima asked the defendants for their preference regarding a carrier for the return trip to Hong Kong, a request which was repeated on 2 April 2004.
75. On 19 April 2004 the defendants sent the plaintiff a quote for charges for the return leg via COSCO, and later that same day the plaintiff accepted the COSCO charges by email timed at 5.35 pm: “it is OK with the charges. Please do the needful”.
76. On 21 April 2004 the plaintiff sent a Letter of Authorization (dated 19 April 2004) direct to Edward Kwok of the defendants, who acknowledged receipt later that day and indicated that they would forward this authorization letter “to our agent in Gibraltar to confirm returning of these containers to Hong Kong”; in fact, this was forwarded to Maritima on 4 May 2004.
77. Subsequently, on 29 April 2004 the plaintiff sought an update from the defendants (and once again on 14 May 2004), and on 4 May 2004 Maratima confirmed that the authorization letter had been sent to Wings Cargo in Barcelona “who are making the relevant arrangements to ship the containers back to Hong Kong”, and that they would revert with details when these were known.
78. On 28 May 2004 the plaintiff in the person of Mr Prasad faxed to the defendants the necessary commercial documents to be passed to Maratima, the receipt of which was acknowledged by Mr Kwok on the same day, and thereafter, on 12 August 2004 the defendants notified the plaintiff by email of the return shipment details, namely that the 3 containers would be arriving in Hong Kong on 19 August, but that the defendants still were awaiting the shipping documents from their agent.
79. It is notable that it was in this latter email that it was first disclosed that the containers had come back not on the COSCO line, but on NOL, on the vessel “Norasia Valparaiso” V-431/92; indeed, Mr Prasad said in cross-examination that this was the first that he had known about the goods were coming back to Hong Kong other than on the COSCO line.
80. In fact, Mr Prasad appears to have been somewhat sceptical about the entire return process; by email of 16 August 2004 he had expressed the hope to Mr Kwok that the plaintiff could get its hands on the shipping documents as soon as possible, asking for the earliest advice, this note ending somewhat presciently: “I hope they have really shipped these goods”.
81. It is common ground on the evidence that the goods were anticipated to be consigned to the defendants for the return carriage – Mr Kwok expressly accepted this – and in fact it was the defendants who first informed the plaintiff on 24 August 2004 that, to the contrary, the shipping documents for the return leg were being sent directly to the plaintiff.
82. As to this, Maritima stated in emails to the defendants dated 24 August 2004 that the decision to name the plaintiff as consignee for the return carriage was made by the ‘shipper’, albeit if this was a reference to Polycotton it is unclear why that entity, which had not taken up the documents and had not paid for the goods, should have had any input into that decision.
83. It further is clear that the plaintiff had no idea that the switch of ocean carrier had been made from COSCO to NOL; Mr Kwok effectively says so in terms in email correspondence with Maratima, and Mr Prasad confirmed this in cross-examination, both as to knowledge of the fact and/or reason for such change; in his evidence Mr D Gidwani also made the same point.
84. Accordingly in this regard I have little difficulty in finding, which I now do, that the particular shipping arrangements were made, absent any input from/knowledge of the plaintiff, by the defendants’ agents/sub-agents in Spain.
85. For the avoidance of doubt I also note, and so find, that there is no evidence whatever that the plaintiff was responsible in any way for making their “own arrangements” for the ostensible return of their cargo – which of course, as the plaintiff soon was to discover, never in fact was returned – to Hong Kong, and that in this regard such ‘arrangements’ as had been put in place were, as I have said, conducted via the defendants via their agents, Maratima, and in turn by Maratima’s sub-agents, Wings Cargo.
(ii) The letter of 19 April 2004
86. This letter has figured large in the defendants’ case, and it is appropriate to deal specifically with it.
87. As earlier indicated, the plaintiff had asked the defendant by letter dated 29 January 2004 – a letter which followed the request made by the plaintiff’s lawyer on 15 November 2003 that the goods be ‘traced’ and returned to Hong Kong within a period of 2 months – to be informed as to the relevant documentary requirement for such return:
“Could you please let us know what documents you require for you to bring the containers back to Hong Kong”.
88. Thereafter the initial mention of a requirement for a letter is contained in an email of 6 February 2004 from Maratima, stating that Wings Cargo required one:
“…the only thing we require to finalise the issue is a letter of indemnity in our favour authorizing Wings Cargo who still maintain frequent relations with Consignee [Polycotton] enabling them to ship back to Hong Kong…”
89. This information was passed on by Mr Kwok by email dated 7 February 2004 to Mr Prasad, which refers to a requirement for “cnee confirmation”, and thereafter, on 26 February 2004 Mr Kwok of Scanwell emailed Mr Prasad in these terms:
“Dear Prasad,
Please find below the message from Maratima/Gibraltar that all charges at destination have been settled and they request your office to issue a letter of authorization allowing Wings Cargo to ship these containers back to HK.”
It is apparent from the attached reproduced message from Maratima that “all our costs have already been paid to us by Wings Cargo in Barcelona.”
90. In this regard Mr Kwok also accepted in cross-examination that this was not a requirement imposed by the defendants, but was a Maratima requirement.
91. On 8 March 2004 Mr Prasad asked Mr Kwok what form was required:
“Could you please send me a form for issuing the authorization to Wings Cargo and what documents they need for returning the goods back to HKG”,
and on 2 April 2004 Maratima sent a pro forma template for such required authorization.
92. Accordingly, on 21 April 2004 Mr Prasad sent Mr Kwok the ‘letter of authorization’, adding:
“Could you please check with your agent in Barcelona whether he will need the original and how to deliver the same or a fax copy will do…”
93. This letter of authorization, dated 19 April 2004, was couched in the following terms:
“WE SUNRICH TRADERS LIMITED OWNERS OF CARGO SHIPPED TO BARCELONA UNDER B/L NO HBL#CHWBAR 087744 PER “CMA CGM MERCURE V.BDB00303” SAILED 22/01/03, HKBAR088041 & 088043 PER “MARE OHENICIUM V.BBL00304” SAILED 30/01/03 AUTHORIZE CUSTODY OF THE CARGO PRESENTLY AT BARCELONA TO MESSERS WINGS CARGO THUS ENABLING THEM TO SEND THE SAME BACK TO HONG KONG.
WE ALSO AUTHORIZE FOR THE CONTAINERS IN QUESTION BE RELEASED WITHOUT PRESENTATION OF ORIGINAL BILLS OF LADING, FOR THEM TO SHIP THE SAID CONTAINERS BACK TO HONG KONG, WITHOUT RESTRICTING OUR RIGHTS.
For and on behalf of
SUNRICH TRADERS LIMITED
[Signature of J M Gidwani]
…………………………………
Authorized signature(s)
J M GIDWANI
DIRECTOR”
94. What is notable about this letter as thus sent is that the plaintiff was careful to add to the proffered text a reservation of its rights, and that it is clear – and for the avoidance of any doubt I so find – that in issuing this letter the plaintiff simply was following the instructions which it had been given as representing the only way it could retrieve its unpaid – for goods, which by this stage had been stranded in Barcelona for a considerable period of time; indeed Mr Prasad said in cross-examination that his only aim in issuing this letter solely was to secure the safe return of the plaintiff’s goods, and that in the circumstances he had been advised to add the clause specifically restricting his employer’s rights.
95. I further find that there was no direct dealing between the plaintiff and Wings, which clearly at all times acted as subagents of Maratima (see, for example, the email from ‘jason’ at Maratima to Mr Kwok dated 4 February 2004, wherein this expressly is stated), and that all communication went via Mr Edward Kwok of Scanwell.
96. Accordingly, in face of these findings I decline to hold that this letter constitutes evidence of the plaintiff making direct arrangements for the return of its goods independent of the defendants, and that by reason thereof I reject the argument that the defendants had no obligation to, and did not have, responsibility for the return of the plaintiff’s goods.
97. To the contrary. In my view the defendants were wholly and centrally involved in returning these goods to the plaintiff, whatever the technicalities raised by the issuance of the ocean bill for the return leg to Hong Kong.
98. In this connection I also reject Miss Cheung’s alternative argument to the effect that, as a matter of law and fact, the release of the goods to Wings Cargo pursuant to this letter of authorization by the plaintiff “must have served to discharge the 3rd defendant from liability” under the bills of lading. In my view it did no such thing in light of the circumstances in which this letter was requested, and thereafter obtained, from Sunrich.
(iii) Decision on the issue of alleged cessation of responsibility
99. It follows from the foregoing that I hold that the 19 April 2004 letter did not have the effect of terminating the defendants’ responsibility under the bills of lading they had issued to the plaintiff upon the initial shipment of these goods to Spain.
100. In this context the defendants have argued strongly that they were not obliged under the terms of the bills of lading as issued to ship the goods to anywhere but Barcelona.
101. However in my view there clearly is a right in a shipper to require goods to be returned to the port of shipment if uncollected at the port of putative delivery – see, for example, Reyes J in Starlight Exports, op cit., at para 20.
102. I further accept the submission of Mr Alder that, any such general right apart, on the particular facts of this case instructions were given to, and accepted by, the defendants to return the goods to Hong Kong, and as such had contractual effect; indeed, the defendants never had suggested to the plaintiff that any terms of such contract other than the original bills of lading as issued by the defendants were to cover the return carriage.
103. The crux of the defendants’ case as to the ‘cessation of responsibility’ argument seems to depend upon the argument that what had happened was that, via the letter of 19 April 2004, the plaintiff independently had ‘authorised’ delivery of the goods at Barcelona, and consequently that an entirely new and unrelated contract had been made for their return.
104. However, it seems to me that on a fair reading of the evidence that what effectively had occurred was that the plaintiff gave, and the defendants had accepted, specific instructions to return the goods under the originally-issued (and unaccomplished) bills of lading, and that, as Mr Alder suggested, the ‘cessation of responsibility’ defence is little more than post-facto forensic rationalisation, and simply does not correspond with the facts as established.
105. In these circumstances I accept the proposition that the 19 April 2004 letter was, in reality, no more than an addendum to the existing agreement between plaintiff and defendants governing the return of the goods under the unaccomplished bills of lading, and, equally clearly, that it originated purely as a ‘Maritima requirement’; in fact, it seems that Maritima would been satisfied by something signed by the defendants themselves, and I agree with the submission that a document issued by the defendants and passed to Maritima could not have effected constructive delivery of the goods at Barcelona to the plaintiff, and thus from the plaintiff to Wings Cargo.
106. It further seems tolerably clear – and I so find – that the plaintiff itself had had no idea that the defendants’ Barcelona agents had consigned the returned goods to them; to the contrary, what must have been anticipated was that the defendants would have expected the goods to be consigned to them on the return trip, thereby enabling them to make an element of profit on the return carriage, and thus the plaintiff would have had to have produced the original bills of lading at Hong Kong, and to pay the back freight, in order to obtain physical delivery of that which they supposed to be their goods.
107. That this sequence of events did not actually happen in the prevailing circumstances is a matter of happenstance; in no sense on the present facts did the defendants at the material time seek to wash their hands of the goods and to repudiate responsibility therefor. In the circumstances it is difficult not to view the defendants’ argument, with its emphasis on the effect of the 19 April 2004 letter as causing cessation of their own responsibility, and thus enabling an independent third party arrangement to effect carriage back to Hong Kong, as other than an opportunistic argument, albeit an argument which in my judgment is without substance on the particular facts of this case.
Conclusion on liability
108. On the basis of the foregoing I find that the plaintiffs have established liability against the defendants for the loss of the plaintiff’s cargo; as earlier observed, for the purpose of this action no practical distinction has been drawn between the Scanwell entities.
109. Nor, for the purpose of this decision, has there been the necessity finally to essay a finding on what precisely happened in the Wings’ warehouse, and what happened to the original goods. However, as earlier rehearsed it is difficult to avoid the conclusion that on the probabilities the goods were released by Wings Cargo to Polycotton – on the basis of what internal covert arrangement I know not – on a date substantially prior to April 2004.
110. If this supposition be correct then, as Mr Alder suggested, the plaintiff’s cause of action against the defendants became perfected at that time, and events thereafter in effect have been little more than, as he put it, an “elaborate charade”, culminating in a wasting of the plaintiff’s money in the form of the acknowledged payment for back freight.
111. Thus, whatever the position under the bills of lading, the defendants undoubtedly were bailees of the plaintiff’s goods, which have been lost and have not been returned to the plaintiff, and it is established law that the defendants must prove that they parted with possession of these goods absent lack of care on their part and/or on the part of their agent(s). This burden clearly has not been discharged, and, as earlier indicated, I do not consider that the 19 April letter provides any defence to this claim, nor for that matter that the defendants have raised any successful defence.
112. It follows that if I be in error in accepting the plaintiff’s argument as to the return of the goods under the unaccomplished bills of lading, in the alternative I should be prepared to found my decision upon the primary issue of liability on the basis of a breach of duty by Scanwell qua bailor.
113. Nor does such alternative basis have any effect on the quantum of loss claimed by the plaintiffs; it never has been suggested that there is any difference between the value of the plaintiff’s goods as at the date of their abstraction from the original 3 containers as compared with the date upon which such goods should have arrived back in Hong Kong in these same 3 original containers.
114. Having thus reached this conclusion, I turn briefly to the issue of quantum itself, an issue which has not been the subject of much, if any, debate in this case, save and except for Miss Cheung’s cautionary submission (with which I agree) as to the non-imposition of compound interest upon any sums as ultimately may be awarded.
Quantum of damage
115. Mr Alder submitted that if and in so far as liability was established (which now is the case), then the prima facie measure of the plaintiff’s loss is the sound arrived value of the goods when the defendants wrongfully parted with possession of them, or when they should have been delivered, namely in Hong Kong in August 2004.
116. For present purposes the best available evidence which the court has available is represented by the three sales confirmations and invoices indicating that the goods were sold to Polycotton for the total sum of US$215,472.50. Reliance on such documentation is standard practice of the Commercial Court: see, for example, Carewins Development (China) Ltd v Bright Fortune Shipping Ltd [2006] 4 HKLRD 131, at para 221.
117. Mr Alder also has pointed out that by clause 7.3 of the bills of lading it was agreed that if the value of the goods was less than US$500 per package (which it is) then their value or compensation for loss shall be the invoice value plus freight and insurance (if paid).
118. In addition to the invoice value of the goods lost, the plaintiff also claims a survey fee of HK$3000, which was incurred at the time the ‘goods’ arrived back in Hong Kong, and the sum of back freight paid in the sum of HK$53,891.47.
119. In his closing written submissions Mr Alder usefully has attached a table summarizing the plaintiff’s claim, wherein the total claimed in regard to the lost goods is the invoice amount [US$215,472.50] less a deposit for which credit is given [US$22,000] and less a part‑payment by Polycotton [US$20,000] which apparently occurred in August 2003, and for which credit also is given by the plaintiff.
120. On the evidence before the court I find this sum to be proved to the requisite standard.
Order
121. Accordingly, judgment is to be entered in favour of the plaintiff against the defendants in the respective sums of US$173,472.50 and HK$56,891.47.
122. There is to be an order nisi that interest is to run on the said sum of US$173,472.50 at the rate of 1% above US$ prime rate from time to time prevailing from the date of the issue of the writ herein until the date of judgment herein, and thereafter at the judgment rate upon the equivalent sum in HK dollars (calculated at the rate prevailing as at the date of judgment herein) from time to time prevailing until payment.
123. There is to be an order nisi that interest is to run on the said sum of HK$56,891.47 at the rate of 1% over HK$ prime rate from time to time prevailing from the date of the issue of the writ herein, and thereafter at the judgment rate from time to time prevailing until payment.
124. As to costs of this action, there is to be an order nisi that the costs of this action are to be to the plaintiff, such costs to be taxed if not agreed.
Finally
125. I have been reminded that there is one outstanding matter of housekeeping, which refers to a reserved costs’ order for the hearing which took place on 2 April 2009.
126. I am told that the matter arose because the plaintiff unsuccessfully had resisted the defendants’ application to re-amend its Defence at this hearing on 2 April 2009, but that as the result of this hearing the pre-trial review originally fixed for 21 April 2009 was able to be vacated.
127. Whilst I cannot now recall with any degree of certainty, I suspect that in accordance with its usual practice this court took the opportunity to make appropriate directions at the same time as dealing with the amendment issue, thereby rendering nugatory the necessity for any further pre-trial hearing.
128. Ms Cheung asks that the costs of the hearing be costs in the main action. Given that the defendants were seeking the indulgence to amend, and given that the hearing clearly was used for directions, and that any such directions hearing normally generates an order for costs in the cause, I agree with her submission.
129. Accordingly I make an order nisi that the costs of the hearing on 2 April 2009 be to the plaintiff, to be taxed if not agreed.
(William Stone)
Judge of the Court of First Instance
High Court
Mr Edward Alder, instructed by Messrs Jonathan Rostron Solicitors, solicitors for the plaintiff
Miss Diana Cheung, instructed by Messrs Fan Wong & Tso, solicitors for the 2nd and 3rd defendants
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