FEDERAL EXPRESS PACIFIC INC. v. TUNG SAU KAM t/a TIN SHUN CO

DCCJ 6675/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6675 OF 2003

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JUDGMENT

Introduction

1.  This is a claim by Federal Express Pacific Inc. against Miss Tung for the sum of $128,246.58 as outstanding freight charges.  By an Order to Carry On made by Master Poon on 22 October 2007, Federal Express (Hong Kong) Ltd. was substituted as the plaintiff to carry on these proceedings.

2.  It is not in dispute that as evidenced by 11 airway bills issued by FedEx, Miss Tung instructed FedEx to arrange for freight service and to deliver goods, namely masks, from Hong Kong to Taiwan.  It is not in dispute that the goods were duly delivered during the period from 10 April 2003 to 16 May 2003, and that the freight charges incurred were $128,246.58.  FedEx claims that Miss Tung is liable for payment of these charges under the express terms of the contract of carriage evidenced by the airway bills.  Miss Tung denies liability.

FedEx's claim

3.  FedEx relies on the following condition of the contract of carriage, which is set out on the reverse of the airway bill :

"Responsibility for Payment.  Even if you give us different payment instructions, you will always be primarily responsible for all charges, including transportation charges, and possible surcharges, customs and duties assessments including fees related to our repayment of the same, government penalties and fines, taxes and our attorney fees and legal costs, related to this shipment.  You also will be responsible for any costs we may incur in returning your shipment to you or warehousing it pending disposition."

4.  FedEx also seeks to rely on further terms contained in their Standard Conditions of Carriage, which FedEx claims forms part of the contract of carriage as the said conditions were included in a "Welcome Kit" sent to its customers.  This provides that in "Bill Recipient" transactions, the recipient should have a valid FedEx account number to be entered on the airway bill, and if the recipient fails to pay any transportation charges, the sender of the goods is ultimately responsible for payment.

The Defence

5.  According to the Defence filed on behalf of Miss Tung by her then solicitors on 2005 February 2004, Miss Tung claims that she had contracted with a customer in Taiwan, Sin Yin Technology Company Ltd. ("S. Y.)", to sell masks to S. Y., on the understanding that S. Y. would be responsible for the transportation charges of the masks sold.  Miss Tung also claims that it was at the request of S. Y. that the masks were entrusted to FedEx for delivery. 

6.  Miss Tung does not dispute that she agreed with the FedEx to provide freight services and to deliver the goods to S. Y. in Taiwan.  Nor does she dispute that the goods in question were duly delivered to S. Y. in Taiwan.  Miss Tung claims that in relation to the airway bills which evidence the contracts of carriage, although she admits that she or her authorized employees had filled out the standard form with details of the sender, the recipient and the shipment sought, some of the airway bills were not signed by Miss Tung or her authorized employees, and she had indicated under "payment" that such was to be made by the recipient of the goods.

7.  Miss Tung claims that the terms and conditions imprinted on the back of the airway bills should not bind her because she did not understand the meaning or effect of these terms; she claims that the terms and conditions were printed in English and neither she nor her only other employee who arranged for the shipment could understand English.

8.  Miss Tung's defence is that when she or her employee completed the airway bills provided by FedEx for the contract of carriage, she or her employee had specified on the standard form of the airway bill that the transportation charges would be paid by the recipient of the goods, i.e. S.Y.  She claims that as it was a condition of the contract of carriage that the transportation charges would be paid by the recipient of the goods, she is not liable.  She further claims that FedEx had failed to mitigate its own loss by failing to give prompt notice to Miss Tung when S.Y. failed or refused to settle FedEx's outstanding freight charges.

9.  At the conclusion of FedEx's case at trial, in the course of the opening of the Defence, and also in the course of giving evidence, Miss Tung through her representative assisting her in the conduct of the trial sought to raise additional lines of defence.  She claims that:

10.    I did not allow Miss Tung to raise additional lines of defence which were not pleaded in the Defence filed (under legal advice) on 25 February 2004, or to raise factual matters not covered in the witness statements filed in the proceedings in October 2007.  FedEx naturally objected to these matters being raised at a late stage in the course of trial, their witnesses not having been given the opportunity to deal with the allegations.  Miss Tung nevertheless dwelt on these arguments in her closing submissions, and I made it clear that the Court is not bound to take these matters into consideration. 

The Issues

11.    The issues for determination at trial are:

Whether the conditions relied upon by FedEx have been incorporated into the contract of carriage

12.  It is not in dispute between the parties that in the ordinary course of their dealings, a standard form airway bill has to be collected from FedEx and completed by Miss Tung's company.  FedEx would send an employee to collect from Miss Tung's company the goods to be delivered and, at the same time, the completed airway bill. According to Mr. Chan who was called on behalf of Miss Tung, he was responsible for making these arrangements on behalf of Miss Tung's company.  Mr. Chan's evidence is that he did not notice that there were Chinese terms and conditions imprinted on the back of the airway bill.  The only terms and conditions which appeared on the back were, according to Mr. Chan, all in English small print.  Mr. Chan's evidence is that he does not read English, did not know what these terms and conditions meant, and therefore, he deliberately chose not to sign on the airway bill so as not to be committed to the terms and conditions which he did not read and did not understand.  There is no evidence from either Mr. Chan, or Miss Tung, that they had at any time informed FedEx that they did not agree to accept the conditions which appeared on the reverse of the airway bill. 

13.   In fact, on the face of the airway bill, there is a column for the person using FedEx's service to sign, with the words:

"Use of this Air Waybill constitutes your agreement to the Conditions of Contract on the back of this Air Waybill, and you represent that this shipment does not require a US States Department License or contain Dangerous Goods. "

14.   The Conditions of Contract on the back of the airway bill contains the following terms:

"Agreement to Terms.  By giving us your shipment, you agree, regardless of whether you sign the front of this Air Waybill, for yourself or as an agent for and on behalf of any other person having an interest in this shipment, to all terms on this NON-NEGOTIABLE Air Waybill … and in our current Service Guide or Standard Conditions of Carriage, copies of which are available upon request. … No one is authorized to alter or modify the terms of our agreement.  This Air Waybill shall be binding on us when the shipment is accepted …

Your obligations.  … you are responsible for all charges, including transportation charges, and possible surcharges, customs and duties assessments including fees related to our pre-payment of the same, governmental penalties and fines, taxes, and our lawyers' fees and legal costs, related to this shipment.

Responsibility for payment.  Even if you give us different payment instructions, you will always be primarily responsible for all charges, including transportation charges, and possible surcharges, customs and duties assessments including fees related to our prepayment of the same, governmental penalties and fines, taxes, and our lawyers' fees and legal costs, related to this shipment.  You also will be responsible for any costs we may incur in returning your shipment to you or warehousing it pending disposition."

15.  On the face of the airway bill, there is a column for the person using FedEx's service to complete in relation to the payment terms.  This reads :

"Payment. Bill transportation charges to: 1. Sender 2. Recipient 3.Third Party 4.Cash check/cheque FedEx Account No."

Under this column, Miss Tung or her employee ticked "Recipient" and inserted the FedEx account number of SY.

16.  On reviewing the airway bills, some were signed in the name of the sender of the goods, and some were not.  Mr. Chan claims that not all of the airway bills was signed by him.  He claims that on at least one occasion, the employee of FedEx who came to collect the goods and the air waybill signed on the face of the airway bill.  Even in his witness statement, Mr. Chan fell short of saying that he did not sign any of the airway bills.  He claimed instead that in order to avoid incurring liability which was not clear to him, he did not sign "most" of the airway bills.

17.  The airway bill relied upon by FedEx is a standard form contract used by it.  In proving the terms contained in a standard form contract which is handed to a party at the time of making the contract, the question is whether the printed conditions contained in the standard form contract have become terms of the contract. 

18.  The conditions of the contract must have been brought to the notice of the party to be bound before or at the time when the contract is made.  Counsel for FedEx referred me to paragraph 12-013 of Chitty on Contracts 29th Edition, which reads as follows:

"It is not necessary that the conditions contained in the standard form document should have been read by the person receiving it, or that he should have been made subjectively aware of their import or effect.  The rules which have been laid down by the courts regarding notice in such circumstances are three in number:

19.  Mr. Chan claims to have long and wide experience in arranging for delivery of goods through different carriers and freight forwarders.  Miss Tung herself has been operating a business for over 10 years.  Mr. Chan, who arranged for delivery of the goods in question, must know that the airway bill issued by FedEx contains contractual conditions.  He admits this as much in evidence, by claiming that he only saw the English version of the conditions imprinted on the back of one of the 5 copies in the set of the standard form airway bill of FedEx, and asked FedEx if a Chinese version was available as he could not understand the English terms.  Mr. Chan further claims that because he did not understand the meaning and effect of the English terms and conditions, he did not sign on most of the documents in order not to incur liabilities which were unclear to him. On the evidence, neither Mr. Chan nor Miss Tung ever bothered to ask anyone to explain the English terms to them.

20.  The question whether the party tendering the document has done all that was reasonably sufficient to give the other party notice of the conditions is a question of fact in each case, to be considered in all the circumstances and the situation of the parties.  On the face of the airway bill, FedEx already specified that the use of the bill will constitute the sender's agreement to the conditions of contract on the back of the bill.  From the evidence, Mr. Chan is clearly aware of this.  In her defence, Miss Tung does not contend that the conditions on the back of the airway bill have not been drawn to her notice.  She only seeks to argue that she did not read them and did not understand them, and therefore should not be bound. 

21.  It is trite law that a person of full age and understanding is bound by what he has signed, and it does not avail him to say that he did not understand, or bother to find out what the document contained, or had a subjective understanding of the contents of the document which turns out to be incorrect.  (See, for example, the judgment of Riberio, PJ in Ming Shiu Chung & others v. Ming Shiu Sum & others FACV No. 25 of 2005 (23 May 2006).)  For a document to be disavowed, and in the absence of fraud (which has to be pleaded with particularity and clearly proved) or misrepresentation, the law has never regarded it as enough to show that the person who signed, or accepted, a document which purports to have legal effect did not know its contents.

22.  It is in my judgment immaterial that Miss Tung or her employee is under some personal disability such as illiteracy or an inability to read or understand English.  Counsel for FedEx has referred me to paragraph 12-016 of Chitty on Contracts, 29th Edition by way of authority.

23.  The decision in the case of Flying Transportation (Macau) Ltd. v. Pacific Air Freight (Hong Kong) Ltd. (unreported, HCA 6187 of 2000, 2003 May 2002) clearly accepts that "freight forwarding contracts and airway bills are documents of a class which a party receiving them would expect there were contractual conditions".  The learned judge in the case had the following to say:

"It is no answer for (the defendant) to say that he did not read either the notice drawing his attention to the conditions or the conditions themselves.  If a businessman chooses to conduct himself without knowing the terms of his contract, that is his problem.  It is up to him to find out what they are."

24.  I am satisfied on the evidence that the conditions of contract imprinted on the back of the airway bill have been incorporated into the contract of carriage.  These terms clearly provide that by giving the shipment of the goods to FedEx, Miss Tung agrees to all the terms on the airway bill regardless of whether the front of the airway bill is signed.  Even though some of the airway bills in question were not signed by Mr. Chan or Miss Tung or on her behalf, this does not afford a defence to FedEx's claim under the contract of carriage.  By delivering the goods to FedEx for carriage, Miss Tung has by conduct accepted the terms and conditions imprinted on the back of the airway bill which she or her agents knew to exist.  Further, Mr. Chan did not dispute that some of the airway bills were signed by him, and since the 11 consignments of goods in this case all took place within a short period of time between 10 April 2003 and 16 May 2003, I find that by virtue of the consistent course of dealings between FedEx and Miss Tung's company within this period of time, she had accepted the terms of the contract evidenced by the airway bill.

25.  FedEx further seeks to rely on the terms contained in the Standard Conditions of Carriage, a copy of which, it claims, was sent to clients with a "Welcome Kit".  There is no evidence that the Welcome Kit was in fact sent to Miss Tung, who denies receipt of it.  The conditions imprinted on the back of the airway bill referred to the Standards Conditions of Carriage being "available upon request", as opposed to their having been sent to the person requesting FedEx's service.  There is no evidence that Miss Tung or Mr. Chan had ever requested a copy of the Standards Conditions of Carriage.  On the evidence, I am not satisfied that the Standard Conditions of Carriage referred to on the back of the airway bill have been incorporated into the contract of carriage.

Whether Miss Tung is liable under the the conditions of the contract of carriage to pay the freight charges

26.  Under the conditions imprinted on the back of the airway bill, the sender of the goods is to be primarily responsible for all charges related to the shipment.  The conditions provide that this is so even if the sender should give different payment instructions to FedEx.

27.  Miss Tung claims that she had clearly given instructions to FedEx on the face of the airway bill that the shipping charges should be paid by the recipient of the goods, S. Y.  In view of the clear provision in the conditions that despite such payment instructions to the contrary, the sender remains primarily responsible for all charges related to the shipment, Miss Tung as sender of the goods does not have a defence to FedEx's claim for the shipment charges. 

28.  Further, on review of the note regarding "Payment" on the face of the airway bill, the instructions are simply that the transportation charges are to be billed to the recipient.  I do not accept that these constitute unequivocal instructions to FedEx that the charges are to be payable only by the recipient, S. Y.  The note regarding "Payment" on the face of the airway bill certainly does not, as Miss Tung claims, constitute instructions to FedEx to collect the transportation charges from SYB immediately upon or before delivery of the goods.

Whether FedEx is entitled to recover its outstanding freight charges, or whether it has failed to mitigate its loss

29.   Miss Tung claims that S. Y. has a separate account with FedEx.  She claims that she had agreed with S. Y. that S. Y. would bear the transportation charges of the goods.  She further claims that FedEx had, without Miss Tung's knowledge or consent, agreed to give 30 days unsecured credit terms to S. Y. for payment, and when S. Y. failed and refused to pay for the freight charges, FedEx failed to notify Miss Tung immediately, such that it was only in July 2003, when all the goods had been sold and delivered by Miss Tung to S., that Miss Tung discovered that S. Y. had defaulted in payment of FedEx's freight charges.  She claims that FedEx failed to take reasonable steps to mitigate its loss, such that it is precluded from recovering the outstanding freight charges from her. 

30.  I accept FedEx's submissions that Miss Tung and S. Y. are in law jointly and severally liable to FedEx for payment of the charges related to the shipment of the goods.  FedEx accordingly has the right to look to either Miss Tung or S. Y. for payment of the outstanding charges.  The 30 days payment terms is entirely a matter of contract between FedEx and SY.  When S. Y. defaults in payment of the invoice issued by FedEx to S. Y. in respect of the freight charges, FedEx is entitled to look to Miss Tung for payment under the terms of the contract between FedEx and Miss Tung, which provides that Miss Tung remains primarily responsible for all freight charges related to the shipment.

31.  Being entitled in law to look to either Miss Tung or S. Y. for payment, it cannot be said that FedEx failed to mitigate its loss or had acted unreasonably in electing to take action against Miss Tung for recovery of the unpaid freight charges.  I reject the contention that FedEx is precluded from recovering the total outstanding amount of freight charges from Miss Tung. 

32.  Having dismissed Miss Tung's inability to understand the conditions imprinted on the back of the airway bill as a defence, I can deal with the other issues raised in her arguments very briefly, despite the fact that they were not raised in the Defence filed, nor in the witness statements served before trial. 

33.  The Control of Exemption Clauses Ordinance does not render invalid or unenforceable all unreasonable terms in a contract.  It only deals with the enforceability of exemption clauses which seeks to exclude a party from liability for breach of contract, or for negligence.  The clause relied upon by FedEx seeks to impose liability on Miss Tung for payment of freight charges in return for the services rendered by FedEx for transporting and delivering goods.  The control of the Ordinance simply does not apply.

34.  There is nothing in the conditions of the contract of carriage evidenced by the airway bill which imposes the obligation on FedEx to collect payment from S. Y. before or upon delivery of the goods, as Miss Tung claims, or to notify FedEx of S. Y.'s failure to pay freight charges.  Such an obligation is entirely inconsistent with the express terms of the contract which imposes on Miss Tung the primary responsibility for payment of all charges related to the shipment.  There is no counterclaim filed in these proceedings for damages sustained by Miss Tung for either breach of contract or negligence on FedEx's part, nor can I find any evidence of breach of contract or negligence.

35.  It is trite law that a contracting party has no duty to explain the contents of a written document to another contracting party (Kincheng Bank v. Kao Yu Kuei [1986] HKC 212). 

36.  How other companies contract with their clients on the payment and collection of freight charges is not relevant to the terms of the contract made between FedEx and Miss Tung.  There is no basis to allege that the condition for payment contained in the contract between FedEx and Miss Tung should not be enforced by reason of customary trade practice, (on which there is no independent expert evidence, nor leave from the Court to adduce such evidence), or that a term should be implied into the contract between FedEx and Miss Tung that FedEx should collect payment from S. Y. before release of the goods.  A term cannot be implied if its effect contradicts the express terms of the contract.

37.  As for the serious allegation of deceit, it was not pleaded and never raised in the statements.  I refused to permit any evidence or arguments to be made, and likewise refuse to deal with such a serious allegation which FedEx did not have the opportunity to meet.

38.  As much as the court lacks sympathy for people who enter into contracts without bothering to find out what the contract document contains or what it means, so does it frown upon creditors who use debt collectors to engage in unlawful acts of nuisance in the recovery of debts.  However, I have not been asked at trial to deal with any further continuing unlawful acts of nuisance by injunction or otherwise.  Although debt collectors were engaged by FedEx at some stage, the matter has been reported to the police and FedEx's actions in this regard do not afford a defence to Miss Tung to the otherwise legitimate claim made for outstanding freight charges. 

Conclusion

39.  It is very unfortunate when litigants act in person without legal advisers, or without the benefit of sound legal advice.  They labour under the misguided belief that they have a valid defence, when there may be none.  On the facts and evidence of the present case, it is quite clear that a defendant in the position of Miss Tung has no defence to the claims made against her.  A businessman who enters into a contract, or who signs a document, without bothering to find out what the document contains or what it means, and without reading the small or even large print, never has a defence in law in the absence of fraud, or misrepresentation.  For anyone with some basic understanding of the law to advise Miss Tung that she has a valid defence is irresponsible.

40.  FedEx is entitled to judgment in the sum of $128,246.58 as claimed, with interest and costs of this action.  There will be certificate awarded to counsel.