SINO-AM GARMENT CENTRE(a firm) v. NAM FONG (CHINA) TRAnSPORTATION CO (a firm) AND ANOTHER

1986, No. A6468

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

_____________

-----------------

JUDGMENT

-----------------

1. On or about 24th September 1981, it was agreed between the plaintiff and the first defendant (hereinafter referred to as D1) that D1 would deliver the plaintiff's cloth to China for reward.

2. On 26 September, two trucks belonging to D1, and carrying the plaintiff cloth, set out for Kwangtung.

3. On the same day, Miss Fung, an employee of the plaintiff, contacted the driver of one of the trucks and told him that part of the cloth (hereinafter referred to as the black cloth) could not enter China, since no contract for it had been obtained.

4. The drivers of the trucks stored the black cloth in a container opposite a cafe in Sheung Shui, and the trucks then proceeded to China with the rest of the cloth which was duly delivered in Kwangtung as agreed.

5. It was subsequently discovered that the black cloth had been stolen from the container, and the plaintiff now sues D1 for damages on the grounds of negligence, further or alternatively on the grounds of breach of the agreement, an implied term of which was that D1 would re-deliver the black cloth to the plaintiff or otherwise at its direction, and further or alternatively on the grounds of an express undertaking by Mrs. Fung, a partner of D1, to Miss Fung, an employee of the plaintiff, that D1 would indemnify the plaintiff for any loss or damage caused to the black cloth while it was stored in the said container.

6. I should add that the owner of the container, D2, was also sued for negligence, and judgment was entered against it in default of a defence.

7. D1 counterclaims for HK$4000 and RMB100 in respect of its charges for delivery of the cloth to China.

8. Counsel for the Plaintiff admitted that those sums were owing by the plaintiff, and that D1 should be given credit for them, whatever the outcome of the action.

9. The only witness for the plaintiff was Fung Yuen Chung, an "assistant manager".  She described how the agreement was made, and there is no need to go into the details. On 26 September, two trucks and the cloth was loaded. She said that "when we placed the order with the cloth factory, it was agreed that the supply would be in a few lots. However, there was only one lot." This was discovered after the trucks had left. She said that she telephoned Mrs. Fung, a partner of D1, at 2.00 p.m. on 26 September, and asked her to Instruct her driver, Ma, to bring the black cloth back. Mrs. Fung gave her Ma's paging number and she eventually spoke to him on the telephone at Sheung Shui, where he was having lunch. She said that she told Ma not to proceed to China, but to convey the black cloth back to the plaintiff. Ma told her that if he did this, he would not have time to convey the rest of the cloth across the border. She told him that the black cloth could not go to China, and Ma asked her if the black cloth was to go to China in two or three days and she said that it was, whereupon Ma told her he had somewhere in Sheung shui to store the cloth. He didn't specifically say where and gave no details, but he said that it was safe; the place "was watched at night" and "could be categorised as a wharehouse".

10. She said she discussed it with her boss, and then telephoned Mrs. Fung, who told her that she didn't know the exact location, but said that it was close to the Fung Kai Middle school. Mrs. Fung told her that the place was safe, that drivers of stored goods there, and that nothing untoward had ever happened in the past. Mrs. Fung said that she knew the proprietor, and that it would cost $100 odd a day.

11. According to Miss Fung, Mrs. Fung said that she then agreed, on behalf of the plaintiff, "to have the goods placed there under her name". She said that she told Mrs. Fung "that in the event the goods were lost, her company should fully indemnify the loss of my company", to which Mrs. Fung replied, "of course".

12. She said that she telephoned Ma again and told him that Mrs. Fung had agreed to have the goods stored there under her company's name and that Mrs. Fung had agreed that in the event of damage or loss, her company would shoulder the responsibility.

13. She said that she telephoned Mrs. Fung on 4 October and told her that the goods should be sent to China on 6 October, whereupon Mrs. Fung said: "allright".

14. She spoke to Mrs. Fung on 5 October, and was told by her that she had been told by her driver on 4 October that the black cloth had been lost.

15. Up to that time, she had no knowledge about the "storage place"; she didn't know its name or the name of the proprietor. She had no document.

16. She said that the plaintiff had done regular business with the defendant for 2 to 3 months.

17. In cross-examination, it emerged for the first time that the black cloth could not go to China because there was no contract in respect of it. Without such a contract, the black cloth would not have been admitted into China. Miss Fung said that there had been a mistake in relation to the black cloth which she discovered after the trucks had departed.

18. She denied that she had instructed the driver to find a place to store the black cloth, and then proceed to China.

19. When asked what advantage there might have been to Mrs. Fung to offer an indemnity, she said that it was the prospect of continued business. But she didn't know why Mrs. Fung might indemnify the plaintiff in relation to its own problem.

20. On behalf of D1, Ma Tin Choi gave evidence. He said he was a driver, and an employee of D1. He arrived at Sheung Shui on 26 September and telephoned Miss Fung, having first been paged. She told him that there was no contract in respect of the black cloth. He told her that the only solution was to take the goods back to the plaintiff. She told him "that it would be ideal if I could locate a wharehouse in Sheung Shui and store the goods. I said that as far as I know, there was no wharehouse in Sheung Shui. Then she asked me if there was any place I could unload the goods. I said there was a place, at the canteen, and she agreed to have the goods placed there. I did not agree to this suggestion, because I would have to unload, and my duty was just to drive and not unload. I asked her to send a transportation company to where I was and transfer the goods to them to take it back to the factory. She agreed and she said she would try if she could get hold of a company. About 15 minutes later, she called me and told me she didn't get a reply from the transportation company. I said I would wait a while longer, because I was not supposed to unload myself. She rang again and said not to wait any longer. She asked me to unload and convey the rest of the goods to China because she was worried I couldn't get across the border in time. She asked me to unload the goods and that as soon as she contacted the company, she would instruct them to pick up the goods. I unloaded the goods and went to China."

21. In fact, he placed the black cloth, consisting of about 150 transparent plastic bags, in an empty container near the Luen Hing Canteen. It was a metal container, apparently removed from a container truck. It was lying there, opposite the canteen, and belonged to Yuen Shui Ming, the proprietor of the canteen, whom he kenw from his trips to China. Yuen agreed to let him leave the goods there. The container was locked up by Yuen in his presence. Charges were not discussed. He told Yuen that the plaintiff might pick the goods up, and he asked him to hand them over. He said that he described the nature of this container to Miss Fung. He said that he "told her that there was an old container outside the canteen and goods could be stored there for the time being". He said he made it clear that it was not a wharehouse or a godown. He told her that he knew the owner, and Miss Fung made the decision herself to have the goods stored there. He was sure that she did not indicate that she had to confirm the decision with her boss. She simply told him to unload and take the rest of the goods to China.

22. He did not talk to Mrs. Fung, "because Miss Fung told me that she had spoken to my boss and she was aware of it. Therefore I didn't speak to my boss. At about 4.50 p.m. I was paged, and I phoned my company and they were surprised I was still unloading".

23. On 4 October, the other driver told him that he had discovered that the door of the canteen was open. He then discovered that the goods had been stolen.

24. He had never stored goods there before, but he had seen other drivers doing it. If Miss Fung had ordered him back, he would have returned and D1 would have charged the plaintiff accordingly.

25. In cross-examination, he said he had never before dropped goods off along the way.  He said that he told Miss Fung "that the only two alternatives were to come back or put them in that place". He said that he "suggested to take the goods back. She felt that if I did that, I couldn't get over the border, and she asked me to find a place". Therefore, "I told her that the only place available was this place. But I said the best course was to take the goods back, because I didn't want to do the unloading". Eventually, "she told me not to wait any longer because she couldn't get in touch with any transportation company".

26. He admitted that he had never personally examined the container and that security was difficult to assess. He admitted that he didn't want to store the goods because of the unloading, and not for any other reason. Miss Fung never suggested that he pick up the goods on his way back, "because she said she would get a transport company" to do so. He agreed that he gave her two alternatives and she chose one, and he followed her instructions. However "I only looked at the outside (of the container) and I was satisfied that it was strong enough. I did not examine the inside", although he later placed the goods inside. The container had a metal door and a large padlock.

27. He agreed that he signed the document at page 2 of the agreed bundle. He didn't know what the character for "wharehouse" meant. The document was handed to him by the proprietess of the plaintiff, and he signed because he was told that it was a formality.

28. He didn't get a receipt from the cafe proprietor because the transaction was based on trust. "Lots of drivers do this ...... I was familiar with him. I had been there to eat. This was not a proper wharehouse. It never occurred to me that the cloth would not be picked up that same day ...... she said that as soon as they contacted her, she would instruct it to go to Sheung shui."  Miss Fung didn't know the proprietor. He told her that the cafe was diagonally opposite to Fung Kai, the middle school. He told the owner of the container that "if a local transporter came to collect on behalf of Sino-Am Garment Centre, he should hand it over."

29. He said he had only had 4 years of primary school education "I only knew that according to this piece of paper I was the one who deposited goods on behalf of this company, and that's all I knew. "

30. The final witness was Keung Lai Wan, or Mrs. Fung. She is the largest shareholder of D1. Her husband, who conducted the case on behalf of Dl, is the manager. Ma, the driver, has a 12¹/₂% share. She said that Miss Fung telephoned her on 26 September and asked her for the paging number of the driver. She asked what the matter was, and Miss Fung said it was urgent, and that she was in a hurry, but she gave no explanation. She gave Miss Fung the number.

31. After 4.30, she paged Ma to instruct him about work for the following day and she discovered that the goods were being unloaded at Sheung Shui. She rang Miss Fung and told her that "it was unsafe to deposit goods there because that place was a canteen. She said she would instruct her local transport company to retrieve the goods. At about 5.00 p.m. she rang me and told me she was unable to get a company, and she would go and pick them up on the following morning. "

32. She said she rang Miss Fang again on 27 September "when I came to know she had not picked up the goods and she told me her transportation company was too busy to pick up the goods. "  On 29 September, she again asked her when she was going to take delivery, and "she told me that the goods were to be transported to China in a few days, on 2nd October. On 1st, she phoned and said that the contract was not yet ready ...... and that date had to be postponed to 6th. On 5th, I came to know that cloth had been found missing. "

33. She said she was told later by the partners of the plaintiff that they would "fabricate a story against me". She said she never told Miss Fung that she knew the proprietor of the cafe, or that she would indemnify any loss. She had no reason to do this.

34. In cross-examination, she explained that she was told by her drivers that the goods would be picked up "very soon".

35. She admitted that after 26 September, she did not actually go and check the goods. She didn't know if anyone from her company did, but "I suppose not".

36. She said this was the first time in her experience that a customer had requested that goods on the way to China be discharged in Hong Kong.

37. That was the evidence in the trial.

38. After carefully considering it, I had no doubt whatsoever that Ma and Mrs. Fung had told the truth. I unhesitatingly accepted their evidence where it conflicted with that of Miss Fung.

39. I had no doubt that Miss Fung had not told the truth when she said that Mrs. Fung agreed to indemnify the plaintiff in the event of loss. The problem which arose was that of the plaintiff. It was discovered that part of the cloth would not be permitted to enter China, because there was no contract in respect of it. But the plaintiff wanted the rest of the cloth to go to China, and without delay. The problem was what to do with the black cloth.

40. There could be no reason for Mrs. Fung to give such an indemnity. Indeed, she would have been very foolish to do so. Having seen and heard her, I am quite satisfied that she did not do so.

41. On behalf of the plaintiff, it was submitted that this was a contract of bailment for valuable consideration. Counsel referred to a passage in Clerk & Lindsell on Torts (15th Edition) at page 452 :

"Where, however, the loss is not caused by the actual performance of the bailment, but through a wholly extraneous factor, the bailee is not liable without negligence on his own part. With regard to the onus of proof, the Privy Council has held that 'the onus is always upon the bailee, whether he be a bailee for reward or a gratuitous bailee, to prove that the loss of any goods bailed to him was not caused by any fault of his or of any of his servants or agents to whom he entrusted the goods for safe keeping. Accordingly, the onus of proving that the loss of the goods deposited with the defendants for safe custody was not caused by the negligence or misconduct of their servants in the course of their employment, without any doubt, lies on the defendants."

42. I accept that in the present case, the loss was not caused by the actual performance of the bailment, but through a wholly extraneous factor. I accept that the bailee, Dl has the onus of proving that it was not negligent.

43. Counsel for the plaintiff submitted that D1 was negligent. She submitted that Ma had a duty to tell Miss Fung that it wasn't safe to leave the goods there. He should have warned Miss Fung. It was foreseeable that the goods were not safe. Ma did not make known to Miss Fung all the possible risks. Since Ma was on the spot, he was the only one who could properly assess the situation. D1 owed a duty of care to the plaintiff.

44. However, counsel for the plaintiff conceded that if Ma had told Miss Fung that it was a broken down container, clearly D1 would be exempted. He didn't do so. He was reckless. She referred to the second paragraph of paragraph 1540 of Halsbury, Volume 2 :

"The burden is on the bailee to prove that the loss or damage to the chattel occurred without any neglect, default or misconduct on his part or on the part of any servant to whom he may have delegated his duty, or that it occurred by negligence of a kind from liability for which he is exempted. The more destructive or restrictive or rights an exempting condition is, the clearer must be the indication, by some sufficiently prominent or explicit notice, that the bailor is to be bound by it. "

45. Counsel submitted that the facts of this case fell within this paragraph. Ma did not even give Miss Fung the exact address of the canteen. He was obliged to make clear to her the circumstances of the container. If he had done that, D1 would be exempt. But he didn't do it, he didn't do what a reasonable man should have done. He didn't alert her to the realities of the situation.

46. Moreover, Mrs. Fung didn't object, She made no enquiries about the safety of the container. She was therefore quite reckless. She had a duty to intervene, but she did nothing.  D1 failed to discharge its onus of proving that it exercised reasonable care. The length of the period of storage was irrelevant. The theft could have taken place at any time.

47. I have already said that I much preferred Ma's evidence to that of Miss Fung, where there was conflict. It is significant in this regard that counsel didn't challenge his evidence. Ma said that he made it clear to Miss Fung that this was not a wharehouse or a godown. He said that he described the nature of the container to Miss Fung. He "told her that there was an old container outside the canteen and goods could be stored there for the time being."

48. Mrs. Fung was not an ignorant foki. She was a woman of business, the assistant manageress of a company whose business involved sending cloth to China. She wanted the cloth to go to China. She was anxious to avoid a delay. She did not want all the cloth to be brought back. Ma was quite willing to bring it back. D1 would not have been out of pocket. It would not have lost anything. It would still have been paid for its services.

49. Ma didn't want to unload the truck. That was no part of his duty. He was a driver. Therefore, it seems most unlikely that he described the container as being something more than it actually was. What more could he do? He couldn't and didn't guarantee the safety of the goods. In any event there was no evidence as to how, or in what circumstances the goods were stolen. In my view, it is quite unrealistic to suggest that Ma didn't make known all the possible risks. The very fact that it was not a proper wharehouse or godown must have suggested to Miss Fung that there was risk. Ma told her that the "best course" was to take the goods back, "because I didn't want to do the unloading". He also told her that it was the only place available. I cannot imagine what else Ma could or should have told her.  There was nothing else to tell. The fact is that Miss Fund was fully aware of the facts, and elected to take whatever risk was involved.

50. As I have said, counsel conceded that if Ma had told Miss Fung that it was a broken down container, "clearly he would be exempted".

51. That is precisely what the evidence suggests. He told her it was an old container, and not a proper wharehouse or godown.

52. Even on the basis of counsel's own submission, therefore, Ma should, to the extent to which there was negligence, be exempted.

53. Counsel submitted that he had to make the circumstances of the container clear to Miss Fung; if he had done so, he would be exempted.

54. That is precisely the evidence. Ma said he told her about the circumstances of the container, and he was not challenged.

55. Having regard to all the evidence, I am satisfied on the balance of probabilities that D1 was not negligent in storing this cloth as it did. I am perfectly satisfied that Miss Ma was fully aware of the actual situation, when she instructed Ma to store the goods. I am satisfied that there was nothing more that Ma could have told her. The fact that the goods went missing is, in any event, not evidence that the container was unsafe. Even the most secure wharehouses can be, and are, penetrated.

56. The bailee has therefore discharged its onus of satisfying me on the balance of probabilities that the loss of the cloth occurred without any neglect, default or misconduct on its part, or on the part of any of its servants or agents.

57. I do not accept that Miss Fung didn't even know the address, but if she didn't, it was entirely her fault. It is clear that she made no effort to have the goods picked up. I accept that she told Ma and Mrs. Fung that she would do so. It is also clear that Miss Fung was quite content to leave the goods there until they could be transported to China. without further instructions from Miss Fung, there was nothing that Dl could or should have done about the black cloth after 26 September.

58. There will be judgment for the defendant on the claim, and for Hk$4000 and RMB100 on the counter-claim.

59. I will hear counsel and Mr. Fung on costs.