ANL LTD v. WILLIAM CHAN WAN KEUNG t/a WINLEY TRADING CO (A FIRM)

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

COMMERCIAL LIST

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DECISION

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1. This is an application by the Defendant by summons dated 16 May 1996 to strike out the Plaintiff's claim under Order 18 rule 19 of the Rules of the Supreme Court and the court's inherent jurisdiction in that it discloses no reasonable cause of action, is scandalous, frivolous and vexatious and an abuse of process.

2. The Plaintiff's claim is for lost freight and storage charges relating to 6 containers of goods that were to be shipped from Hong Kong to Australia. The Defendant's liability (if any) to the Plaintiff depends on whether or not, as the Plaintiff alleges, there was a contract of carriage between the parties, entered into on the Defendant's behalf by Union Transport (HK) Limited ("Union (HK)").

The facts

3. The Defendant is a sole proprietorship carrying on business in Hong Kong as supplier of houseware to overseas buyers. Grocery Holdings Pty Ltd ("Grocery") is a company incorporated in Victoria, Australia carrying on business, inter alia, as importer, seller and/or distributor of household goods. It is a subsidiary of Coles Myer Ltd ("Coles"), an Australian listed company. In November 1993, the Defendant and Grocery entered into contracts for the supply and purchase of the goods in question. The contracts as well as the letters of credit provided by Grocery to the Defendant contained the following terms, namely, the sale was FOB Hong Kong and the merchandise had to be shipped through Grocery's freight forwarder, Trans Tec Ocean Express. Union (HK) and its affiliate Union - Transport FMI ("Union FMI"), which had offices in both Brisbane and Melbourne, were subsidiaries of Trans Tec.

Shipping procedures

4. Grocery and the Defendant had a business relationship for a number of years prior to the FOB contracts in this action and shipping procedures had been adopted by them for shipment of goods to Grocery in Australia. The following is an unchallenged summary provided by the Defendant:

Chronology of events

5. On about 30 May 1994, the Defendant informed Myer Asia and Union (HK) that the goods were ready for shipment. Union (HK) booked shipping space for six 40 feet containers (or space for 12 TEU slots) from Hong Kong to Melbourne on freight collect which is to say that the Plaintiff would have to collect the freight at the destination port from the consignee. The consignee, Union FMI, was an affiliate of Union (HK). Jardine Shipping, the Plaintiff's agent in Hong Kong issued six shipping orders to Union (HK) confirming its booking and instructed Union (HK) to deliver the loaded containers to MTL for shipment on the vessel Australian Endeavour. Union (HK) faxed copies of the shipping orders to the Defendant having endorsed instructions on those orders as to the closing time for delivery of the loaded containers.

6. Six empty containers were collected from MTL by Thru-Trans on behalf of the Defendant on or about 30 May 1994 and loaded with the Defendant's goods. The loaded containers were delivered to MTL on 6 June 1996, prior to the closing time stipulated by Union (HK) on copies of the shipping orders which Union (HK) had sent to the Defendant. In respect of each shipping order, Jardine Shipping issued a collection/acceptance order and an Equipment Interchange Receipt evidencing delivering to and receipt by MTL of the containers.

7. By a facsimile dated 7 June 1994, Union (HK) instructed Jardine Shipping "to hold the ..... containers in [its] warehouse until further notice. Any storage charges and liabilities involved, pls. debit (sic) to [Union (HK)'s] account." By a facsimile dated 20 June 1994, Myer Asia advised Union (HK) that the shipment for Grocery would be suspended until further instructions from Coles.

8. The containers remained at MTL for approximately 3 months when they were moved to Hoi Kong for storage.

9. The Plaintiff's claim is for storage and incidental charges concerning the 6 containers and loss of ocean freight. Whether or not, as the Plaintiff alleges, contracts of carriage and bailment existed between the Plaintiff and the Defendant turns on whether there is any basis for the allegation that Union (HK) acted as the Defendant's agent in entering into the contract of carriage with the Plaintiff.

The role of Union (HK)

10. As will become apparent, it is accepted that Union (HK) acted as Grocery's agent. But the question is whether it also acted as the Defendant's agent for some part of the transaction. The Plaintiff's contention is that as the contract was FOB HK, until the goods were loaded onto the designated vessel, possession remained with the Defendant and all acts performed by Union (HK) as the designated freight forwarder until the goods left the possession of the Defendant were on the Defendant's behalf. In the Statement of Claim, it is alleged (at para.5) that Union (HK) on behalf of the Defendant engaged the Plaintiff to ship the goods to Australia; (at para.6) that the Defendant was the "shipper" and (at para. 12) that Union (HK) acting on behalf of the Defendant gave notice to the Plaintiff (a) not to load the 6 containers on board M.V. Australian Endeavour; and (b) to store them in its warehouse until further notice.

11. The Defendant denies that Union (HK) ever acted as his agent in engaging the services of the Plaintiff. Rather, it is the Defendant's case that Union (HK) was Grocery's agent throughout.

The evidence

12. The existence of an agency relationship between the Defendant and Union (HK) lies at the heart of the Plaintiff's claim against the Defendant. Yet there is not a scintilla of evidence to support the Plaintiff's allegation of an agency relationship between Union (HK) and the Defendant in arranging for the shipment in question : no evidence was adduced, whether from Union (FMI/HK) or otherwise, on the agency relationship (if any) with the Defendant; nor has Union (HK) responded to the letter from the Defendant's solicitors dated 5 February 1996 on that issue. As appears below, such evidence as there is goes against the existence of the alleged agency relationship.

13. The instructions to Jardine Shipping of 7 June 1994 to hold and store the containers were given by Union (HK). Although Union (HK) did not state on whose behalf it was acting, there are two facsimile transmissions ("the letters") which are directly relevant. The first is dated 20 June 1994 from Myer Asia to Union (HK) regarding the suspension of the shipments for Grocery until further instructions from Myer Asia's principal in Australia. The second is dated 18 October 1994 from a Mr Glenn Mills of Union FMI to the Plaintiff regarding the containers - "Account of [Coles]". It referred to "the latest invoice to Coles" and stated that from Union FMI's point of view "the accounts are for [Grocery] and not for [Union FMI] as [Union FMI] are only acting as [Grocery's] agent. [Union FMI] will continue to pass the invoices on to [Grocery] but will not accept any liability for any storage and/or handing charges." The only inference that can be drawn (in the absence of any evidence to the contrary) is that Union (HK/FMI) issued its instructions to the Plaintiff to hold the shipment on 7 June 1994 on the instructions of Grocery/Coles and not the Defendant.

14. There is the unchallenged evidence of Frances Ann Truman who at all material times was the Regional Manager of the Plaintiff based in Hong Kong relating to "Blue Water" services which the Plaintiff provided Coles for imports from Hong Kong and Taiwan to Australia. These services covered not only the cost of transporting the goods to the destination port and discharging the goods from the vessel but also the cost of loading the goods on board the vessel. The arrangement which initially applied to a subsidiary of Coles called K Mart (which was an FOB account) was extended to all of Grocery's shipments.

15. The letters and Miss Truman's evidence show, first, that contrary to the Plaintiff's allegations in para. 12 of its Statement of Claim, the instructions to suspend the shipment did not emanate from the Defendant: they were issued by Grocery's parent company. In fact, the Defendant was not aware of the "suspension" until 22 June 1994. Second, as far as the agent (Union (HK) and/or FMI) was concerned, its principal was Coles and not the Defendant. Third, the "shipper" could not have been the Defendant but Grocery. Under the "Blue Water" services arrangement, the cost of loading the goods on board the vessel was part of the overall cost incurred by the subsidiaries of Coles. There is no evidence that it was ever segregated out and separately charged to the seller under the FOB contracts by Union (HK). Further, although in the shipping orders, Union (HK) was designated "shipper", it was not acting as principal. Since this was an FOB contract, the consignee could only have been the buyer's agent but the consignee in this case was Union (HK)'s affiliate in Australia. The allegation that the Defendant was the shipper is irreconcilable with the nature of "Blue Water" services described above and the fact that the shipper and the consignee were affiliated companies. There is also the Defendant's uncontroverted evidence that it has never paid any lifting charges, storage charges, moving charges, container rental or ocean freight to the Plaintiff nor any agency fee to Union (FMI/HK) for arranging shipment.

16. The Plaintiff sought to rely on an allegation in a pleading in related actions brought by the Defendant against Grocery and Union (HK) relating to other contracts that Union (HK) was the Defendant's agent. As appears from the Defendant's 2nd affirmation, the Defendant's claim against Union (HK) in the related actions did not involve any allegation that Union (HK) was the Defendant's agent for making shipping arrangements with the Plaintiff in the present action. This apart, the claim against Union (HK) in the related actions has since been withdrawn.

17. In these circumstances, the Plaintiff's allegation that Union (HK) acted as the Defendant's agent in contracting with the Plaintiff is obviously unsustainable. It follows that its claim (which stands or falls with the agency allegation) must be struck out as being frivolous and vexatious and an abuse of process under Order 18 rule 19 and the inherent jurisdiction of the court. The Defendant is entitled to the costs of this application.