DENSE BILLION LTD. v. WAYON (CHINA AND HONG KONG) TRANSPORTATION & TRADING CO. and LAM SIU HUNG (Third Party)

1993, No. A2107

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

__________

____________

JUDGMENT

__________

Background

1. In November 1992, the plaintiff entered into a contract with the defendant in terms of which the defendant agreed to transport and deliver a quantity of silk material from Hong Kong to a factory in the People's Republic of China and to transport and deliver another lot of silk from the People's Republic of China to Hong Kong.

2. On 11 November 1992, the third party, who was a driver employed by the defendant, received onto his vehicle, in the People's Republic of China, the silk material for the purpose of transporting it to Hong Kong. At about 7 pm on that day, he parked the vehicle near his home in Hong Kong. When he returned the next morning to where he had left the vehicle, it was missing. Some days later, the vehicle was found elsewhere, but the silk material had been removed from it. The silk has not been recovered. Undoubtedly, the vehicle had been moved unlawfully, and the silk had been stolen.

The Allegations

3. The plaintiff seeks to recover $475,863.45 from the defendant as damages. The plaintiff alleges that the defendant was in breach of its contract in failing to take care of the lost silk and that the loss of the silk was due to the negligence of the defendant or its servants or agents.

4. The defendant denies liability to the plaintiff. The defendant says that the contract with the plaintiff contained a clause (the exemption clause) under which the defendant was not liable to the plaintiff for the loss. The defendant denies that it was in breach of the duty to take care of the silk, and denies that the defendant or its servants or agents were negligent. The defendant also alleges that the third party was operating outside the scope of his employment when he left the vehicle loaded with the silk, parked and unattended, and the defendant is not liable for his acts.

5. The defendant claims, as against the third party, that it is entitled to be indemnified against the plaintiff's claim and the costs of defending the action by the plaintiff. The defendant alleges that the third party acted outside the course of his employment and in breach of his contract of employment and express instructions in parking the loaded vehicle unattended at a place other than the defendant's premises. The defendant also alleges that the third party was negligent.

6. The third party denies it is liable to indemnify the defendant. He denies the defendant's allegations, alleges that the loss was caused by the defendant's negligence or contributory negligence, and denies that he is liable to indemnify the defendant.

The Conduct of the Third Party

7. It is clear that central to this whole case is the conduct of the third party on the evening of 11 November 1992, when he parked and left unattended the vehicle with the silk material inside. I will examine the evidence in relation to this and the third party's obligations.

8. One of the defendant's witnesses, Mr Law Ngai Sang, told me that, when the third party was employed, he was told that, if any goods being transported were contained in his vehicle, he should park the vehicle only in the defendant's car park or any place designated by the owner of the goods. This was a mandatory requirement. If the vehicle contained no goods, the third party was told that he could park the vehicle for his own convenience. There was a risk that the contents of a vehicle would be stolen if the vehicle was not secured, and it was left unattended. The doors of the goods compartment were secured with padlocks. There were no other security precautions. The third party knew where the defendant's car park was situated. This car park was fenced, with a locked gate. Before 11 November 1992, the defendant had not suffered any loss or theft of vehicles or goods.

9. Another of the defendant's witnesses, Miss Lau Pik Fong, gave evidence that the third party had standing instructions not to leave his vehicle with goods inside unattended save, in Hong Kong, at the defendant's premises. She said that on the morning of 11 November 1992, the third party telephoned her and said that he might not be able to return to Hong Kong that day. Miss Lau says she told the third party that, if he was able to return to Hong Kong that day, he was to tell her his estimated time of arrival so that the goods could be collected by the plaintiff or stored in a safe place. The defendant's office hours were until 8 pm. If the third party could not arrive before 8 pm, he should park the vehicle at the defendant's car park. A driver could contact her after 8 pm by her mobile phone or pager. The third party had been given the numbers of the mobile phone and the pager. The purpose of the instruction regarding the parking of the vehicle was to minimise the risk of theft, which the witness recognised. The only security precautions taken by the defendant were the instructions regarding parking the vehicle and the padlocking of the doors of the goods compartment. The drivers were expected to provide the padlocks, because they knew best which ones to use. The witness denied that she told the third party that he could park at the defendant's parking area or any other parking space. The policy regarding parking was not recorded in the defendant's company documents.

10. The third party gave evidence. He said that he had not been told to park his loaded vehicle only in the defendant's car park. He was told he could park near his residence. The vehicle was not fitted with any anti-theft devices or alarms. No one had told him of the address of the defendant's car park or shown it to him, but he knew it was in Sun Tin, Lok Ma Chau. No one had told him Miss Lau's home phone number or mobile phone number. He spoke to Miss Lau on 11 November 1992 from the People's Republic of China. She asked him to come back to Hong Kong that evening if he could. He was to call her when he arrived in Hong Kong, and she told him he could park at the defendant's car park or other parking space. When he arrived in Hong Kong, he tried to contact the office, but no one answered his calls. Because he could not contact Miss Lau, he parked the vehicle in an open space near his home. He had parked there before, and parked there after 11 November 1992. He says he had never heard of any thefts from this open space. Every night, he said, 40 to 50, up to 70, vehicles, private cars, goods vehicles and container trucks, were parked there. Before he left the vehicle, he checked that all the doors were locked and all the windows closed. The doors of the goods compartment were secured with a brass padlock. When he returned the next day, the vehicle was missing. According to his statement to the police on 16 November 1992, he found the brass padlock he had used on the ground. When he was interviewed by the police on 12 November 1992, the third party was asked why he had parked there when he knew very well that there were goods in the truck and there were car park facilities in the area. He replied: "Because I used to do that and there was no problem all along. And what is more, I found it more convenient". Before 11 November 1992, he had never heard of the theft of the defendant's vehicles or goods in the defendant's vehicles. And before that date, he had never parked in the defendant's car park in Sun Tin.

11. Under cross-examination, the third party said that he had been told by Mr Law of the car park in Sun Tin as a result of his inquiry as to where to park. Mr Law did not say it was a "must"; he said the vehicle should "follow him". The third party was pressed by Mr Cheung on the matter of what he was told about where to park when the vehicle had goods aboard. Mr Cheung said: "I am suggesting to you that you were told about the defendant's car park because if there were goods in the vehicle you were to park there." The third party answered: "Yes, but I did not know where the place was." The third party said that Miss Lau had told him that, if he returned to Hong Kong, he was to call her. He knew he might return very late. He asked Miss Lau how he should contact her if he returned very late. He says she told him to call the company. He then said that he did not ask her how to contact her if he returned very late. He forgot to ask. He did not know that Miss Lau had a mobile phone and a pager. He did not ask her this. He did not ask her where the defendant's car park was when she told him to park there. Firstly, he said that he knew he was carrying cloth, but did not know it was silk. Later, he agreed that he knew he was carrying silk. He knew the vehicle had no anti-theft tools or alarm. He did not park in a commercial car park because they were very far away.

12. The relevant parts of two documents issued by the defendant and discovered by the third party stipulated that "If the driver needs to take leave, 2 days' notice has to be given to the company (unless there are special circumstances), the vehicle has to be driven back to the company's car park, to facilitate the company's management"; that "On transportation, if late arrival . . . shall notify the Company or any person in the Company immediately, for the Company to dealt with."; and that "Driver should keep close contact with the Company's office, to ensure mutual benefit and to avoid lost of time."

Assessment of that Evidence.

13. I have no hesitation in accepting the versions of Mr Law and Miss Lau about what happened over that of the third party. In this respect, the third party was an unsatisfactory witness. On one occasion, he admitted, in essence, that he had been told to park in the defendant's car park when he had goods on board. I accept that the third party was given instructions to park the vehicle, when it was loaded, only in the defendant's car park, or where directed by the owner of the goods. I accept that the third party knew how to contact Miss Lau, by way of her mobile phone or her pager, and that he decided, for his own reasons, not to do so. By failing to carry out his instructions; by failing to park his loaded vehicle in the defendant's car park, and by failing to contact Miss Lau to receive instructions, the third party was in breach of his obligations under his contract of employment.

The Consequences of the Third Party's Conduct

14. But the defendant does not allege that it suffered any loss as a result of the third party's breach of contract. What it says is that, if it is liable to the plaintiff because of what the third party did, the third party must indemnify it against that liability.

15. The plaintiff is not taking action against the third party. It is proceeding only against the defendant. The plaintiff is not able to, and does not purport to, found its claim against the defendant on the breach of any of the third party's contractual obligations to the defendant. The plaintiff alleges that the defendant is liable to it because the defendant breached its duty as bailee, or in breach of the agreement between the plaintiff and the defendant or because the defendant or its servants or agents were negligent.

16. As well as being in breach of his contract with the defendant, was the third party also negligent? Before one can answer that question, one has to ask - negligent towards whom? Negligence is a breach of duty of care, so one has to examine the nature of duty before deciding whether or not there has been a breach. Clearly, the third party had a duty towards the defendant to take care of the goods, but it is not alleged that the defendant suffered any loss as a result of any breach of this duty. It can also be said, on general principles, that the third party had a duty towards the plaintiff to take care of the goods. This is the duty that is relevant to this case. If the third party was in breach of his duty to the plaintiff, and he was, at the time acting within the scope of his employment, the defendant will be vicariously liable for the damages suffered by the plaintiff as a result of that breach.

17. The loss suffered in this case arose directly from the act of the thief, who was, it must be assumed, acting independently of the third party. What does the law say about this situation?

18. In Weld-Blundell v. Stephens [1920] A.C. 956, Lord Sumner said, at 986 -

"In general (apart from special contracts and relations and the maxim respondeat superior), even though A. is in fault, he is not responsible for injury to C. which B., a stranger to him, deliberately chooses to do. Though A. may have given occasion for B.'s mischievous activity, B. then becomes a new and independent cause."

19. Smith v. Leurs (1945) 70 C.L.R. 256, Dixon J. said at 261 -

". . . one man may be responsible to another for the harm done to the latter by a third person; he may be responsible on the ground that the act of the third person could not have taken place but for his own fault or breach of duty. . . . It is, however, exceptional to find in the law a duty to control another's actions to prevent harm to strangers. The general rule is that one man is under no duty of controlling another man to prevent his doing damage to a third."

20. In Dorset Yacht Co. Ltd. v. Home Office [1970] A.C. 1004, Lord Reid, at 1030, said -

"These cases show that, where human action forms one of the links between the original wrongdoing of the defendant and the loss suffered by the plaintiff, that action must at least have been something very likely to happen if it is not to be regarded as novus actus interveniens breaking the chain of causation. I do not think that a mere foreseeable possibility is or should be sufficient, for then the intervening human action can more properly be regarded as a new cause than as a consequence of the original wrongdoing."

21. In P. Perl (Exporters) Ltd v. Camden London Borough Council [1984] 1 Q.B. 342, Waller L.J. at 351 said, after reviewing the relevant parts of the speeches made in the Dorset Yacht case -

"These quotations do indicate that in circumstances in which it is sought to make somebody liable for the actions of a third party it would appear to require a fairly high degree of foreseeability."

22. The decision in the case of Stansbie v. Troman [1948] 2 K.B. 48 did hold the defendant in that case liable for damages suffered by the plaintiff as a result the actions of a burglar. The defendant was a contractor working on the premises. He left the premises unoccupied leaving the door unlocked. The court held that the contractual relationship between the occupier of the house and the contractor imposed a duty to take reasonable care with regard to the state of the premises if he left them during the performance of his work. It was a breach of that duty to leave front door unlocked. As a direct result of that breach that thief entered and stole, because the breach consisted in a failure to guard against the very loss which in fact occurred. The dictum by Lord Sumner in Weld-Blundell v. Stephens was referred in the judgment, but it was said this dictum not intended to apply to facts of a case where "the act of negligence itself consisted in the failure to take reasonable care to guard against the very thing that in fact happened." That case involved a special relationship between the plaintiff and the defendant; it was based on a breach of contract; they were not strangers, but even here it was recognised that the matter was not plain. Somervell L.J. said - "This is not, I think, one of those cases that falls plainly on one side of some line which the law draws; it required careful consideration. In my opinion it received careful consideration from the county court judge . . .". Clearly, in that case, the court considered that the foreseeability of the loss was such that the defendant had a duty to guard against it.

23. Before it may be decided whether or not the third party was in breach of his duty to the plaintiff, it is necessary to look at the circumstances.

24. The third party knew he was carrying a valuable cargo; a considerable quantity of silk material. It was, he knew, very bulky and very heavy; not easily, unobstrusively and quickly removed from his vehicle and carried away. It is also reasonable to believe, in my judgment, that goods of this type and bulk would not be easily disposed of. A reasonable man would not, in my view, consider that the goods would be at risk from the actions of a casual or opportunist thief. To steal the goods would involve considerable effort by a knowledgeable and determined criminal, probably a gang of professional criminals; the crime would have to be committed in a place frequented by others, the padlock would have to be overcome, and means provided to transport and "fence" a large quantity of heavy silk. I accept - this was not challenged - that the third party parked his vehicle where many other vehicles were parked then and at other times.

25. The evidence is that, although, of course, theft is always a possibility and those concerned were aware of this, the defendant had not suffered from this in the past. There is no evidence that thefts of or from vehicles of this type in the area where the third party parked were prevalent at the time.

26. The situation facing me is far removed from that in which a Securicor guard, taking the cash of his employer's client to the bank, leaves it, in full view, in an unlocked vehicle, with the windows open, in a busy street, while he pops into the bookmaker to place a bet. In that case, a reasonable man might well be surprised if the money was still there when the guard returned fifteen minutes later, and, consequently, the law would find a duty towards the client obliging the guard to take steps to avoid this loss. In the case before me, a reasonable man would say, in my judgment, that to have the silk stolen in these circumstances was, unless there is some other explanation about which I may not speculate, an extraordinary stroke of ill-luck.

27. It seems to me, on the authorities, that where there is no contractual or other special relationship between the third party and the plaintiff, or any special relationship between the third party and the person directly causing the loss, to hold the third party liable for a loss caused directly by the intervention of another, independent, person that the loss must be "at least . . . something very likely to happen" or that there was "a fairly high degree of foreseeability" of the loss. I do not think this is so in this case. In fact, I do not believe that, in this case, the loss was even reasonably foreseeable, let alone "very likely" or had "a fairly high degree of foreseeability". In other words, I do not think that a reasonable man would have foreseen to the required degree that, in the circumstances of this case, the silk would have been stolen. The third party's duty towards the plaintiff was to safeguard the silk against loss that was foreseeable to the degree I have mentioned. It follows, in my view, that the third party was not in breach of that duty.

Scope of Employment

28. If I am wrong in this conclusion, and it is so that the third party was negligent towards the plaintiff, I would have held that the actions that constituted that negligence were not outside the scope of his employment with the defendant. I have found that the third party was expressly forbidden to do what he did, but these instructions had an impact only in the way the third party was required to carry out the work he was employed to perform; they did not have the effect of making what he did actions that were outside the course of his employment.

Negligence or Breach of Contract of the Defendant or Other Servants

29. I do not think it can be said that the defendant itself, or any other servant or agent of the defendant, was negligent towards the plaintiff, or that the defendant was in breach of its obligations under its contract with the plaintiff. The defendant gave the appropriate instructions to the third party, and provided a car park that was, probably, safe. The vehicle was not, it is true, fitted with anti-theft devices or alarms, but I doubt if this, having regard to the way in which the defendant's operations were carried on, implies a lack of a reasonable standard of care. The defendant has satisfied me that it took all reasonable care of the goods in its custody. They were lost, as I have found, by a stroke of misfortune that could not reasonably have been foreseen.

The Exemption Clause

30. Assuming that the defendant would otherwise be liable to the plaintiff, I have to consider whether the exemption clause would have protected it.

31. The delivery order in which the clause is contained is largely in Chinese characters. The agreed translation shows that, on the bottom of the form on the left hand side, there is a box for the purpose of recording the arrival and packing times. Immediately above this, it is said - "This is to declare that the above are correct", being, presumably, a reference to the details of the goods to be recorded above. In the box, there is evidence of the application of a rubber stamp showing the plaintiff's name, address and other details. This impression of the stamp is apparently identical to the impression made, admittedly by the plaintiff, on other documents. Immediately to the right of this, written in easily read Chinese characters, there is a list headed "Notice to Consignor". The first item says, in translation, that "All columns in the delivery order should be correctly filled in and chopped and signed" and other items speak of export permits, cargo receipts, misdescriptions of goods, the consignor's obligations as to loading, customs documents and prohibited goods. Item 5 requires the consignor to provide the appropriate customs documents. Item 6 records: "During transport, all risk caused by wind or fire and other accident shall be the responsibility of the consignor. Water." Item 7 says: "If the goods need to be insured, consignor should insure at your own insurance company".

The Evidence regarding the Exemption Clause

32. Miss Yiu Li Ngor, employed by the plaintiff as a clerk, gave evidence. She said that the plaintiff had been using the defendant's services since about September 1990. She spoke to Miss Lau of the defendant on or about 6 November 1992. They agreed that the defendant would send a lorry to collect goods on 10 November 1992 for transportation to the People's Republic of China, and the lorry would also transport goods back from the People's Republic of China. It was "standard practice according to previous dealings" that the charge would be $3,000 and the journey time would be two days; this was not specifically discussed. The lorry arrived on 10 November 1992, driven by the third party, and goods were loaded. She gave an export licence, a customs clearance list and an import licence to the third party. She says that she did not see the delivery order, and she did not put the plaintiff's address chop on it. In cross-examination, she said, initially, that she had not seen the form of delivery order before, but then said that she had that she had, and, somewhat reluctantly, agreed that this form followed every job by the defendant for the plaintiff. She was reluctant to admit that the address chop on the consignment note looked like the one used by the plaintiff. She denied that the chop had been applied by her. The plaintiff took out insurance for the goods transported to the People's Republic of China, but not those transported back. This was because a Miss Ng, through whom they bought insurance, told her that she did not have to buy insurance for goods coming from the People's Republic of China because the "boss" in China would take care of that. In re-examination, Miss Yiu agreed that she had seen documents similar to the delivery order note before.

33. Mr Law told me, under cross-examination, that the information as to the quantity of goods loaded was contained in a document called a delivery order. This information was recorded after the doors of the vehicle were closed and locked. The sole purpose of the delivery order was to record what loaded and unloaded and the times of loading and unloading. Under re-examination, Mr Law said the delivery order (which the witnesses sometimes called a consignment bill or a consignment note) contained a declaration of duties and responsibilities for the customer to read; the customer's responsibilities were to guard his own goods. The customer would know of these because "when negotiating the customer would be shown the consignment bill." The customer would see the bill when the goods were loaded; the customer would fill in the consignment bill to show the specifications of the goods. That is the first time the customer would see the bill.

34. Miss Lau said that the delivery order would be seen by the customer when the driver produced it before the goods were loaded. The defendant had business with the plaintiff before and a similar document was used every time. The conversation with Miss Yiu resulted in reaching agreement. The conversation contained the entire agreement. After loading the vehicle, the quantity and type of goods were recorded in a delivery order. The purpose of this document was to enable the defendant to have a record of the exact amount and type of goods loaded. It served also another purpose; when customers are asked to sign the document "it is considered a sort of contract with the company. . . the terms and conditions are supposed to be read by customers." If a customer said that one or more of the terms contained in the consignment note was not acceptable, the defendant would not proceed with the transportation.

35. The third party said that the consignment note was filled in after the goods were loaded, not before.

Construction of the Exemption Clause

36. It seems clear that the character for "water" was added after the clause was originally drafted. It is fair to construe the clause as reading -

"During transport, all risk caused by wind or fire or water and other accident shall be the responsibility of the consignor."

37. I have considered the clause in the light of the tests laid down in Canada Steamship Lines Ltd v The King [1952] A.C. 192. The clause does not expressly exempt the person in whose favour it is made from the consequences of the negligence of its own servants, so the clause does not pass this test. Are the words used wide enough, in their ordinary meaning, to cover negligence on the part of the servants of the defendant? To get to where the defendant wants to be, one must read the clause as saying - "During transport, all risk caused by wind or fire or water and other accident caused by the negligence of the carrier, its servants or agents shall be the responsibility of the consignor." It follows, in my view, that the words, as they stand, are not wide enough, in their ordinary meaning, to cover negligence. This being the case, there is no need to consider the third test.

38. Accordingly, I hold that the exemption clause does not exempt the defendant from liability towards the plaintiff for negligence, or lack of care in breach of the contract between the parties.

Exemption Clause Contractual?

39. As whether or not the clause was part of the contract between the parties, I would decide that it was. It may be that the plaintiff's servants had never read the clause, or, if they had, paid any attention to it. Very few people do read these things, or pay much attention to them. This is because, I suppose, one knows that if one wishes to employ the services of the person concerned, one must accept the conditions under which that person does business. The plaintiff was in business, and a reasonable businessman contracting with a carrier would assume that the carrier accepted business under conditions. The plaintiff had done business with the defendant several times, and, on each occasion, a delivery order, such as the one in this case, was passed from the defendant to the plaintiff. On the delivery order, there appeared, very prominently, a "notice to consignor" very close to where the plaintiff, as I hold, placed its chop. The "notice" was available to the plaintiff to read. If it chose not to do so, and decided to conduct business with the defendant without bothering to ascertain under what conditions the defendant accepted carriage, it cannot be heard to say that it did not know what those conditions were. Some indications that the plaintiff did, in fact, know the conditions are that it accepted responsibility for insuring the goods being transported, and it provided the customs documents, both of which the notice required it to do.

Damages

40. As for the damages, if I had found the defendant liable, I would have found these proved. They are established by the evidence of Mr Ho Pong Fu and Mr Chan Chun Hung, and there is no evidence to the contrary.

Result

41. In the result, the plaintiff's claim against the defendant is dismissed, as is the defendant's claim against the third party.

Costs

42. On the face of it, it appears that costs should follow the result. I make an order nisi that the plaintiff pay the defendant's costs, to be taxed if not agreed, and that the defendant pay the costs of the third party, to be taxed if not agreed.