UTi (HK) LTD v. SOUTH CHINA GARMENTS CO LTD

 DCCJ 4819/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4819 OF 2004

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BETWEEN

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JUDGMENT

Background

1.  Uti (HK) Limited ("UHL") is a freight forwarder. On 30 July 2003, UHL was instructed by the South China Garments Company Limited ("South China") to ship from Hong Kong to Los Angeles USA by air ("Original Shipment") a consignment of 468 cartons of ladies' garments ("Goods"). It is not in dispute that in the written Instructions for Dispatch evidencing the Original Shipment, South China was designated as the party to be billed, whereas the shipper of the Goods was named as Mark Top Enterprises Ltd. ("Mark Top"). Upon arrival in the USA, the Goods could not be cleared by customs. UHL claims that on or about 13 September 2003, Miss Michelle Chong ("Michelle") of South China instructed and agreed with UHL to return the Goods by air from Los Angeles to Hong Kong ("Contract"). It claims that the Goods were duly delivered to Hong Kong and collected by Mark Top for South China, but that South China failed and refused to pay the sum of $233,664.16, representing the freight charges and charges for storage of the Goods after their arrival in Hong Kong.

The Issues

2.  In its Defence, South China denies that Mark Top was its agent and denies that it had received the Goods. South China further denies that there was any agreement between UHL and South China for payment of the freight charges and storage fees for the shipment of the Goods from Los Angeles to Hong Kong ("Return Shipment"). South China further claims that Michelle had no authority to enter into the Contract on its behalf. It is claimed in the Defence that Michelle was the direct subordinate of one Nelson Ng ("Nelson"), South China's General Manager, and that Michelle as its Merchandiser had not reported to Nelson that she had entered into the Contract on behalf of South China.

3.  Despite the denials and averments made in the Defence, no one came forward at trial to give evidence on behalf of South China in relation to Michelle's lack of authority, or the role of Mark Top. The witness statement filed on behalf of South China is to be ignored since the maker of the statement was not called to be cross-examined. The issue for determination at trial is, essentially, whether UHL has proved its case as to the making of the Contract and South China's liability for the charges claimed under the Contract.

The role of Mark Top and Michelle's role

4.  According to the evidence of Ken Lau ("Ken") of UHL, prior to the Original Shipment, he had had a meeting with Joe Man ("Joe") of South China. At the meeting, Joe informed Ken that South China was selling the Goods to a customer in the US named Hot Kiss ("Hot Kiss"), using the export quota of Mark Top. Mark Top accordingly had to be designated as the shipper of the Goods sold by UHL in the relevant documents. As there was delay in the delivery, the Goods had to be sent by air to the US, and South China had to be responsible for the air freight charges. Hence, South China was designated as the party to be billed in the Instructions for Dispatch which was UHL’s standard form document used in the Original Shipment.

5.  According to Ken, Joe informed him at the meeting that Michelle was South China's merchandiser who was responsible for the consignment of Goods, and that Joe would assist Michelle in handling the documentation. Ken's evidence is that Michelle had been the person liaising with him and giving him instructions on behalf of South China in relation to the Original Shipment and the Return Shipment, and that he had never been put on notice of the fact that Michelle did not have authority to act on South China's behalf in any respect. Ken's case is that it was Michelle who had given him instructions to arrange for the Goods to be sent by air to Hong Kong on the Return Shipment, and that South China would be responsible for the freight charges involved.

6.  The Original Shipment and the Contract relating to the Return Shipment were made in 2003, nearly 7 years ago. This is a case where it would be appropriate to place more reliance on the contemporaneous documentation rather than the accuracy of the memory of witnesses.

7.  The Instructions for Dispatch for the Original Shipment was dated 30 July 2003 ("Instructions"). It was signed by Michelle as the "handling person" in the space designated for the shipper of the Goods, accompanied by a chop of Mark Top signed by Mark Top's authorized signatory. Ken's evidence is that he had sent the Instructions to Michelle, as is supported by the copy of the Instructions itself which bears the words in manuscript at the top on the right: " Attn : Michelle /From Ken Lau". Ken's evidence is that Michelle then sent the Instructions to Mark Top, as evidenced by the words in manuscript at the top of the Instructions, on the left: "From Michelle /Mark Top /Pinky".

8.  From the contemporaneous e-mails exchanged between UHL and South China, I accept that Michelle was involved in all the correspondence between the parties concerning the quotations for air freight and storage charges, and the status of the Goods upon and after their arrival in Los Angeles and prior to their return to Hong Kong. Joe was also a party to such correspondence, but Joe would ask Ken to deal with Michelle (e-mails dated 1 August 2003, 2 August 2003 and 4 August 2003) in relation to details of the buyer of the Goods, i.e. Hot Kiss, and in relation to other details of the sale and delivery to Hot Kiss, such as the ocean freight for delivery (when calculating the difference between the sea freight and airfreight for which South China was to be responsible). Nelson was copied some of the e-mails in August, but he was never directly involved in the exchange, nor was there in the evidence any communication or query from Nelson as to any limitation in Michelle's role in the transactions.

9.  According to Ken, he was told that Michelle was the merchandiser responsible for the consignment of the Goods. There is no evidence from South China to dispute this, and I see no reason why Ken should be disbelieved. As "merchandiser", I consider that it is reasonable for Ken and UHL to accept and assume that Michelle would have the authority to give instructions to UHL in relation to "merchandising" (or selling) the Goods, and this would inevitably, in the context of the sale of the Goods to the US, involve the shipment of the Goods to the US. I accept that by placing Michelle in the position of merchandiser, permitting it to be represented that Michelle was merchandiser and allowing her to act in the conduct of South China's sale of its goods, South China has represented and permitted it to be represented that Michelle had the authority to act on its behalf in relation to the shipment of the Goods (Bowstead and Reynolds, paras. 8-013 - 8-014, 8-017, 8-021, 8-026, 8-032 and 8-035; Pharmed Medicare Private Ltd v. Univar Ltd [2002] EWCA Civ 1569 at paras. 7-13). If a merchandiser has the usual authority to ship the goods to its overseas buyer, it follows that the merchandiser has the authority to agree charges in relation to such shipment. Third parties dealing with Michelle, such as UHL, can assume that South China's internal procedures such as Michelle reporting to Nelson and seeking clearance before agreeing to the air freight charges have been complied with. This is particularly so when Ken had dealt with Michelle in relation to the Original Shipment, and South China had failed to indicate that Michelle was not authorized in relation to any aspects of the Original Shipment.

10.  Michelle was clearly designated as the handling person on the face of the Instructions for the Original Shipment. There is no evidence to contradict Ken's evidence in relation to Mark Top's role as the party supplying the export quota to South China, and I accept his evidence as inherently probable. The contemporaneous e-mail correspondence supports the fact that Mark Top had no role to play in relation to the Original Shipment, and in relation to the Return Shipment, I accept Ken's evidence that UHL's operations staff had contacted Mark Top's Pinky upon the arrival of the Goods to Hong Kong for survey of the Goods, because Mark Top was designated as the shipper in the Original Shipment and accordingly as consignee in the airway bill for the Return Shipment.

11.  Importantly, after the Return Shipment and the delivery of the Goods to Mark Top as consignee in Hong Kong, South China never made complaint in its correspondence with UHL, whether in relation to the delivery of the Goods to Mark Top, or in relation to the airfreight, or Michelle's instructions or authority concerning the Return Shipment. This was so notwithstanding the fact that Ken had stated in his e-mail to Joe of 15 September 2003 that Michelle's instructions to UHL had been that South China would be responsible for the freight and storage fee for the Return Shipment. Joe only complained on 22 August 2003 and 23 August 2003 in relation to the storage charges of the Goods in the US while they were detained, claiming that they should be borne by Hot Kiss (and not on the basis of any lack of authority on Michelle's part in making the Contract on behalf of South China).

12.  On the contrary, when UHL issued its debit note for the airfreight in respect of the Return Shipment and sought payment from Joe on 18 September 2003, Joe's reply (his e-mail of 3 October 2003) was that the outstanding charges would be settled within the following week. Moreover, Joe was still asking UHL to contact Michelle in relation to the instructions for shipping the Goods back to the US, without indicating any restriction on Michelle's role in any respect concerning such shipment. On 11 October 2003, Joe sent an e-mail to UHL, advising that the cheque for the outstanding airfreight would be available for collection the following Wednesday. This correspondence flies in the face of South China's claim that the Return Shipment and Michelle's agreement to pay the airfreight for the Return Shipment were unauthorized. It also shows that South China's claim that Mark Top was not its agent in collecting the Goods upon their return to Hong Kong was merely an after-thought in its defence to the present proceedings.

The Contract

13.  At trial, Ken was cross-examined as to the time of the making of the Contract for the Return Shipment. On his evidence, it was in the course of his telephone conversation with Michelle after midnight on 12 September 2003 and in the early hours of 13 September 2003 that Michelle agreed with him to return the Goods by air to Hong Kong, and that South China would be responsible for the air freight charges. On Ken's evidence, it was as a result of the telephone call that he emailed Michelle and Joe at about 10 am on 13 September 2003 the "best airfreight rate from Los Angeles to Hong Kong" for the Return Shipment. Ken said that he had given to Michelle on the telephone earlier an estimate of the possible freight charges. I consider that Ken's e-mail of 13 September 2003 is consistent with his evidence concerning the Contract reached with Michelle in the course of their telephone conversation at around midnight, as he is seen to have stated in the e-mail that he would provide Michelle with the flight details and would fax her the house airway bill once it was available.

14.  Counsel for South China relies on the fact that notwithstanding Ken's evidence that it was only in the early hours of 13 September 2003 that he and Michelle agreed on the Contract for the Return Shipment, UHL had issued a house airway bill on 11 September 2003 in relation to the shipment of 468 cartons of goods from the Los Angeles airport to Hong Kong on Cathay Pacific Airways Flight CX089 on 14 September 2003.

15.  Ken was not able to give evidence in relation to the airway bill dated 11 September 2003, as it was handled by his colleague in the US. He could only maintain that as evidenced by the airway bill dated 12 September 2003, it was only on 15 September 2003 that the 468 cartons of the Goods were actually shipped on Cathay Pacific Airways Flight 089, after he had reached agreement with Michelle on 13 September 2003. According to Ken, UHL had designated cargo space for its clients on weekly flights, although the flight details would often be changed and need to be finalized. On Ken's evidence, even before 13 September 2003, Michelle had throughout been seeking from him by telephone up to date information concerning the status of the Goods and when they could be sent back to Hong Kong, and Ken had likewise been liaising with his colleagues in US on the status, as the e-mails show. On the entirety of the evidence, I accept that it is likely that UHL may have been making preliminary arrangements in the US for the dispatch of the Goods from Los Angeles to Hong Kong before the Contract was finally made between Michelle and Ken on 13 September 2003, but that the instructions and paperwork were finalized after the telephone call at the early hours on 13 September 2003 (Hong Kong time) for the relevant airway bill to be finalized and issued on 12 September 2003 (Los Angeles time) for dispatch of the Goods on 15 September 2003.

16.  On the whole of the evidence, I am satisfied that Michelle had the authority to make the Contract with UHL for the Goods to be returned to Hong Kong, that the Goods had been delivered to Mark Top as agent for South China, and that South China is bound to make payment of the air freight charges for the Return Shipment, under UHL's invoice No. 379437.

17.  UHL further seeks payment of a sum of $600 under its invoice No. 389423, for storage of the Goods after their arrival in Hong Kong and after a period of "free storage" offered by UHL. Ken admits in his evidence that there was no agreement made between Michelle and himself on 13 September 2003 relating to storage of the Goods in Hong Kong or charges therefor. UHL has not pleaded any clause in any document relevant to the Contract as to UHL's claim for storage charges. Nor has Counsel for UHL referred me in the course of trial to any documentation to support UHL's claim. I therefore decline to make any award in respect of UHL's claim for $600.

Conclusion

18.  I give judgment to UHL for the sum of $233,064.16, with interest from the date of judgment to the date of payment at judgment rate. I will make an order nisi for South China to pay UHL's costs of the action, to be taxed if not agreed, with certificate for Counsel.