HUI CHI YUK v. UNI-TOP AIR AND SEAFREIGHT (H.K.) LTD

DCCJ 2092/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2092 OF 2009

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JUDGMENT

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A Introduction

1.  The plaintiff had in 2006 and 2007 provided local transportation services to the defendant.  The defendant itself is a company providing cross border logistic (中港物流) and storage (倉儲) services.  The defendant had, at the material time, subcontracted the local leg of the transportation services that it provided to its customers to the plaintiff.

2.  In these proceedings, the plaintiff claims against the defendant the sum of $304,754 for services rendered to the defendant in August, September and October 2007.

3.  The defendant does not dispute that services were rendered by the plaintiff during the material period, nor does it dispute that no payment has been made for those services.  Liability is instead contested on the following two bases. 

4.  According to the Re-Amended Defence and Counterclaim (re-amended by consent on the 1^st day of trial), it puts the plaintiff to strict proof on the quantum of his claim.  Additionally, the defendant relies on a set-off (and counterclaim) arising from the loss of 20 notebook computers on or about 22 or 23 October 2007, which loss the defendant alleges as having been caused by the plaintiff’s negligence and/or breach of duty.  As will be detailed later, the defendant’s counterclaim is one pursued against the plaintiff as a bailee for reward.  The quantum counterclaimed is quantified at $360,374, being compensation paid to Hon Hai Precision Industrial Company Limited (trading in the name of Foxconn) (“Hon Hai”), the owner of the 20 notebook computers.

5.  At the trial, the plaintiff gave evidence and the defendant called 2 witnesses, namely 郭化冰先生 (“Mr Kwok”) and 毛松濤先生 (“Mr Mao”).

6.  I propose to first deal with the plaintiff’s claim and then proceed to deal with the defendant’s set-off and counterclaim.

B The plaintiff’s claim

(i) The plaintiff’s evidence

7.  According to the plaintiff, he first started providing local transportation services to the defendant in mid 2006. At that time, the plaintiff would charge the defendant on an order-by-order basis.  As the volume of business placed by the defendant was substantial, subsequently commencing from November 2006, the plaintiff agreed to carry out the orders placed by the defendant at a monthly fee of $110,000 plus disbursements incurred during the transportation.  The disbursements included expenses such as tunnel tolls, loading dock charges, entry fees to certain loading areas (“the November 2006 Arrangement”).

8.  In evidence was a written quotation issued by the plaintiff in, inter alia, the following terms, which terms are consistent with the November 2006 Arrangement:

“

報價單:

由2006年11月1曰起本公司 [the plaintiff] 將承接貴公司友和通道集運(香港)有限公司 [the defendant]之全部本地ORDER每月為HK$110,000…

現暫定數期為45天…

(什費除外)

(加班不另收費)”

9.  About 2 to 3 months later, since the volume of the business placed by the defendant had dwindled, it was agreed between the parties to reduce the monthly fee from $110,000 to $80,000.  In other words, the November 2006 Arrangement was varied only in respect of the monthly fee whilst the other terms remained unaltered (“the Early 2007 Arrangement”).  It is fair to say that the plaintiff did not identify precisely with whom in the defendant organization did he agree on in repsect of the November 2006 Arrangement and the Early 2007 Arrangement.

10.  The plaintiff accepted that the defendant had complained from time to time about the level of fees charged.  In fact, the plaintiff accepted that he had relatively little bargaining power when it came to the defendant’s request for reduction in fees.  

11.  Despite the foregoing, the documentary evidence shows that the parties had nevertheless dealt in accordance with the Early 2007 Arrangement.  I set out the following information as can be gleaned from the documentary evidence.  It will be noted that for the period between February and July 2007 (both months inclusive), the defendant had settled in full the invoices issued by the plaintiff in accordance with the Early 2007 Arrangement (with the exception of strict compliance with the “temporary” and indicative payment term of 45 days).

Month (2007)	Plaintiff’s Statement Date	Monthly Fee	Disbursement	Payment Date
February	28/2/07	$80,000	$11,898	23/4/07
March	31/3/07	$80,000	$23,723	21/5/07
April	30/4/07	$80,000	$19,788	21/6/07
May	31/5/07	$80,000	$17,115	23/7/07
June	30/6/07	$80,000	$23,184	24/8/07
July	31/7/07	$80,000	$26,349	24/9/07

12.  The plaintiff’s claim, in the sum of $304,754, is made up of 3 months of monthly fees in the sum of $80,000 for each of August, September and October 2007 (totalling $240,000) and disbursements incurred in the respective sums of $22,876, $25,958, and $15,920 for the 3 months.

13.  Following the loss of the 20 notebook computers on 22 or 23 October 2007, the defendant shortly thereafter stopped placing orders with the plaintiff.  It can be gleaned from the October 2007 statement issued by the plaintiff that the last transactions claimed by the plaintiff were dated 24 October 2007.  However, the plaintiff gave evidence that he was willing to carry out his obligations for the remainder of October 2007.  In fact, his fleet of trucks was, as before, still parked in the vicinity of the defendant’s premises, no doubt for the purpose of answering any services demanded of by the defendant.

(ii) The defendant’s evidence

14.  In relation to the contractual arrangement between the parties, the relevant evidence adduced on behalf of the defendant came from Mr Mao.  Mr Kwok primarily gave evidence in relation to the events surrounding the loss of the 20 notebook computers.

15.  Mr Mao joined the defendant in January 2007 as its general manager.  Previously, Mr Mao was involved with other entities within the defendant’s group of companies in the PRC.  Prior to Mr Mao’s assumption of his role in the defendant company, one 張華清先生 (“Mr Cheung”) was responsible for liaising on behalf of the defendant with the plaintiff.  Mr Cheung left the defendant’s employ in July 2007.

16.  As one might expect, Mr Mao spent some time in familiarizing himself with the affairs of the defendant, and as a result, he was unable to speak firmly on matters occurring just before and after he joined the defendant in January 2007.  For example, he accepted that there might have been in place the November 2006 arrangement but he was not entirely sure.  He also accepted that most of the dealings with the plaintiff were still initially handled by Mr Cheung even after he joined the defendant.

17.  It was also Mr Mao’s evidence that he was aware of the Early 2007 Arrangement but he emphatically stated that he did not agree to its terms.  He said that he discovered the Early 2007 Arrangement in about March or April 2007.  He further pointed out that, and as stated earlier not disputed by the plaintiff, following his discovery of the Early 2007 Arrangement the defendant had attempted to ask for a fee reduction from $80,000 per month.

18.  Mr Mao also emphasized that no written agreement was executed and various attempts at eliciting information from Mr Cheung on the various arrangements with the plaintiff did not bear fruit.

19.  There were occasions when the defendant had contemplated replacing the plaintiff because he thought the plaintiff was charging excessively, but due to various considerations, not least to maintain continuity in the defendant’s operations, such contemplation was not acted upon.

20.  Following the loss of the 20 notebook computers, the defendant stopped placing orders with the plaintiff in late October 2007.  Although Mr Mao stated in his witness statement that finding a company (or companies) to replace the plaintiff was no easy task due to the substantial volume involved, it seems clear from the documentary evidence adduced that it took relatively little time for the defendant to find such replacements.  The defendant placed most of its orders with a company called 韻福 in November, and from December onwards a company called Pan-Pacific (Group) Limited.

21.  Mr Mao also stated in cross-examination that the charges paid to the companies replacing the plaintiff were substantially less than those charged by the plaintiff thereby confirming his hitherto held view that the plaintiff was charging excessively.

(iii) The parties’ respective submissions

22.  Mr Ho (appearing for the plaintiff) submitted that the conduct of the parties clearly pointed to the unavoidable conclusion that the services rendered by the plaintiff in August, September and October 2007 were rendered in accordance with the Early 2007 Arrangement.  He contended that, on a proper analysis, there was clearly an offer on the plaintiff’s part for a monthly contract on terms of the Early 2007 Arrangement, which offer was accepted by the defendant in placing orders at the commencement of each relevant month.  Reliance was understandably placed on the fact that the defendant had made full settlement in accordance with the Early 2007 Arrangement for services rendered in February to July 2007 notwithstanding its protestions of excessive charges.

23.  Miss Tjia (appearing for the defendant) on the other hand invited the Court to resolve the plaintiff’s claim by reference to witness credibility.  She submitted that the plaintiff had failed to prove that the parties had orally agreed to a fixed monthly fee of $80,000 plus disbursements.  Reliance was placed on the evidence that Mr Mao had repeatedly disputed the Early 2007 Arrangement and that the plaintiff had accepted that he had no bargaining power to reject the defendant’s requests for fee reduction.  She therefore invited the Court to conclude that the plaintiff provided his services in August, September and October 2007 on terms yet to be agreed and the terms to be agreed would surely be less favourable than those encompassed in the Early 2007 Arrangement.  She submitted that there was much room for reasonable downward adjustment of the monthly fees, making reference to the fact that the fees paid by the defendant to companies which replaced the plaintiff were more than 50% lower.

(iv) Analysis

24.  It might be thought surprising that counsel approached the issue of how the agreement between the parties was formed from such divergent positions.  On the one hand, Mr Ho submitted that the relevant agreement was to be inferred from conduct whilst Miss Tjia contended any agreement between the parties (if any) was reached orally.

25.  This state of affairs is contributed by the generality of the pleadings.  In fact, the plaintiff has only filed an Endorsement of Claim and leave was previously obtained from the Master to treat the Endorsement of Claim as the Statement of Claim.  At the commencement of trial, I reconfirmed with both parties that they were content to proceed on this basis.

26.  The plaintiff’s pleaded case is for services rendered.  The defendant’s pleaded case (apart from the set-off and counterclaim) is a general denial, with an additional averment that the defendant “denies that the Plaintiff had provided up to a sum of HK$304,754.00 and the Plaintiff is put to strict proof thereof.”  It is specifically not the defendant’s pleaded case that the loss of 20 notebook computers was an event entitling it to terminate any agreement then in place with the plaintiff should I find that there was in existence such an agreement.

27.  I do not agree with Miss Tjia’s submission that the plaintiff’s case is limited to an agreement reached orally.  Related to the foregoing, I also do not agree with her contention that the issue of witness credibility necessarily features prominently in the resolution of the plaintiff’s claim.

28.  In fact, I do not see any irreconcilable differences between the evidence of the plaintiff and that of the defendant set out in Sections B(i) and B(ii) above.  I make the following material factual findings:

(1) Commencing on 1 November 2006, the plaintiff agreed to provide services and the defendant agreed to engage the plaintiff on terms of the November 2006 Arrangement.

(2) In early 2007, the November 2006 Arrangement was varied to the Early 2007 Arrangement. I am cognizant that Mr Ho at one point during his cross-examination suggested to Mr Mao that the variation was agreed to between the plaintiff and Mr Mao, a suggestion which Mr Mao denied. This, in turn, precipitated Miss Tjia’s invitation to the Court to accept Mr Mao’s evidence thereby grounding her submission that the plaintiff had failed to prove an oral agreement had been reached between the parties.

(3) However, on the totality of the evidence, it seems to me more likely than not that any negotiation on the variation was conducted between the plaintiff and Mr Cheung. As stated earlier, the plaintiff did not identify precisely with whom in the defendant organization did he agree on in respect of either the November 2006 Arrangement or the Early 2007 Arrangement. Also as recounted above, Mr Mao spent some time in familiarizing himself with the affairs of the defendant when he first joined the company in January 2007 and he also accepted that most of the dealings with the plaintiff were still initially handled by Mr Cheung even after he joined the defendant. The Early 2007 Arrangement would have been in place in January 2007, since the plaintiff invoiced, and the defendant paid, in accordance with the Early 2007 Arrangement from February onwards. In fact, it was Mr Mao’s own evidence that he had to elicit (unsuccessfully) information from Mr Cheung as to why there was in place a monthly fixed fee arrangement.

(4) By March or April 2007, Mr Mao became aware of the Early 2007 Arrangement. He complained to the plaintiff about the level of fees but nevertheless the parties had until 24 September 2007 (the date on which the defendant settled the service fees for July) conducted their dealings in accordance with the Early 2007 Arrangement.

(5) Although the defendant stopped placing orders with the plaintiff from 24 October 2007 onwards, the plaintiff was ready and willing to perform his part of the contract for the remainder of October.

29.  Given the above factual findings, I agree with Mr Ho’s submissions.  It seems to me that the following passage from Chitty is apposite:

“Establishing the terms of contracts made by conduct. Where an offer or an acceptance or both are allegedly to have been made by conduct, the terms of the agreement are obviously more difficult to ascertain than where the agreement was negotiated by express words. The difficulty may be so great as to force the court to conclude that no agreement was reached at all. But sometimes the court can resolve the uncertainty by applying the standard of reasonableness or by reference to another contract (whether between the same parties or between on of them and a third party), or even to a draft agreement between them which had never matured into a contract. For example, in Brogden v Metropolitan Ry a railway company submitted to a merchant a draft agreement for the supply of coal. He returned it mark “approved” but also made a number of alterations to it, to which the railway company did not expressly assent; but the company accepted deliveries of coal under the draft agreement for two years. It was held that once the company began to accept these deliveries there was a contract on the terms of the draft agreement.” (Chitty on Contracts, 28^th Ed, §2-031)

30.  In the present case, despite having found that the defendant had made various complaints in relation to the level of fees charged, the fact of such complaints, in my view, does not prevent me from finding that the defendant had engaged the plaintiff to provide services from February to October 2007 on the basis of consecutive monthly contracts on terms of the Early 2007 Arrangement, which contracts were formed on the basis that the plaintiff’s “standing” offer was accepted by the defendant’s conduct in placing orders for each of the relevant months.

31.  It seems to me that Miss Tjia’s proposition that the plaintiff was prepared to (and did) provide services on terms to be agreed is against commercial sense.  In coming to my conclusion, I also take stock of the following:

(1) As early as March or April 2007, Mr Mao was complaining about the level of fees charged by the plaintiff but yet service fees for April to July were settled in full (the last payment having been made on 24 September 2007).

(2) Therefore, as late as 24 September 2007, the objective indicia all pointed to the conclusion that the parties were conducting themselves in accordance with the Early 2007 Agreement and the complaints should reasonably be regarded as mere commercial jostling. There was also no evidence that the circumstances had become materially different between 24 September and 2 October 2007 when the first order was placed for the month of October.

(3) There was ample opportunity for the defendant to replace the plaintiff between April and 24 September 2007 and the evidence shows that the defendant was in the position to do so. Yet, the defendant deliberately chose to continue to engage the plaintiff.

(4) On the evidence, it seems to me that the real reason for the defendant stopping payment was the loss of the 20 notebook computers. Mr Mao himself gave evidence to that effect at paragraph 11 of his witness statement.

32.  Further, since I have found that the defendant had by conduct entered into a series of monthly contracts with the plaintiff on terms of the Early 2007 Arrangement, no issue of excessive charges arises.  It is not the Court’s function to rewrite a concluded agreement, on the basis that a party was of the subjective view that it entered into a poor bargain. 

33.  Miss Tjia also made the forensic observation that primary documents have only been adduced into evidence to support the plaintiff’s claim for disbursements for August, but not for September and October.  She therefore submitted that the unsupported sums should in any event be disallowed.

34.  I disagree.  It is true that no primary documents, in the form of receipts for disbursments paid by the plaintiff, were adduced into evidence for September and October 2007.  However, I do have before me the debit notes issued by the plaintiff to the defendant.  The defendant has never disputed that such disbursements had been incurred.  Bearing in mind the contention advanced by the defendant, any allegation of excessiveness can only relate the the monthly fee component, not the disbursements paid by the plaintiff (for tunnel tolls,  loading dock charges etc.).    

35.  For all the above reasons, the plaintiff is entitled to the sum of $304,754, subject to the defendant’s set-off and counterclaim to which I now turn.

C The defendant’s set-off and counterclaim

(i) Background

36.  On 22 October 2007, Hon Hai engaged the defendant to transport 13 pallets of goods from its factory in Shenzhen to the Hong Kong International Airport.  Of the 13 pallets of goods, 12 were to be delivered to a forwarder called Nippon Express Company Limited (“NEC”) located at SuperTerminal No. 1 and the remaining one to another forwarder called KWE located in another part of the airport.

37.  According to the Hon Hai’s中港派車申請單 (“the Application Form”) issued to the defendant on 22 October 2007, the 12 pallets were assigned 2 reference numbers, one of which was SEA-7AFA76.  This is in fact a reference to an invoice also dated 22 October 2007 bearing the same reference number (“the Invoice”).  The Invoice was issued by Hon Hai to Sony Service Centre (Europe) N.V. (“Sony”) and was in respect of an air shipment of 180 units of notebook computers to Frankfurt.  The 180 units comprised of the following: (1) 36 units of Model M611EAU2NL-H (“Model 2NL-H) at a unit price of US$2,290.74, (2) 36 units of Model M611EAUEGR-H (“Model EGR-H”) at a unit price of US$2,291.30 and (3) 108 units of Model M611EAUGDE-H (“Model GDE-H”) at a unit price of US$2,290.17.

38.  According to the relevant packing list (“the Packing List”), the 180 units were to be stowed onto 5 pallets, each of 36 units.  The 108 units of Model GDE-H were to be stowed on pallets numbered P01 to P03, the 36 units of Model 2NL-H on pallet numbered P04, and the 36 units of Model EGR-H on pallet numbered P05.

39.  The defendant was responsible of transporting all 13 pallets from Hon Hai’s factory in Shenzhen to its own warehouse located in Tins Plaza in Tuen Mun.  It did so using its own 中港車 (“the Cross Border Truck”).

40.  Although there is a dispute as to the precise mechanism and the timing, it is common ground that, as was usual at the time, the defendant engaged the plaintiff to carry out the local leg of the transportation.  The 13 pallets were transferred from the Cross Border Truck to the plaintiff outside Tins Plaza for onward delivery to the airport.

41.  Of the 12 pallets delivered to NEC, NEC’s warehouse operator refused to take delivery of 5 pallets, on the basis that the outward appearance of the pallet(s) revealed signs of having been tampered with.  These 5 pallets were then kept at an area with surveillance camera (“the 5 Pallets”).

42.  On 23 October 2007, a joint inspection was carried out at which representatives from the plaintiff, the defendant, Sony and Hon Hai attended.  During the course of the inspection, it was discovered that 2 out of the 5 Pallets contained, in part, boxes of distilled water instead of notebook computers. 

43.  Mr Ho observed that the distilled water was of a PRC brand not usually available in Hong Kong but I think it is fair to say that this observation can only be described as an opinion of Mr Ho and there is insufficient evidence for me to form a view one way or the other.

44.  It is the defendant’s case that 20 notebook computers (10 units of Model EGR-H and 10 units of Model GDE-H) were missing.  Although a report was made to the police, no charges have been laid against any person.  The 20 notebook computers have not been recovered.

45.  Unless I have otherwise indicated, the background facts set out in this section are largely not disputed.  Before I turn to the evidence adduced by the parties, I should make one general observation.  During the course of the hearing, both parties (and in particular Mr Ho)   hny either Mr Ho or Miss Tjia made reference to a number of statements made to the police.  These statements were made by 陳錦華先生 (“Mr Chan”), 張鴻南先生 (“Mr Chang”), and 黃廣生先生 (“Mr Wong”), respectively a staff of the plaintiff, an engineer of Hon Hai and a warehouse staff of NEC.

46.  Adopting the approach of Stone J. as set out in Samsung Electronics Ltd v J & C Cargo Services Co Ltd [2008] 2 HKLRD 243 at §43, I decline to attribute much if any weight to such hearsay statements.  As in Samsung, no proper reason was proffered as to why the makers of the above statements should not have been called to give viva voce evidence in the witness box.  Stone J. decided to adopt that approach even though the contents of the hearsay statements did not materially contradict the evidence of those witnesses who gave viva voce evidence.  A fortiori, Stone J.’s approach must be even more apposite in circumstances where the hearsay statements were contradictory to the viva voce evidence. 

47.  As stated by Mr Recorder Anthony Chan SC in Chang Ming Fang Jacqueline v Zhang Zi Qiang (HCA 2714 of 2006, unreported, 28 August 2009) §67, there is an inherent unfairness in relying upon evidence which has not been tested in cross‑examination.

(ii) The defendant’s evidence

48.  The defendant’s evidence on liability came principally from Mr Kwok.  Mr Kwok joined the defendant as its 調道經理 in May 2006 but has since July 2007 been promoted to an assistant to the manager.

49.  Mr  Kwok’s evidence can be summarized as follows:

(1) On 22 October 2007 at around 11:30 a.m., he called Mr Chan to inform him about the 13 pallets of notebook computers. He instructed Mr Chan to arrive at Tins Plaza between at between 10 to 11 pm.

(2) Mr Chan and 楊國威先生 (also known as 阿細) (“Mr Yeung”), the driver of the plaintiff’s truck bearing registration mark LY6660 (“LY6660”), arrived at Tins Plaza at around 10 p.m.

(3) At around 11:30 p.m., the Cross Border Truck arrived at Tins Plaza. The driver used a special cutter to cut open the seal of the Cross Border Truck.

(4) He and Mr Chan then inspected the 13 pallets together in the course of transferring them from the Cross Border Truck to LY6660. It is clear that such inspection was limited only to the outward appearance of the pallets. For each pallet, the contents were in fact packed inside a large cardboard box. The large cardboard boxes were then wrapped with transparent plastic materials and tightly strapped. Since Hon Hai prohibited the cardboard boxes from being opened, no one was in a position to tell what was packed inside the large cardboard boxes. However, he was of the opinion that the packaging of all 13 pallets was 靚仔 (handsome), in that the external plastic wrappings were crease free and tightly strapped.

(5) The handover was completed at around midnight. Neither Mr Chan nor Mr Yeung raised any issue on the packaging of the 13 pallets. Mr Yeung then set off for the airport, unaccompanied by Mr Chan.

(6) At 9:30 a.m. on 23 October 2007, he received a call from NEC informing him that NEC refused to accept 5 of the 12 pallets delivered. He was also requested by NEC to attend a joint inspection at 1 p.m. He then called Mr Mao and informed him of this development.

(7) At the joint inspection, he observed that the packaging of 3 of the 5 Pallets was no longer “handsome”, in that there were signs that they had been tampered with since the plastic wrappings had become creased and the straps loosened. Upon opening the cardboard boxes, it was discovered that 20 notebook computers were missing (10 from each of 2 pallets) and instead 5 boxes of distilled water were found inside each of the 2 problematic cardboard boxes. A report was then made to the police.

(8) He later learnt from the police that LY6660 broke down near the entrance of SuperTerminal No. 1, and as a result, the 13 pallets had to be transferred to another truck operated by the plaintiff bearing registration mark CH6660 (“CH6660”) driven by 梁全豪先生 (“Mr Leung”).

(9) He then made an appointment to meet with the plaintiff and Mr Chan. The meeting took place on 23 October 2007 on the 3^rd Floor of Tins Plaza and was attended by himself, Mr Mao, the plaintiff, Mr Chan and the plaintiff’s wife (“the Meeting”). At the Meeting no satisfactory explanation was provided by the plaintiff or his representatives and requests for any relevant documentary proof were not entertained by the plaintiff. In fact, the plaintiff stated that LY6660 broke down on the Tuen Mun highway, which was a rather different account from that given by Mr Chan which the defendant learnt from the police.

(10) He emphasized that the defendant was never informed of the breakdown of LY6660 and the defendant never provided a proper explanation as to why it took over 4 hours for the 13 pallets to arrive at the airport.

(11) On 27 October 2007, the defendant was informed by Hon Hai that another shipment handled by the plaintiff suffered the same fate. In a shipment to Paris on 12 October 2007, 7 notebook computers went missing and cartons of distilled water was put in their place (“the Paris Incident”). The documentary evidence reveals that the shipment to Paris was also handled by NEC and/or KWE.

50.  Mr Mao gave essentially the same evidence.  Mr Mao was not present at the handover outside Tins Plaza or the joint inspection.  He accepted that much of what he knew was told to him by Mr Kwok.  When cross-examined by Mr Ho, Mr Mao accepted that no clear view as to whether the plaintiff was responsible was reached in relation to the Paris Incident.

(iii) The plaintiff’s evidence

51.  The plaintiff did not call any witness who was in a position to give direct evidence on how the 13 pallets were handed over by the defendant and transported to the airport (eg. Mr Chan, Mr Yeung and/or Mr Leung).  As stated above, no proper explanation was proffered by the plaintiff as to why this course was adopted.

52. The following matters are set out in the plaintiff’s witness statement:

(1) In the evening of 22 October 2007, Mr Chan received an order from the defendant. Mr Chan then arranged Mr Yeung to handle the matter by himself.

(2) At the time of the handover, the doors to the Cross Border Truck was already opened and the seal broken.

(3) Mr Yeung then delivered the goods to NEC but NEC refused to accept the goods. Mr Yeung then informed Mr Chan who then informed 陳子全先生 of the defendant.

53.  However, as pointed out by Miss Tjia, the plaintiff’s evidence changed drastically during the course of the trial.  A few notable examples were:

(1) Both Mr Chan and Mr Yeung dealt with the defendant’s order on 22 October 2007.

(2) During the handover, Mr Chan was also present at the scene.

(3) On the way, LY6660 broke down and the 13 pallets were in fact transloaded onto CH6660 and delivered by Mr Leung.

54.  The plaintiff also disagreed as to what transpired at the Meeting.  He said that he only took a passive role in the Meeting and any explanation offered was given by Mr Chan.

55.  The plaintiff’s witness statement does not contain any evidence as to what system he put in place to monitor the activity of his drivers.  When cross-examined by Miss Tjia, the plaintiff initially gave evidence that only a rather lax system was put in place, in that the plaintiff did not keep records of the personal particulars of all of his drivers (especially the casual drivers). 

56.  Although the plaintiff eventually gave evidence that he would remind his drivers to check the number of goods received, to stay with the goods and to deliver the goods on time, I agree with Miss Tjia that this part of his evidence is unreliable and appears to have been given as a reaction to finally having gained an understanding as to what allegations were being made against him.

57.  In any event, I accept Miss Tjia’s submission that even if that part of the evidence were to be accepted, there was still no sufficient evidence before the Court that the plaintiff had put in place any proper system to ensure the safe keeping of goods entrusted under his care or to guard against theft.  For example, there was no proper system of monitoring the drivers’ whereabouts.

(iv) Factual findings

58.  As regards the evidence adduced in relation to the counterclaim recounted above, I prefer the defendant’s evidence over that of the plaintiff’s.  As stated above, the plaintiff’s evidence mostly (if not wholly) consisted of hearsay evidence and his change of stance during the trial certainly detracted from his credibility.

59.  I digress to clarify that although I have formed a negative view on the plaintiff’s credibility, it does not affect the conclusion I have reached in relation to the plaintiff’s claim, which was based largely on uncontroversial evidence.

60.  Since I prefer the evidence of the defendant over that of the plaintiff, I make factual findings in terms of the matters set out in Sections C(i) (setting out the undisputed evidence) and C(ii) (setting out the defendant’s evidence) above. 

61.  I further make a specific finding that the 13 pallets were transloaded from LY6660 to CH6660 and that the plaintiff was at the material time a bailee for reward.  These are not matters which Mr Ho submitted otherwise.

62.  I should emphasize that my factual findings only go so far to find that the outward appearance of 3 of the 12 pallets had changed from the time of the handover to when NEC refused to accept the 5 Pallets.

(v) Analysis

63.  The parties accept the following as being the applicable principles (Samsung Electronics (supra) §§52 to 57):

(1) A bailee for reward owes a duty to the bailor return the bailed goods safely at the conclusion of the bailment relationship, and if the bailee fails to do so, he is liable for the loss of the goods unless he is able to prove that he exercised all due care for the goods.

(2) A bailee for reward can only escape liability only by discharging the burden as to the taking of appropriate care of that his failure so to do was not causative of the loss.

64.  But for the issue discussed below, I would have found for the defendant since the plaintiff has clearly failed to demonstrate that he exercised all due care for the goods.

65.  Even accepting the evidence of Mr Kwok and Mr Mao, it seems to me that there is still a palpable missing link in the defendant’s case. 

66.  It is clear from the evidence recounted above that there was no direct evidence as to what was packed into the cardboard boxes loaded onto the 13 pallets.  In particular, it was accepted by Mr Kwok that no one was able to tell what was contained in the 13 pallets during the handover (ie. when the goods were bailed to the plaintiff). The defendant did not call the driver of the Cross Border Truck who might have been in position to give evidence as to what was packed inside the cardboard boxes.  Nor did the defendant call any witness from Hon Hai to give evidence.

67.  I stated earlier that I am not prepared to give any weight to the police statements.  However, even if I were prepared to do so, the only evidence from Hon Hai came from Mr Chang.  In his police statement, Mr Chang only set out the details of the transactions between Hon Hai and Sony.  As one might expect, Mr Chang, being an engineer, was not in a position to and did not say that he witnessed what was in fact loaded into the cardboard boxes. 

68.  In closing, Miss Tjia submitted that reliance should be placed on the documentation generated, namely the Application Form, the Invoice and the Packing List (collectively “the Documentation”).  She submitted that the Documentation all contained consistent information.  She further contended that since the plaintiff did not challenge the accuracy of the information contained therein, he therefore assumed the responsibility as bailee of the goods stated in the Documentation.

69.  I do not agree with Miss Tjia’s submissions.  The Documentation as was generated were transactional documents.  One would have thought that the information contained therein would necessarily be internally consistent as between the various documents. It is important to note that, since there was no viva voce (and firsthand) evidence in respect of what was packed into the cardboard boxes, the Documentation was not used as corroborating documentary evidence, but as the sole evidence as to what was in fact packed into the cardboard boxes.

70.  Miss Tjia was inviting me, unwarrantedly in my view, to ascribe to the Documentation a probative value similar to that of, for example and in an applicable situation, a bill of lading.  The probative effect of a bill of lading is explained in Goode on Commercial Law, 4^th Ed at page 1165:

“Both at common law and under the Hague-Visby Rules signature of the bill of lading showing shipment or receipt for shipment constitutes prima face evidence in favour of the shipper, and conclusive evidence in favour of a transferee, as to the fact, time, and place of shipment, and as to the leading marks the number, quantity or weight and the apparent order and condition of the goods as stated in the bill.”

71.  Miss Tjia was unable to provide any authority in support of her proposition, especially in the circumstances where none of the documents relied upon was issued by the plaintiff.  I decline to accede to her invitation.

72.  However, I have given the Documentation the requisite consideration enjoined upon me by section 49 of the Evidence Ordinance Cap. 8 (Aqua-Leisure Industries Inc & Anor v Aqua Splash Ltd [2003] 1 HKLRD 156 §§30 to 33).  I am not satisfied that significant weight should be attached to the Documentation as proof of what was packed into the cardboard boxes.

73.  At the end of the day, it seems to me that Miss Tjia was in reality asking the Court to draw all necessary inferences in her client’s favour, based on the fact that the packaging of 3 of the 5 Pallets not accepted by NEC appeared to have been tampered with.

74.  However, it seems to me quite clear that the outward appearance of the packaging is inconclusive. First, the evidence of Mr Kwok was the 3 of the 5 Pallets appeared to have been tampered with.  However, it is not disputed that the loss of the notebook computers only related to 2 of the 5 Pallets. 

75.  Second, in relation to the Paris Incident, the loss of the notebook computers was only discovered in Paris (and similiarly boxes of distilled water were found instead).  It will be remembered that the shipment to Paris was also handled by NEC and/or KWE.  The logical inference to be drawn is that there was nothing untoward in relation to the outward packaging of that shipment.

76.  On the evidence as led, I am not satisfied that the defendant has discharged its burden of proving, on the balance of probabilities, that 180 units of notebook computers were handed over to the plaintiff.  It is not beyond peradventure that boxes of distilled water were already placed inside the cardboard boxes in the PRC, perhaps even by staff at Hon Hai’s factory in Shenzhen. 

77.  For all the above reasons, I dismiss the counterclaim.

D Quantum

78. Had I found for the defendant on its counterclaim, I would have dealt with the issue of quantum as follows.

79. As stated above, the unit prices Hon Hai was to paid by Sony for Model EGR-H and Model GDE-H were respectively US$2,291.30 and US$2,290,17 (on FOB basis). It will be recalled that 10 units of each of the 2 models went missing. The value of the missing notebooks was therefore US$45,814.70.

80. On 12 December 2007, Hon Hai issued an invoice to the defendant claiming US$45,814.71 (for loss of the 20 notebooks) and US$387.10 (for freight) totalling US$46,201.81.

81. On 16 April 2008, Hon Hai issued a debit memo in the sum of $360,374 (ie. round figure of US$46,201.81 x 7.8). Mr Mao gave evidence, which evidence I accept, that the sum of $360,374 had been deducted from sums the defendant ought to have received from Hon Hai.

82. In other words, the defendant settled its liabiltiy it thought it owed to Hon Hai and the defendant seeks to recover the sum of $360,374 from the plaintiff.

83. P&O Developments Ltd v The Guy’s and St Thomas’ National Health Service Trust (1998) 62 ConLR 38 is authority for the proposition that (1) a settlement between two parties, however reasonable it may be from the point of view of those parties (in this case Hon Hai and the defendant), cannot determine a third party’s (the plaintiff’s) liability to one of the settling parties (the defendant) and (2) the claiming party (the defendant) must establish a prima facie case that the settlement was a reasonable one.

84. Mr Mao was not able to explain how the freight component was calculated, and in the circumstances, I am of the view that the defendant has failed to show that the freight component was reasonable, despite Miss Tjia’s submission to the contrary.

85. Therefore, had I found for the defendant on the counterclaim, I would have only allowed the sum of [US$45,814.70 x 7.8 =] $357,354.66.

E Conclusion

86. I enter judgment in favour of the plaintiff in the sum of $304,754. As to interest, I make an order nisi that interest is to run at the commercial rate (prime + 1%) from the date of the writ until judgment and thereafter at judgment rate until payment.

87. I also make a costs order nisi that the defendant do pay to the plaintiff the costs of this action (including those of the counterclaim) with certificate for counsel, to be taxed if not agreed.

88. Absent any application to vary within 14 days, the above orders nisi will become absolute.

89. I thank counsel for their assistance.