Kithan Ltd. v. A & G International Cargo Ltd.

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 14253 OF 2000

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J U D G M E N T

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1. This case has been very well argued on both sides. The plaintiffs are importers and distributors of inter alia mobile telephones. The defendants are international freight forwarders. Both are Hong Kong registered companies.

2. The plaintiffs have purchased 300 Nokia mobile telephones together with their adapters and other attachments for US$37,270 from Camry International Limited, a company in Dubai. These were shipped to Hong Kong by air from Dubai, packed in their individual boxes which in turn had been packed into cardboard cartons, this having been done by the manufacturer in Finland. The cartons had been sealed with adhesive tape and then further secured by nylon straps. Some of these cartons appear in colour photographs, part of Exhibit P1 (see also pages 38 to 43 of the Trial Bundle) which shows how they were packed for shipment. There were 15 cartons in all weighing 190 kilogrammes.

3. They were despatched to Hong Kong on 2 July 2000 on an Emirates Airlines aircraft flight No. EK86 under Master Airway Bill FCE11246 of the same date (see page 25) arranged by Flying Carpet Express, the freight forwarders at Dubai. The defendants are Flying Carpet Express's correspondents in Hong Kong and are named as the consignees in the Master Airway Bill.

4. The consignment arrived at Hong Kong on 3 July and was removed from the aircraft and taken to the Hong Kong Air Cargo Terminals Limited (HACTL) cargo terminal at Hong Kong International Airport. The plaintiff then engaged the defendant to arrange for collection of the consignment and to deliver it to the plaintiff's premises in Hong Kong. This was done on 4 July, the defendants having employed the services of a transport company called Wilson Transport Company.

5. When the consignment arrived at the plaintiff's premises, it was received on the plaintiff's behalf by Mr Naresh Basant, a director of the plaintiffs. The plaintiffs and the defendants agreed that the fee for this transportation of the consignment from the airport to the plaintiff's premises would be $480 together with some other charges relating to terminal charges and handling charges (see the invoice at page 28). I was told that these charges are in accordance with a scale maintained by the Hong Kong Association of Freight Forwarders.

6. Mr Basant noticed that some of the cartons had had their seals broken. He weighed the consignment to ensure that it was 190 kilogrammes. The weight came to 173.5 kilogrammes, some 16.5 kilogrammes underweight. He refused to accept the consignment which was then returned to the defendant's warehouse.

7. Mr Basant arranged for a professional survey of the consignment by McLaren Toplis which was carried out the following day, 5 July, at the defendant's premises. That report forms part of Exhibit P1 and it also starts at page 33 of the Bundle. It does not make happy reading. Of the 15 cartons, 10 had been broken into and the consignment was 200 mobile telephones short, together with 45 batteries. There should have been 300 of each. The surveyor concluded that these had been stolen. The cartons from which items had been removed had the plastic adhesive tape at the bottom of the carton cut along its entire length so as to give access to the contents. Mr Basant surmises, and rightly so in my view, that the nylon retaining straps were eased off the carton and then replaced after the contents had been removed.

8. The plaintiffs now sue the defendants for these losses, the claim being particularised at paragraph 14 of the Amended Statement of Claim, page 7 of the Bundle, at US$24,276, the largest element being for the loss of the telephones at US$125 each, totalling $25,000 with credit being given for the proceeds of sale of the balance of the consignment.

9. The claim is brought on the basis of contract, the defendant being a forwarding agent for reward and/or as a bailee, on the basis that the defendant was under a duty to take good care of the consignment and to ensure that it was delivered to the plaintiff in the same good order, condition and quantity as shown in the forwarder's Airway Bill, the Carrier Airway Bill and the Release Form. The significance of these three forms is that in each case, that is to say the forwarder at Dubai: Flying Carpet Express; the airline: Emirates Airlines and the cargo terminal, HACTL, have all acknowledged receipt of the 15 cartons weighing a total of 190 kilogrammes and the defendants gave HACTL a release acknowledging that the consignment that it had accepted from HACTL accorded with that description. In the alternative, there is also a claim for negligence.

10. The defendant's defence is perfectly simple. They were engaged to transport 15 cartons from the airport cargo terminal (HACTL) to the plaintiff's premises for the modest scale fee appearing in their invoice at page 28. This they have done. They had no knowledge of the details of the matter and any losses that the plaintiff may prove have not been caused by any negligence on their part.

11. Alternatively, Mr Terry Wong who appears for them, submits that if the defendants have been proved to be negligent in the performance of their duties to the plaintiff, their liability is limited by the Airway Bill (see clauses 4(a) and 2(d), page 22 of the Bundle) to the equivalent of 4,125 French Gold Francs, he having submitted that the agreement between these parties is governed by the House Airway Bill at page 22. In the event that he is wrong about that, Mr Terry Wong then relies on the defendant's own Shipper's Instruction Form, pages 77 and 78, which limits liability in the event of negligence to 4,125 French Gold Francs or HK$2,000, whichever is the greater of those two amounts.

12. At this stage, I need only make brief reference to the defendant's case on these two documents that are said to govern this transaction between the parties. As to the Airway Bill, Mr Terry Wong submits that the Airway Bill which describes the defendants as the consignees, being the Dubai forwarder's correspondents in Hong Kong, covers this contract for the carriage of air of this consignment to Hong Kong. He submits that the carriage by air did not end at the cargo terminal at Hong Kong International Airport but that it extended to the short, final journey by road to the plaintiff's premises. For that proposition, he relies on the Court of Appeal decision in Manohar t/a Vinamito Trading House v Hill & Delmain (Hong Kong) Limited [1993] 2 HKC 342.

13. Mr William Wong for the plaintiffs submits firstly, that on its true construction, this carriage of air was completed at the air cargo terminal. There was then a separate contract for local road transport from the terminal to the plaintiff's premises. He also submits that anyway beyond this point has not been pleaded and cannot now be relied on. I must return to these matters presently.

14. Alternatively, Mr Terry Wong says that the defendant's standard form of contract applies because the parties had contracted on the basis of this form on many previous occasions, albeit for export purposes, not for collection of consignments locally. On those occasions, the plaintiffs had filled up and signed the form at page 77 and they are therefore taken to know of these terms and to have agreed to contract on these terms on this occasion by virtue of the parties previous course of dealing, notwithstanding the fact that on this occasion the form had not been filled out and signed by the plaintiffs.

15. Lastly, Mr Terry Wong submits that if all else fails and these documents do not govern their relationship on this occasion and that his clients have been shown to have performed their duties negligently, the plaintiffs were duty-bound to mitigate their loss. They have not demonstrated that and therefore they should only get nominal damages.

16. From that brief analysis of the issues, it will be seen that the main issue on liability, which applies to whichever view I take of the parties' legal relationship, is the need for the plaintiffs to show negligence by the defendants. I say that subject to one matter which Mr William Wong for the plaintiffs puts at the forefront of his submissions, which is that this was an ordinary oral agreement whereby the defendants were to transport the consignment in its precise constituents, 15 cartons weighing 190 kilogrammes. They have come home with 15 cartons, 10 broken into and only weighing 173.5 kilogrammes. They have failed to perform their contract and therefore they must be in breach of their agreement.

17. I do not accept that strict view for one moment. This was a simple, rather unglamorous assignment, two men and a van, whereby the defendants agreed to get 15 cartons identified in the House Airway Bill from Chek Lap Kok to the defendant's premises, all for a very modest scale fee. The defendants did not undertake the strict burden, almost of an insurer, to bring the cartons with their exact contents, 300 mobile telephones weighing a total of 190 kilogrammes. Far more precise terms would be required to fix them with that level of contractual responsibility. I reject that submission.

18. Apart from that then, on any view of the three bases put forward by the parties, the defendant must be shown to have performed the task with lack of due care. It should be observed that these cartons have a clearly defined top and bottom. The arrows show which is the right way up. The cartons had been slit at the bottom. The top seals were intact. The nylon straps were in place and intact. They were underweight, but only as to 10 per cent overall, insufficient to immediately put a man carrying them onto a van or lorry on notice that something was amiss. These had been handed over by a reputable cargo terminal operator apparently in good order, put on Wilson Transport Company's vehicle and taken to Hong Kong.

19. For my part, I cannot see how the defendant's agents, Wilson Transport Company, could have done this task differently. It is said that they should have noticed that something was amiss and therefore they should have refused to take delivery and perhaps alerted the authorities.

20. In the absence of any evidence to show that something was fairly obviously wrong, I am not prepared to condemn the performance of this work by Wilson Transport as negligent. This was a routine job. The defendants were asked to fetch these 15 cartons from the airport. They arranged a reputable transport company who they had used many times in the past without complaint. In the absence of anything which would have put a reasonable person on notice that something was wrong with the consignment, and there was nothing on this occasion, the job of transporting the cartons to Hong Kong was properly done.

21. The plaintiffs, I am afraid, have failed to show negligence. Accordingly, they have fallen at the first hurdle and this action must fail.

22. For the sake of completeness, I should indicate, and I do so briefly, because this is not necessary for the purposes of my decision, that in my judgment, this was an oral contract between the parties. The Airway Bill ceased to have effect at the cargo terminal. This is different from the facts in Manohar t/a Vinamito Trading House v Hill & Delmain supra. This was carriage by air to Hong Kong International Airport. The land transport was separate. It was an extra, paid for separately by the plaintiff. Mr William Wong is correct in his proposition that had the defendants been put to it to sue for the cost of the land transport, they would have done so on the oral instruction, not on the basis of the House Airway Bill. In any event, the House Airway Bill has not been pleaded as governing the parties' relationship in this matter when it should have been. And so for this additional reason, this part of the defendant's case would have failed.

23. I am also of the same view on the defendant's standard terms and conditions. There is a distinct difference between an export transaction which is more complex, requiring the forwarder to deal with booking space on an aircraft, correspond with a forwarder at the destination, deal with customs clearance and perhaps export licences. This import transaction was no more complex than a taxi service for the cartons. I cannot imagine that these parties thought they were contracting on a complex basis, as provided at page 78, for a mere pickup service. In my view the limitation provisions in these two forms would not have applied.

24. As to mitigation of damage, had I found negligence to have been made out, my view would have been that in all the circumstances, the plaintiffs had done all that they could have done to mitigate their loss. It would have been wise to report the loss to the police but the prospect of these mobile phones being located, even with serial numbers, would have been remote in the extreme. I would have awarded them the amount claimed, but as I have already observed, they have fallen at the first and all important hurdle.

25. The claim must stand dismissed and there must be judgment to the defendants with costs and with certificate for counsel.