YUE KIT GROUP LTD v. SYMS CONTAINERS LINE AGENCIES (HK) LTD

HCA 1579/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1579 OF 2008

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J U D G M E N T

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Introduction

1.  This is a claim by the plaintiff, as shipper under a bill of lading, for damages in respect of the carriage of a number of reefer containers from Hong Kong to Haiphong, Vietnam.  The plaintiff complains that the carrier refused to release the cargo upon arrival in Haiphong and one of the containers which was not shipped on the vessel in Hong Kong, but instead did so only against the payment of or security for certain charges and extra fees, which the Plaintiff claims should not have been raised.

The relevant facts

2.  On about 20 July 2008, the plaintiff, Yue Kit Group Limited, which carries out the business of export trading, entered into a contract with a Vietnamese company, Vuhai Company Limited, to ship a quantity of frozen meat from Hong Kong to Vietnam.  The plaintiff engaged Perennial Advance Faction Logistics (China) Limited (“Perennial”), a freight forwarding company, as its shipping agent in respect of the frozen meat.

3.  Between 25 and 30 July 2008, Perennial, acting on behalf of the plaintiff shipper, made bookings with the defendant, SYMS Container Line Agencies (HK) Limited (erroneously named as “SYMS Containers Line Agencies (HK) Limited” in the writ), for the shipment of seven reefer containers from Hong Kong to Vietnam.  Each of these bookings was effected by a document headed “Shipper Order”.  The defendant’s Customer Service Department then issued booking orders to confirm those bookings.  Perennial tendered the booking orders and, on about 1 August 2008, collected seven empty reefer containers from a terminal in Tsing Yi operated by China Merchants Container Services Limited (“CMCS”) into which the frozen meat was loaded for carriage.  After loading, the reefer containers were sealed by the shipper and returned to the terminal, whereupon dock receipts were issued to Perennial. 

4.  Upon tender of the dock receipt and the submission of further information and payment of freight, a bill of lading was issued to the plaintiff in respect of the cargo of frozen meat.  The further information in question included a description of the cargo and its weight, which information was provided by Perennial.  The bill of lading that was issued was numbered No. SYHJVHPV2830005 and dated 1 August 2008.  The carrying vessel named in the bill of lading was the M/V PIRA BHUM.

5.  During the process of loading the cargo on board the vessel on 2 August 2008 at Tsing Yi, one of the reefer containers, namely container No. GESU 9211539, was being moved by a container lifting truck crane.  In the course of being so moved, the lifting truck toppled over forwards so that the container landed on its side in front of the upended lifting truck.  As a result of this both the lifting truck and the container both sustained damage.  An inspection of the damage and a survey was conducted on 2 August 2008.  Since the container was damaged, the cargo contained in it had to be re-loaded into another reefer container.  This new reefer container remained at the cargo terminal at Tsing Yi to await further instructions from the shipper.  It is the defendant’s case that the cause of the accident was the fact that the container was overweight.  The other six reefer containers, having been duly loaded, were carried by the vessel to Haiphong, Vietnam, under a replacement bill of lading dated 2 August 2008 and also numbered No. SYHJVHPV2830005.  Upon arrival of the vessel at Haiphong, these six containers were weighed by the carrier’s local agent.  It is the defendant’s case that they were found to be overweight when weighed.  Accordingly, the six containers were not released pending the payment of further charges in respect of their carriage.

6.  The plaintiff commenced these proceedings on 25 August 2008.  By an inter partes summons dated 27 August 2008, the plaintiff applied for a mandatory injunction requiring the defendant to release the cargo held in Haiphong.  On about 3 September 2008, upon the agreement of the plaintiff’s consignee to pay an additional sum of US$34,050, the six reefer containers situated at Haiphong were released.  On about 4 September 2008, upon the plaintiff’s agreement to treat HK$63,749, being part of a total sum of HK$579,715.29 paid into court by the plaintiff, as security for fees and expenses incurred in respect of the handling of the damaged container, that damaged container was released to the plaintiff in Hong Kong.

The parties’ respective cases and the issues arising

7.  The plaintiff claims that the defendant received the cargo of frozen meat as contractual carrier under the bill of lading and therefore as bailee of the cargo for reward.  The plaintiff claims that the defendant acted in breach of its contractual obligations and in breach of its duties as bailee for reward in refusing (until 4 September 2008) to release the six containers shipped to Haiphong.  It also claims that the defendant acted in breach of contract and in breach of its duties as bailee for reward in refusing to release the goods in the damaged container.  The plaintiff claims to recover the sums it and its consignee were required to pay in order to secure the release of the containers in Haiphong and the damaged container in Hong Kong.

8.  For its part, the defendant denies that it was the contractual carrier under the bill of lading.  Furthermore, the defendant claims that the cargo in the damaged reefer container weighed 36,180 kgs, which was in excess of the permissible limit.  It claims that the carrier was entitled, pursuant to clause 23 of the bill of lading, to exercise a lien on the cargo in the damaged container in respect of the damage caused and other expenses and costs incurred.  It is also the defendant’s case that the charges levied in Haiphong in respect of the six containers discharged from the vessel there were proper overweight surcharges and scale fees.  It is the defendant’s case that the initial refusal to release the cargo in Vietnam did not amount to a breach of contract or duty as bailee because it was justified under a contractual right of lien pursuant to clause 23 of the bill of lading.

9.  The issues therefore arising for determination are:-

(1)     Whether the defendant was the contractual carrier under the bill of lading or bailee for reward in respect of the cargo?

(2)     Whether, if the defendant was the contractual carrier or bailee of the cargo, it was entitled to exercise a lien over the cargo pursuant to clause 23 of the bill of lading?

(3)     Whether the defendant is liable to the plaintiff and, if so, for what damages?

The first issue: was the defendant the contractual carrier or bailee for reward?

10.  This issue is an issue of first importance.  If the defendant was not the contractual carrier under the bill of lading, it must follow that there was no contractual duty on its part of which it can be said to have been in breach by reason of the facts alleged in the Amended Statement of Claim.  Nor, if it was merely acting as agent for another party as contractual carrier under the bill of lading, would the defendant have been a bailee for reward in respect of the cargo.

11.  The plaintiff accepts that the defendant is not named as carrier under the bill of lading.  Instead, the plaintiff accepts that Shandong Province Yantai International Marine Shipping Company (“SYMS”) is named as the carrier.  However, the plaintiff suggests, in its counsel’s written opening submissions, that the defendant’s principal, SYMS, was only identified “at the very last moment when the Bill of Lading was issued”.  The plaintiff contends that the previous communications including the shipper orders and booking confirmations were all between the plaintiff and the defendant so that the defendant is the proper party to the contract in this case and is therefore in fact the carrier.  In the opening submissions for the plaintiff, it is suggested that even if the defendant were acting as an agent it might be liable on a “side contract or collateral contract” and that, given the course of dealings between the plaintiff and defendant, it can be inferred that it was the parties’ intention that the defendant would be liable even if it were merely the agent of SYMS.

12.  In my judgment, the plaintiff’s case on this issue does not withstand analysis.  There can be no doubt that the defendant was in fact an agent acting for and on behalf of SYMS as its principal.  The defendant had entered into an agency agreement with SYMS dated as of 1 April 2008, whereunder SYMS appointed the defendant as its general agent for all its owned and/or chartered vessels including any slots or space charter agreement serving various countries in Southeast Asia and all other services involving the port of Hong Kong.

13.  It is trite law that when an agent makes a contract with a third party, purporting to act solely on behalf of a disclosed principle, whether identified or unidentified, he is not liable to the third party on that contract: see Bowstead and Reynolds on Agency (18th Ed, 2006) Article 97, at paras.9-001-9-002. 

14.  It does not matter that the plaintiff may have been unaware that the defendant was acting as agent for SYMS.  What is relevant is the state of knowledge of Perennial, as agent for the plaintiff, since it is not disputed that Perennial was duly authorised to enter into a contract of carriage on behalf of the plaintiff in respect of the cargo.

15.  As to this, the evidence of Mr Yeung Wai Chiu, the defendant’s Assistant General Manager, was that prior to the plaintiff’s shipment, Perennial had dealt with the defendant on between 10 and 20 transactions over a period of about two years.  This evidence was not challenged by the plaintiff.  The evidence of the previous dealings between Perennial and the defendant included documents relating to a previous shipment on board the vessel MV ALICE, which involved similar documents and procedures.  Mr Chan Chung, counsel for the plaintiff, objected to the admission of these documents relating to that other shipment on the grounds that the issue of Perennial’s knowledge arising from the course of dealing was not pleaded so that these documents were irrelevant.  I disagree.  The plaintiff itself pleaded that it entered into the contract of carriage evidenced by the bill of lading via Perennial as its forwarding agent.  Perennial’s state of knowledge as to the capacity in which the defendant was acting is therefore material and this, in my view, renders the disputed documents relevant and therefore admissible.

16.  This is not a matter of imputation of an agent’s knowledge to its principal.  Rather, as Hoffmann LJ (as he then was) pointed out in El Ajou v. Dollar Land Holdings plc & another [1994] 2 All ER 685 at 702c-g, the agent’s knowledge affects the terms or performance of the contract which he concludes on behalf of his principal.  Thus, to cite one of the examples there referred to by Hoffmann LJ, in Dresser v. Norwood (1864) 17 CBNS 466 (144 ER 188), the agent was authorised to enter into a contract for the purchase of wood.  His knowledge that the vendor was a factor dealing for a principal was held sufficient to enable the contract to be treated as made with the principal and so preclude the purchaser from relying on a set-off against the factor.  In the same way, in the present case, Perennial’s knowledge that the defendant was acting as an agent only for SYMS is the basis for treating the contract as one made between the plaintiff and SYMS and not with the defendant.

17.  I therefore turn to consider what must have been clear to Perennial from the documents generated in respect of this particular shipment and also the previous course of dealing, including the shipment on board the MV ALICE.  In the present case, I accept and find as a matter of fact that, in concluding the contract on behalf of SYMS, the defendant had disclosed to Perennial, as agent for the plaintiff shipper, that it was acting as agent solely on behalf on its principal, SYMS.  In this regard, the evidence is, in my opinion, very clear.

18.  First, each of the shipper orders submitted by Perennial to the defendant contained the following express provision: “Carriage of cargo is subject to the terms and conditions of the Carrier’s Bill of Lading and the applicable tariff”.  The reference to the “Carrier” in the shipper orders can be contrasted with the reference in the same document to “the Company”: the latter clearly refers to the defendant and this, in my view, at least put Perennial on notice that the carrier under the bill of lading would be a different party.

19.  Secondly, and, in my opinion, critically on this issue, the bill of lading issued in respect of the shipment clearly defines and identifies SYMS as the carrier.  This fact was common ground. 

20.  Thirdly, the invoice issued by the defendant to Perennial dated 2 August 2008 in respect of the shipment expressly states: “As agents only for SHANDONG PROVINCE YANTAI INT’L MARINE SHIPPING CO.”  Whilst that document post-dates the conclusion of the contract of carriage, as noted above there is evidence that Perennial had booked shipping space through the defendant previously on board the M/V ALICE and had received an invoice dated 14 June 2008 containing the same statement.

21.  It was faintly suggested by Mr Chan that, despite the express reference to the bill of lading terms in the shipper order and the definition of the carrier in the bill of lading, the fact that the booking confirmation did not contain any qualification suggesting the defendant was only acting as agent suggested the defendant was itself bound by a contract of carriage in respect of the cargo in question.  In my opinion, there is no merit in that suggestion whatsoever.  The booking confirmation was simply one step in the process whereby the contract of carriage was concluded.  Looking at the evidence as a whole, referred to above, it is plain, in my opinion, that the contract was made by the defendant as agent only for SYMS.

22.  For the above reasons, I conclude on the first issue that the defendant was not the contractual carrier under the bill of lading or bailee for reward in respect of the cargo.  I would add that the suggested side or collateral contract is neither pleaded nor supported by any evidence and I reject the plaintiff’s contention that such a contract came into existence.

The second issue: if the defendant was the carrier of the goods, was it entitled to exercise a lien over them?

23.  My conclusion on the first issue is sufficient to dispose of this case in favour of the defendant.  However, since the second issue was argued, I propose also to state my conclusion on it.

24.  Under the terms of the bill of lading, the plaintiff, as shipper, made certain warranties regarding the goods to be carried and accepted responsibility for the particulars relating to the goods as set out on the front of the bill of lading and also agreed to indemnify the carrier against loss, damage or expense arising or resulting from inaccuracies in those particulars.  The relevant clauses are set out below:-

“3) WARRANTIES.

The Merchant represents, warrants and agrees that:

(a)        The Goods and any Container loaded by the Merchant are packed and secured in such a manner as to be handled in the ordinary course of transportation without damage to the Goods, Vessel, Containers or other property or persons …”

“13) MERCHANT’S RESPONSIBILTY AND INDEMNIFICATION.

…

2.      The Merchant further warrants to the Carrier that the particulars relating to the Goods as set out on the front of this Bill of Lading have been checked by the Merchant on receipt of this Bill of Lading and that such particulars and any other particulars furnished by or on behalf of the Merchant and are adequate, accurate and correct …

3.      The Merchant shall indemnify the Carrier against all loss, damage and expenses arising or resulting from inaccuracies in or inadequacy of such particulars …”

“15) MERCHANT-PACKED CONTAINERS.

1.      If a Container has not been filled, packed, stuffed or loaded by the Carrier, the Carrier shall not be liable for loss of or damage to the contents and the Merchant shall indemnify the Carrier against any loss, damage, liability or expense incurred by the Carrier, if such loss, damage, liability or expense has been caused by:

(a)     the manner in which the Container has been filled, packed, stuffed or loaded; …”

25.  It was not in dispute that the containers in the present case were loaded by or on behalf of the plaintiff as shipper.  Each of the shipper orders submitted by Perennial on behalf of the plaintiff contained a notation stating: “SHIPPER CONFIRM THE RF WOULD NOT OVER 34MT AND THEY PROVIDE THE L/G.  PLEASE ACCEPT THT SHIPPER DOES NOT PROVIDE MEASURED RECEIPT.” Furthermore, in an e-mail from Perennial to the defendant dated 1 August 2008, containing shipping instructions, the instructions in question stated the weight of each of the seven containers to be 28,000 kgs.  This weight was used to calculate the gross weight of the seven containers as stated in the original bill of lading relating to the seven containers, namely 196,000 kgs.

26.  The evidence adduced in the present case by the defendant includes a survey report compiled by Hench Public Marine & Cargo Survey (H.K.) Ltd.  dated 4 August 2008 on behalf of the defendant.  This evidence is that the damaged container contained a weight of cargo of 36,180 kgs. 

27.  Hench’s survey report expressed the opinion that the cause of the plaintiff’s container toppling over when it was being lifted by the lifting truck “could be attributed to the over-weight/over-loaded of cargo inside the container”.

28.  A survey report dated 5 August 2008 was also prepared by Delta Marine Services Ltd. on behalf of CMCS, the operator of the container terminal at Tsing Yi.  That report assessed the weight of the damaged container to be 40,910 kgs.  Delta also expressed the opinion that the lifting truck toppled over because the container was in excess of the maximum weight limit of the lifting truck.

29.  As a result of the toppling over of the lifting truck and the damage to the container, claims and charges were incurred.  By a letter from the defendants to Perennial dated 5 August 2008, the defendant advised perennial that CMCS, the terminal operator, was claiming repairing charges for the lifting truck and various other fees and expenses and that the defendant was claiming repairing charges for the damaged container as well as other fees and expenses.  The total amount of the claims was HK$515,966.29.

30.  Subsequent to the arrival of the vessel at Haiphong, arrangements were made to weigh the six containers which had been discharged there.  Instead of their declared weight of 28,000 kgs each, the six containers were respectively found to weigh from 35,400 kgs to 41,140 kgs.

31.  The Carrier was accordingly entitled to charge an overweight fee of US$3,000 and a scale fee of US$110 in respect of each of the six containers.

32.  None of the facts set out in paragraphs 25 to 31 and above were subject to any or any substantive challenge by the plaintiff.  In the course of the evidence of Madam Tsang Yuen Mui, the shipping general manager of the plaintiff, she suggested that she had been told by a surveyor engaged by the plaintiff to be present when the damaged container was surveyed at the container terminal in Tsing Yi that the accident was caused by the driver of the lifting truck braking suddenly and by the uneven ground at the container terminal.  However, no surveyor was called to substantiate these alternative or additional causes of the accident and no survey report was adduced by the plaintiff.  I therefore find that the cause of the accident and the damage to the container and the lifting truck was the fact that the container in question was overweight.

33.  The relevant clause of the bill of lading governing the carrier’s lien provides as follows:-

“23) LIEN.

The Carrier shall have a lien on the Goods and any document relating thereto, which shall survive delivery, for all sums earned or due or payable to the Carrier under this and/or any other contract with the Merchant, or on account of the Goods or carriage, storage or handling of the Goods, including but not limited to, general average contributions, freight, delivery, destination, demurrage, detention, port and/or handling charges, to whomever due and/or for the cost of recovering the same and/or any fines or penalties levied against the Carrier by reason of any acts or omissions for which the Merchant is responsible.  Carrier may at its sole discretion exercise its lien at any time and at any place, whether the contractual transportation is completed or not.  For the purpose of such lien the Carrier shall have the right to sell the Goods, by public auction or private treaty without notice to the Merchant at any time and at any place at the sole discretion of the Carrier.  The Carrier shall be entitled to claim the difference in the event that the sale proceeds fail to cover the full amount due to the Carrier.”

34.  In the opening submissions of the plaintiff, it was submitted that the words in the above clause “all sums earned or due or payable to the Carrier” should be construed as sums representing remuneration for service and that “on account of the Goods, or carriage, storage or handling of the Goods, …” should be construed as expenses for managing the goods themselves for the purpose of their carriage.  It was submitted that fines or penalties were different from damages and that if the parties intended that damages suffered by the carrier due to fault on the part of the shipper were to be covered by the lien, it would have been quite simple to include the words “damages and loss”. 

35.  I reject the plaintiff’s argument in this regard.  Clause 23 falls to be construed in accordance with its natural and ordinary meaning.  In my judgment, the sums claimed in respect of the damaged container and the damage to the lifting truck, arising as a result of the plaintiff misstating the weight of the cargo on the bill of lading and submitting containers which exceeded the stipulated weight limit, constituted sums “due or payable to the Carrier under this and/or any other contract with Merchant”.  Similarly, in my judgment, the overweight fees and scale fees for the other six containers constituted sums “due or payable to the Carrier under this and/or any other contract with the Merchant” and/or “due or payable to the Merchant … on account of the Goods or carriage, storage or handling of the Goods”.

36.  I would add, for the sake of completeness, that an argument was alluded to in the witness statement of Madam Tsang, the plaintiff’s shipping general manager, that the carrier should not have detained all the containers in the exercise of the lien, since the value of the goods in total was worth HK$4 million, which was far in excess of the sums claimed and in respect of which the lien was being exercised.  I reject this argument also.  First, it has not been pleaded by the plaintiff.  Secondly, I do not see any basis for construing clause 23 as being restricted as to the amount or value of the goods over which the carrier is entitled to exercise a lien.

37.  In the circumstances, if, contrary to my conclusion on the first issue, I had concluded that the defendant was the contractual carrier, I would have held that the initial refusal to release the cargo was justified by the carrier’s exercise of a lien over the goods pursuant to clause 23 of the bill of lading.

The third issue: whether the defendant is liable to the plaintiff and, if so, for what damages

38.  In the light of my conclusions on the first two issues, it follows that, in my judgment, there is no liability on the part of the defendant to the plaintiff as claimed in this action.  The question of damages due from the defendant of the plaintiff does not therefore arise.

Disposition, costs and miscellaneous matter

39.  I therefore dismiss the plaintiff’s claim against the defendant in this action.  I make an order nisi that the plaintiff pay the costs of the action to the defendant, to be taxed if not agreed.

40.  One final matter addressed in submissions concerned the sum paid into court by the plaintiff on 2 September 2008.  Mr Chan admitted that, even if the plaintiff’s claim were to fail, it would be entitled to an order that it be paid out to the plaintiff.

41.  For her part, Ms Ho, counsel for the defendant, submitted that the money presently paid into court should be paid out to the defendant in the event that it prevailed on the issue of the lien, i.e. the second issue addressed in this judgment.  She submitted that the payment into court was made pursuant to an agreement between the parties that upon its being made the defendant would procure its principal to release the goods to the plaintiff’s consignee.  She submitted, therefore, that, having regard to the nature and purpose of the payment into court, which was not expressed to be in satisfaction of any cause of action, it was intended that the Court should make an order in respect of that sum dependent on its determination of the lien issue.  She went further and submitted that the payment out should be ordered by way of security for costs, even if the first issue were decided in favour of the defendant, on the footing that the Court had a discretion to do what is just and equitable in the circumstances.

42.  I decline to order payment out of the sum presently paid into court to the defendant.  At the time of the payment in, there was no pleaded claim by the defendant in respect of the lien.  It could not therefore be said with certainty that the payment out of the monies was to abide the result of that issue.  Furthermore, insofar as the payment in represents security for various claims, those claims are claims to be advanced by the contractual carrier and not by its agent, the defendant.  There is no apparent reason why it would not have been open to SYMS, as contractual carrier, to seek to join this action and to raise a counterclaim in order to recover any sums due and owing to it from the plaintiff.  I do not know why such a counterclaim was not made and I express no opinion on what the outcome of such a counterclaim by SMYS would have been.  However, given my conclusions on the issues dealt with in this judgment, I do not think it would be right for me to make an order which, in effect, would result in the award of a sum of damages due to SYMS to another party.

43.  I propose to order that the sum paid into court by the plaintiff be paid out to the plaintiff.  However, in case the defendant or its principal, SYMS, takes the view that it would be prejudiced by reason of the payment out so that it would be minded to make some form of application in respect of those monies (as to the merits of which I express no view), I propose to direct that the order for payment out should only take effect 28 days after the handing down of this judgment.