KAI MIN FASHION (HK) LTD v. FOND EXPRESS LOGISTICS LTD AND ANOTHER

HCCL 20/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 20 OF 2011

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AND

HCCL 21/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 21 OF 2011

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(Heard together)

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J U D G M E N T

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INTRODUCTION

1. The Plaintiffs in these two actions (“Kai Min” in HCCL 20 of 2011 and “Sino Trifone” in HCCL 21 of 2011) sold various garments to a US buyer, Malcolm & Co LLC (“Malcolm”) on “D/P” (document against payment) or “D/P at sight” terms.

2. The Plaintiffs shipped the garments in Hong Kong pursuant to a number of bills of lading issued for and on behalf of the 2^nd Defendant, a freight forwarder based in Los Angeles.  The bills (14 in relation to Kai Min and 5 in respect of Sino Trifone) named the Plaintiffs as shipper; CIT Group (which I understand was Malcolm’s banker/financier) was named as consignee; and C-Air International Inc (“C-Air”), the buyers’ US custom broker, as “Notify Party/Intermediate Consignee”.  Malcolm was also named as notifying party.

3. The goods arrived at Los Angeles and were released to C-Air immediately upon arrival without presentation of the originals of the bills of lading.  C-Air released the goods to Malcolm after clearing through US customs.  Malcolm not having paid for the goods, the Plaintiffs commenced these actions for their mis-delivery.

THE APPLICATION

4. In this application, the Plaintiffs seek summary judgment against the 2^nd Defendant.  The Plaintiffs contend that the 2^nd Defendant, having released the goods without presentation of the original bills of lading, has no defence to their claims.

5. The 2^nd Defendant, on the other hand, argues that it has a credible defence to the claim.  In the affidavits of Mr So Chak Chiu, the 2^nd Defendant’s President, it is suggested that since the 2^nd Defendant first handled the Plaintiffs’ shipments to Malcolm (and another US buyer, “San Simeon”) from around December 2007 (in the case of Sino Trifone) and January 2008 (in the case of Kai Min), the arrangement had been that the goods would be released to Malcolm (and San Simeon) “notwithstanding that the original Bills of Lading for the relevant shipment was not ready for presentation”. According to Mr So, the Plaintiffs authorised and consented to this practice.

6. In his affidavits, Mr So describes how the alleged consent/authority from the Plaintiffs came about.  In relation to Kai Min, Mr So claims that in about January 2008, soon after the first shipments reached Los Angeles, a Mr Tim Beare of Malcolm applied to the 2^nd Defendant for the release of the goods, without having to present the original bills of lading.  Mr So then contacted one Mr Kelvin Chui of Kai Min.  Mr Chui was, according to Mr So, the owner/manager of Kai Min (although Kai Min denies that there was a “Kelvin Chui”; only a Mr Kevin Zhu who denies having the alleged conversation with Mr So).  Mr So says that this Mr Chui “without any hesitation” told Mr So that the 2^nd Defendant could release the goods to Malcolm.  The 2^nd Defendant accordingly released the goods to C-Air, which was Malcolm’s (and San Simeon’s) custom broker.  Mr So says that the same practice was followed in over 80 subsequent shipments from Kai Min, and the goods were released to Malcolm without requiring the presentation of the original bills of lading, without the 2^nd Defendant seeking specific instructions from Kai Min on any of those occasions.

7. Mr Eric Jones, a Vice-President of C-Air, provided an affidavit deposing to the same practice in each of the actions.

8. It is therefore said that Kai Min had authorised the release of the goods without the need to present the original bills of lading. Alternatively, it is said that by conduct the Plaintiffs have “waived its right to enforce the terms stipulated in the contract of carriage contained in or evidence by the Bill of Lading” or “acquiesced to the variation” of the terms of the carriage contract.

9. Mr So filed a similar affidavit describing a similar practice in relation to Sino Trifone’s shipments to Malcolm (and San Simeon).  According to Mr So, one Mr Warren Wong on behalf of Sino Trifone gave Mr So the “go ahead” in a conversation that took place in about December 2007.  Thereafter the 2^nd Defendant followed the same practice for some 233 shipments from Sino Trifone.  Mr So also produced an email between Mr Wong and Malcolm dated 7 September 2007 to support his claim.

10. However, the undisputed evidence shows that Sino Trifone was only incorporated in November 2009.  In December 2007, Mr Wong was a director of another company called Trilefone Limited (“Trilefone”).  Indeed, the email dated 7 September 2007 produced by Mr So shows that Mr Wong was acting for Trilefone at the time.

11. I pause to record that originally the 2^nd Defendant also sought to rely on a limitation clause and a time bar clause in the bills of lading.  That ground of defence was not pursued in view of the Court of Final Appeal’s decision in Carewins Development (China) Ltd v Bright Fortune Shipping Ltd (2009) 12 HKCFAR 185 and Stone J’s judgment in Mau Wing Industrial Ltd v Ensign Freight Pte Ltd [2009] 5 HKLRD 240.

DISCUSSION

12. The facts of this case are strikingly similar to those in Star Line Traders Ltd v Transpac Container System Ltd HCAJ 180 of 2008 (unrep, Reyes J, 4 September 2009).  One of the grounds relied upon by the carrier in that case to oppose the shipper’s application for summary judgment was that the shipper had acquiesced in the delivery of the cargoes without production of the relevant bills of lading because on 128 previous occasions goods had been released to the buyer without presentation of the original bills.  It was argued that the shipper had “actual or constructive knowledge” of such deliveries without bills and had waived its right to object by not raising any complaints.

13. Reyes J dealt with that argument in paragraph 7 of the judgment as follows:

“The argument is nonsense. Star Line (the shipper) denies knowledge of the past misdeliveries. But assume that it knew of them. I cannot see how knowledge of the past misdeliveries without making complaint can logically amount to a representation by Star Line that Transpac (the carrier) could in the future misdeliver goods without presentation of a Bill of Lading.”

14. Mr Edward Fan, counsel for the 2^nd Defendant, argues that the present case is distinguishable from Star Line.  He argues that in this case there is evidence showing that the Plaintiffs have consented to the release of the goods without presentation of the bills of lading.

15. I disagree.  The evidence filed on behalf of the 2^nd Defendant shows, at its highest, that Kai Min had consented to the first shipment being released without the original bills of lading.  That could be due to a variety of reasons: for example, Kai Min might have already received payment from Malcolm but the original bills were still in transit.  Further, even if Kai Min had consented to that shipment being released without presentation of the original bills of lading, it does not follow that it must have consented to subsequent deliveries without the original bills.  It would appear that Malcolm (and San Simeon) must have honoured its payment obligations to Kai Min so that there was no need for Kai Min to make any complaint.  But that could not amount to a representation to the 2^nd Defendant that it could deliver future shipments without presentation of the original bills of lading.

16. In relation to Sino Trifone, there is not even evidence of consent.  Mr Fan accepts that there is no evidence that Sino Trifone and Trilefone were connected.  However, he argues that Mr Wong was the common link and I can infer a continuing practice which followed him from Trilefone to Sino Trifone.  I am unable to accept that submission.  There is nothing to show that what Mr Wong might have said to Mr So in December 2007 could be attributed to Sino Trifone, when the latter was not incorporated until almost 2 years later.

17. I also note that the email dated 7 September 2007 produced by Mr So indicates that at the time, Mr Wong (on behalf of Trilefone) agreed to the release of the goods without presentation of the original bills of lading because Trilefone had received payment for the goods in question.  That explains why Mr Wong (on behalf of Trilefone) was prepared to release the goods to Malcolm on that occasion.  But there is no evidence from the 2^nd Defendant that either Plaintiff had received payment in respect of the shipments in question.

RESULT

18. In my view, the present case is indistinguishable from Star Line which I propose to follow.

19. Accordingly, in my judgment, the 2^nd Defendant has failed to show any arguable defence to the Plaintiffs’ claims.  Judgment must be entered in favour of the Plaintiffs as claimed.

20. Interest will be payable on the amounts claimed from the date of the writ to the date of judgment at 1% above US dollar prime rate from time to time.

21. I also make a costs order nisi that the Plaintiffs shall have their costs of the actions and the summary judgment applications, to be taxed if not agreed with certificate for counsel for the hearing.