ARKO SHIP LEASING LTD (formerly known as ARKO SATELLITE LTD) AND ANOTHER v. WINSMART INTERNATIONAL SHIPPING LTD AND ANOTHER

HCAJ 213/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO 213 OF 2009

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JUDGMENT

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I. INTRODUCTION

1.  This action arose out of the sinking of a container feeder barge “Ying Gao 306” (“Vessel”) in Hong Kong waters near Green Island in the afternoon of 30 April 2009. At the time of sinking, there were 49 containers on board fully laden with cargo.

2.  The 1^st Plaintiff is a BVI corporation. Its main business was the carriage of container cargo between Hong Kong and ports in Guangdong, Mainland China. At the material time, it was the charterer of the Vessel under a bareboat charter with the owner Guangdong Yinggao Shipping Limited (“Owner”) and was in possession and control of the Vessel. As a bareboat charterer, it operated the Vessel by employing its own master and crew on board. The Vessel was one of a fleet of vessels chartered by the 1^st Plaintiff for the operation of its business.

3.  The 2^nd Plaintiff is a company incorporated in Hong Kong and belongs to the same group of companies as the 1^st Plaintiff. Prior to 2010, it was the Hong Kong and PRC shipping agent of the 1^st Plaintiff. As agent, it assisted in completing departure and arrival port formalities for vessels chartered by the 1^st Plaintiff as well as collecting and paying shipping charges on its behalf.  At the material time, the 1^st and 2^nd Plaintiffs shared an office at China Resources Building in Wanchai. They also shared staff. 

4.  The 1^st Defendant (“Winsmart”) is also a company incorporated in Hong Kong. Winsmart, together with its associated company incorporated in the PRC (“Winsmart PRC”), were, at the material time, in the business of the carriage of container cargo between Hong Kong and ports in Guangdong. Winsmart/ Winsmart PRC would either use their own chartered vessels to carry the cargo or, if not, would engage other feeder service providers to do so.

5.  The 2^nd Defendant (“Sinokor”) is a Korean company carrying on business as ocean-going cargo carrier. Its Hong Kong agent was at the material time Dongnam Shipping Company Limited (“Dongnam”). By a Connecting Carrier Agreement dated 1 July 2005 (“CCA”), Sinokor engaged Winsmart to provide connecting service between Hong Kong and ports in Guangdong. 

6.  On the 1^st Plaintiff’s case, Winsmart has been its regular customer since 2004. Winsmart denies it had any business dealings with the 1^st Plaintiff.  Instead, it admits its previous business dealings were with the 2^nd Plaintiff.

7.  On 29 April 2009, Winsmart engaged the 1^st or 2^nd Plaintiff to provide feeder service to carry (i) 28 containers of tobacco (“28 containers”) [1] from Huangpu, Guangzhou to Hong Kong [2] and (ii) 20 containers of softwood pulp and 1 container of songnox (“21 containers”) [3] from Hong Kong to Huangpu, Guangzhou. I say the 1^st or 2^nd Plaintiff to emphasise the point that one of the core issues in this case is whether it was the 1^st Plaintiff who contracted with Winsmart to provide the feeder service in question, as the Plaintiffs contend, or whether it was the 2^nd Plaintiff who did so, as Winsmart contends. The answer to this issue can be found in paragraph 63 below.

8.  It is however common ground between the Plaintiffs and Winsmart that two contracts were made on 29 April 2009. The first one (“1^st Contract”) related to the shipment of the 28 containers from Guangzhou to Hong Kong. The second (“2^nd Contract”) related to the shipment of the 21 containers from Hong Kong to Guangzhou (collectively “Contracts”). 

II. THE VESSEL AND THE SINKING

9.  The Vessel was a flat top river trade container ship designed for navigation on the Pearl River Estuary ie in relatively calm sheltered waters. It was single-decked with the navigation bridge at the forward end. It was equipped for the carriage of containers on the main deck only – it had no cargo holds as such. Containers would be placed on the main deck surrounded by a “coaming” ie an upright fence‑like structure around the perimeter of the cargo space of about 1 m high, in effect like an open “bed” on which the containers were placed. There were gangways around the outside of the coaming. There was also a “bulwark” ie an upright fence‑like structure around the perimeter of the Vessel of about 0.6m high. The engine rooms were beneath the main deck. Two deck houses, arranged on either side of the Vessel just aft its mid‑length, provided access to the engine rooms. 

10.  The Vessel’s certified Deadweight Tonnage (“DWT”) and hence its cargo carrying capacity was 1,380 tonnes (“MT”). While this much is common ground between the parties, the Plaintiffs allege that the carrying capacity of 1,380 MT was only applicable to navigation in rivers and lakes on the Mainland. They further allege that the Owner has issued a safety guideline limiting the Vessel’s carrying capacity in Hong Kong coastal waters to 80% of its DWT ie 1,104 MT. This is disputed by Winsmart and Sinokor.

11.  At the time of sinking, the Vessel held a River Trade Seaworthiness Certificate issued by the Guangzhou Sub‑Office, Guangdong Province Ship Safety Bureau. The Certificate was valid until July 2009.

12.  In the morning of 30 April 2009, the Vessel entered Hong Kong waters from Guangzhou with the 28 containers plus 9 containers of other cargo. Upon completion of immigration clearance, it sailed to Tuen Mun River Trade Terminal (“RTT”) to off-load the 9 containers. According to the Plaintiffs, the original plan was to proceed to Hongkong International Terminals (“HIT”) at Kwai Chung to off-load the remaining 28 containers before loading the 21 containers “mid-stream”. However, the Plaintiffs said Ms Sin Kit Hung Emily (“Ms Sin”) called Mr Chan Ping Kwan (“Mr Chan”) in the morning of 30 April 2009, requesting the Plaintiffs to load the 21 containers first, before off-loading the 28 containers, in the course of which Ms Sin misrepresented the gross container weight of the 49 containers to Mr Chan. This is vehemently denied by Ms Sin and Winsmart. Ms Sin said she had never spoken to Mr Chan.

13.  After discharging the 9 containers, Master Pang Cheung Hung (“Master Pang”) of the Vessel said he received a phone call from Mr Leung Ka Yip (“Mr Leung”), the General Manager of the Plaintiffs, instructing him to first sail to North Lamma Anchorage to collect the 21 containers before proceeding to HIT. Master Pang told Mr Leung the loading limit of the Vessel in Hong Kong waters would only be 80% of its DWT ie ~ 1,100 MT and asked Mr Leung to re-confirm the gross container weight of the cargo and then confirm his instructions.

14.  At around 10:30 am, Master Pang received a phone call from Mr Chan. Mr Chan advised him the gross container weight on board would be within 1,100 MT and asked him to proceed to North Lamma Anchorage to load the 21 containers. At about noon, the Vessel arrived at North Lamma Anchorage, moored alongside a barge “Jin Hong 648” and commenced loading.

15.  At about 3 pm, the Vessel finished loading from the barge “Jin Hong 648” and was about to proceed to Kellett Bank No. 2 Anchorage. When the Vessel was manoeuvring away from the barge, there was contact between the port side aft of the Vessel and the starboard side of “Jin Hong 648”. Master Pang instructed the crew to go to the aft deck to check whether there was damage. None was found. Then, the chief engineer went to the engine room at the stern to check for internal damage and also found it intact without water ingress. After reporting to Master Pang, the Vessel set sail to Kellett Bank No.2 Anchorage to wait for indication from HIT in order to off-load the 28 containers.

16.  When the Vessel was approaching the Western Fairway and the route of high speed passenger ferries, the sea was very rough. The waves were reportedly about 2.8 meters high. Master Pang found the Vessel listing towards the port side and instructed the chief engineer to pump the water from the port side ballast tank to the starboard side in order to control the situation. Sea water continued to spill onto the deck at the Vessel’s port side. Master Pang instructed the crew to clear the sea water from the deck. The chief engineer reported that water was entering the port side entrance to the engine room. Master Pang ordered the crew to pump out the sea water from the engine room.

17.  At around 3:40 pm, when the Vessel was near the north west corner of Green Island, the listing became more severe and it gradually submerged by the port side bow. The containers on deck also slided to the port side and dropped into the sea. Master Pang ordered the Vessel to be abandoned. A vessel passed by and rescued the crew. Shortly afterwards, the Vessel sank.

18.  At the time of sinking,

(1) the gross weight of the cargo ie the net weight of the cargo plus packaging (“gross cargo weight”) on board was 1,115.095 MT [4];

(2) the gross weight of the containers ie gross cargo weight plus tare weight of containers (“gross container weight”), on board was 1,297.46 MT [5].

19.  One of the core issues in this case is whether the Vessel sank by reason of overloading.

20.  It should be readily apparent that if the Vessel’s cargo carrying capacity in Hong Kong waters was 100% of its DWT, there was no overloading - the gross container weight of 1,297.46 MT was close to but still within its limit. If the Vessel’s cargo carrying capacity in Hong Kong waters was reduced to 80% of its DWT, there was.

III. THE PLAINTIFFS’ CASE VS WINSMART

21.  The Plaintiffs’ pleaded case against Winsmart can be summarised as follows.

22.  By the 1^st Contract, concluded between Ms Sin, shipping operation clerk of Winsmart, and Mr Chan, operation manager of the 1^st Plaintiff, over the phone, the 1^st Plaintiff agreed to carry the 28 containers plus 9 other containers from Guangzhou to Hong Kong as follows:

(1) 28 containers of tobacco to be unloaded at HIT at Kwai Chung;

(2) 9 containers of other goods to be unloaded at RTT at Tuen Mun.

23.  By the 2^nd Contract, concluded by emails and over the phone between Ms Sin and Mr Chan, the 1^st Plaintiff agreed to carry the 21 containers from Hong Kong to Guangzhou.

24.  The Contracts contained, inter alia, the following implied terms:

(1) The 1^st Plaintiff would charge Winsmart according to the size and number of containers, subject to a gross weight limit of the containers. Containers which exceeded the limit would be subject to a surcharge. Gross weight of a container to be charged by the 1^st Plaintiff included both the tart weight of the container and the cargo inside.

(2) Winsmart must provide accurate information on the gross weight of the containers which would be relied upon by the 1^st Plaintiff for the calculation of charges and the planning of a safe voyage within the loading capacity of the Vessel.

(3) The voyage and the loading arrangement of the Vessel performing the contract of carriage would be arranged at the discretion of the 1^st Plaintiff’s master.

25.  The said terms were implied into the Contracts on the basis of their past dealings and/or as a matter of law in order to give business efficacy to them.

26.  Winsmart misrepresented to the 1^st Plaintiff the gross container weight of the 28 containers under the 1^st Contract and the 21 containers under the 2^nd Contract. 

27.  The misrepresentation was made by Ms Sin on behalf of Winsmart on 29 April 2009 when the Contracts were entered into, or shortly afterwards. The misrepresentation was repeated by Ms Sin in the morning of 30 April 2009 when she called Mr Chan and asked the 1^st Plaintiff to collect the 21 containers from North Lamma Anchorage first before unloading the 28 containers at HIT.  At the request of Mr Chan, Ms Sin confirmed over the phone that the gross container weight of the 28 containers was 537.6 MT and that of the 21 containers was 536.1 MT making a total of 1,073.7 MT. The misrepresentation was repeated by Ms Sin to Mr Leung.

28.  By reason of the misrepresentation, the Vessel was loaded with 49 containers whose gross container weight exceeded her safe and proper capacity. The overloading adversely affected the Vessel’s stability or made it unseaworthy. As a result, the Vessel sank. 

29.  The 1^st Plaintiff claims against Winsmart for (i) the tort of misrepresentation; (ii) breach of the implied terms of the Contracts and (iii) negligence. The common thread of the three causes of action was Winsmart’s failure to provide accurate gross container weight of the 49 containers to the 1^st Plaintiff.

30.  In the event the 2^nd Plaintiff is held to be the proper party to the Contracts, it claims against Winsmart on the basis of the same three causes of action aforesaid.

IV. THE PLAINTIFFS’ CASE VS SINOKOR

31.  First, the 1^st Plaintiff claims that Sinokor, as principal of Winsmart, is vicariously liable for the negligence of Winsmart.

32.  Second, the 1^st Plaintiff claims that Sinokor owed an independent duty of care to it in respect of the weight statements given in Sinokor’s own bills of lading (“B/Ls”). Sinokor has breached its duty of care in that it has negligently understated the gross container weight of the 20 containers of softwood pulp by excluding the tare weight [6]. The inaccurate weight information was passed on by Sinokor’s agent Dongnam to Winsmart and onto the 1^st Plaintiff.  

V. THE DEFENCES

Winsmart

33.  First, Winsmart denies any contractual relationship with the 1^st Plaintiff. Its case is that both Contracts were entered into with the 2^nd Plaintiff.

34.  Second, Winsmart denies making any representation about the weight of the containers other than what was stated in their booking notes [7] provided to the 2^nd Plaintiff and signed and returned by the latter on 30 April 2009. On Winsmart’s case, the “gross weight” in the booking notes stated, by industry practice and to the knowledge of the 2^nd Plaintiff, the gross weight of the cargo only ie the tare weight of the containers was excluded. There was no misrepresentation.

35.  Third, Winsmart contends that the gross container weight of the 49 containers was still below the carrying capacity of the Vessel and that the sinking of the Vessel was not due to overloading. Instead, the sinking of the Vessel and hence the loss of the containers and cargo was caused or contributed by the fault and negligence of the Plaintiffs in failing to (i) properly assess the weight of the cargo, (ii) provide a suitable vessel to safely carry the cargo, (iii) ensure the Vessel was seaworthy and (iv) properly man and equip the Vessel. In this regard, Winsmart contends that the Vessel was not seaworthy and the master and crew were incompetent.

Sinokor

36.  First, Sinokor denies Winsmart was its agent. Rather, Winsmart was a charter service provider to Sinokor. This is said to be supported by the CCA which was drafted as a slot charter rather than an agency agreement and conferred no authority from Sinokor to Winsmart.

37.  Second, Sinokor denies it owed any duty of care to the Plaintiffs under the principles laid down in Caparo Industries Plc v Dickman [1990] 2 AC 605 concerning information in its B/Ls since the Plaintiffs should know Sinokor could not verify the accuracy of weight information supplied to it by its customers and reproduced in the B/Ls and there was an express disclaimer in the B/Ls excluding its responsibility for weight statements. In all the circumstances, there was no proximate relationship between the Plaintiffs and Sinokor and it is not just, fair or reasonable to impose a duty of care on Sinokor.

38.  Third, Sinokor’s B/L for the 28 containers did not reach Winsmart or Plaintiffs before the sinking so the Plaintiffs could not have relied on the weight information in the B/L and the whole cause of action based on breach of duty of care fades away. 

39.  Fourth, there was no misrepresentation by Winsmart or Sinokor.  As a matter of trade practice, only cargo weight, exclusive of container tare weight, would be provided to feeder carriers and the cargo weight information given in the B/Ls was accurate. The Plaintiffs themselves should have added the approximate container tare weight of the 49 containers to the weight information they received.

40.  Fifth, the combined container gross weight of the 49 containers ie 1,297.460MT was still within the DWT of the Vessel ie 1,380MT. The sinking of the Vessel and the loss of the containers and the cargo inside was caused by the Plaintiffs’ own fault, in tandem with Winsmart’s case aforesaid.

VI. COUNTERCLAIMS

41.  Winsmart counterclaims against the Plaintiffs for damages and an indemnity for its actual or potential liability, to Sinokor and/or container and cargo interests, in respect of (i) claims for the loss or damage to the containers and the cargo; (ii) claims for any other loss or damage arising out of the sinking of the Vessel; and (iii) all costs and expenses incurred or to be incurred.

42.  Winsmart’s counterclaim is premised on the fact that (i) the 2^nd Plaintiff (or, if this court so finds, the 1^st Plaintiff) was the contracting carrier entrusted with delivery of the cargo in question and was under a duty to take care of and safely deliver the cargo; (ii) the 2^nd or 1^st Plaintiff, as bailee, was under a duty to take reasonable care of the cargo and to deliver up the same in the same good order and condition as received; (iii) the 2^nd or 1^st Plaintiff was a sea carrier and therefore strictly liable for the loss of cargo during the carriage.

43.  Sinokor contends that the Plaintiffs are liable as bailees and/or carriers for reward for the loss of the 49 containers and the cargo inside. It counterclaims against the Plaintiffs for the loss of the containers, sums paid under HCAJ 252 of 2009, an indemnity in respect of its actual or potential liability to container and cargo interests in connection with the sinking and damages.

44.  Pausing here, I would observe that, since on the parties’ case, Winsmart only contracted with either the 1^st or the 2^nd Plaintiff, it seems to this court only one of them can be held liable for breach of contract. This much is accepted by Winsmart in its pleadings. As I said earlier, the answer to this core issue can be found in paragraph 63 below. Further, on the evidence, only the 1^st Plaintiff was the bareboat charterer in possession and control of the Vessel. It is thus difficult to see how the 2^nd Plaintiff can also be held liable as bailee of the containers or cargo, or, a fortiori, strictly liable for them.

VII. THE CORE ISSUES

45.  For reasons which need not be gone into in this judgment, in  the morning of 10 October 2014, this court formally ordered the trial be confined to the issues of liability on the Plaintiffs’ claims and the Defendants’ counterclaims, and adjourned all questions of assessment of damages until after the handing down of judgment on liability. 

46.  The core issues on liability before this court are:

(1) Whether the Contracts were entered into between Winsmart on the one hand and (i) the 1^st Plaintiff or (ii) the 2^nd Plaintiff on the other? (“1^st Issue”)

(2) Whether in 2009 there was a well-known and common trade practice in the business of container cargo transport between Hong Kong and Guangdong ports that the cargo weight declared by shippers to feeder carriers was inclusive of the tare weight of the containers (as the Plaintiffs contend) or exclusive of it (as the Defendants contend)? (“2^nd Issue”)

(3) Whether a term should be implied into the Contracts on the basis of past dealings that Winsmart must provide accurate information on gross container weight to the 1^st or 2^nd Plaintiff? (“3^rd Issue”)

(4) Whether a term that Winsmart must provide accurate information on gross container weight to the 1^st or 2^nd Plaintiff should be implied into the Contracts in order to give them business efficacy? (“4^th Issue”)

(5) Whether Winsmart misrepresented the gross container weight of the 49 containers to the 1^st or 2^nd Plaintiff? (“5^th Issue”)

(6) Whether Sinokor owed a duty of care to the 1^st or 2^nd Plaintiff and breached it by misrepresenting the gross container weight of the 49 containers to the 1^st or 2^nd Plaintiff? (“6^th Issue”)

(7) Whether Sinokor, as principal of Winsmart, was vicariously liable for Winsmart’s tortious act ie misrepresentation on weight to the 1^st or 2^nd Plaintiff ? (“7^th Issue”)

(8) What was the cause of sinking of the Vessel? (“8^th Issue”)

VIII.  THE FACTUAL WITNESSES – GENERAL OBSERVATIONS

47.  Each of the parties called one witness to testify at the trial.[8]

(1) The Plaintiffs called Mr Leung.

(2) Winsmart called Ms Sin.

(3) Sinokor called Mr Ngai Kut Cheung David (“Mr Ngai”), import manager of Dongnam at the time of his witness statement.

48.  I have carefully considered the testimony, as well as the demeanour, of all three witnesses, and assessed it against the documentary evidence and the known and undisputed surrounding circumstances of this case.  I have in particular considered the inherent probabilities or otherwise of the parties’ respective contentions, and assessed the witnesses’ credibility accordingly. 

49.  I find Ms Sin a truthful witness.  She gave her evidence clearly and calmly and her response to questions was mostly direct. Her credibility has withstood the test of cross-examination. 

50.  Mr Ngai’s evidence was not controversial, save for the practice concerning declaration of weight by shippers/ consignors. His witness statement was confined to (i) Dongnam’s relationship and dealings with Sinokor; (ii) Dongnam’s dealings with Winsmart; (iii) Sinokor’s and Dongnam’s documentation; (iv) events after the sinking. His evidence was not shaken in cross-examination. I find him by and large a truthful witness.

51.  I find Mr Leung’s testimony not entirely reliable.

52.  Mr Leung was quite prepared to testify on matters of which he clearly had no personal knowledge. A good example concerns the 1^st Plaintiff’s Shipping Orders dated 29 and 30 April 2009 issued to Winsmart (“Shipping Orders”). The Shipping Orders were signed by Mr Chan. Mr Leung said in his statement that he “understand[s] the Shipping Orders were sent by hand to the 1^st Defendant’s office in Bonham Strand West, Sheung Wan”. The Shipping Orders purported to show the existence of business dealings between the 1^st Plaintiff and Winsmart and hence supportive of the Plaintiffs on the 1^st Issue. On the evidence, Mr Leung was not the person who arranged for the preparation of these Shipping Orders or their despatch. On the evidence, that person was Mr Chan (who was not available at trial), as admitted in his witness statement. Nonetheless, Mr Leung gave evidence on the subject, in his witness statement and in court.

53.  Worse still, these Shipping Orders were issued in the 1^st Plaintiff’s current name viz Arko Ship Leasing Limited. On the undisputed evidence, the 1^st Plaintiff was still trading in its former name viz Arko Satellite Limited back in April 2009 – the change of name only took place on 25 June 2009. Mr Leung’s only explanation for this anomaly was that “may be Mr Chan had been using the forms newly provided by the company”. This court finds that answer wholly speculative, if not disingenuous.

54.  In his closing submissions, Mr Bartlett was highly critical of Mr Leung’s reliability as a witness. He submitted to this court that Mr Leung had adopted the role of a champion of the Plaintiffs’ cause across all aspects of the case, irrespective of whether he was in a position to testify on some of those aspects. In particular, he said Mr Leung’s attempt in his supplemental witness statement (which this court has rejected) to present himself as a purported expert on various matters is something the court should not overlook:

(1) Mr Leung sought to give evidence on the meaning of PRC statutes when he was not a PRC lawyer and was in no way qualified to do so.

(2) Mr Leung sought to give evidence on the seaworthiness issues, when he had shown no basis for being qualified to do so.

55.  In my view, there is considerable force in that submission. Further, I find Mr Leung quite prepared to embellish his testimony to suit the Plaintiffs’ case, even in face of contrary documentary evidence. Examples will be given when the various core issues are canvassed below.

IX. 1^st ISSUE

56.  As expected, the evidence adduced by the Plaintiffs and Winsmart on this issue contradicts one another.

57.  Mr Leung confirmed that Winsmart had been a regular customer of the 1^st Plaintiff since 2004. He said Mr Chan, whom the Plaintiffs said negotiated the Contracts with Ms Sin, reported to him. Prior to 2009, as an internal arrangement, the 1^st Plaintiff would let the 2^nd Plaintiff handle the documentation of its shipping business like arranging vessels, issuing invoices and preparation of some accounting documents. From early 2009 onwards, the 1^st Plaintiff started to play a larger role in the business. In the witness box, Mr Leung also said the 1^st Plaintiff made use of the 2^nd Plaintiff to “do the communications” which this court took to mean communications with outsiders.

58.  On the other hand, Ms Sin told this court Winsmart had never dealt with the 1^st Plaintiff – all along, it only engaged the 2^nd Plaintiff as its sub‑contractor for feeder services between Hong Kong and Guangdong ports. She also confirmed that she had never been informed that the 2^nd Plaintiff was acting as agent for the 1^st Plaintiff or that the 1^st Plaintiff was the bareboat charterer of the Vessel.

59.  As for documentary evidence, both sides have produced some documents in support of their case. The invoices and statements, for instance, were consistently issued by the 2^nd Plaintiff to Winsmart. These tend to support and explain Ms Sin’s strong belief that Winsmart was all along dealing with the 2^nd Plaintiff only. The Plaintiffs were able to point to a number of Shipping Orders issued in 2008 and 2009 by the 1^st Plaintiff and addressed to Winsmart who denied having received them. There were also two letters of the 1^st Plaintiff addressed to Winsmart dated 22 December 2008 and 25 March 2009 regarding adjustment of freight charges. Similarly, Winsmart denied having received them.

60.  It seems to this court reasonably clear that for some years prior to the incident in question, the Plaintiffs have been jointly carrying on feeder business between Hong Kong and Guangdong ports under the name “Arko”. They shared office together and they had common staff. Mr Leung, for instance, was the general manager of both Plaintiffs. Mr Chan, in addition to being the operation manager of the 1^st Plaintiff, was also a director of the 2^nd Plaintiff. The 1^st Plaintiff was the charterer and the actual operator of the feeder vessels, including the Vessel. This is supported by the bareboat charter in respect of the Vessel which was entered into between the Owner and the 1^st Plaintiff. The 2^nd Plaintiff, on the other hand, performed the role of a shipping agent. This is borne out by a letter of authorisation dated 29 December 2008 by which the 2^nd Plaintiff was appointed the 1^st Plaintiff’s shipping agent with a variety of duties. Such duties included inter alia the issue of invoices to customers such as Winsmart and making declarations to Hong Kong Customs for the import of dutiable commodities such as the 28 containers of tobacco.

61.  This sort of arrangement is not uncommon in the shipping industry and makes business sense. Since this is a matter of the Plaintiffs’ internal arrangement, it is not something that Winsmart was in a position to refute. But equally, there is no evidence that the Plaintiffs had informed Winsmart of such internal agency arrangement and, indeed, there was no reason for them to. I accept Ms Sin’s evidence that she was not aware that the 1^st Plaintiff was the bareboat charterer and the actual operator of the Vessel. There is no evidence that any one else within Winsmart was.

62.  On the basis of the above findings, the 1^st Issue can be dealt with as a case of the 1^st Plaintiff being the undisclosed principal of the 2^nd Plaintiff in its dealings with Winsmart. The established legal position is that an undisclosed principal may sue or be sued on a contract made on his behalf by his agent acting within his actual authority. Further, where an agent enters into a contract without reference to the agency, evidence is admissible to show who the real principal is: Bowstead & Reynolds on Agency 20^th Ed. para. 8-068 – 8-069; Siu v Eastern Insurance Co Ltd. [1992] 2 AC 199, 207.

63.  While Winsmart might consider itself dealing at all times with the 2^nd Plaintiff as principal, in fact and in law, the latter was acting as agent on behalf of the 1^st Plaintiff. If so, as a matter of legal analysis, the Contracts were entered into between Winsmart and the 1^st Plaintiff who can sue and be sued on them. That answers the 1^st Issue.

X. 2^nd AND 3^rd ISSUES

Preliminary

64.  To start with, it is accepted by Mr Bartlett for Winsmart, advisedly in my view, that shippers must declare weight accurately to feeder carriers. But that begs the question: what is the weight which should accurately be declared – gross cargo weight or gross container weight?

65.  In the present case, there is no evidence that, specifically in relation to the Contracts, the 1^st Plaintiff and Winsmart have expressly agreed on which weight should be declared by Winsmart. Instead, all parties have asserted the existence of a trade practice concerning the declaration of weight by shippers to feeder carriers for container cargo carriage between Hong Kong and Guangdong ports.

66.  It should be noted that, in this regard, there are three possibilities:

(1) The existence of a clear and common practice of including the container tare weight in shippers’ declarations of weight, as pleaded by the Plaintiffs and supported by the evidence of Mr Leung. 

(2) The existence of a clear and common practice of excluding the container tare weight in shippers’ declarations of weight, as pleaded by Winsmart and supported by its expert Mr Cheng. Sinokor’s expert Captain Fung was only prepared to opine on the practice vis-à-vis Sinokor, as shipper, and Winsmart, as feeder carrier which was to declare only the gross cargo weight, and not the gross container weight.

(3) No clear practice either way, which was the preponderance of the evidence of the Plaintiffs’ expert Mr Bliault, although the conclusions in his report were drafted in terms which negated a clear and common practice of excluding tare weight.

67.  As for the 3^rd Issue, a term may be implied into a contract from the circumstances of the parties having consistently on previous similar occasions adopted a particular course of dealing: Chitty on Contracts 31^st Ed. Vol. 1 para. 13-023. In this regard, the Plaintiffs have pleaded that in the past, Winsmart would supply gross container weight of the cargo when making enquiries with the 1^st Plaintiff about the availability of feeder services and a term should be implied into the Contracts that Winsmart must provide accurate gross container weight.

68.  Strictly speaking, the 3^rd Issue is a separate issue from the 2^nd Issue ie trade practice. However, since both the 1^st Plaintiff and Winsmart were in the Hong Kong/Guangdong feeder business, their past dealings would in my view also shed light on the existence or otherwise of the alleged trade practice and can conveniently be dealt with together.

69.  For reasons set out below, it appears to this court the difficulties of the Plaintiffs’ case on trade practice and past dealings are manifold. I shall deal with them in reverse order.

Past Dealings

70.  I shall start with Mr Leung’s testimony.

71.  His evidence was that Winsmart had been a regular customer of the 1^st Plaintiff since 2004 and the two had many dealings. He said the 1^st Plaintiff relied on Winsmart to provide gross container weight. It was always the 1^st Plaintiff’s practice, as well as the practice in the industry, to charge its customers a flat rate, but if the gross container weight exceeded certain limits, in accordance with gross container weight. Different gross container weight limits applied to different types of containers and a surcharge would be levied if the limits were exceeded.

72.  Mr Bell SC submitted that the Plaintiffs’ case is supported by a number of the 1^st Plaintiff’s Shipping Orders including those issued in respect of the Contracts. These Shipping Orders all contain a column for “Gross Container Weight” (總箱重). 

73.  The existence of the 1^st Plaintiff’s practice of charging by gross container weight is also said to be evidenced by two letters from the 1^st Plaintiff to Winsmart in December 2008 and March 2009 notifying the latter of adjustment to the freight charges, as referred to in paragraph 59 above. Finally, the Plaintiffs’ case is said to be supported by a fax copy of Winsmart’s written plan for the 28 containers which referred to “total  cabinet weight” or “total box weight”. I take that to mean gross container weight.

74.  However, as Mr Bartlett pointed out, the history of dealings between the Plaintiffs and Winsmart did not reveal any invoice on freight based on gross container weight, let alone a consistent pattern of it. On the contrary, the invoices showed that freight was charged per container, without reference to weight. There were variations to the freight charged depending on the type of containers in question and whether they were laden or empty. Further, higher freight applied to containers carrying frozen goods or dangerous goods. Given that the Plaintiffs and Winsmart have been dealing with each other on many occasions since 2004, this lack of documentation is rather surprising if there is any truth in the Plaintiffs’ case on past dealings.  

75.  Further, the handful of documents relied upon by the Plaintiffs do not really show a pattern of them requiring Winsmart to declare gross container weight at the time of booking.

76.  Take, for instance, the 1^st Plaintiff’s Shipping Orders which contained a column for “gross container weight”. These are the Plaintiffs’ own documents and prepared by their own staff. There is no evidence that Winsmart was required to fill in the blanks in these Shipping Orders at the time of booking. Moreover, as Mr Leung himself acknowledged, because of the “urgent” nature of the shipping business, the Shipping Orders might not always be prepared in time before the completion of the carriage, and once the carriage was completed, it would be more important for the staff to invoice the customers. This is understandable. The voyage between Hong Kong and Guangzhou is short. As stated in Mr Chan’s witness statement, because of the short voyage, customers including Winsmart would usually book the Plaintiffs’ service just one or two days in advance. The Contracts, for instance, were arranged over the phone and by email on 29 April, the day before the incident. Hence, most of the time, the 1^st Plaintiff would only issue shipping orders to customers, if at all, after completion of the voyage.

77.  For these reasons, in my view, the Shipping Orders do not support the alleged practice of requiring shippers like Winsmart to provide gross container weight to enable the Plaintiffs to determine the surcharge payable or plan a safe voyage, as contended by them. 

78.  The Plaintiffs also relied on one email dated 29 April 2009 from Ms Sin in relation to a different shipment on board “Emilia Schulte” in which she stated the weight given ie 385MT was exclusive of the tare weight of containers. Mr Bell SC submitted in effect that the email represented the occasional exception which proved the alleged practice. I am unable to accept that submission - the email is just as compatible with the practice being what the Defendants contended or with there being no consistent practice at all.

79.  As for the two freight rate adjustment letters from the 1^st Plaintiff to Winsmart in December 2008 and March 2009, the relevant 3^rd column in each table did not refer to gross container weight as such, but only “gross weight limit (kg)”.

80.  Importantly, the Plaintiffs’ case is contradicted by Ms Sin’s evidence. Her testimony was that Winsmart would only provide gross cargo weight to the 2^nd Plaintiff, which information was in turn supplied by Winsmart’s customers, normally in the form of ocean B/Ls. It would then be up to the 2^nd Plaintiff to decide whether or not to accept the instructions. Ms Sin said this was in line with industry practice. As for freight, Ms Sin was adamant that it was based on the agreed unit rate per container and varied according to inter alia the type of container and whether it was empty or not. It was never based on weight. In particular, she explained it was not practicable to charge freight by reference to weight since it was not possible for the parties to weigh the cargo every time prior to acceptance of instructions.

81.  I accept Ms Sin’s testimony in this regard as truthful.

82.  Given the relatively short time frame within which these feeder services between Hong Kong and Guangzhou were arranged, it would be highly cumbersome if not wholly impractical for service providers like the Plaintiffs to add a surcharge to the freight by reference to weight. I would not go so far as to say that is impossible – just very improbable. In particular, charging by reference to weight would only be feasible if the Plaintiffs had ready access to weighing facilities in order to verify the weight declared by shippers, as to which there is no evidence. If the Plaintiffs regularly weighed the cargo entrusted to them prior to acceptance of instructions in order to see whether they should add a weight‑based surcharge, one would expect some evidence, documentary or otherwise, to that effect at the trial. But there was not. 

83.  As for the Plaintiffs’ contention that a feeder carrier would need to know the gross container weight in order to decide which vessel to use and plan a safe voyage, this may well be so but it does not necessarily mean that the gross container weight had to be supplied by the shipper.

84.  In this regard, I accept Ms Sin’s evidence that it was Winsmart’s own practice, when acting as actual feeder carrier, to add the estimated container tare weight to the cargo weight supplied by its customers – 2MT for a small container ie 20’ container and 4 MT for a large one ie 40’ container. It was therefore not necessary for Winsmart to be supplied the gross container weight (ie inclusive of the containers tare weight) for the purpose of planning a safe voyage. The estimates of 2MT and 4MT were in line with the agreed expert evidence that the approximate normal range of tare weight was 2 – 2.5MT for one 20’ general purpose container and 3.5 – 4MT for one 40’ general purpose container. If  Winsmart, acting as actual feeder carrier, could plan a safe voyage without asking for or being supplied the exact gross container weight by its customers, so could the Plaintiffs. It was after all, simple arithmetic to add the average container tare weight to the cargo weight.

85.  For all these reasons, this court rejects Mr Leung’s evidence that it was always the 1^st Plaintiff’s practice to require and Winsmart’s practice to supply gross container weight of the cargo to be carried and accepts Ms Sin’s evidence to the contrary. This court therefore answers the 3^rd Issue in the negative.

86.  I shall next turn to trade practice.

Trade Practice

87.  The first point to note is that the Plaintiffs’ case on trade practice is not supported by their own expert Mr Bliault, a master mariner and marine consultant with over 27 years of experience. Several paragraphs in Mr Bliault’s report are worth repeating here.

(1) At paragraph 4.3, Mr Bliault said:

“From my research, and from my own experience, I have reached the conclusion that the declaration of cargo weights by shippers, and the documentation of such weights, is one of the most poorly‑structured aspects of the container shipping industry. Each operator has his own system which he uses for the declaration of ‘gross weight’, which might, or might not, involve the addition of the container tare weight to the declared weight of the goods. However, to complicate the matter further, an operator might, on occasion, change his system if asked to do so, for a particular reason. Thus, so far as I can establish, there is no consistency within the shipping industry.” (emphasis added)

(2) At paragraphs 4.4 – 4.6, Mr Bliault said he had made inquiries with two reliable sources in the shipping industry: one retired shipping executive with experience in operating container feeder services in Hong Kong and Singapore (Mr. John Davidson); the other a major international freight forwarder with a hub in Hong Kong serving all parts of China including the Pearl River ports (Mr. David Fielder). Mr. Davidson, the shipping executive, stated his company always required the full container gross weight from shippers, whereas Mr. Fielder, the freight forwarder, stated his company always declared only the gross cargo weight. This is in line with his earlier conclusion that there is no consistency within the shipping industry.

(3) At paragraph 5.7(a) and (b), Mr Bliault reiterated that “There is no consistent system for the declaration of weights on cargo documents…The carrier must be aware of this and must adjust all weights, where appropriate, to ensure that the container gross weight of each container to be carried is known.” 

88.  I then turn to the Defendants’ expert evidence on trade practice.

89.  Winsmart’s expert is Mr Cheng. While Mr Cheng has extensive experience in operating a container terminal in the PRC, he was not in the business as shipper or feeder carrier as such. Further, unlike Mr Bliault, Mr Cheng did not claim to have carried out any “research” or inquiries into the practice of shippers and carriers concerning declaration of weight. Yet, in his two-page report, Mr Cheng appeared to be very firm in his conclusion that the trade practice contended for by Winsmart existed and gave several reasons for it. But, in my judgment, the real issue is not whether there were good reasons for the existence of the trade practice contended for by Winsmart. The real issue is whether it did exist.

90.  Further, some of the reasons given by Mr Cheng in support of the alleged trade practice are a non sequitur. For instance, Mr Cheng said shippers must make a declaration to the PRC Customs of the weight of the cargo imported or exported, ie exclusive of tare weight of containers, since any tax or refund would be calculated by reference to that weight. Similarly, he said the cargo manifest to be submitted to the PRC Customs only required the cargo weight to be declared. While these reasons are entirely valid and pertinent with regard to the declaration of weight for the purpose of calculating import/export duties, they are hardly indicative of what the practice was vis-a-vis shippers and feeder carriers, which was not for such a purpose.

91.  Sinokor’s expert is Captain Fung. As I said earlier, he was only prepared to opine on the practice vis-à-vis a shipper like Sinokor and a feeder carrier like Winsmart. At paragraph 56 of his report, Captain Fung expressly abstained from commenting on the practice between a shipper like Winsmart and a feeder carrier like the Plaintiffs on the ground that he did not have to. It is unclear from the report why a distinction should be drawn between the two cases but, given that it was indeed drawn, this court cannot place reliance on Captain Fung’s report for the present purpose. In any event, his report does not support the existence of a clear and common practice that all shippers declared only the gross cargo weight.

92.  The Defendants also relied on a letter dated 12 March 2012 from the Guangdong and Hong Kong Feeder Association Ltd (“Feeder Association”). The letter stated that usually the cargo weight given by shippers would not include the tare weight of the containers. This court was urged to give great weight to this letter because the Feeder Association represented feeder carriers and had no incentive to state the position incorrectly.

93.  Lastly, the Defendants relied on the evidence of Mr Ngai which was to the effect that, save and except for Russian ports, Sinokor’s practice was to require its shippers to provide only the gross cargo weight, exclusive of container tare weight.

94.  Having considered the totality of the evidence on trade practice, this court is not satisfied there was a common and well‑known trade practice as contended for by either the Plaintiffs or the Defendants.

95.  In so far as the parties’ experts claim to have made some inquiries with participants of the trade, this court is not satisfied that their sampling size was representative of the trade as a whole. Mr Bliault said he had made inquiries with two executives in the business while Captain Fung’s “research” was based on his company’s practice and that of one feeder carrier in Hong Kong and one in Guangzhou. Mr Cheng did not claim to have carried out any kind of “research” or inquiries and, as I said, some of his reasons did not really support his firm conclusion that the practice contended for by Winsmart existed. Similarly, regarding the letter from the Feeder Association, there is no evidence as to how representative this Association was and what sort of survey it had conducted before issuing the letter. In any event, the Feeder Association only purported to represent feeder carriers whereas this court was concerned at least partly with what shippers did in practice. Lastly, Mr Ngai’s evidence only concerned Sinokor’s practice as an ocean going carrier, whereas the 3^rd Issue deals with the practice in the business of container cargo transport between Hong Kong and Guangdong ports. If so, Sinokor’s practice, whatever it may be, is not directly relevant to what this court has to grapple with.

96.  In my view, the problem is inherent in the width of the questions posed to the experts and the lack of a clear definition of “shippers”. A shipper, in the widest sense, can mean anyone who instructs a feeder carrier to carry containerised cargo between Guangdong ports and Hong Kong. The term is apt to include both (i) professional freight forwarders like Winsmart who also operates as actual feeder carrier and (ii) non‑professionals such as manufacturers/sellers of goods who engage, routinely or on an ad hoc basis, feeder carriers to carry their goods between Guangdong ports and Hong Kong. In Captain Fung’s report, even his client Sinokor, an ocean carrier, is regarded as a shipper vis‑à‑vis Winsmart. Given the diversity of “shippers”, it is hardly surprising that there might not be any uniformity in the way they declared cargo weight in practice. This, in gist, is the preponderance of the evidence of Mr Bliault. This court is very much conscious of the fact that Mr Bliault did not appear at the trial and his evidence was not tested in cross‑examination. But having exercised due caution with regard to his evidence, this court is prepared to accept it to the extent that it reinforces the lack of a clear and uniform practice either way, as emerged from the “live” evidence.

Conclusion

97.  To recap,

(1) on the 2^nd Issue, this court concludes that, at the material time, there was no clear and common trade practice regarding the declaration of weight of containerised cargo for carriage between Guangdong ports and Hong Kong;

(2) on the 3^rd Issue, this court concludes that no term should be implied into the Contracts on the basis of past dealings that Winsmart must provide accurate information on gross container weight to the Plaintiffs.

XI. 4^th ISSUE

98.  The law on the implication of terms into a contract has been succinctly summarised by Lord Simon of Glaisdale when delivering the advice of the majority in the Privy Council decision of B.P. Refinery (Westernport) Pty Ltd v. President, Councillors and Ratepayers of the Shire of Hastings (1978) 52 ALJR 20 at 26 as follows:

“…for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.” (emphasis added)

99.  The above formulation was adopted by the Court of Final Appeal in Kensland Realty Ltd v Whale View Investment Ltd (2001) 4 HKCFAR 381 at [23] & [59].

100.  For the present purpose, the second requirement is of prime importance.

101.  In this regard, the Plaintiffs submitted that they obviously needed to know the gross container weight of the cargo in question before entering into a contract of carriage.  It was not satisfactory for them to assume an average weight per container especially when the actual weight of each container could vary significantly. They could not conduct their business efficaciously either (i) from the point of view of levying a weight‑based surcharge or (ii) from a safety point of view.

102.  This court does not accept the Plaintiffs’ submission.

103.  As far as the levying of a weight-based surcharge is concerned, this court has already rejected the Plaintiffs’ evidence that it was their practice to levy a weight-based surcharge on Winsmart if the cargo exceeded a certain weight limit.

104.  As far as safety is concerned, this court is prepared to assume that the 1^st Plaintiff, as the actual feeder carrier, would need to know the gross container weight of the cargo in making stability calculations, planning stowage and so on with a view to deciding which vessel to use and how to stow the cargo. But this court does not accept (i) the 1^st Plaintiff needed to know the gross container weight of the cargo with precision for that purpose or (ii) the gross container weight had to be declared by Winsmart as the shipper when giving instructions to the 1^st Plaintiff.

105.  In my judgment, any professional feeder carrier of containerized cargo can be expected to know and, in all probability, would know the approximate tare weight of a standard general purpose container. In any event, the tare weight is stencilled on the right door of each container and is for all to see. It is simple arithmetic for the carrier to add the approximate tare weight to the cargo weight declared by the shipper in order to decide whether a particular vessel is capable of carrying the cargo in question and to prepare its loading and stowage plan. According to Ms Sin’s evidence which this court accepts, this is what Winsmart did when it acted as actual feeder carrier and, as this court concludes, so could the 1^st Plaintiff.

106.  This court is also prepared to assume, after a period of use and exposure to the elements, each container weighs slightly differently from another. But as long as the feeder carrier allows a reasonable safety margin when deciding which vessel to use, instead of loading the vessel to its absolute maximum cargo capacity, safety need not be compromised whether or not the feeder carrier is apprised of the actual gross container weight of the cargo. In my judgment, it is ultimately the responsibility of the actual feeder carrier to either weigh or estimate the weight of the cargo it agrees to carry in order to select and provide a seaworthy vessel capable of carrying the cargo to its destination. In this regard, this court’s view is reinforced by Mr Bliault’s report. At paragraph 5.7 of his report, Mr Bliault also expressed the view that it was for the actual carrier to make all appropriate adjustments in order to ascertain the gross container weight of the cargo before making the necessary stability calculations.

107.  For these reasons, it seems to this court that the Contracts were perfectly effective and workable in practice even without the implied term contended for by the Plaintiffs. If so, the 4^th Issue must be answered in the negative.

XII. 5^th ISSUE

108.  As revealed in Mr Bell SC’s closing submissions, the Plaintiffs’ case on misrepresentation is confined to the conversation between Ms Sin and Mr Chan in the morning of 30 April 2009, in which Ms Sin requested the Vessel to load the 21 containers first before unloading the 28 containers. In the course of that conversation, it is said Ms Sin confirmed with Mr Chan that the gross container weight of the 21 containers was 536.1MT and that of the 28 containers was 537.6MT, making a total of 1,073.7MT. The evidence in support of that conversation essentially boils down to one paragraph in Mr Chan’s witness statement. At paragraph 17, he said:

“I rang Ms Sin at about 10.30 a.m. on [30 April 2009]. I told her that the maximum loading capacity of the Vessel in Hong Kong waters was 1,100,000 kg. I asked her to double confirm the gross weight of the containers. Ms Sin confirmed to me that the total weight of the 28 containers of tobacco was 537,600 kg and the 21 containers was 536,100 kg making a total gross container weights for the 49 containers 1,073,700 kg. I spoke with Mr. Leung on that. I understood Mr. Leung had personally telephoned Ms Sin to confirm the information.”

109.  It was in reliance of Ms Sin’s confirmation of the gross container weight over the phone that Mr Chan informed Master Pang that he could load the 21 containers at North Lamma Anchorage before unloading the 28 containers of tobacco at HIT.

110.  While Mr Chan said in his statement that he understood Mr Leung had also telephoned Ms Sin to confirm the weight information stated above, that was not quite what Mr Leung said in his statement. At paragraph 25, Mr Leung simply said he asked Ms Sin to provide “weight notes for the containers”. Ms Sin’s reply was that “the weights” were provided by Sinokor and there were no weight notes for the 21 containers. It is unclear from Mr Leung’s statement what “the weights” were supposed to mean. As for the 28 containers of tobacco, they were shipped from Mainland China and there were no weight notes either.

111.  Ms Sin denied having the alleged conversation with Mr Chan in the morning of 30 April 2009 or making the alleged representation on weight to anyone in the Plaintiffs’ employ. She confirmed in court that she did not know and had never met or communicated with Mr Chan.

112.  Since Mr Chan did not testify at the trial, the actual words said to be used by him and Ms Sin in the alleged telephone conversation, as opposed to the gist of the conversation, were unknown and there was no opportunity for Winsmart to test his evidence in cross-examination. This is highly unsatisfactory. Misrepresentation is one of the core issues in this case. When the misrepresentation sued upon was an oral one, it is all the more important for the Plaintiffs to prove their case with “live” evidence from someone with personal knowledge the veracity of which can be tested by cross‑examination. Instead, this court is left with the witness statement of Mr Chan admitted in hearsay form. The Chinese memorandum dated 30 April 2009 said to record the alleged conversation between Mr Chan and Ms Sin does not take the Plaintiffs’ case any further. It has little more probative value than Mr Chan’s witness statement and similarly, there was no opportunity for Winsmart to test the veracity of this memorandum by cross-examining Mr Chan.

113.  But that is not all.

114.  There are aspects of Mr Chan’s witness statement which, when read with the documents he referred to, are highly suspicious and cry out for an explanation. As Mr Chan was not available at the trial, no explanation was forthcoming.

115.  Take paragraph 8 of Mr Chan’s statement for example. He said, after his initial telephone conversation with Ms Sin about the 28 containers of tobacco[9] and after confirming that the Vessel was available, he began liaising with Ah May of Winsmart’s Mainland office on the phone and through MSN messenger. He said Ah May also sent a written plan (“Plan”) to him. According to the Plan, the (總箱重), which Mr Chan said meant “total container weight”, of the 28 containers of tobacco was 537.6MT, conveniently fit into the Plaintiffs’ case of misrepresentation.

116.  As pointed out by Mr Bartlett, on its face, the Plan gave no indication as to who created it or by whom it was sent. While it was said to have been sent by Ah May, its fax header did not support the allegation. Importantly, the Chinese title of the Plan (計劃紙) was the very same description that Mr Chan said the Plaintiffs used for the plans they themselves created for use by their masters to plan voyages and make loading arrangement: see paragraph 7 (c) of Mr Chan’s statement.

117.  Further, except for that one Plan, no other documents similar to it have been adduced by the Plaintiffs and proved as having come from Winsmart, notwithstanding the long history of their business relationship since 2004. By contrast, there were a number of standardised export plans (出口計劃) of Winsmart (“Export Plans”) in the materials before this court which bore no resemblance to the Plan. These Export Plans did not purport to set out the gross container weight of the cargo. In so far as Mr Leung’s testimony was that the term “毛重” in these Export Plans meant the same thing as gross container weight, this is, in my judgment, nothing but another bald assertion on the part of Mr Leung to suit the Plaintiffs’ case and I do not accept his evidence. “毛重” simply means gross weight.

118.  Take paragraphs 9 and 11 of Mr Chan’s statement as another prime example. Mr Chan said on 29 and 30 April 2009, he signed and issued the Shipping Orders. He said the Shipping Orders were sent by hand to Winsmart’s office in Sheung Wan on 30 April 2009. In the Shipping Orders, the gross container weight of the 28 containers was stated to be 537.6 MT and that of the 21 containers was stated to be 536.1 MT. These  figures again conveniently fit into the Plaintiffs’ case of misrepresentation.

119.  The Shipping Orders are curious documents. The most curious of all is that they were purportedly created and signed by Mr Chan on 29 and 30 April 2009 at a time when the 1^st Plaintiff’s name was still “Arko Satellite Limited” but they bore the 1^st Plaintiff’s present name viz “Arko Ship Leasing Limited”. According to the BVI Registrar of Corporate Affairs, the 1^st Plaintiff changed to its present name only on 25 June 2009. Further, inexplicably, the Shipping Orders produced by the Plaintiffs were “Shipper’s Copy” which were supposedly sent to and retained by Winsmart. When asked about it by this court, Mr Leung was unable to satisfactorily explain why this was so save that they were photocopies retained by the Plaintiffs for record.

120.  On the other hand, Ms Sin confirmed in court she did not know and had never met or communicated with Mr Chan. Mr Leung disagreed with that. But notwithstanding the years of business relationship between the Plaintiffs and Winsmart, Mr Leung was not personally aware of any direct communication between Ms Sin and Mr Chan or of any document evidencing same – he simply relied on Mr Chan’s assertion to that effect.

121.  On the contrary, Ms Sin’s evidence that she has never communicated with Mr Chan was borne out by the documentary evidence, or rather the lack of it, from the Plaintiffs’ side. On the materials before this court, Ms Sin’s emails were on occasion copied to numerous persons including those within the Plaintiffs. But, despite the many years of business relationship, the Plaintiffs have been unable to adduce any written communication between Ms Sin and Mr Chan. Ms Sin also confirmed in court that Winsmart had never received the Shipping Orders.

122.  The Plaintiffs submitted that Ms Sin’s evidence was extremely unsatisfactory as it was hearsay. This court disagrees. Ms Sin certainly had personal knowledge of whether she herself had any contact with or spoken to Mr Chan, whether generally or on 29 and 30 April 2009. As I said earlier, this court regards Ms Sin as a truthful witness.

123.  Importantly, there was no reason at all for Ms Sin to make any representation to the Plaintiffs regarding the gross container weight of the 49 containers.

124.  First, as this court found in relation to the 2^nd and 3^rd Issues, (i) there was, at the material time, no clear and common trade practice concerning declaration of weight of containerised cargo for carriage between Guangdong ports and Hong Kong, and (ii) the past dealings between the Plaintiffs and Winsmart did not support the Plaintiffs’ contention that Winsmart always provided the gross container weight of cargo to them.

125.  Second, there was no evidence that Winsmart had been informed, whether by Sinokor, Dongnam or otherwise, of the gross container weight of the 49 containers. Ms Sin’s evidence was that Winsmart did not know the tare weight of containers (and hence gross container weight of the cargo entrusted to it) - Sinokor/Dongnam only provided the “gross weight” of the cargo to Winsmart. According to Ms Sin’s evidence, it meant gross cargo weight. At any rate, irrespective of what Ms Sin said she understood, the documents produced certainly did not state the so-called “gross weight” meant gross container weight, as asserted by Mr Leung.

126.  Third, there was no basis to think Winsmart would independently know or take the trouble to find out the actual tare weight of each and every of the 49 containers in question (so as to arrive at their gross container weight) - they did not own the containers or even lease them from their owner(s) and it would be far-fetched to suggest Winsmart would weigh every empty container before they took on an assignment. On  Ms Sin’s evidence which this court accepts, even for cargo which Winsmart itself carried, it would be sufficient to plan a safe voyage by adding the approximate tare weight of the containers to the gross cargo weight supplied. 

127.  Lastly, I do not think there was any reason or motive on Winsmart’s or Ms Sin’s part to misrepresent weight to the Plaintiffs. The Plaintiffs suggested that Winsmart’s motive in understating the gross container weight was to save some freight charges. As I have already concluded, I do not accept the Plaintiffs’ evidence that they levied a weight-based surcharge so the suggested motive did not hold water. Nor, on balance of probabilities, is it likely that Ms Sin would have made such a mistake, whether fraudulently, reckless or negligently. She was an experienced shipping clerk at the material time and I accept her evidence that Winsmart was never in the habit of declaring gross container weight to its subcontractors.

128.  To conclude, this court finds as a fact that Winsmart has not misrepresented the gross container weight of the 49 containers to the Plaintiffs. This is fatal to the Plaintiffs’ case on misrepresentation against Winsmart. The question whether the misrepresentation, if made, was fraudulent, reckless or negligent, does not arise.

XIII. 6^th ISSUE

129.  This issue can be dealt with very briefly.

130.  Notwithstanding the Plaintiffs’ pleaded case, it is apparent from their written closing submissions that their only factual case on misrepresentation was that they had been misled by Ms Sin acting for and on behalf of Winsmart.

131.  On the evidence, this court finds that the Plaintiffs had no direct dealing with Sinokor and Sinokor had not made any representation about the weight of the 49 containers directly to either of them. Further,

(1) as far as the 28 containers of tobacco were concerned, Sinokor’s B/L was dated 2 May 2009 and did not reach Winsmart prior to the sinking. It could not possibly have been relied upon by the Plaintiffs in deciding whether to allow all 49 containers to be on board the Vessel prior to the sinking;

(2) concerning both the 28 containers and the 21 containers, Sinokor’s B/Ls, on their face, did not purport to state the gross container weight of the cargo – instead, they set out only the “gross weight”. In so far as Mr Leung’s testimony was that it meant the same thing as gross container weight, I reject his testimony.

132.  For these reasons, my conclusion is this: Sinokor has not made any representation, let alone misrepresentation, to either of the Plaintiffs regarding the gross container weight of the 49 containers. No useful purpose will be served by considering hypothetically whether Sinokor, as a matter of law as applied to the facts of this case, owed any direct duty of care to either of the Plaintiffs regarding declaration of weight.

133.  That answers the 6^th Issue.

XIV. 7^th ISSUE

134.  In view of this court’s finding on the 5^th Issue, the Plaintiffs’ case on misrepresentation against Winsmart simply collapses and the 7^th Issue ie whether Sinokor was vicariously liable for Winsmart’s misrepresentation also becomes academic.

135.  For completeness, this court would record that, on the evidence available, principally the CCA and Mr Leung’s testimony, it is not satisfied that Winsmart was Sinokor’s agent for the purpose of fixing the latter with liability for any misrepresentation that the former might have made. In particular, the CCA was not structured as an agency agreement providing for the rights and duties of Sinokor and Winsmart inter se as being those of principal and agent. Sinokor and Winsmart were not even described as principal and agent in the CCA – instead, Winsmart was described as “Owner” and Sinokor was described as “Charterer” who “charters slot from Owner” in it: see Article 1 CCA.

136.  Further, as a matter of law, a principal is only liable in tort for loss and injury caused by his agent in defined circumstances: Bowstead & Reynolds on Agency 20^th Ed. Art 90. At paragraph 8‑177, the learned editors summarised the law as follows:

“(2) A principal is liable in tort for loss or injury caused by his agent, whether or not his servant, and if not his servant, whether or not he can be called an independent contractor, in the following cases:

(a) if the wrongful act was specifically instigated, authorised or ratified by the principal;

(b) (semble) in the case of a statement made in the course of representing the principal within the actual or apparent authority of the agent: and for such a statement the principal may be liable notwithstanding that it was made for the benefit of the agent alone and not for that of the principal;

(c) where the principal can be taken to have assumed a responsibility for the actions of the agent.”

137.  Suffice it to say this court is not satisfied on the evidence that the Plaintiffs have brought their case within any of the three circumstances stated above so as to render Sinokor vicariously liable for any misrepresentation that Winsmart was alleged to have made.

138.  That answers the 7^th Issue.

XV. 8^th ISSUE

139.  This issue has taken up a considerable amount of the court’s reading and hearing time but, given this court’s findings that neither Winsmart nor Sinokor has made any misrepresentation to the Plaintiffs and Winsmart was not in any way in breach of the Contracts, this issue has also become largely academic.

140.  However, for completeness, this court shall set out its finding on the cause of sinking.

141.  At the risk of stating the obvious, it might just assist if this court starts with a few basic concepts concerning a vessel’s “buoyancy”. A convenient summary of these concepts can be found in the report of Mr Wilson, Sinokor’s expert, at paragraphs 7.1 – 7.3.

“7.1 A vessel floats due to the water it displaces below it exerting an upwards supporting force which is called buoyancy. Whether this force is enough to support the vessel and keep it afloat depends on the volume of the water displaced. If the hull of the vessel encloses a space containing low density material, which includes air, then the weight will be low enough to allow the displaced water to support the vessel so it will float. As a vessel is loaded with cargo it will float lower in the water and will need more volume of displaced water to support it, that is, more buoyancy force.

7.2 If more cargo is loaded and the vessel is completely immersed in the water, these further increases in cargo weight will not increase the amount of water displaced. The amount of water displaced is now less than the increased weight of the vessel and is not creating enough buoyancy force to support the vessel, so it will sink.

7.3 Similarly, if the hull of the vessel is breached and flooded with water, then the flooded compartment no longer contributes to the displacement volume of water and the buoyancy force is reduced, so the vessel floats lower at a deeper draft. If the enclosed spaces become fully submerged and the lost buoyancy is not compensated, then the vessel will sink, as is often seen to be the case when a vessel’s hull is breached below the waterline.”

142.  The Plaintiffs’ case is that the Owner had set the 80% guideline back in November 2007 and instructed bareboat charterers to comply with it. This is evidenced by a minutes of meeting of experts dated 28 November 2007 as well as the Owner’s letters of instructions to “All Masters” and “Arko Company” dated 25 December 2007 and 24 December 2008 respectively.

143.  The Plaintiffs submitted this guideline made ample sense. Although the Vessel’s maximum DWT was 1,380 MT, it was prudent, while navigating in Hong Kong waters, not to load the Vessel to its full capacity. The reasons were set out in the minutes of 28 November 2007. Essentially, this was because, compared to the calmer conditions in the Pearl River, the condition to be found in Hong Kong waters would likely be much rougher. In particular, between November and April each year, owing to relatively strong monsoon, the height of waves could rise to 2 metres. Further, the passing of high speed passenger ferries nearby could create waves of another 1 metre, causing the Vessel to roll severely and increasing the risk of sea water coming onto the deck.

144.  This court finds as a fact that the Owner had indeed set such a guideline and instructed inter alia the 1^st Plaintiff, as its bareboat charterer, to comply with it. This court also accepts the Plaintiffs’ submission that it was prudent to load the Vessel only up to 80%, ie 1,104 MT while navigating in Hong Kong waters, as long as it is remembered that 80% is essentially a rule of thumb or, as the Plaintiffs called it, a guideline.

145.  In this court’s view, the guideline is entirely reasonable as a safety precaution. The 80% limit meant the Vessel’s freeboard would be higher than if was loaded to its maximum capacity, making it less likely to take on water in the first place. Further, in an area where the waves are likely to be higher, if water does come onto the deck and thus increase its total load, the remaining 20% could act as a safety margin. Ex hypothesis, if the Vessel was already loaded to its full capacity, the weight of water coming onto the deck would have overloaded the Vessel, thereby adversely affecting its stability and increasing the risk of sinking. A fortiori if water was allowed to enter the engine rooms. In this regard, this court notes that Mr. Wilson also accepted in his report and testimony that the Owner’s decision to reduce the Vessel’s cargo carrying capacity in Hong Kong waters would not be unreasonable and that by increasing the freeboard, it would reduce the chance of the Vessel being overwhelmed at sea.

146.  In the circumstances, if loaded at more than 80% of its DWT in Hong Kong waters, the Vessel could become unsafe. Mr. Wilson, in his report, also accepted that the weight[10] of the 49 containers as it were, which created a very small freeboard aft and facilitated sea water to come onto the deck as the Vessel moved in a seaway, was one of the factors which caused the sinking.

147.  The evidence therefore strongly indicates the fact that the gross container weight of the 49 containers exceeded the 80% limit, and came very close to the Vessel’s maximum cargo carrying capacity, was a cause for the Vessel to take on water under the prevailing weather and sea condition and then to sink.

148.  The Defendants’ case is that the Vessel was physically unseaworthy and Master Pang was incompetent in that he had committed a series of errors on the day. Such errors included:

(1) Loading the 21 containers in rough weather condition.

(2) Carrying HC containers in a number of bays at the top tier, rendering the height of the top tier uneven and thereby precluding the use of bridge fittings at certain locations.

(3) Allowing the stow to be top heavy ie the top tier being the heaviest tier at 436.656 MT, contrary to elementary practice.

(4) Stowing some of the containers transversely instead of longitudinally.

(5) Failing to calculate the Vessel’s stability.

(6) Ordering the Vessel to set sail after loading the 21 containers under the then prevailing weather condition.

149.  At the trial, this court enquired of Mr Wilson what caused the sinking of the Vessel in terms of the issues identified in Reyes J’s Order on expert directions dated 26 July 2010. In gist, he said:

(1) The Vessel was incorrectly manned and therefore unseaworthy.

(2) The Vessel was unseaworthy on account of the unsecured vents and pipes.

(3) The Vessel was unseaworthy on account of there being no cargo securing manual on board.

(4) Master Pang’s failure to add the tare weight of the 49 containers to the gross cargo weight.

(5) Carrying HC containers which were not the same type of containers that the Vessel was certified to carry.

(6) The problem with the stern trim resulting in a very small freeboard aft.[11]

150.  The manner in which the Vessel listed, took on water and eventually sank has been set out in Section II above. It is difficult to see how the errors identified in paragraph 148 above could have caused the Vessel to sink.

151.  Notwithstanding the poor weather condition, the Vessel did not sink in the course of loading the 21 containers midstream. In so far as the Defendants contend Master Pang should not have loaded the 21 containers before discharging the 28 containers on board, that is another way of saying he should not have overloaded the Vessel. At the risk of stating the obvious, someone has to overload a vessel before the vessel will become overloaded. But, in the absence of other causative events like collision or hitting a hard object at sea, overloading is still the cause of the sinking of the Vessel - the negligence of the person who overloads it merely allows the overloading to occur (or fails to prevent it from occurring). Poor stowage and inadequate lashing might have facilitated the containers to move, slide to one side or another and eventually fall into the sea, but would not have caused the Vessel to sink as such. Unless of course the poor stowage resulted in one side of the Vessel being much heavier than the other, which is not borne out by the evidence. As for “Failure to calculate stability”, a vessel does not sink just because someone on board fails to take out a calculator and do the maths. It seems to this court what it really means is that Master Pang failed to realise the Vessel would be overloaded and become unstable once the 21 containers were on board, and should have refused to allow it to happen. That is yet another way of saying he should not have overloaded the Vessel. Lastly, once the 21 containers were on board, it is difficult to see what else Master Pang could have done apart from setting sail. There is no evidence in support of the proposition that, if overloaded, a vessel’s stability would improve just by being stationary in the middle of the sea. There is also no evidence in support of the proposition that, if not overloaded, its stability would deteriorate by setting sail.

152.  The same can be said of the “causes” of sinking identified by Mr Wilson in court, save for the unsecured vents and pipes which could have the effect of facilitating water to enter the engine rooms, thereby reducing the Vessel’s buoyancy. In this court’s view, this might have sped up the process of sinking. However, the evidence before this court does not support the proposition that, without overloading, the water entering into the engine rooms alone would have reduced the Vessel’s buoyancy to such an extent as to be sufficient to sink the Vessel, in the same way that water entering into the Titanic’s hull after it had hit an iceberg eventually caused it to sink.

153.  For these reasons, this court finds as a fact that the sinking of the Vessel was caused by overloading. If and in so far as may be necessary, this court is prepared to find that it was Master Pang’s error which allowed the Vessel to be overloaded.

XVI. CONCLUSION ON PLAINTIFFS’ CLAIMS

154.  For all the above reasons, the Plaintiffs’ claims against Winsmart and Sinokor fail.

XVII. THE DEFENDANTS’ COUNTERCLAIMS

155.  It cannot seriously be disputed that the choice of a suitable and seaworthy vessel to perform the Contracts was the responsibility of the 1^st Plaintiff. It is also accepted by the Plaintiffs that the voyage and the loading arrangement of the vessel performing the Contracts would be arranged at the discretion of the 1^st Plaintiff’s master – indeed, they have pleaded it as an implied term of the Contracts. In paragraph 9 of the Joint Memorandum of Experts dated 8 August 2012, all parties agreed that the Vessel’s Seaworthiness Certificate expressly stated:

“…During loading, the Master is responsible to ensure the loading condition is meeting the requirements of the vessel’s Stability Booklet.”

156.  Given this court’s conclusion that the Plaintiffs’ claims totally fail and that the sinking of the Vessel was caused by overloading and Master Pang’s error, it follows that the sinking and the consequent loss of the containers and cargo inside was due to the fault of the 1^st Plaintiff as bareboat charterer, contracting carrier and bailee. If, for reasons unconnected with any wrongful act on the part of the Defendants, the 1^st Plaintiff has chosen a vessel with a carrying capacity in Hong Kong waters of only 1,115.095 MT, but loaded cargo with gross container weight of 1,297.46MT, the 1^st Plaintiff only had itself to blame.

157.  For these reasons, I accept the Defendants’ submissions that their Counterclaims should succeed.

XVIII. DISPOSITION AND COSTS ORDER NISI

158.  The Plaintiffs’ claims are hereby dismissed and judgment be entered in favour of the Defendants accordingly.

159.  Interlocutory Judgment be entered in favour of the 1^st Defendant against the 1^st Plaintiff for damages to be assessed under paragraph (i) of the prayer for relief in its Re‑amended Defence and Counterclaim dated 9 October 2014.

160.  Judgment on liability be entered in favour of the 1^st Defendant against the 1^st Plaintiff under paragraph (ii) of the prayer for relief in its Re‑amended Defence and Counterclaim dated 9 October 2014.

161.  Interlocutory Judgment be entered in favour of the 2^nd Defendant against the 1^st Plaintiff for damages to be assessed under paragraphs (i) and (ii) of the prayer for relief in its Amended Defence and Counterclaim dated 14 January 2013.

162.  Judgment on liability be entered in favour of the 2^nd Defendant against the 1^st Plaintiff under paragraph (iii) of the prayer for relief in its Amended Defence and Counterclaim dated 14 January 2013.

163.  Liberty to apply.

164.  All issues on quantum, as well as assessment of damages, be referred to the Admiralty Registrar.

165.  There be a costs order nisi that costs of

(1) the Plaintiffs’ claims be paid by the Plaintiffs to the 1^st and 2^nd Defendants,

(2) the 1^st and 2^nd Defendants’ counterclaims be paid by the 1^st Plaintiff to the 1^st and 2^nd Defendants,

to be taxed on a party and party basis if not agreed, with Certificate for Counsel.

166.  Lastly, I thank Counsel for their detailed and helpful submissions.