POWER STEP LTD v. METALMARINHA-COMÉRCIO INTERNACIONAL DE RESÍDUOS METÁLICOS, S.A.

HCA 434/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 434 OF 2011

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J U D G M E N T

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1.  This is an appeal against an Order made by Master Hui who declined to make an Order setting aside the leave which was granted by Master Ho to serve the writ out of the jurisdiction.

2.  The plaintiff is a Hong Kong company which imports and exports metal scrap.

3.  The defendant is a Portuguese company which exports metal scrap.

4.  In July and August 2010 the parties entered into 6 sale and purchase agreements for the sale of metal and copper scrap.  The sale was evidenced by 6 purchase orders issued by the plaintiff.

5.  The defendant issued 16 invoices to the plaintiff in the sum of US$1,687,265.  These were settled in full.

6.  By the agreement the goods were to be shipped in 16 containers.

7.  On arrival in Hong Kong it was discovered that the containers were filled with stones garbage and other worthless matter.

8.  The plaintiff had entered into contracts with two companies for the onward sale of the metal scrap and have sustained losses consequential upon the failure of the defendant to supply the metal scrap contracted for.

9.  The defendant’s application to set aside the Order for service out of the jurisdiction is based upon their contention firstly that the plaintiff has failed to establish a good arguable case that the provision contained in Order 11, rule 1(1)(d)(i), (iii) and rule 1(e) have been complied with and secondly that they have failed to demonstrate that Hong Kong is the appropriate forum for this action.

10.  Order 11, rule 1(d) and (e) are as follows:

“(d) the claim is brought to enforce, rescind, dissolve, annul or otherwise affect a contract, or to recover damages or obtain other relief in respect of the breach of a contract, being (in either case) a contract which-

(i) was made within the jurisdiction, or
(ii) was made by or through an agent trading or residing within the jurisdiction on behalf of a principal trading or residing out of the jurisdiction, or
(iii) is by its terms, or by implication, governed by Hong Kong law, or
(iv) contains a term to the effect that the Court of First Instance shall have jurisdiction to hear and determine any action in respect of the contract; (25 of 1998 s. 2)

(e) the claim is brought in respect of a breach committed within the jurisdiction of a contract made within or out of the jurisdiction, and irrespective of the fact, if such be the case, that the breach was preceded or accompanied by a breach committed out of the jurisdiction that rendered impossible the performance of so much of the contract as ought to have been performed within the jurisdiction;”

11.  Mr John Hui who represented the defendant argued that when the purchase orders were submitted by the plaintiff to the defendant they were part of a Master agreement which related to the purchase orders.

12.  This Master agreement has been exhibited as evidence.  It is not necessary to consider this in any detail as it is manifest from the contents of the agreement that what it mainly provides for is the regularity requirements of the European Union relating to certain environmental matters.  It is essentially an agreement to agree.

13.  All of this is separate and distinct from the purchase orders.  It was clearly the purchase orders which when accepted comprised the contracts between the parties.

14.  Mr Hui’s next point was to contend that as communications had been made electronically (i.e. by email) acceptance of the purchase orders had been effected in Portugal.  There is no merit in this contention as it was an express agreement in the purchase orders that Hong Kong was the place of each of the purchase orders.

15.  Mr Hui then went on to argue that as the purchase orders contained a provision that delivery should be “CNF (destination port)” i.e. in Portugal.  The defendant’s obligation was only to deliver the goods to the port and the moment the goods crossed the rail onto the ship the property and the risk passed to the plaintiff.

16.  This submission overlooks the fact that CNF contracts have no in built insurance component.

17.  Section 34 of the Sale of Goods Ordinance, Cap 26 is relevant in this connection.

“34. Delivery to carrier

(1) Where, in pursuance of a contract of sale, the seller is authorized or required to send the goods to the buyer, delivery of the goods to a carrier, whether named by the buyer or not, for the purpose of transmission to the buyer is prima facie deemed to be a delivery of the goods to the buyer.
(2) Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable having regard to the nature of the goods and the other circumstances of the case. If the seller omits to do so, and the goods are lost or damaged in course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself, or may hold the seller responsible in damages.
(3)   Unless otherwise agreed, where goods are sent by the seller to the buyer by a route involving sea transit, in circumstances in which it is usual to insure, the seller must give such notice to the buyer as may enable him to insure them during their sea transit, and, if the seller fails to do so, the goods shall be deemed to be at his risk during such sea transit.”

18.  There is no evidence that the defendant ever gave notice to the plaintiff that the goods were shipped and accordingly the risk remained with the defendant until the arrival of the goods in Hong Kong.

19.  In this connection it does not assist the defendant that the shipping documents were subsequently sent to the plaintiff. It is apparent that these documents were not sent to the plaintiff until after the ship had already left Portugal.  Accordingly it would not have been possible for the plaintiff to make arrangements for the goods to be insured assuming that they might have been minded to do so.

20.  Over and above all of this, the main issue on this application was not so much the delivery of the goods but that the goods which were delivered bore little or no resemblance to the subject matter of the purchase orders.

21.  The trial will mainly be concerned with the fact that the goods found to be in the containers were completely different to the goods which were described in the purchase orders.

22.  It is therefore the case that the defendant’s breach of contract occurred in Hong Kong and that the requirements of Order 11, rule 1(d)(i) and (iii) have been met.

23.  In additional to this the requirements of Order 11, rule 1(1)(e) have clearly been complied with.

(1)  Hong Kong is the agreed place of each of the purchase orders.

(2)  The plaintiff is based in Hong Kong and it is where the contract was negotiated and where the goods were delivered.

(3)  The contract is in English.  The price is expressed in US dollars.

24.  There can be no doubt from all of this that the provisions contained in Order 11 have indeed been complied with.

FORUM NON CONVENIENS

25.  It is overwhelmingly the case that Hong Kong is the most appropriate forum for this case to be heard.

26.  The Master was right to decline setting aside the leave granted pursuant to Order 11.  This appeal is accordingly dismissed.

27.  I make an Order nisi that the plaintiff will have their costs and this would appear to be a suitable case for a lump sum to be assessed and paid forthwith.  There will be liberty to apply in case the parties are unable to agree an appropriate lump sum.