KASE SHIPPING & ENTERPRISES LTD. AND OTHERS v. CHINA SEA MARINE LTD.

HCCL 29/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 29 OF 2001

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J U D G M E N T

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1. This is the plaintiffs' application for summary judgment against the defendant pursuant to a summons issued on 19 March 2002. Judgment is sought in the sum of US$90,643.55 and HK$250,234 together with interest and costs.

The background facts

2. The application concerns a dispute about containers between two freight forwarders. The plaintiffs say that on or about 20 April 2000 the defendant made a booking with the 1st plaintiff for the lease of 12 40 foot HQ containers for outbound shipment from Hong Kong to Los Angeles, and that consequent upon this booking, the 2nd plaintiff, through the 3rd plaintiff, made a corresponding booking for the lease of the 12 containers with COSCO Container Line Agencies Ltd through Cosco's agent, Welley Shipping Ltd.

3. Some nine days later, on 29 April 2002, the plaintiffs further say that the defendant again booked with the 1st plaintiff for the lease of another 11 40 foot containers for similar outbound shipment from Hong Kong to Los Angeles. And once again, on receiving this booking, the case is that the 2nd plaintiff through the 3rd plaintiff made a corresponding booking for its lease of these 11 containers with Capital Distribution Services acting as agent of Mediterranean Shipping Company SA.

4. It is not in contention that the defendant subsequently caused these two lots of containers to be collected from the relevant container yards, nor is it in dispute that these containers have been lost and have never been returned.

5. Hence this action, mounted by the plaintiffs against the defendant for breach of agreement and/or breach of duty as bailee in failing to return the containers after use, the specific amounts claimed being first, the sum of HK$250,354.00 for what are pleaded to be 'lifting and detention charges', and second, the sum of US$90,643.55 representing the 'depreciated value' of these lost containers.

6. It appears that this case has arisen, and has been formulated as such by the plaintiffs, in the face of anticipated claims by the respective container owners, Cosco and Mediterranean Shipping, albeit as I understand the position such claims have not yet eventuated. In my view it is unfortunate that the shape of this case has developed as it has. Had owners maintained their own claims by suit against the present plaintiffs, the defendant herein would have been joined as third party, and the precise nature of the relationship between the various entities explored at trial. I fear that in attempting to head off owners' claims against themselves by first attempting recovery against the defendant, the plaintiffs in effect have made a rod for their own back.

Quantum

7. I take the quantum of the claim first because it quickly became apparent that in terms of Order 14 procedure this was to be an early casualty. All that Mr Au for the plaintiffs was able to proffer on this issue was a letter dated 8 March 2001 received from solicitors acting for Welley Shipping, Cosco's agent, asserting a claim for rental value and rental charge of the twelve containers at US$41,136.91 and HK$185,920.00 respectively, and the hard copy of an email of 15 June 2000 sent by Capital Distribution Services, making demand for replacement value and detention charges for the eleven containers that had been lost, the sums therein demanded by attached schedule representing the balance of the total claim now made in the present action.

8. Mr Au sensibly accepted that mere assertions of loss made against his client by those acting on behalf of their clients did not suffice to discharge the burden that lay upon him, and further accepted that he could not obtain the quantum of his claim at this stage. Accordingly he asked the court to treat his application as one for summary judgment on liability, and for an order that damages be assessed. I turn therefore to the issue of liability.

Liability

9. Notwithstanding his change of tack in concentrating upon liability alone, I fear that Mr Au encountered yet more problems. He presented his case persuasively with the material that he had to hand, focusing in particular upon internal documents generated by his clients and on a fax dated 20 May 2000 sent by the defendant subsequent to the loss of the containers. Surprisingly, however, he was unable to respond to factual queries raised during the course of his submission. Perhaps the most important of these referred to the consideration (if any) which had accrued to his clients consequent upon what now was said to be the sub-lease of the containers to the defendant. This was a matter not dealt with in the evidence and which seemed to the court to provide a significant pointer in terms of classifying the relationship between the plaintiffs and the defendant, and the legal obligations arising therefrom.

10. It was precisely the nature of this relationship which provided Mr Mok, appearing for the defendant, with fertile ground on which to oppose the application for summary judgment. Mr Mok strongly submitted that so far as the lifting and detention charges were concerned, not only was there no documentary evidence to support the claim, but that if such charges were payable at all, they were payable to the shipping companies from whom the containers actually were collected. In my view, as far as Order 14 is concerned, this aspect of the claim clearly falls short of the required benchmark.

11. With regard to the second, and more substantial limb of the plaintiffs' claim, Mr Mok's attack was aimed, root and branch, at the legal relationship between the plaintiffs and the defendant in this instance. His basic proposition was that, unlike previous transactions to which reference had been made (wherein the plaintiffs, or one of them, had acted as carrier in addition to freight forwarder, and duly had issued bills of lading for the particular ocean voyage), the current case involved no more than the mere relationship of freight forwarder to freight forwarder. All that the plaintiffs had done, he said, was to make arrangements for containers to be made available, no more and no less. He submitted that not one document existed clearly to demonstrate that what had occurred between these parties was in the nature of a sub-lease. To the contrary, the defendant's position was that payment for the use of the containers, and indeed damage for their loss, should accrue to the shipping companies themselves, and certainly not to any of the plaintiffs, nor did he accept on the facts that it should be his client at the receiving end of such bill.

12. Mr Mok further argued that in the circumstances of this case his client never had been a bailee of the containers, but that if this were incorrect (which he disputed) the defendant certainly was not the bailee of the plaintiffs, in that the containers had not been obtained from any of the plaintiffs, and none of the plaintiffs at any stage had had possession or control of them. In this instance, he said, both plaintiffs and defendant were merely acting as 'go-between' in the classic freight forwarder manner, with a defined limit to their liability, and in the circumstances the plaintiffs could not establish a valid claim in contract, bailment or conversion, and certainly were in no position to do so for the purpose of obtaining Order 14 judgment.

13. The submission focusing upon the absence in the plaintiffs of legal ownership or entitlement to possession of the containers, and the concomitant absence of a right to sue in terms of any of the causes of action relied upon, attracted considerable reference both to case-law and to academic text, as did the further submission to the effect that the defendant's status as mere forwarding agent not having possession of the containers resulted in no liability for their loss (which in any event was said to have been caused by the fraud of the defendant's customer of which the defendant was innocent, and which thus negated any liability in conversion.) Mr Mok relied in particular upon the well-known dictum in Jones v European & General Express Company Ltd (1920) 4 Lloyd LR 127 as to the status and limited responsibility of a forwarding agent, and to the observation in Palmer, 2nd ed., at 499 that "the balance of modern authority is against the forwarder's becoming, in ordinary circumstances, a bailee".

14. For present purposes, however, I do not think it necessary to rehearse the arguments in any great detail; they strike me as having the potential to become quite complex depending upon such facts as are proved at trial, and the consequent classification of the available causes of action. I am entirely satisfied that in this case significant triable issues have been raised, both as to fact and law, which have as their genesis the actions of these freight forwarders in the events prior to the undisputed loss of the containers.

15. It follows that I accede to the defendant's submission that this is not an appropriate case for summary judgment on liability, the quantum element, as earlier noted, having been conceded as unobtainable at this stage. Notwithstanding Mr Au's enthusiastic efforts on behalf of his client, there are simply too many unanswered questions which may, or may not, ultimately prove to be relevant, and in my judgment it would be quite wrong to attempt to short-cut this claim as the plaintiffs now wish.

Order

16. Against this background, Mr Mok asked not merely that he should be permitted unconditional leave to defend, but that the Order 14 summons be dismissed. For his part Mr Au submits that the alternative to judgment should be no worse than unconditional leave to defend if and in so far as the court were to be against what he continued to suggest was a clear case on liability.

17. I disagree with Mr Au that this is a case suffused with clarity. Patently presently it is not, whatever subsequently may become the position. I confess I am in two minds as to the correct order. Whilst tempted, on balance I have not been convinced that it would be right to dismiss, and I consider that in the circumstances the appropriate order on this summons is that the defendant is to have unconditional leave to defend this action, and that the costs of this application are to be in the cause. I so order. No doubt the parties can agree upon the usual directions up to and including discovery. I see no reason why this action should be further delayed.