XCHRX CHINA NINGBO CIXI IMPORT & EXPORT CORPORATION v. BERAISEA HONG KONG LTD.

HCCL 186/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.186 OF 1999

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J U D G M E N T

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The application

1. There is before the court a summons dated 6 May 2000 issued in this action by the plaintiff. In that summons, the plaintiff seeks final judgment against the defendant for the sum of US$26,390.00 together with interest and costs. The application is mounted on the alternate bases of Order 14, rule 1 and judgment on admissions under Order 27, rule 3. In moving the application, Mr Thomas Au on behalf of the plaintiff has made it clear that he is content to go under either head, because in his submission either head is amply justified on the present facts. What, then, are these facts?

Factual background

2. This is a misdelivery claim and the primary events are, as far as I can see, undisputed. It appears that the plaintiff as seller entered into a CIF contract to sell to a Canadian company by the name of Potirna Rep, a quantity of 14,000 T-shirts at a price of US$20,300.00, this sale being evidenced by a commercial invoice dated 20 September 1998.

3. The plaintiff as shipper of these goods entered into a contract of carriage with the defendant as evidenced by bill of lading No.CPE180-I dated 24 September 1998 ("the bill of lading") for the carriage of this cargo of 117 cartons of T-shirts contained in container No.ZJSU4401398 from Ningbo Container Freight Station in the PRC to Trieste CFS in Italy. Under the contract of carriage, there was to be transshipment in Hong Kong. By Clause 17(A) of the terms and conditions of the bill of lading, the Hague Rules were incorporated into the contract.

4. The bill of lading named an entity known as Karlovacka Pivovara Croatla (which presumably was Potirna Rep's buyer) as Consignee, and Potirna Rep as Notify Party, and under Clause 5 of its terms and conditions the bill was negotiable. The defendant acknowledged the receipt of the cargo in apparent good order and condition, there being no adverse clausing in the bill of lading.

5. There was, as I have said, transshipment in Hong Kong. At this stage the third party appears in the matrix of facts. Apparently the defendant had contracted with the third party as agent or sub-contractor for the onward carriage of the cargo from Hong Kong to Trieste CFS, although Mr Au makes clear that the plaintiff, his client, had and has no knowledge of the precise contractual arrangements between the defendant and the third party.

6. What then happened to these goods? It is apparently accepted that they were released without production of the original bill of lading upon the cargo's arrival at Trieste and Mr Au says on behalf of his client that this was in breach of the contract of carriage and/or of the defendant's duty as bailee and/or as carrier for reward and/or negligently.

7. Mr Au further points out to the court that the defendant has admitted, whether in pleadings or affidavit, the following matters :

First, that the plaintiff at all material times was the owner of the cargo and the holder of the bill of lading;

Second, that the cargo should not be released without production of the bill of lading; and

Third, that the cargo in fact was released absent production of the bill of lading.

8. My attention has also been drawn to the fact that those formerly acting for the defendant and who have recently come off the record, Messrs Rene Hout & Co., by a letter dated 28 December 1999 addressed to Messrs Richards Butler, the solicitors for the plaintiff, noted as follows :

"As can be seen, the contents of these letters [letter dated 16 November 1998 from the defendant to the Third Party; letter dated 1 December 1998 from the defendant to the Third Party and letter dated 23 December 1998 from Third Party to one Mr Dizdar] support our client's claim against the Third Party and in fact accurately reflect what had actually happened to the cargo. Accordingly we again invite you to consider amending the Points of Claim to bring your client's claim into line with ours. Thereafter, and assuming you are to take out Order 14 proceedings against our client, we propose that our client shall do likewise against the Third Party so that the two sets of proceedings will be heard together or one immediately after the other. If however you will not amend the Points of Claim, then we should be obliged if you would let us have a further period of 14 days to file our client's Point of Defence."

From the foregoing, it appears tolerably clear to the court that the attitude adopted by those then acting for the defendant was that the plaintiff's claim would not be seriously contested, but that the defendant had in mind immediately passing on its liability to the third party, i.e. Freight Links Express (HK) Limited, who had taken the goods on from Hong Kong to Trieste.

Applicable principles

9. It is against this background that Mr Au seeks his relief against the defendant. This is, it seems to me, a classic misdelivery case, the cargo in question being delivered without production of an original bill of lading.

10. I pause to remind myself of the well known principles applicable to summary judgment applications, and I shall not here refer to the oft-cited authorities in this area. This court is resistant in practice to summary judgment applications save in all but the clearest cases. However, in my view this is a case where there really is no defence to the head claim. It is trite law that when a bill of lading has been issued, the carrier is under the obligation to deliver the goods at the port of destination to the holder of the bill upon presentation of the bill itself. If the goods are delivered to a third party who does not present the original bill of lading, even if that person is a named consignee, the carrier will be liable for the resulting loss in tort for conversion and/or in breach of the contract of carriage.

Potential defences

11. Mr Au has been kind enough to carefully isolate three 'defences' which are pleaded in the Defence. I take them briefly in turn.

12. The first is that the defendant had fully discharged its duty under the contract of carriage and/or as bailee and/or as carrier for reward, as through the third party the cargo had been delivered to the consignee under the bill albeit without production of the original bill of lading (see the Defence, paras 5 and 6(5)).

13. Mr Au submits that this purported defence is entirely without merit. The defendant, he says, was clearly in breach of the contract and of its duties as carrier in delivering the cargo without production of the bill of lading. It could not be disputed that in law, and under the terms of the bill of lading itself (in particular Clauses 1, 2 and 5), that the defendant was bound under the contract and/or had a duty as a bailee and/or as a carrier for reward to deliver the cargo to the consignee only upon production of the bill. Ironically, the defendant appears to be clearly aware of this duty to deliver the cargo only to the holder of the bill of lading as it is the defendant's own evidence that it had expressly and specifically instructed the third party not to release the cargo without production of the original bill of lading. In this connection, Mr Au has drawn my attention to a fax dated 16 November 1998 from the defendant to the third party which reads in part as follows :

"REGARDING TO THE ABOVE-MENTIONED SHPTS, WE WOULD LIKE TO SURRENDER YOUR ORIGINAL MEMO B/L IN HKG, PLEASE KINDLY ADVISE YOUR AGENT TO RELEASE THE CAPTIONED CARGO TO THE ORDER OF HOLDER OF ORIGINAL THRU B/L (NO.CPE180-I, 1ST MV DRAGON WELL V.377) ISSUED BY BERAISEA HONG KONG LTD., NINGBO."

14. So there is nothing in that point. The second purported defence put up was that the delivery of the cargo, absent production of the bill of lading, was the result of a breach of duty and/or negligence on the part of the third party (see Defence, para 6(4)). In other words, that it was all the third party's fault.

15. Once again, this allegation appears to have no redeeming merit, at least in terms of the head action between the plaintiff and the defendant. The fact that the third party, which was the defendant's sub-contractor and/or agent, had released the cargo absent production of the bill of lading offers no defence to the plaintiff's claim. The duty under the bill of lading held by the plaintiff not to release the cargo without production of the bill of lading was that of the defendant, and what the third party sub-contractor may or may not have done is of no consequence to the plaintiff. For good measure, Mr Au adds that in any event the defendant is and was at all material times vicariously liable for the third party's act as the third party's principal, and, further, under clauses 10 and 23.3 of the terms and conditions of the bill of lading. So this line of argument does not assist the defendant either.

16. The third point which is taken on the pleadings (see Defence para.6(2) and 8) is that even if (which is denied) the defendant is liable for the plaintiff's loss, it is not liable for the full amount claimed because damage had already occurred to the cargo as discovered during the transshipment in Hong Kong.

17. This also does not seem to offer much prospect of success. Under the original bill of lading, the defendant acknowledged receipt of the cargo at the port of loading in apparent good order and condition. In other words, the bill of lading was not claused. Under Clause 12 of the terms and conditions of the bill of lading and Article III(4) of the Hague Rules, this representation in the bill of lading is prima facie evidence of the description of the cargo when loaded, and that the defendant has taken charge of the cargo. Mr Au adds that under Article III(2) of the Hague Rules, the defendant was under a duty to properly and carefully, inter alia, handle, carry and keep and care for the cargo, and subject to any contrary evidence to be provided by the defendant (which is non-existent in this case) the damage to the cargo was presumed to be caused during the shipment. In other words, that any damage which did transpire was damage which occurred during the carriage itself when the cargo of T-shirts was under the defendant's possession and control.

18. Whilst Mr Au, on behalf of the plaintiff, has been careful to isolate and deal with the purported defences, and rightly so, the fact remains that there is no one in court today from the defendant to dispute this claim. After Messrs Rene Hout & Co. obtained permission to come off the record, pursuant to an order of this court sealed on 21 September, I am told that those instructing Mr Au took pains to ensure further service of the papers in this matter upon the defendant at its registered office. An affidavit to this effect (which Mr Au, on behalf of his client, undertakes to file today) makes the position clear. So there can be no question but that the defendant has been properly served with this application, having been first served through its solicitors of record and, again, when those solicitors removed themselves from the case.

Decision

19. As I have indicated in the body of this judgment, this appears to me to be a very clear case. It is one of the few cases recently brought before the Commercial Court wherein there really can be no doubt that it is one suitable for summary judgment. In my judgment, no defence has been made out to the plaintiff's claim.

Order

20. There is to be judgment for the plaintiff against the defendant in the principal sum of US$20,300.00 (the same being the value of these goods as per the commercial invoice dated 20 September 1998).

21. As to interest, I am told that the misdelivery took place on a date in December 1998, and, in the circumstances, I am minded to order interest on the principal sum, which I now do, at the rate of 8% per annum for the period 1 January 1999 to the date of judgment herein, i.e. 29 September 2000, and thereafter interest is to run on the aforesaid principal sum at the judgment rate from time to time prevailing until payment.

22. I further order that the costs of this action, including the costs of and occasioned by this application, are to be paid by the defendant to the plaintiff, to be taxed if not agreed.