GEMERALDIAM BVBA v. MALCA AMIT FAR EAST LTD

HCCL 10/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO 10 OF 2015

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D E C I S I O N

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1.  This is the application made by the Plaintiff, Gemeraldiam BVBA, for summary judgment to be entered against the defendant, Malca-Amit Far East Limited. The plaintiff is a Belgian company which trades in gemstones. The defendant is a Hong Kong company which is part of a Belgian group of companies which carry on business as a carrier, freight forwarder and logistics solutions provider for the diamond and jewellery industries.

2.  The plaintiff claims to be the joint owner of a 32.4 carat polished diamond of a cushion brilliant shape and cut (“Diamond”).  The plaintiff was an exhibitor at the Hong Kong Jewellery & Gem Fair which was held in September 2014 (“Fair”).  On the last day of the exhibition, on 19 September 2014, the plaintiff claims that it entrusted and delivered the Diamond to the defendant at the defendant’s collection point in the Fair (“Collection Point”), initially for storage and safe keeping, and later gave instructions to the Defendant to deliver the Diamond to the plaintiff’s specified address in Belgium.  The plaintiff claims that the defendant failed to deliver the Diamond to it, because it was discovered, when the shipment arrived in Belgium, that the Diamond was not in the parcel which was sent from Hong Kong.  The plaintiff claims that the defendant is in breach of its agreement with the plaintiff for the storage and shipment of the Diamond (“Agreement”), had failed to exercise reasonable care and skill in providing the storage and shipment services, and had converted the Diamond.  The plaintiff claims the delivery up of the Diamond or its value of US$900,000, or damages. 

3.  A Defence was filed by the defendant, in which it denies that the plaintiff had transferred physical possession of the Diamond to the defendant at all, and denies that it had received the Diamond.  The defendant claims that the plaintiff’s representative had only passed a brown box to the defendant’s representative at its Collection Point, which had not been opened by the plaintiff and the defendant, that the brown box had been placed into the defendant’s usual yellow sack for dispatch (“Yellow Sack”), that the Yellow Sack had been sealed and identified with a seal number in the presence of the Plaintiff’s representative, and that the Yellow Sack had not been tampered with nor was its seal broken until its arrival in Belgium.  It is the defendant’s evidence that when the shipment arrived in Belgium, the Yellow Sack was unsealed under CCTV surveillance, and when the brown box was opened, it was discovered that the box was empty.

4.  The plaintiff claims that the defendant has no defence to its claims, since the defendant had acknowledged in writing on its standard form of Shipping Instructions (entitled Domestic Secured Service Shipping Instructions, and dated 19 September 2014 “Instructions”) that it had received the Diamond, that the defendant’s assertion that the plaintiff had handed over an empty box to the defendant at the Collection Point is unsupported by evidence and is unbelievable, and that any exclusion clause relied upon by the defendant to avoid or limit its liability does not and cannot apply.  The defendant pleads in its defence that Clause 12 of the conditions of the Instructions provides that the defendant shall not be liable for loss of, damage to the shipment or liability caused by or resulting from “mysterious disappearance or unexplained loss from or damage to the contents of any Parcel described”. 

Legal principles

5.  The principles applicable to applications for summary judgment are clear and not in dispute.  To resist an Order 14 application, the defendant must show that there are triable issues.  A concise statement of the standard approach in an application for summary judgment is to be found in the dicta of Ma J, as he then was, in Schindler Lifts (Hong Kong) Ltd v Ocean Joy Investments Ltd [2003] 1 HKC 438.  The court has to determine two questions: firstly, whether what the defendant says is believable as opposed to whether its version of events is to be believed; and secondly, if it is, whether what the defendant says amounts to an arguable defence in law.  In determining the first question, the court should not embark on a mini trial of the action on affidavit evidence.  The burden of proof is not a heavy one.  It is not the function of the court at this stage to assess if a defence will succeed at trial.  Insofar as the second question is concerned, summary judgment will not be granted if there are arguable defences or serious disputes of law.

6.  Nor should there be any dispute as to the principles applicable to the interpretation of contracts.  Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract. 

Are there triable issues?

7.  Factually, there is dispute on the evidence as to whether the Diamond had been placed by the plaintiff’s Mr Nissan (“Nissan”) in a small black box, which was then placed in a small white box secured with 2 elastic bands, with the weight of the Diamond written on the white box, as Nissan alleges, before it was handed over to the defendant’s Mr Matalon (“Matalon”). Matalon himself has no recollection of whether the box which Nissan handed to him was brown or white, but his colleague who had allegedly seen Nissan and had directed Nissan to Matalon claimed that Nissan was carrying a brown box.  The parties agree that whatever box which was handed over to Matalon was not opened before it was put into the Yellow Sack, and that the Yellow Sack was sealed with a plastic zip tie marked and identified with a seal number 60512160 (“1^st Seal”), all in the presence of Nissan.  The standard form Instructions was completed by Nissan, and then signed by Nissan on behalf of the plaintiff, and by Matalon on behalf of the defendant, in each other’s presence. 

8.  On the defendant’s evidence, all the closed and sealed Yellow Sacks delivered to or collected by the Defendant were placed on a metal trolley, and then taken to the defendant’s sorting area or hub in another part of the exhibition hall.  The metal trolley was continuously guarded by a security guard, and when all scanning and formalities had been cleared, the Yellow Sacks would be taken to the defendant’s secured storage facility in Hong Kong, where the Yellow Sack containing the plaintiff’s shipment (“plaintiff’s Yellow Sack”) was kept.  On about 6 October 2014, the defendant received Nissan’s instructions to ship the consignment to Belgium.  A set of the defendant’s standard form Global Shipping Instructions was signed by the plaintiff and faxed to the defendant.  On receipt of such instructions, the defendant’s evidence is that the plaintiff’s Yellow Sack was then placed inside a second Yellow Sack (“2^nd Yellow Sack”), and sealed with a separate seal of the defendant marked with a seal number 60541664 (“2^nd Seal”).  On the defendant’s evidence, when the shipment arrived in Antwerp, the 2^nd Yellow Sack with the 2^nd Seal intact, and the plaintiff’s Yellow Sack also with the 1^st Seal intact, were both opened at customs under CCTV surveillance, when the seals were cut with a bolt cutter.  An unopened brown cardboard box bearing the defendant’s name and logo, sealed with the defendant’s tape, was then emptied from the plaintiff’s Yellow Sack, and the box was cut open with a knife.  This box was shown to be empty, and the defendant’s case is that this box taken out from the untampered, sealed Yellow Sacks was the very same box that Nissan had handed over to Matalon on 19 September 2014.  The alleged white box, and the alleged black box in which the Diamond was claimed to have been put by Nissan, were nowhere to be found.

9.  The plaintiff’s case is that the denials and assertions made by the defendant do not support any defence, since the defendant is estopped from disputing that it had received the Diamond from the plaintiff.  The plaintiff relies on the fact that by the Instructions, the defendant had acknowledged in writing that it had received the Diamond, described to be 32.4 carats in weight and US$900,000 in value, in good condition, for delivery to the plaintiff.  On behalf of the plaintiff, Mr Sussex argued (in his Skeleton) that the acknowledgment serves as prima facie evidence of the matters represented, that the shipment contained the Diamond of a specific weight and value, and that the parties are contractually estopped from denying such a state of affairs, regardless of any detrimental reliance, and whether or not such state of affairs is in fact true (DBS Bank (Hong Kong) Ltd v San Hot HK Industrial Co Ltd [2013] 4 HKC 1). 

10.  The relevant acknowledgment contained in the Instructions is in the following terms :

“On behalf of (the defendant), the undersigned subject to the terms and conditions on the reverse side of this document, hereby acknowledges receipt of the described shipment in good condition and with no indication of having been broken or tampered with, for delivery to the above named party at the address shown above.” (Emphasis added)

11.  Above such acknowledgment appears the customer’s (ie the plaintiff’s) statement, in the following form:

“On behalf of the customer, the undersigned hereby states that the description of the shipment and its contents is accurate and complete:

Pieces 1

Weight 32.40

Declared value (USD) 900,000

Description of Property polished diamond”

(emphasis added)

12.  On behalf of the plaintiff, Mr Sussex argued that, construed as a whole, the defendant contracted under the Agreement to assume liability for the “physical loss of, or damage to the shipment resulting from any cause whatsoever”, on the basis of the plaintiff’s warranty that the contents of the shipment had been accurately described, and the plaintiff’s agreement to indemnify the defendant for any loss resulting from the breach of any such warranty.  Mr Sussex stressed that the burden is on the defendant to show that the loss falls within the contractual exclusion of “mysterious disappearance or unexplained loss from the contents of any parcel described in the shipment”, and that the defendant has slim prospects of success in establishing this.

13.  It is relevant (and not disputed) that the description of the shipment (as comprising a polished diamond of the declared weight and value) is made by the customer, ie the plaintiff.  It is not disputed that the box which was handed over by Nissan to Matalon had never been opened for the contents to be verified or checked.  The defendant claims that the trade practice of couriers and shippers is not to open and inspect the packages and cargo delivered by customers for dispatch.  This is conceivable, as no expert can be available on each occasion to inspect and verify the description of the precious stone or gem delivered for storage or courier.

14.  It is also pertinent that the terms and conditions on the reverse of the Instructions (“Terms and Conditions”), to which express reference is made on the face of the Instructions itself, define the term “shipment” as used in the defendant’s acknowledgment of receipt and the plaintiff’s statement.  The Terms and Conditions state:

“The particulars on the front page of the Shipping Instructions and the terms defined therein, together with these Terms and Conditions and any other documents provided by (the defendant) ...  shall be deemed to form an integral part of the Shipping Instructions, all of which are part of the agreement between the Customer and (the defendant) and hereinafter collectively referred to as the “MA-Contract”.  By signing this MA-Contract, Customer agrees to all the terms of this MA-Contract and any rider hereto...”

15.  In particular, clause 4 of the Terms and Conditions provides as follows:

“A “Shipment” for the purposes of this MA-Contract shall be deemed to mean any distinctively and securely sealed parcel (or parcels) which is (are) said to contain the Property described on the front page or rider hereto and which is (are) packaged as specified in Section 14 (f) or rider hereto.”

16.  The defendant’s acknowledgment of receipt, set out in the Instructions and sought to be relied upon by the plaintiff, is expressly stated to be subject to the Terms and Conditions.  The customer’s request for the forwarding of the shipment described in the Instructions is likewise expressly made subject to the Terms and Conditions. 

17.  As Mr Sussex has highlighted, the defendant’s liability is set out in clause 11 of the Terms and Conditions, which provides:

“(The defendant) shall be liable for the physical loss of, or damage to the Shipment resulting from any cause whatsoever, during the period of responsibility, subject however to the exclusions from liability and limitations of liability set forth hereinafter.”

18.  Clauses 12 and 13 of the Terms and Conditions set out exclusions from and limitations of the defendant’s liability, for specified loss of or damage “to the Shipment”, including shortage or mysterious disappearance or unexplained loss from or damage to the contents of any Parcel described (under clause 12 (c)). 

19.  It is in my view reasonably arguable that on a proper construction of the Agreement, and taking into account the definition of “Shipment” in clause 4 of the Terms and Conditions, the defendant’s acknowledgment of receipt, contained in the Instructions, is only intended by the parties, at the time when the Agreement was made, to be an acknowledgment of receipt of the sealed parcel, said and stated by the plaintiff to contain the property described by the plaintiff in the Instructions as “polished diamond”, 32.40 in weight and of a declared value of US$900,000.  As clause 14(f) of the Terms and Conditions provides, the plaintiff as customer acknowledges and agrees that the defendant shall be under no obligation to ascertain or check the contents of any parcel forming part of the “Shipment” as defined.  Clause 14 (f) further expressly provides that “the Shipment shall be considered delivered in good order and condition, unless the Customer’s sealed parcel(s) or container(s) show evidence of tampering or penetrating damage at the time of delivery”.  As the evidence shows that the plaintiff’s Yellow Sack and the 1^st Seal were not damaged, nor was there any evidence of tampering of the plaintiff’s Yellow Sack and the 1^st Seal, at the time of delivery in Belgium, it is reasonably arguable that the Shipment, as defined, was delivered in good order and condition. 

20.  When the definition of “Shipment” is considered and borne in mind, as a reference to a parcel or parcels “said to contain the Property described” on the front page of the Instructions, I do not agree that clause 14 of the Terms and Conditions cannot be sensibly and commercially construed, simply because there were different references to “Shipment”, “Property” and “parcel” in different contexts.

21.  It will be a matter of evidence, including evidence of trade custom and usage, as to the purpose and objective of the “said to contain” provisions in the Agreement.

22.  If there is no estoppel which operates to prevent the defendant from disputing the contents of the shipment, the Defence and evidence filed for the purposes of the application for summary judgment show that there are triable issues, as to whether the plaintiff and Nissan on its behalf had in fact delivered the Diamond, allegedly in the black box which was placed in the white box, to the defendant, and whether it was a brown box with the defendant’s name which was delivered to the defendant at the Collection Point.  The plaintiff has, in reply to the Defence and the affidavit in opposition served on behalf of the defendant, put in evidence CCTV footages and screenshots, from the CCTV cameras installed within the plaintiff’s booth at the Fair.  Despite the assertions made by the plaintiff as to what can be seen from these screenshots, I cannot find from these materials clear evidence that the Diamond inspected by Nissan on the day and in the booth was indeed put into the black box, and then into the white box, as alleged.  As pointed out by the defendant, the footages do not cover the entire time period in question as there were gaps in time which were not shown on the screenshots.  Even if Nissan’s claims are accepted in full as to what had happened in the plaintiff’s booth, the CCTV footages do not show that the white box (allegedly containing the black box and the Diamond) taken from the plaintiff’s booth by Nissan was in fact handed over to the defendant at the Collection Point, in the state Nissan claims, without the defendant’s cardboard brown box.  There is no evidence as to what had happened between the time when Nissan left the plaintiff’s booth with the white box, and when he arrived at the defendant’s Collection Point, and what Nissan had handed over to Matalon.  All this will be a matter for cross-examination at trial.

Orders

23.  Since I am satisfied that there are triable issues as to the construction of the Agreement, whether the Diamond had been delivered to the defendant, and (although the bailment argument was not pursued at the hearing) that the defendant has raised an arguable defence that the plaintiff’s loss did not result from a failure on the defendant’s part to exercise care, I give unconditional leave to the defendant to defend the plaintiff’s claims.  The costs of the application should be in the cause.

24.  The parties are to agree on directions for the further conduct of the action and to submit a draft order within 14 days of the handing down of this Decision.