XCHRX TREASURE MARK DEVELOPMENT LTD. v. PANALPINA (HONG KONG - CHINA) LTD.

1994, No. A1939

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. In this action, the plaintiff claims loss and expense amounting to $237,938.10 for breach by the defendant of a contract for shipment of goods from Shanghai to Hamburg. The defendant has a counterclaim amounting to $18,804 for freight and other charges.

2. On 12th May 1993, the plaintiff contracted with Herma Limited, a Hong Kong company acting on behalf of Manor Limited, a Swiss company, to sell a quantity of ladies' pullovers which were to be manufactured in China. Manor emphasized to the plaintiff that delivery of the goods was critical because they were needed for a publicity campaign. On the documents which I have seen, there is room for debate as to the latest date by which Manor was prepared to accept shipment, failing which it would refuse the cargo, require the payment by the plaintiff of US$23,598 representing 20% of the value of the goods and claim compensation for any damages. As far as the plaintiff is concerned, however, it is clear that, rightly or wrongly, it viewed 15th August 1993 as the target date for shipping the goods from Shanghai. That was the evidence of Miss Lee Yuen Man, the merchandising manager of the plaintiff. And it was Miss Lee who at the beginning of July set about making arrangements for shipping the goods from Shanghai by 15th August.

3. The order placed by Manor required the plaintiff to engage the services of the defendant. Accordingly, Miss Lee contacted Miss Yuan Chun-fang, a lady who lives in Shanghai and who works for the plaintiff from time to time on a job-by-job commission basis. Miss Yuan had in fact already dealt with the shipment of a previous batch of goods sold by the plaintiff to Manor. She was well aware of Manor's delivery requirements and the consequences if these were not met. Nonetheless, Miss Lee telephoned Miss Yuan, explained to her the details of this contract, emphasized the possible penalties if the goods were not shipped on 15th August and asked Miss Yuan to contact the defendant's Shanghai office and get information about vessels leaving Shanghai "around 15th August".

4. Miss Yuan contacted Mr. Wu Ming of the defendant on about 5th July. In her telephone conversation with him, she emphasized the importance of 15th August as the date for shipment, that is the date of departure of the cargo carrying vessel from Shanghai, and the consequences if such shipment was not met.

5. Miss Yuan's evidence is crucial to the plaintiff's case. Mr. Wu was not called by the defendant. It is from Miss Yuan's evidence, therefore, that I have to determine the term or terms of the contract made between the plaintiff and defendant through Miss Yuan and Mr. Wu respectively. I propose, therefore, to examine Miss Yuan's evidence in some detail.

6. Referring to her initial telephone conversation with Mr. Wu on 5th July, Miss Yuan said,

"I told Mr. Wu I wanted to book a vessel that must depart that day (that is 15th August), the latest date for departure. Mr. Wu told me there was a vessel departing on 15th August which would arrive in Hamburg at the latest on 19th September. I reported the information to Miss Lee immediately. Miss Lee agreed the date. I informed Mr. Wu to confirm booking of the vessel. He also agreed. He promised to book a vessel for me on that date, 15th August, that is the date for departure."

7. Later, Miss Yuan when examined further about her second telephone conversation with Mr. Wu on 5th July, said,

"I contacted Mr. Wu to confirm the booking. I told him I wanted that day and vessel. He replied the vessel would be reserved for me. I told him the day was 15th August, the date the vessel departed Shanghai."

Later, Miss Yuan said,

"I told Mr. Wu I needed a vessel and it must be that day. He said he knew about it and that's it."

In answer to a question by me to clarify whether Mr. Wu knew about the consequences if the target date was not met, Miss Yuan said,

"I said to Mr. Wu that I did not want to see any return of the goods and the vessel must go on 15th August. His reply was 'Yes'."

Miss Yuan then continued in chief,

"I was aware of the consequences told me by Miss Lee when I reverted to Mr. Wu. First, I asked Mr. Wu to provide information of the schedules. Later, when the vessel and date were confirmed, I said I wanted that date and he promised."

8. In cross-examination, Miss Yuan explained that Miss Lee had asked her to get schedules for the period between 10th and 15th August. Having obtained a schedule from Mr. Wu, she reverted to Miss Lee who said she would like 15th August but that there was to be no delay. Miss Yuan passed on this instruction to Mr. Wu explaining that otherwise the plaintiff would have to pay compensation. She continued,

"I asked Mr. Wu to book space on 15th August. He did so."

Later, she said,

"I just asked the defendant to book space on the vessel."

9. Later, she confirmed that in her evidence in chief she said that, when the date was confirmed, she told Mr. Wu that she wanted that date and he promised, "that is he promised to book space on that vessel."

10. The plaintiff's claim is that the plaintiff entered into a contract with the defendant whereby the defendant undertook to ship the cargo by sea from Shanghai to Hamburg at a cost to the plaintiff of HK$37,104. Having abandoned a plea based upon breach of representation, the plaintiff's pleaded case was :

"8. Further or alternatively, it was a term of the contract that the Cargo would be shipped from Shanghai on 15th August 1993 and arrive in Hamburg by 19th September 1993.

9. In breach of ...... the express term of the contract pleaded in paragraph 8 hereof, the Defendant failed to ship the Cargo from Shanghai on 15th August 1993 and in fact delayed shipment until 28th August 1993."

11. Mr. Liang for the plaintiff contended that the contract between the parties consisted of a single express term, namely, a promise by and an obligation on the part of the defendant to ensure that the cargo left Shanghai on 15th August no matter what. For this, Mr. Liang relied very heavily upon the promise made by Mr. Wu which I have emphasized in the evidence set out. He said that the evidence is quite clear and unequivocal upon the matter and that there is no need to resort to any canons of construction to resolve the issue.

12. I am afraid that I find myself wholly unable to agree with Mr. Liang. Looking at Miss Yuan's evidence, it is clear that all Mr. Wu undertook to do was to book space on a vessel scheduled to depart on 15th August. No doubt there might have been an implied term of the contract that the defendant, as a freight forwarder, would do everything reasonably necessary to ensure that the cargo was loaded on the vessel. However, such an implied term has been neither pleaded nor canvassed in evidence.

13. In the event, the cargo was not loaded on the vessel which departed on 15th August and, after further delays, it is not in dispute that the cargo finally left Shanghai on 28th August so that, by the time it reached Hong Kong, it was too late to meet Manor's deadline for the arrival of the goods in Basel, Switzerland, if the goods continued by sea. The plaintiff required the defendant to arrange for the goods to be air-freighted to Switzerland at the defendant's expense. The defendant was not prepared to accept such responsibility. Ultimately, the plaintiff obtained release of the goods in Hong Kong and arranged for another freight forwarder to send the goods by air to Switzerland where apparently they arrived in sufficient time to avoid penalties. It is the cost of the air freight charges, less the sea freight which the plaintiff would otherwise have had to pay, that the plaintiff claims in this action.

14. The reason why the goods were not loaded on the vessel which departed on 15th August is in dispute. According to Miss Yuan, Mr. Wu phoned her on 28th July and said that the cargo was too large to fit in a standard container and enquired whether a high cube container could be used. Miss Yuan said she had no idea what a high cube container was and told Mr. Wu that it did not matter how the goods were loaded as long as they departed on 15th August. Mr. Wu, therefore, had authority to use two separate containers if necessary.

15. The case put to Miss Yuan was that on 13th August, Mr. Wu telephoned her to say that a high cube container was not available and enquiring whether the plaintiff was prepared to use one 40-foot and one 20-foot container. Mr. Wu said that a decision had to be made within one hour otherwise the goods could not be loaded. No decision was given to Mr. Wu so that the goods missed the vessel.

16. Although Miss Yuan agreed that she spoke to Mr. Wu on 13th August, she denied that there was any such exchange as was put to her. She said that she had telephoned Mr. Wu that day to check about the bill of lading and to confirm that the goods had been delivered to the warehouse and when the vessel would depart. At this stage, she said, Mr. Wu told her that there were problems and that there were no containers of any kind available. Pressed as to whether she had mentioned two containers to Mr. Wu during that conversation, she replied,

"Of course I mentioned two containers, otherwise he would not say that there were no containers available."

17. That last answer had spontaneity and the complete ring of truth. Miss Yuan was never really shaken in cross-examination. I have no hesitation in accepting her evidence. Accordingly, had it been necessary for me to do so, I would have been prepared to find that through Mr. Wu the defendant was negligent in failing to ensure that the goods were loaded on the proper vessel. Mr. Wu would have had ample time to ensure that two standard containers rather than a high cube container were available.

18. Unfortunately, the plaintiff has not established the case which it has pleaded. Very late in his final submission, Mr. Liang indicated that he would like to seek an amendment to the statement of claim to plead an implied term or terms along the lines which I have already indicated. I said that I would be reluctant to grant such an application because it would inevitably mean an adjournment and a reopening of the whole trial. Mr. Liang did not press his application.

19. It is legitimate, I think, to test the plaintiff's contention as to the express term of the contract between the parties against common sense and commercial reality. The defendant is a freight forwarder. A freight forwarder has no control over vessels upon which goods are shipped, over the loading of those vessels or the provision of containers, unless the freight forwarder happens to own or operate the vessels. There was no evidence of that in this case. The loading and sailing of a vessel can be delayed for a variety of reasons, as Miss Lee accepted. Accordingly, it is unlikely in the extreme that a freight forwarder would expressly undertake that goods would leave a particular port on a particular day. As I understand it, a freight forwarder is really the link between an exporter and the shipping line. The freight forwarder books space on a vessel, undertakes necessary paper work and arranges for the collection of cargo ready for stuffing in containers or otherwise. In this case, the defendant carried out all those functions and only failed in the last, albeit vitally important, task of having the goods moved from its warehouse into containers. A letter written by Mr. Wu to the defendant's office in Hong Kong by way of explanation of what happened suggests that Mr. Wu was so hard pressed in Shanghai that he could not pay proper attention to this and no doubt other cargoes. If this case had been fought along other lines that would no doubt have been a damning piece of evidence.

20. In the circumstances, the plaintiff's claim must be dismissed. There being no dispute about the defendant's charges for having the cargo shipped to Hong Kong from Shanghai, there will be judgment for the defendant on its counterclaim in the sum of HK$18,804.

21. I make an order nisi that there should be interest on that sum at the rate of 9% from 10th September 1993 until the date of this judgment and thereafter at the rate prescribed by the Chief Justice until payment.

22. I also make an order nisi that the defendant should have the costs of this action.