TRI RUSS INTERNATIONAL (HK) LTD AND ANOTHER v. CHINA OCEAN SHIPPING CO (SHANGHAI BRANCH) AND ANOTHER

1988, No. CL-171

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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JUDGMENT

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1. This is a simple cargo claim. The Plaintiffs are the owners of a cargo of toys which were shipped in the 1st Defendant's vessel, the 'Su Feng' in July and August 1987. The 2nd Defendant acted as Agents for the 1st Defendant.

2. The goods arrived in Hong Kong on 15th August and were transhipped to the 2nd Defendant's premises at Tsing Yi Island. It is common ground between the parties that the cartons were stored on an open area and that they were covered by a canvas cover.

3. It is the Plaintiffs case that the goods were damaged by water. The main issue in this litigation is the extent of the damage which occurred and the liability for such damage.

4. In this connection, the Defendants contend that there was an Agreement between the parties that only 193 cartons were damaged by water.

5. The Plaintiffs arranged for the goods to be collected on the 8th September. Mr. Ho who has his own transportation co. attended at the 2nd Defendant's shipyard at Tsing Yi to take delivery.

6. He immediately noticed that the cartons he was to collect were covered by a thin blue and white striped canvas cover. In his opinion, this cover was thinner than the normal type of canvas cover which is used to protect goods when they are stored out in the open.

7. It soon became apparent to Mr. Ho that a substantial proportion of the cartons containing the' goods had been damaged as a result of water coming into contact with them. He calculated that slightly over 300 of the 930 cartons were seriously affected.

8. He asked representatives of the 2nd Defendant whether they were prepared to acknowledge the damage which had apparently occurred. Their immediate reaction was to decline to do so and state that he could either leave the goods at the shipyard or take them all.

9. Mr. Ho said in evidence that he was aware that it was the usual practice at wharfs for surveyors to be available to undertake surveys in such circumstances. However, he also anew that the 2nd Defendant did not follow this practice and no surveyor was available in the present case.

10. He had telephoned the Plaintiffs and advised them of the situation. They had instructed him to take delivery of the goods notwithstanding the fact teat it appeared that extensive damage had occurred as a result of the penetration of water. He complied with this instruction and delivered the goods to the Plaintiffs' premises at Shatin where the goods were stored in a godown.

11. Before leaving the 2nd Defendants' shipyard, he had received a form of acknowledgement from them which indicated that 193 cartons appeared to have been damaged by water. He denied that he had entered into any agreement to the effect that only 193 cartons appeared to be damaged. The said acknowledgement had not been signed or initialled by him.

12. The next witness to give evidence was Mr. Lam who at the relevant time has been an employee of Richards Brooks McLaren, a firm of surveyors.

13. Mr. Lam had attended at the Plaintiffs' premises and examined the goods. It was obvious that damage had been caused by water. Silver nitrate tests indicated that the damage had been caused by fresh water which led him to believe that it had occurred aster the arrival of the goods in Hong Kong while they had been stored prior to delivery being effected on the previous day.

14. The goods in question were children's teddy bears and he gave particulars of the damage which had occurred in the survey report which he had prepared.

15. He had been advised by the Plaintiffs that the teddy bears should only be put on the market for sale if the labels on them were removed. In his opinion, the labour costs of removing the labels would amount to approximately $4,000. Also in his experience, the proceeds of sale of such goods were unlikely to amount to wore than 10% of their invoice value.

16. The final witness. to give evidence for the Plaintiffs was Mr. Siu, an employee of the company. At the time of the dispute, he     had dealt with the matter and in particular had conducted correspondence with the Plaintiffs' insurers on the recovery of moneys in respect of the damage.

17. He gave evidence which was not seriously contested which proved the amounts which were being claimed in the Points of Claim. He also confirmed that the Plaintiffs were anxious to avoid the teddy bears being sold on the market with his company's trade labels on them. One consequence of this was to render a distress sale impracticable.

18. Mr. Tsui who was the officer-in-charge of the shipyard at Tsing Yi gave evidence for the 2nd Defendant. He said that goods were stored in the open when there was insufficient space in the godown. When this was necessary, the goods were covered by thick convas cover which was weather-proof. He said that the goods were inspected 4 times per day so as to ensure that they were adequately protected. In addition to this, a wax sealant was applied along the seams so as to keep rain out.

19. He had been aware of the problems which had arisen in the present case.  The goods had remained longer than usual owing to the fact that there had been a mis description of the measurement of the cargo in Shanghai.

20. The 2nd Defendant had not been prepared to release the goods as the documentation indicated that the volume of the goods was almost o times its actual volume. The Plaintiffs had not been prepared to pay the additional freight and then endeavour to seek a refund from Shanghai and accordingly, the 2nd Defendant had not been prepared to release the goods.

21. However, the problem had been resolved by the 8th September. he had been told by his Assistants that the representative of the owner of the goods had alleged that some of the cartons had been damaged by water. He understood that there had been agreement concerning the extent of the damage and that the goods had been released to the owners. He was, however; adament that a thick canvas cover had been placed over the goods.

22. Mr. Tsui's assistant, Mr. Chui also gave evidence. He had been the person who had negotiated with Mr. Ho when he had attended at the shipyard to take delivery of the goods. He accepted that there had been a protracted dispute, but he considered that it had been resolved as Mr. Ho had been prepared to sign the Delivery Order form and receive the certificate in which had been given which referred to 193 cartons being wet stained. As Mr. No had not objected to this certificate, he had assumed that he had agreed to it.

23. He was then invited by Mr. Fok for the Plaintiffs to reconcile this evidence with the 2nd Defendant's pleaded case, namely that there had been a specific agreement struck between the parties to the effect that only 193 cartons had been wet stained. Mr. Chui was unable to take matter's any further. His attitude was very much one of take it or leave it as far as owners of goods were concerned. If they were hot prepared to accept the 2nd Defendant's assessment of the alleged damage, they should decline to take delivery of goods. Mr. Chum also supported Mr. Tsui's evidence that the goods had been covered by a thick canvas cover.

24. That, I think, summarizes the most important and relevant evidence which was led before me. I will say immediately that I was far more impressed by the 3 witnesses for the Plaintiffs than I was the Gnu defendant's witnesses.

25. To be more specific, I found Mr. Ho to be a convincing and reliable witness and I accept his testimony that no agreement was struck concerning the 193 cartons. Also I have no hesitation in accepting his testimony that the goods were covered by a thin stripped canvas cover and that it was as a result of the inadequacy of the protection afforded to the goods that this damage occurred.

26. I have no doubt that all of the damage alleged by the Plaintiffs has been proved. I found the Surveyor, Mr. Philip Lam to be a convincing and reliable witness and I have no doubt. that when the survey was undertaken on the following day, the goods were in the same condition as when delivery was effected. The survey accurately recorded the condition of the goods which is entirely consistent with the claim being made by the Plaintiffs. I also accept the evidence of Raymond Siu to the effect that all reasonable measures were taken in an attempt to mitigate damages.

27. I will now turn to the legal position. I accept that Mr. Folk has accurately stated the law which is applicable. The legal relationship between the parties is governed by the Hague Rules and in general terms it is incumbent upon the other Defendants to put forward some form of plausible explanation as to why they should be exonerated from liability. Such an explanation has certainly not been forthcoming in the present case. I have no doubt whatever that on the facts of this case, as I have found them, the 2nd Defendant has been guilty of negligence in the matter.

28. In most years there is heavy precipitation in the months of August and September. To store goods in the open and then only cover them with a thin canvas cover undoubtedly constitutes a negligent act. The 2nd Defendant has been lacking in any acceptable degree of duty of care towards the Plaintiffs. The damage which occurred to the goods was entirely caused by the 2nd Defendant's negligence and the Plaintiffs have made out fully the claims contained in the Points of Claim.  It follows from what I have said that the 1st Defendant is also liable oh this claim. I enter judgment as claimed in the amended Points of Claim against both Defendants. Subject to any submissions which may be made, I would order that the Plaintiffs are entitled to their costs.