THE OWNERS OF AND/OR OTHER PERSONS ENTITLED TO SUE IN RESPECT OF THE CARGO LATELY LADEN ON BOARD THE SHIP OR VESSEL M.V. “APL MALAYSIA” v. TRANSPAC CONTAINER SYSTEM LTD TRADING AS BLUE ANCHOR LINE

HCAJ152/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO. 152 OF 2010

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J U D G M E N T

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I. INTRODUCTION

1.  By dint of an interlocutory judgment dated 13 October 2011, the Plaintiffs obtained judgment with damages to be assessed and costs against the Defendant.  They now seek final judgment to be entered in terms of the Draft Final Judgment for damages following assessment by this court against the Defendant in default of filing notice of intention to defend.

II .  background

2.  The following facts gleaned from the affidavit evidence filed on behalf of the Plaintiffs do not appear to be controversial.  They are accordingly taken as established for present purposes.

3.  A contract of carriage under an Express Cargo Bill numbered BANQFRA0934716 dated 11 October 2009 was entered into between the Plaintiffs and the Defendant pursuant to which the Defendant agreed to deliver a cargo of 775 cartons containing 4,650 cans of a specialty medical food for treatment of children with epilepsy to Baltimore, USA.  The buyer and consignee, Nutricia North America, a company specializing in medical nutrition was duly invoiced by the seller, Danone Trading BV.  The cargo supplied from a warehouse in Germany was consolidated with other unrelated goods in a container for shipment. The container was loaded on board the “APL Malaysia” at Bremerhaven, Germany.

4.  The Express Cargo Bill was issued clean, acknowledging that the cargo had been received in good order and condition for shipment.

5.  The container was discharged on 20 October 2009 at Port Newark, New Jersey, USA and taken to the premises of Vanguard Logistics in the same state. The cargo was devanned on 22 October 2009.  The unloading report did not indicate any damage to the cargo that was later transported to another warehouse in Baltimore, MD.  It was first discovered with wet damage prior to delivery by the truck driver of Bandit Express Inc., the haulage contractor and the inland carrier on 30 October 2009.  The Release document signed by the driver on the same day noted “Mildew on ctns. Ctns wet and crushed. Damaged”. “Ctns” is an obvious reference to cartons.

6.  The Plaintiffs contend that the cargo was damaged whilst in the custody and care of the Defendant.

7.  On 18 November 2009, the buyer/consignee requested the cargo to be surveyed.  As happened, Kuehne and Nagel were invited to attend the survey.

8.  The cargo was surveyed twice with the first survey taking place on 20 November 2009 and the 2^nd, on 16 December 2009.  The resulting survey report appears at Plaintiffs’ Bundle 1 (pp 27-64).

9.   Prior to dealing with the extent of damage to the consignment, for completeness it is noted that Nutricia North America was compensated by the underwriters in the amount of USD 41,711.26 after deduction.  The release/letter of subrogation dated 7 April 2010 is at Plaintiffs’ Bundle 1, page 29.

iii.  The Plaintiffs’ claims

10.  The Plaintiffs seek compensation for loss suffered in respect of 529 cartons or 3,174 cans of baby food in the amount of US$44,410.06 as converted from Euro, the currency of the consignment and the cost of the survey.

11.  The Defendant accepts liability for the total loss of 437 damaged cartons.  Liability for the remaining 92 cartons is refuted.  The Defendant submitted that the Plaintiffs have failed to prove that these 92 cartons were either damaged, or if they were, that the damage was caused by the act or neglect of the Defendant.  The survey fees are unchallenged.

12.  The Plaintiffs have requested that the judgment for the damages to be assessed be entered in US dollars.  The Defendant contends that damages should be awarded in Euro as the invoice was so denominated.

13.  Then there is the dispute on the appropriate scale of costs with the Plaintiffs urging costs to be awarded on the High Court scale and the Defendant submitting that District Court costs should be ordered.  Ancillary thereto, is the further dispute as to the time costs and indemnity costs sought by the Plaintiffs.

IV.  The extent of damage

14.  The survey report described the consignment as medical food contained in cartons made of corrugated cardboard paper.  Each carton had 6 cans that were basically cardboard tubes with foil lining and tin tops and bottoms.  The cartons were stacked on wooden pallets and shrink wrapped.  The pallets bore a sticker marked “Quarantine”.

15.  At the time of inspection, the damaged product had been hand sorted and placed in quarantine as required.  The damage according to the surveyor was caused by exposure to fresh water or moisture during the transit from New Jersey to Baltimore prior to delivery from the Baltimore International Warehouse to the consignee.  More particularly, when the cargo was transported from the New Jersey warehouse, rain was recorded on October 24 and 27 both in NJ and MD.

16.  The report revealed that the cartons had dried, but showed evidence of moisture exposure and wrinkling in varying degrees.  The cartons had evidence of minor exposure where they had minor water stain or wrinkling to heavy exposure where they were heavily stained and partially collapsed.  Black mildew was evident on the cartons.  In all, a total of 437 cartons were segregated as wet for which the Defendant has accepted liability.

17.  The shipment consisted of 775 cartons.  After hand sorting and removal of the 437 damaged cartons, the balance of the consignment of 338 cartons were accepted by the consignee.  These cartons were on the interior stacking and lower in the pallet.  They had not been exposed to moisture.

18.  It is apparent that the 338 cartons considered good or undamaged were dispatched to the customer.  A week thereafter, a few customers complained of the cans being rust stained or exhibiting rust development.  A further inspection was conducted (the 2^nd survey on16 December 2009, some 26 days after the 1^st survey on 20 November 2009) and new damage was uncovered.

19.  Of these 338 cartons, 65 were segregated as “possible damage/reject although there was no sign of any wetting on exterior or interior.  Since customers had already complained of cans showing rust development on cans which were originally considered good, they decided not to take any chance of shipping those 65 cases as good but considered them as reject”.  The 65 cartons were said to be “apparently good but possibly reject by consignee”.  Sample cans from this lot were inspected.  They exhibited no sign of wetting inside or out or of any rust or rust development except deep print marks of can bottom rims on cardboard boxes.

20.  23 cartons of the same lot of 338 were “segregated as damaged.  Although exterior and interior of cardboard boxes indicated dry and without any sign of wetting, individual cans exhibited very minor rust development on can rims or bleeding of minor rust spots through labels”.

21.  The Defendant submitted that absent wetting on the cardboard cartons, it was inherently unlikely that any minor rusting was caused by rainwater as alleged. Silver Nitrate test indicated that the moisture exposure could have been from rain or condensation.  It was contended that condensation damage was an equally plausible and probable scenario for which the Defendant would not be liable. It was further submitted that if condensation was a likely cause, there was no evidence that it had occurred when the cartons were in the Defendant’s custody through any neglect or omission on its part.  I agree.

22.  The Plaintiffs bear the burden of proving their damages.  This they have done only in respect of the 437 cartons for which liability has been conceded. Accordingly I shall assess damages limited to this number of cartons.

V.  The denomination of the award

23.  The good were invoiced in Euro.  The damaged 437 cartons each containing 6 cans costing 9.3874 Euros per can had a value of 24,613.76 Euros.  That without more represents the damages recoverable by the Plaintiffs.  However the Plaintiffs have sought an award denominated in US currency.  The Defendant disagreed, arguing that a Euro award was appropriate.

24.  The proper test to determine this issue is to be found in The Folias [1979] AC 685.  Damages for breach of contract in respect of sums expended in foreign currency should be calculated in the words of Lord Wilberforce at 701B-C:

“in the currency in which the loss was felt by the plaintiff or ‘which most truly expresses his loss.’ In ascertaining which this currency is, the court must ask what is the currency, payment in which will as nearly as possible compensate the plaintiff in accordance with the principle of restitution, and whether the parties must be taken reasonably to have had this in contemplation.”

25.  The Plaintiffs submitted that although the invoice was expressed in Euro, the consignee, Nutricia North America was located in the US where the goods were destined to be sold in US dollars and its underwriters have settled the claim in US dollars.  Further it has been said that US dollars would have to be sold for Euros by the assured/ buyer to settle the invoice.  Accordingly, the loss would have been felt in that currency.

26.  The Defendant countered that Nutricia North America, the consignee has not been described as the Plaintiffs on the amended writ.  Rather the Plaintiffs were said to be “THE OWNERS OF AND/OR OTHER PERSONS ENTITLED TO SUE IN RESPECT OF THE CARGO LATELY LADEN ON BOARD THE SHIP…”  Nothing was known of the corporate identity of the Plaintiffs and there was no evidence of their usual operating currency.  The Plaintiffs’ addresses on the amended writ are in the USA, Netherlands and Germany, the latter two being in the Euro zone.

27.  As the evidence stands, a cogent case for an award in US dollars has not been substantiated.  I am not persuaded on balance that the loss suffered by the Plaintiffs would necessarily have been felt in that currency.

28.  I therefore award damages of 24,613.76 Euros to the Plaintiffs for the damaged goods, the currency of the invoice with interest at Euro prime rate plus 1% from 30 October 2009 to the date hereof and thereafter at judgment rate until full payment.

29.  To that must also be added the survey expenses of US$2,260.40 that have not been challenged.  This head of claim should also be converted into Euros and shall carry the same Euro rate of interest as stipulated in paragraph 28 from 2 March 2010 (the date of the survey report) to the date hereof and thereafter at judgment rate until full payment.

VI.  costs

30.  There are two distinct issues in contention in this regard.  Firstly, the Plaintiffs have sought indemnity costs and secondly, they have pursued costs on the High Court scale, it being said that this action was on the Admiralty List.  The Defendant contended otherwise on both matters.

31.  As to indemnity costs, the Plaintiffs have relied on four matters they say cumulatively would entitle them to a more generous level of costs.  They referred to abortive negotiations at settlement.  Attempts at settlement always encouraged by the courts particularly in the post CJR culture often produce no dividend.  Outright refusal to even attempt to do so with no good reason, however, would attract criticism that may be reflected in costs.  In my view, there is no merit on this point.

32.  The second point raised in this regard referred to the Defendant ignoring the proceedings and then belatedly seeking to set aside the judgment in default only to abandon that attempt.  The Defendant submitted that such conduct was hardly vexatious, scandalous, malicious, oppressive or for an ulterior motive.  I concur.

33.  Thirdly, the Plaintiffs described the Defendant’s conduct throughout as “come and get us approach” and that was vexatious to them.  The Defendant is entitled to put the Plaintiffs to strict proof and that is what took place. There is no substance in this complaint.

34.  The last criticism hardly warrants any consideration, it being a reference to the many writs allegedly issued against the Defendant.  Even if there is evidence to support this averment, it is irrelevant to these proceedings.

35.  The Plaintiffs cited Choy Yee Chun (The representative of the estate of Chan Pui Yiu) v Bond Star Development Ltd [1997 HKLRD 1327, a case where the plaintiff was entirely oppressive and vexatious in the conduct of the suit.  There are no such features in this case.

36.  The case for indemnity costs fails.

37.  As for the scale of costs, the Plaintiffs argued that the present suite being an Admiralty claim fell within the exclusive jurisdiction of the High Court.  Additionally, as interlocutory judgment has been granted with costs, it must be inferred that costs should be on the High Court scale.

38.  No such inference can be drawn as is evident from Lai Ki V B+B Construction Co Ltd & Ors [2003] 3 HKC 322 and the more recent decision of the Court of Appeal in Ng Shing Yan Vincent v Poon Kin Pong (CACV 170/2009).  Costs are always a matter of discretion.

39.  In the instant case, even on full liability which the Plaintiffs failed to establish, the claim would have fallen well within the District Court jurisdiction of HKD 1 million.  There was simply no reasonable prospect of achieving an award in excess of the District Court limit.

40.  Section 12A of the High Court Ordinance (Cap. 4) does not provide that the Court of First Instance has exclusive jurisdiction in Admiralty matters, or more particularly to hear and determine claims for loss of or damage to goods carried on ships.  The District Court has regularly tried disputes involving loss or damage to goods in similar situations: see for instance Forsa Multimedia Ltd v C&C Logistics (HK) Ltd DCCJ 3467/2009, Red Chamber Co v Lau Siu Man DCCJ 2790/2009, Kind Respect Ltd v Apex Logistics Ltd DCCJ 502/2004.  The fact that a ship or bills of lading featured made little difference to jurisdiction provided that the claims did not exceed the District Court’s limit.

41.  In the circumstances of this case, I order that the Plaintiffs’ costs of the suit and of the assessment shall be party and party against the Defendant on the District Court scale.

42.  The Defendant justifiably complains to having been brought before the High Court at additional expense when the matter was entirely suitable to be heard below.  It seeks costs on the issue limited to jurisdiction.  That being a distinct dispute, I see no reason not to grant costs to the Defendant who has succeeded in demonstrating that the High Court scale is inappropriate and was patently so when the writ was issued.  It shall have costs on the High Court scale with certificate for counsel.

43.  Very latterly the Plaintiffs by letter dated 31 January 2012 to the court unsuccessfully attempted to reopen the issue of the currency of the award.  The Defendant rightly objected with further costs incurred on both sides.  I ordered that the Defendant should have the costs of this failed attempt.  Those costs, possibly minimal, shall also be on the High Court scale.

44.  Although the Plaintiffs have put in schedules for costs, these have been challenged.  As the Defendant now has costs orders in its favor which need to be taxed, agreed or assessed, I shall refrain from making a gross sum assessment of the Plaintiffs’ costs.  It makes better sense for all costs to be addressed in one go rather than piecemeal.  Accordingly, all costs awarded herein shall be taxed if not agreed, nisi in the first instance with 14 days to apply from today.