AMCONICS INFOTECH (HK) LTD v. MENLO WORLDWIDE FORWARDING, INC

HCA860/2004

IN THE HIGH COURT OF THE

          HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 860 OF 2004

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J U D G M E N T

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1. The plaintiff purports to fix liability under Articles 18 and 19 of the Amended Convention.  The defendant contests this application by relying on clauses purporting to exclude or limit its liability and quantum.  In summary, these are Clause 2 of the terms on the reverse side of the air waybills (“Clause 2”), Clauses B and C of Section XIII of the Service Guide (“Clauses B and C” respectively), Articles 22 and 25 of the Amended Convention. 

Claim Under Article 18

2. I am prepared to accept Mr Au’s argument that the plaintiff’s claim arguably does not fall within this Article as there was no destruction, loss or damage to the goods in question. 

Claim Under Article 19

3. Under this Article, the carrier is liable to damage occasioned by delay in the carriage by air of cargo.  The defendant argues that some part of the delay was caused by the acts of the Customs & Excise Department (“C & E”).  For the purpose of this line of argument, Mr Au has identified two possible periods of delay.  The first was the initial detention by C&E after the error in the manifests was discovered.  The second was allegedly after around 31 March 2004 when C&E refused to release the goods despite the plaintiff’s request. 

4. The first period of delay was, in my view, clearly caused by the defendant and solely by the defendant.  The difference in description of goods between the plaintiff’s instructions and the manifests was material and it led to detention of the goods by C&E.  I note that in the written submissions, the plaintiff describes the description as “false”, whilst the defendant uses the word “mistake”.  To me, it does not matter as it does not alter the fact that the defendant had acted contrary to express instructions from the plaintiff and it does not alter the fact of conviction under Section 18(1)(b) of the Import and Export Ordinance.  In addition, falsity, fraud or intent to defraud are not essential to establish an offence under that section. 

Defence Under Clause 2 & Clause B

5. The second period of delay flowed naturally from the first.  The defendant prays in aid Clause 2 and Clause B which exempt them from liability where delay was caused by public authorities acting with actual or apparent authority.  It is said that C&E unreasonably refused to release the goods and that was something beyond the control of the defendant.  The plaintiff is further estopped from arguing that C&E had not been unreasonable. 

6. Mr Ng relies on Article 3 of the Amended Convention which provides that:

“Any provision tending to relieve the carrier of liability or to fix a lower limit than that which is laid down in this Schedule shall be null and void.”

I am inclined to accept Mr Ng’s view in holding that Clause 2 and Clause B are null and void as tending to relieve in part, if not in whole, the defendant’s liability.  However, for the purpose of this application, I am prepared to hold otherwise, namely, that it is at least arguable in law that those two Clauses do not contravene Article 3.  Hence, if there was an intervening act of public authorities which took the goods out of the air carriage, the defendant cannot be held liable.  This is just stating the obvious.  A defendant cannot be held liable for acts it had not committed.  But that is not the end.  The next question is:  Can the defendant raise triable issues of fact to show that the second identified period of delay fell within the terms of Clauses 2 and B? 

7. On this question, I must disagree with the view of Mr Au.  It is apt to apply the but-for test.  But for the defendant’s conduct in the first place, would the second period of delay occur?  The answer must be “No”.  The reasons are as follows. 

8. In every similar case, after seizure of goods, C&E has a discretion to retain the goods or restore them to the true owner.  In this case, C&E detained the goods for valid legal reasons.  There were then ongoing criminal proceedings against the defendant.  I accept, for the purpose of argument, that the telephones would not be needed as exhibits in the criminal proceedings.  Photos, for example, would have been sufficient.  But that did not mean C&E should immediately restore the goods upon a claim being made by the plaintiff.  As in all cases, C&E was not obliged to accept the evidence and submission (notwithstanding being backed by legal authorities) given by a claimant.  The Import and Export Ordinance gives a power and opportunity for C&E to test a claimant’s case in court.  In the present case, although C&E failed eventually in the forfeiture proceedings and was obliged to return the goods unconditionally to the plaintiff, that result could not, in the absence of cogent evidence, be said to reflect a wrong exercise of discretion on the part of C&E.  In fact, short of facts showing C&E’s decision to be Wednesbury unreasonable, I can hardly see how a court, the plaintiff, or the defendant can question C&E’s exercise of discretion.  Mr Au says that the plaintiff or their solicitor’s stance was that C&E had been unreasonable in detaining the goods and the plaintiff is estopped from arguing otherwise.  I respectfully differ.  I cannot see how the plaintiff’s view, made in the context of a desperate attempt to retrieve the goods as soon as possible in order to cut loss, and on a without-prejudice basis, can change my conclusion.  The delay was initially caused by the defendant and it carried on with consequences in the first and second identified periods of delay, all consequences of which were naturally flowing from the defendant’s fault.  There was nothing in the conduct of C&E which was extraneous to the defendant’s fault and which the defendant need not be responsible for.  In my view, neither Clause 2 nor Clause B would assist the defendant. 

Defence Under Clause C

9. The defendant has also relied on Clause C to dispute liability.  This is the clause which says that the defendant cannot guarantee delivery by a specific time or date.  It might be that the defendant can be protected by this clause if the goods were delivered a few days beyond the original intended date.  But in the present case, there was an inordinate delay of months tantamount to no delivery of the goods.  Clause C simply would not avail the defendant. 

Summary on Liability

10. In so far as the defendant seeks to deny, limit or relieve liability under Clause 2, Clause B and Clause C, I am of the view that there are no triable issues of liability to the claim under Article 19. 

Quantum

11. The plaintiff asks for three heads of damages:  loss of profit on resale of the mobile phones, legal costs and other expenses in relation to the forfeiture proceedings, and loss of interest.  It is true that the question of damages has to be adjourned for assessment.  However, I agree with Mr Au that the potential quantum of damages is relevant at this stage in at least one aspect - the limitation of quantum of liability under Article 22(2)(a) or Clause 2.  This entails two questions:

(i) Whether Article 25 would prevent the defendant from relying on Article 22(2)(a)?

(ii) If it does not, whether it can be said that the plaintiff can, in any case, at least recover $418,230.00 pursuant to Article 22(2)(a) and hence part-judgment should be entered? 

(i)  Whether Article 25 would prevent the defendant from relying on Article 22(2)(a)?

12. Under Article 25, the limitation of quantum recoverable under Article 22 does not apply if it is proved that the damage resulted from an act or omission of the carrier “with intent to cause damage or recklessly and with knowledge that damage would probably result”.  There are thus two limbs to this Article:

(a) act with intent to cause damage;

(b) recklessness with knowledge that damage would probably result. 

13. Even if it is arguable that the first limb is not satisfied, I am of the view that the second limb is.  The defendant’s conduct was clearly reckless as it engendered the risk of undesirable consequences.  The defendant claimed that the error in the manifests was the result of a mistake or alleged misunderstanding between staff.  However, any alleged mistake or misunderstanding had never been explained despite the lapse of over 1½ years since the incident.  Which staff member in the morning shift was responsible was never known.  What was known was that despite this alleged mistake or misunderstanding, the mistake was known to the person filling in the manifests well before delivery of the goods to the airport.  The mistake was noted but there was a decision to run the mistake.  The same person filled in the house air waybills and manifests using two materially different descriptions of the goods.  There was clearly knowledge that damage would probably result, as evidenced by the fact that from supervisor to clerk in the defendant company, it was known that Thai Airways would not have accepted goods described as “electronic equipment” without a licence to export.  Damage had resulted to the plaintiff in that the goods could not be delivered as anticipated.  To the extent that the defendant seeks to rely on Article 22 to exempt its liability or to limit the quantum recoverable by the plaintiff, I can see no triable issue.

(ii)  Whether Part Judgment for $418,230.00 should be entered pursuant to Article 22? 

14. It is noteworthy that Article 22 merely sets a ceiling of quantum recoverable by the plaintiff based on the weight of goods.  It does not entitle a plaintiff to recover more than its actual loss.  Mr Au has made certain submissions as regards the quantum of loss in paragraph 23 of his written submissions.  Those are comments made on the basis of documents produced by the plaintiff.  Effectively, Mr Au is putting the plaintiff to strict proof of their loss (which is understandable because documents are principally in the plaintiff’s possession) and is asserting that the plaintiff has failed to discharge the burden of proof.  In my view, his submissions do raise triable issues as to the quantum of loss suffered by the plaintiff.  It is arguable that the plaintiff might not satisfy the court eventually that it would recover anything at $418,230.00 or above.  It is therefore not appropriate to enter part judgment. 

Conclusion

15. There are no triable issues on liability in so far as the plaintiff’s claim under Article 19 is concerned.  In so far as quantum is concerned, I can see no reason to permit the defendant to rely on Article 25 to limit the quantum recoverable by the plaintiff.  However, since it is arguable that the plaintiff might not be able to satisfy the trial judge that it has suffered damages at $418,230 or above, it is not appropriate for me to enter part judgment for that sum.  In the premises, there will be judgment on liability with damages to be assessed. 

16. Once again, I thank counsel for their very able assistance in this case.  I will hear parties on costs. 

Order Nisi on Costs

17. The question of liability was seriously contested and, notwithstanding the many issues raised, the plaintiff eventually won on the question of liability.  Looking at the evidence at this stage, I can hardly see any reason to expect that the plaintiff will only recover nominal damages in due course.  In my view, there should be an order nisi that costs of the Order 14 application, together with the costs reserved, be to the plaintiff and there shall be certificate for counsel.