FORSA MULT IMEDIA LTD v. C & C LOGISTICS (HK) LTD

HCMP 683/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO. 683 OF 2011

(ON AN INTENDED APPEAL FROM DCCJ NO. 3467 OF 2009)

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BETWEEN

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J U D G M E N T

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Hon Yeung Acting CJHC (giving the Judgment of the Court):

Introduction

1.  On 8 February 2011, District Court Judge Mimmie Chan gave judgment for the Plaintiff (Forsa Multimedia Ltd) (“Forsa”) against the Defendant (C & C Logistics (HK) Ltd) (“C&C”) in the sum of about US$65,000, being the price of 28 cartons of computer display cards (“the goods”).

2.  Not satisfied with the judgment, C&C sought leave to appeal from the judge, but the application was dismissed on 1 April 2011. A similar application was also dismissed by Fok JA under Order 59 r 2A(5)(a) on 19 May 2011 without a hearing. C&C now renews the application before us in accordance with Order 59 r 2A(7).

The Facts

3.  The facts, largely undisputed, can be summarized as follows.

4.  In October 2008, Daesan IT Co Ltd (“Daesan”), as the consignor, delivered the goods to World Road Express Co Ltd (“World Road”) in Korea for shipment to Forsa in Hong Kong. World Road had entrusted the goods to C&C, its agent in Hong Kong, to handle the delivery. In connection with the aforesaid transaction, World Road had issued what was stated to be a “Bill of Lading or Multimodal Transport Document” (“the Document”).

5.  Under the Document, Daesan was the Consignor/Shipper, and Forsa was the Consignee. The port of discharge and the place of delivery were both stated to be “Hong Kong”. The application for delivery of the goods had to be made to C&C.

6.  The Document carried no signature, but contained the provision that “If required by the Carrier one (1) duly endorsed original B/L must be surrendered in exchange for the goods or delivery order” (“the production clause”).

7.  When Forsa demanded delivery of the goods, C&C refused and returned them to World Road. It was C&C’s case that the goods could only be released to Forsa against the production of an original bill of lading and as Forsa was unable to do so, Forsa was not entitled to the goods. C&C also claimed to be acting on instruction when it returned the goods to World Road in January 2009 when in fact Daesan had given clear instruction for the immediate release of the goods to Forsa in November 2008.

8.  Forsa admitted that it was unable to produce the original Document as it had never received one, but argued that the Document was not and never intended to be a bill of lading. The suggestion was that it was just a seaway bill evidencing the contract between Daesan and World Road to ship the goods to Forsa and that Forsa was entitled to the immediate possession of the goods without the production of the original Document.

9.  The Managing Director of Daesan (Mr Choi), in his evidence, confirmed that World Road had been engaged as the courier for the shipment of goods to Forsa for the past four years and that World Road had never asked for the production of any bill of lading or other document, either from Daesan or Forsa, for collection of the goods.

10.  There was undisputed evidence that Daesan had issued written instructions to C&C for the immediate release to Forsa on 29 November 2008. However it was thought that as Daesan owed World Road money, World Road was justified in not giving instruction for the release of the goods to Forsa.

11.  Miss Cho, when giving evidence for C&C, accepted that the production of an original bill of lading was aimed at protecting the interests of the shipper to secure payment for the goods and as Daesan had given express instruction to release the goods to Forsa, there was no justification to refuse delivery of the goods to Forsa. In any event, Miss Cho also accepted that one of the ways by which goods could be released if the original Document was not presented was by “tele-release”.

12.  It appeared that the Document was not signed by World Road and in fact no one had seen any signed shipping document relating to the delivery of the goods. Daesan was not given the original or a signed copy of the Document although according to World Road, it was because Daesan did not collect it.

The Judge’s Findings

13.  Despite the practice between Daesan and World Road that Daesan was never given the original or a copy of the signed Document, that the Document had not been signed by World Road, that the original or a signed copy of the Document had not been produced and that the production clause shown on the face of the Document was not signed by or on behalf of World Road, the judge concluded that the Document was nevertheless a bill of lading.

14.  The judge took the view that the court should be slow to reject the description which the Document bears when considering the nature of a bona fide mercantile document issued in the ordinary course of trade.

15.  However, on the undisputed evidence that Daesan had given clear written instructions to C&C to release the goods to Forsa, the judge took the view that the requirement for the presentation of the original Document had been waived and that Forsa was entitled to the release of the goods without the production of the original Document.

C&C’s Argument

16.  Mr Simon K.C. Lam, counsel for C&C, argues that as a matter of law, C&C was entitled not to release the goods without the production of the original Document, and that such legal entitlement could not be “waived” by the shipper. Mr Lam emphasizes that the need for the surrender of the original Document in exchange for the goods is not solely for the protection of the shipper and therefore is not capable of being unilaterally waived by the shipper. Mr Lam suggests that on this issue, the court is not bound by Miss Cho’s opinion.

17.  Mr Lam refers to s 5 of the Bills of Lading and Analogous Shipping Documents Ordinance Cap 440 (“Cap 440”) and suggests that Forsa was, thereby, subject to the same liabilities under the Document as if it had been a party to it. The suggestion is that Forsa was bound by the terms of the production clause.

Forsa’s Position

18.  In his written submissions, Mr Adrian Lai, Forsa’s counsel, argues that the “presentation rule”, as a contractual provision for the benefit of the shipper, could be waived. He refers to Miss Cho’s evidence that the goods could be released by “tele-release”.

19.  Mr Lai points out that C&C had not at trial relied on Cap 440 and should not therefore be allowed to rely on it on appeal. Mr Lai suggests that relying on it on appeal is an abuse of the court’s process.

20.  In any event, Mr Lai argues that as Forsa’s claim is premised on conversion, Cap 440 has no relevance and even if it were relevant, it does not apply to the present case because (1) the bill was a “straight bill” and not “a bill of lading”; (2) the production clause had not been signed and did not form part of the contract of carriage, and therefore could give rise to no obligation on Forsa’s part to produce it for collection of the goods, and (3) as C&C had accepted that the presentation rule was for Daesan’s benefit and if the rights and obligations of Daesan under the contract of carriage had been transferred to Forsa, Forsa was entitled to waive the presentation rule.

Discussion

21.  Despite the heading of the Document, namely “Bill of Lading or Multimodal Transport Document”, it is highly questionable that it should be treated as a “bill of lading” with all its associated attributes. There is certainly no indication that it should be treated as a document of title by the parties.

22.  However it was described, the Document could not be treated as a document of title, which calls for the application of the presentation rule. It was stated to be non-negotiable and therefore could not be endorsed. It could not be exchanged for other document of title, such as a delivery order. In fact, it was doubtful if a signed copy of the Document ever existed. World Road certainly had not supplied one to Daesan and was happy to conduct the transaction on that basis.

23.  On the facts of the case, there was no risk that the named consignee had transferred the Document to a subsequent holder. C&C did not have to ascertain the identity of the person entitled to delivery without the production of the original Document as there was no dispute that only Forsa was entitled to obtain delivery of the goods.

24.  The judge found that the Document was a bill of lading, but without elaborating what such a finding entailed.

25.  In our view, the true nature and effect of the Document needs to be determined in accordance with the factual matrix of the case. As emphasized by Mr Lai, the production clause had not been signed. Daesan was not given the original Document, assuming it existed, and therefore the consignee would never be able to collect the goods if C&C’s insistence for the presentation of the original Document was justified. There was no commercial rationale for C&C to insist on the production of the original Document in exchange for the goods and it was contrary to business efficacy to do so.

26.  The undisputed evidence was that World Road had never asked for the production of the original Document in exchange for the release of the goods in all its previous dealings with Daesan. Miss Cho, of C&C, accepted that the collection of the goods did not have to be premised on the production of the original Document.

27.  We accept that where a bill of lading is a document of title, its production is essential for the delivery of the goods; otherwise the shipping Company may be held liable. However, despite its description, the Document was never intended to be a document of title as such. On the undisputed evidence, it cannot be so construed. C&C faces no risk by delivering the goods to Forsa without the production of the original Document as Daesan had clearly instructed it to immediately release the goods.

28.  The Document is just a contractual document and its true meaning and effect must be determined in accordance with its wordings, the surrounding circumstances, including the parties’ intention. On the facts of the case, we are satisfied that C&C could not insist on the production of the original Document as if the Document was a document of title.

29.  We are also satisfied that C&C cannot rely on s 5 of Cap 440 for the simple reason that it has not been established that Daesan was subject to the production clause. In our view, on the proper construction of the Document, the production clause was never intended to be a term of the contract and if it had been, it was waived.

30.  In any event, Forsa’s claim was based on conversion. C&C not only refused to deliver the goods to Forsa, but had in fact sent them back to World Road in Korea, thus depriving Forsa the chance to reclaim them. There was no suggestion that World Road had any title or possessory rights to the goods.

31.  Even if Mr Lam was right in his submission that C&C was entitled not to release the goods without the production of the original bill, C&C was not entitled to send the goods to World Road because Daesan owed it money. The goods belonged to Forsa and C&C had no right to take any step to deprive Forsa’s ownership of the goods. The suggestion that as World Road should still be in possession of the original Document and therefore was entitled to take delivery of the goods is, in our view, fanciful.

32.  We are satisfied that C&C has no reasonable prospect of success and there is no other reason in the interests of justice in hearing the appeal. The application for leave to appeal is therefore dismissed.

33.  Having heard argument, we also order C&C to bear the costs of the application, including that of the paper application before Fok JA, to be taxed if not agreed.