ASCOBA CO LTD v. SAFCO INTERNATIONAL FREIGHT CORPORATION AND OTHERS

DCCJ 1463/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1463 OF 2004

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Judgment

Background

1.  At trial the dispute was only between D2 and the Plaintiff (“P”). P was the exporter of 1501 containers of telephones to buyer Dabouqi in Jordan.  D2 was the freight forwarder for P, and D2’s agent in Jordan was Gardenia: Documents Bundle (“DB”) at pages 034, 035.  P’s case is that a contract for carriage was made with D2 before D2 (or D1 as D2’s agent) issued the relevant three Bills of Lading (“BL”) to P.  P paid D2 the necessary fees e.g. terminal charges, after which D2 issued original BL to P.  P instructed D2 that delivery of goods beyond Gardenia be only made upon the claimant producing the original BL.  P gave the BL to HSBC in Hong Kong with the same instructions: see DB 012 and 032.  In other words buyer Dabouqi would obtain the BL after he had paid to Union Bank at Jordan.  HSBC sent the original BL to Union Bank in Jordan for Dabouqi or agent to collect upon payment.  The goods were shipped out of Hong Kong on 31st July 1999.  However P never received any payment.  On making inquiries P discovered from D2 by letter dated 7th April 2000 that D2’s agent in Jordan had released the goods on 24th August 1999, i.e. 3 weeks after leaving Hong Kong.  The delivery was obviously allowed without Dabouqi or any other claimant producing to PIL or Gardenia the original BL.  HSBC in the end received the original BL back from Union Bank hence P now has possession thereof.  P therefore sues D2 for breach of contract of carriage, and/or negligence as a bailee, in the sum of USD 74,700 representing the value of the goods.

The issues

2.  D2 raises two defences: (1) that D2 was a mere secretary for the original D1, i.e not a principal, so that P is suing the wrong person, and (2) P’s claim is time-barred because Clause 19 in the BL gave P only 9 months to issue proceedings, but proceedings were issued a few days short of 12 months: P on the other hand relies on Clause 7 of the BL, being “Paramount Clause” referring to the Hague-Visby Rules which gave P 12 months to sue. The issue here is which clause should be used.  The Writ was issued on 22nd August 2000, 2 days within the time limit of 12 months after delivery.

3.  D2 has not raised any defence as a bailee for negligence, but as Counsel for the Plaintiff concedes, the Plaintiff in truth bases its case on breach of contract, not bailment. 

The evidence

4.  P adopts the witness statements of 2 shipping clerks (PW1-2) and its director (PW3).  PW3’s evidence included an assertion that P had always dealt with D2 as a principal.  This is supported by documents such as found in the Annexes to the witness statements, the following not being an exhaustive list:

(1)	D2’s name card when dealing with P: DB 002.
(2)	Shipping Order in D2’s name: DB 005.
(3)	Equipment Booking Confirmation in D2’s name: DB 007, 008.
(4)	P’s staff Ms LEUNG dealt directly with D2, not D1: DB 011.
(5)	The BL, although at the lower right says D1, it has D2’s chop on the top left: DB 012, 014.  In any event, as to  the signature on DB 012, I give weight to the statement of handwriting expert Mr Novotny, and I find on the balance of probabilities that the signature was by the same person as the invoice issued by D2 to P: DB 026.
(6)	The “PIL bill” shows D2 engaging PIL as carrier, with D2 giving indemnity to PIL: DB 031.
(7)	It was D2 who instructed PIL to surrender the goods: Pleadings bundle page 88.
(8)	Gardenia wrote to D2 (not to D1): DB 034.
(9)	D2 wrote as principal to Gardenia: DB 035.

5.  Accordingly, all the documents point to D2 being a principal.  There is not a single document which points to the fact that D2 was a mere agent (secretary) of D1. 

6.  D2’s representative Mr LEE testified.  He adopted his witness statement in the Bundle as evidence.  He also asserted that the HAFFA Standard Trading Conditions (“HSTC”) applied to the present contract, relying on the “time bar” clause being 9 months, but he is unable to point to D1 or D2, not to mention P, being a member entitled to rely on the HSTC.  Further, there is nothing in any of the documents in the Court’s bundles to say that the HSTC had been explained to any party, as HAFFA itself prescribes, to enable the same to be incorporated in a contract.  I also note that P was a mere exporter, a customer, and not in the shipping business, and so I am unable to see why HSTC would be notorious to P such that as a matter of course HSTC would be incorporated.  I do not accept that HSTC applied to the instant case.  As to whether it was D2 as a principal or someone else who had contracted with P, as against overwhelming documentary evidence, D2’s evidence was vague and unsatisfactory, e.g. he was residing in Taiwan, not Hong Kong, he could not even remember whether he was in Hong Kong in July 1999, who Sandy Chung (on DB 002) was, and he agreed he could not testify to the present contract of his own knowledge, because he had no knowledge of whom PW1-PW3 were dealing with. 

7.  I have no difficulty finding that D2 was a principal vis-à-vis the plaintiff.

8.  D2 also disputes the existence of a contract between D2 and P.  As Carver on Bills of Lading (1st Ed.) says at paragraph 3-001, a BL is only evidence of a contract of carriage, which “in the vast majority of cases” would be made without formality and before the issue of a BL.  Therefore, even if BL (DB 014) was issued by D1 and not D2, it does not oust the existence of a contract between D2 and P.  But there is positive evidence to show the existence of a contract between D2 and P: see the Shipping Order (DB 005) which proves the same, and furthermore, that D2 was principal.  As to one of the contractual terms being delivery only on production of BL before exchange for goods, this is evidenced in DB 012. 

9.  As to “misdelivery” by D2’s agent PIL or Gardenia (to a claimant without the latter producing the original BL), D2 admitted same in its letter dated 7th April 2000: DB 036.  Mr LEE in the witness box did not dispute such misdelivery.  D2 does not dispute the fact that P has never received payment for the goods.

10.  There is no dispute as to the value of the goods, and D2 does not dispute the question of limit of claim under the Hague-Visby Rules A.IV(5)(a), so that P’s claim falls well under the upper limit, because calculation is not based on weight but on units i.e. 1501 cartons as seen in DB 012.

11.  The dispute, as stated earlier in this judgment, is in two legal issues, to which I now turn.

The issue of whether D2 was a principal or a mere agent

12.  Regarding the first issue, for the abovestated reasons I find that D2 was a principal vis-à-vis P within the terms of its contract, and therefore P is able to sue D2 as principal.  I have considered Long Emperor Ltd  v  Scanwell Consolidators Ltd & Anor HCA 2190/2002 especially paragraphs 3, 4, 16-18.  Furthermore, never until proceedings were issued had D2 stated it was a mere agent of D1 or anybody else.  I find D2’s first defence to be a bare oral assertion and I do not accept the same to represent the truth.  I find D2 to be liable as a principal to P.

The issue of whether P was time-barred from issuing proceedings

13.  Regarding the second issue, I take into account the following factors:

(1)	Clause 7 in the Bill of Lading (see DB 015) is entitled “Paramount Clause”, and the Hague-Visby Rules (being the law in Hong Kong by Cap.462) allows a time limit of 12 months after delivery or intended delivery of the goods.
(2)	Clause 19 in the Bill of Lading was not a “specifically negotiated” clause.
(3)	D2 submitted the case of Bhatia Shipping and Agencies Pvt Ltd  v  Alcobex  Metals Ltd [2004] All ER (D) 265 which held the plaintiff was time-barred.  However the Court reached that conclusion because the plaintiff in that case was “way out of time” and exceeded the Hague-Visby Rules’ 12-month time limit by some 8 months.  The Court did not reject the thesis that a time limit of 12 months was possibly applicable: see especially judgment at paragraphs 21 and 22.
(4)	The loss or damage in this case was not “known to occur within a particular stage of the carriage shorter than would apply to it under the relevant Convention” as stated by the Court in Finagra (UK) Ltd  v  OT Africa Line Ltd  [1998] 2 Lloyd’s Law Rep 622 at page 630 at the bottom of the right hand column, and at page 631 at the right hand column.
(5)	The Hague-Visby Rules in A.III 3.8 recites “Any clause…lessening such liability…shall be null and void”, and,
(6)	If there is a conflict, the longer time period is to be preferred: Finagra (UK) Ltd, supra, and Sabah Flour and Feedmills SDN BHD  v  Comfez Ltd [1988] Lloyd’s Law Rep 18 at 20.

14.  I find, therefore, that in the present proceedings the time limit for P to issue proceedings was 12 months after delivery of goods, and hence P was not time-barred.

Conclusions

15.  For the above reasons I find that D2 was a principal vis-à-vis P, and it is liable to P in breach of contract of carriage.  I find P has not been time-barred from issuing proceedings.  I award damages at USD 74,700 and interest at 2% from issue of proceedings to judgment. 

16.  Costs awarded to the plaintiff nisi to be taxed if not agreed.