LOKYIU INDUSTRIES LTD T/A SILINK TRADING CO AND ANOTHER v. MERCHANDISE WORLDWIDE TRANSPORTATION LTD.

DCCJ 3466 of 2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3466 OF 2005

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JUDGMENT

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1. I dismiss the Plaintiffs’ claim and make an order nisi that, save for costs already provided for, the Plaintiffs are to jointly and severally pay the Defendant’s costs in this case with certificate for Counsel.

2.  The Plaintiffs’ claim is for damages and relates to events in the year 2004. The claim is based on the loss or pilferage of 205 sets of MP3 players (all of one type i.e. 128MB; known herein as “the Missing Goods”) allegedly air-freighted from Incheon, South Korea to Hong Kong by Thai Airways. After reading the relevant papers filed (pleadings, witness statements etc.) but before taking any evidence, one question kept nagging me : what is there to satisfy the Court, albeit on a balance of probabilities, that the Missing Goods were loaded onto the Thai Airways airplane (“the Plane” ) in South Korea (“the Question”)?

3. After taking evidence from both sides and final submissions from Counsels, the Question steadfastly remained. Thus, I can only conclude that the Plaintiffs have failed to prove their case. I further accept Defence evidence and find, in particular, that the Defendant has discharged its duty of care as bailee in taking charge of/ storing the MP3 players from South Korea. 

4. I will state here certain relevant facts:

a)	The Plaintiff Lokyiu Industries Limited trading as Silink Trading Company (“the 1st Plaintiff”) purchased from the Plaintiff Sodiff  E and T Company Limited (“the 2nd Plaintiff”) 2,000 MP3 Players of 128MB and 1,000 MP3 Players of 256MB (see, for example,  Commercial Invoice at Hearing Bundle Volume 3 pages 1 and 2);
b)	The MP3 Players (including sets of “Buffer Stock” and “Dummy Mock-up”; known herein as “accessories”) were to be airfreighted from South Korea to the 1st Plaintiff in Hong Kong;
c)	The 2nd Plaintiff used the services of a Family Express Co. Ltd. to forward the MP3 players and accessories;
d)	The MP3 players and accessories were (allegedly) packed into 65 cartons (“the 65 Cartons”) and loaded onto the Plane bound for Hong Kong;
e)	The 65 Cartons arrived at the Hong Kong International Airport on 2 July 2004. They were offloaded from the Plane by ramp handlers hired by Thai Airways;
f)	The 65 Cartons were transported to the terminal of Hong Kong Air Cargo Terminals Limited (“HACTL”). There was   “break down” of the 65 Cartons i.e. they were removed carton by carton from the one pallet on which they were transported (from the Plane), put in a HACTL receptacle and stored in the terminal pending collection. HACTL recorded damage to 9 cartons viz. the cartons were crushed and wet. HACTL also recorded the weight of the damaged cartons as 157 kilogrammes (see Hearing Bundle Volume 3 pages 101 and 103);
g)	On 2 July, the 5th witness for the Defendant (“DW5”) received instructions from the Defendant to go to HACTL and collect the 65 Cartons. At all material times, DW5 was the proprietor of a transportation company called Kwan Kee Transportation Company. For more than 7 years, DW5 had been working for the Defendant in collecting cargo from HACTL. He was registered with HACTL as the agent of the Defendant for such purpose;
h)	In the morning of 3 July, DW5 went to HACTL terminal and collected the 65 Cartons. He found nothing unusual with the carton boxes. He signed a Shipment Release Form for HACTL (Hearing Bundle Volume 3 pages 87 and 88). DW5 separately put the 65 Cartons  onto 3 pallets;
i)	DW5 delivered the 3 pallets with the 65 Cartons to the Defendant’s warehouse in Tsuen Wan (“the Warehouse”) that same morning. The 3rd witness for the Defendant (“DW3”) was at that time the assistant accountant of the Defendant. DW3 and his colleague, a Mr. Wong (“Mr. Wong”), dealt with DW5. Mr. Wong checked the quantity and condition of the cartons. The 3 pallets of 65 Cartons were then placed inside the Warehouse;
j)	Around 4 July, someone from the Defendant informed the 1st Plaintiff by telephone that goods had arrived for them from South Korea;
k)	On 5 July, the Defendant faxed a Notice of Arrival to the 1st Plaintiff (Hearing Bundle Volume 3 page 31);
l)	On 7 July, the 1st Plaintiff instructed the 2nd witness for the Plaintiffs (“PW2”) to collect the 65 Cartons from the Defendant. At all material times, PW2 was proprietor of a transportation company called Flourish Transportation Company. He had been transporting goods for the 1st Plaintiff for some 2 years;
m)	PW2 went to the Warehouse. The 1st Plaintiff faxed over to the Defendant a letter (“the Letter”, Hearing Bundle Volume 3 page 32). Ultimately, PW2 was allowed to take the 65 Cartons. PW2 checked that the number of cartons he was collecting was correct and that there was no apparent damage to the cartons. He took delivery of the 3 pallets with the 65 Cartons on them;
n)	PW2 delivered the pallets with the 65 Cartons to the 1st Plaintiff that same afternoon of collection;
o)	At all material times, PW1 was the Purchasing Supervisor of the 1st Plaintiff. She was present when PW2 made his delivery. After 5 to 6 cartons had been moved into the office of the 1st Plaintiff, a colleague of PW1 told her that he found 1 of the cartons very light in weight. PW1 gave instructions that that carton be opened. Goods were found missing from that carton. Loss Adjusters, Messrs. McLarens Young International, were immediately summoned (see their report at Hearing Bundle Volume 3 pages 45 to 61, “the Report”); and
p)	11 of the 65 Cartons (“the 11 Cartons”) were found “with their sealing tapes at the bottom section…cut open and resealed with transparent tapes”. A number of MP3 Players of 128MB were found missing from each of these cartons: 9 cartons were each found to have 20 missing; 1 had 22 missing and 1 had 3 missing. There was thus missing 205 sets of MP3 Players (i.e. the Missing Goods).

The carton with 22 MP3 Players missing was found to weigh 9 kilogrammes; the carton with 3 missing was found to weigh 13.5 kilogrammes and each of the remaining 9 cartons was found to weigh 9.4 kilogrammes (see the Report at Hearing Bundle Volume 3 pages 48 and 49).

5. In the above text, I have introduced the only witnesses for the Plaintiffs (PW1 and PW2) as well as 2 of the 5 witnesses for the Defendant (DW3 and DW5). There were 3 other witnesses for the Defence. The 1^st witness (“DW1”) is the Manager of the building which housed both the office of the Defendant (on 2^nd Floor) and the Warehouse (on 6^th Floor). His evidence concerned the time when PW2 arrived at and left the building. The 2^nd witness (“DW2”) is the Managing Director of the Defendant. He (and DW3) explained, inter alia, security measures at the Defendant for storing goods in the Warehouse and also what happened on 7 July when PW2 came to collect the 65 Cartons. The 4^th witness (“DW4”) worked at HACTL. He was mainly in charge of handling documents including those relating to customer service/ complaints, general administration and day-to-day operations. He was familiar with most of the procedures at HACTL when goods were offloaded from airplanes and stored in HACTL terminal. His evidence was mainly on these 2 aspects. DW4 was not personally involved in handling the 65 Cartons.  

6. In an attempt to address the Question, the Plaintiffs mainly relied on the relevant documents viz. the Packing List and the Airway Bills (“the Documents”, Hearing Bundle Volume 3 pages 3 to 18 and 21 to 27 respectively, with the Master Airway Bill at pages 26 to 27. See also Hearing Bundle Volume 3 pages 82 and 86). The quantity of MP3 players was stated in the Documents. The Documents also stated the net weight of all the MP3 players (845 kilogrammes) and the gross weight of the 65 Cartons (941 kilogrammes; ‘the Gross Weight”).

7. I accept that the prohibition against hearsay evidence is virtually purged in civil proceedings (see Evidence Ordinance, Cap. 8, Part  IV). The Court, however, has the right to consider the weight to be assigned to such evidence. I find myself unable to accept from the Documents that the Missing Goods were included in the 65 Cartons received in Hong Kong.

8. There is no direct evidence before me to show that the Missing Goods were packed into the cartons subsequently loaded onto the Plane. Assuming the Missing Goods were initially so packed, there is no evidence as to what happened to those cartons before they were put on the Plane (e.g. were they kept in such circumstances that the Court can infer theft of the Missing Goods did not occur prior to the Plane landing in Hong Kong?). Counsel for the Plaintiffs, Mr. Andrews, was essentially asking me to draw all necessary inferences in favour of the Plaintiffs.

9. Mr. Andrews referred to the Gross Weight. I think he was saying that airfreight was calculated and paid on the basis of such weight. Hence, the total number of MP3 players stated in the Documents was in the cartons loaded onto the Plane. There is, however, nothing to indicate that the Gross Weight in fact included that of the Missing Goods (this is of course apart from what the Documents themselves say). For all we know, the Missing Goods could have been removed before the Gross Weight was determined. There is no evidence to indicate that the Gross Weight differed after the Missing Goods were noted in Hong Kong.

10. Mr. Andrews pointed out that the red/ brown sealing tapes applied to the 11 Cartons had been cut and those cartons resealed with transparent tape (covering the original sealing tapes. See also paragraph  4 p) above). Counsel submitted that this indicated someone must have stolen MP3 Players from those cartons. That may be so but the Question remains unanswered. Could not the theft have taken place in South Korea? Counsel argued (as I understood him) that if the sealing tapes had already been cut prior to the cartons being received/ handled by anyone in Hong Kong, then surely those receiving/ handling them would have noticed it. The fact that there was no prior mention of this phenomenon indicated that the Missing Goods were on board the Plane and the Missing Goods did pass to the Defendant in Hong Kong.

11. There was no evidence before me to explain the circumstances in which the ramp handlers dealt with the 65 Cartons. As I understood it, they were there just to offload goods from the Plane. Why should they care or pay attention to sealing tapes at the bottom of cartons being cut and resealed?

12. HACTL detected 9 of the 65 Cartons (“the 9 Cartons”) having external damage i.e. they were crushed and wet. There is no evidence to show the extent of the damage. DW4 explained that whether any such external damage will be recorded depends on the HACTL staff handling the goods. As such, even very slight damage may be recorded. I do not think HACTL staff will inspect each and every carton of goods for unusual features (e.g. sealing tapes being cut and resealed) or will they care that 1 carton is lighter in weight. Indeed, the resealing of sealing tapes or the loosening of sealing tapes may mean nothing to the unsuspecting mind. The fact that HACTL noted damage of crushing and wetness does not go towards proving that the 11 Cartons had not already been tampered with. (I note in passing that nothing shows any of the 9 Cartons as being part of the 11 Cartons. McLarens Young International apparently did not find any carton crushed or wet. If otherwise, one would expect a note to that effect in the Report.)

13. DW5 handled the 65 Cartons box by box and put them onto 3 separate pallets. He said in cross-examination that if he had seen the condition of a carton to be like that in the photographs at Hearing Bundle Volume 3 page 57, he would have refused to accept it. Those photographs show 1 of the 65 Cartons found by McLarens Young International as having the sealing tapes at the bottom cut and resealed.

The evidence of DW5 was that he merely looked at the packaging for apparent damage. Though he handled each carton, it is clear that he did not hold up each carton to inspect. There is certainly no evidence that he paid particular attention to the bottom part of any carton.  He was handling 65 Cartons in total. It is not beyond the bounds of probability that he failed to notice the condition of that 1 carton shown in the photographs. It is not beyond the bounds of probabilities that he did not notice or did not give any significance to the resealing of tapes for any carton. DW5 was not informed what was in the cartons. I do not think that difference in weight of the cartons would have alerted him. Hence, his evidence that he did not find anything unusual with the 65 Cartons. I do not think DW5’s evidence precludes the probability of prior pilferage.

14. It is clear to me that Mr. Wong (and DW3) did no more than take a cursory look at the packaging of the cartons arrayed on the 3 pallets. They merely had sight of those surfaces exposed for viewing. The fact that they detected nothing untoward and accepted the 65 Cartons does not really assist the Plaintiffs’ case.

15. PW2 said that when he collected the 3 pallets containing the 65 Cartons from the Warehouse, each pallet was entirely shrouded with transparent plastic sheet/ film (see Hearing Bundle Volume 2 pages 6 and 8). I think the Plaintiffs suggest that this sheeting was an artifice on the part of the Defendant to deter/discourage PW2 from checking the cartons for defects (and thus hide from PW2 the missing MP3 Players).

PW1 and DW3 could not recall whether there was such sheeting. The evidence of DW5 (and DW2) was to the effect that there was none. The Report describes the collection of the 65 Cartons by PW2 in these terms: “ Upon receipt of the goods, the…transportation company noted that the goods were stacked up on 3 wooden skids. Of these, 1 skid was partly wrapped with poly sheet…” (Hearing Bundle Volume 3 page 48). Messrs. McLarens Young International could only have obtained such information from PW2. The Report does not contain any other reference to sheeting for the 3 pallets. One would have thought that if Messrs. McLarens Young International saw any sheeting during their survey, they would have said so in the Report.

I will simply say that the evidence on sheeting is such that I cannot draw any inference favourable to the Plaintiffs.

16. There is some controversy between the parties as to the circumstances in which the Letter came into being.

In gist, the version of each party is thus:

PW2 said he went to the Defendant with the 1st Plaintiff’s company chop and letter of authorisation (together with payment cheque and other relevant documentation). However, the Defendant wanted some sort of written guarantee. Ultimately, the Letter was faxed to the Defendant by the 1st Plaintiff (the Letter was modelled on a sample that the Defendant sent/faxed to the 1st Plaintiff). Only then could PW2 collect the 65 Cartons.

The Defendant maintained that PW2 showed up without the 1st Plaintiff’s company chop or letter of authorisation. Mr. Wong dealt with PW2 and sought instructions from DW2. DW2 insisted that the 1st Plaintiff’s company chop or letter of authorisation be produced before release of goods. The Letter was subsequently faxed over to the Defendant by the 1st Plaintiff. The Defendant never provided any sample document to the 1st Plaintiff.

17. PW2’s evidence was that before proceeding to the Defendant, he had gone to the 1^st Plaintiff’s office. PW1 and a person called Stephen gave him instructions to collect the 65 Cartons. They also gave him, inter alia, the 1^st Plaintiff’s company chop and a letter of authorisation. When he was at the Defendant’s office and was told about the requirement of guarantee, he telephoned PW1 about it.

Despite what is recorded in paragraphs 8 and 9 of her witness statement (Hearing Bundle Volume 2 page 3), PW1 said in evidence that it was not herself but her assistant, a Miss Chan (“Miss Chan”), who dealt with PW2 that day. PW1 never mentioned about a Stephen (whether in her witness statement or her oral evidence). As far as company chop and letter of authorisation are concerned, PW1 could only say that from experience they would be provided to PW2. PW1 did not mention receiving any telephone call from PW2. PW1 said that Miss Chan told her the Defendant faxed over a sample letter and wanted the 1^st Plaintiff to type it out on the 1^st Plaintiff’s letterhead. The Letter was thus prepared, signed by Miss Chan and faxed over to the Defendant. Miss Chan left the employment of the 1^st Plaintiff in April 2006 and did not  give evidence in this case.

18. Mr. Wong was the assistant of DW2. Mr. Wong did not give evidence in this case. DW2 explained that no letter (sample or otherwise) would be issued by the Defendant without his permission or that of Mr. Wong. DW2 himself never issued/ permitted issue of any sample letter to the 1^st Plaintiff and Mr. Wong’s standard of English was such that he would not be able to prepare a document like the Letter.  The evidence of both DW2 and DW3 said to the effect that PW2 was without company chop or letter of authorisation.

19. The Letter appeals to me as an ordinary letter of authorisation. I observed and listened to DW2 and DW3 when they gave evidence. I note the unsatisfactory evidence of the Plaintiffs on this aspect of the case. I prefer and accept the Defendant’s version.

20. Lest there be any suspicion against them, I say in no uncertain terms that I am satisfied PW2, DW2, DW3 and DW5 have no personal involvement in the loss or disappearance of the Missing Goods. I accept the evidence called by the Defence. I am satisfied that the Defendant (and DW5) took care of the 65 Cartons to the extent and degree required by the law. 

21. For the reasons stated above, I can already come to a decision in this case. I do not see the need to consider the various other (and somewhat arcane) points raised by Counsels. Such points included who was bailor and at what point in time as well as whether the limitation on liability endorsed on the Airway Bills applied.