FORSA MULTIMEDIA LTD v. C&C LOGISTICS (HK) LTD

DCCJ 3467/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3467 OF 2009

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JUDGMENT

Introduction

1.  The Plaintiff ("Forsa") is named as the consignee in a document entitled "Bill of Lading" ("Bill") issued by World Road Express Co. Ltd. ("World Road") on 12 October 2008. The Shipper was named as Daesan IT Co. Ltd. ("Daesan") of Korea. 28 cartons of computer display cards ("Goods") were named as the goods lodged on board a vessel on 12 October 2008 for shipment from Korea to Hong Kong. The Bill specifies that application should be made to the Defendant ("C&C") for delivery of the Goods.

2.  Daesan claims that it had delivered the Goods to World Road for onward delivery to Forsa in Hong Kong. It is not disputed that in turn, World Road entrusted the Goods to its agent, C&C, for delivery to Forsa. When Forsa, as the named consignee, demanded delivery of the Goods from C&C, C&C refused to release the Goods to Forsa, but returned the Goods to World Road instead. These proceedings were consequently instituted by Forsa against C&C to seek damages, being the value of the Goods in the sum of US $65,926.

3.  By way of defence, C&C claims that the instructions it had received from World Road were that the Goods should only be released to Forsa against production of the original Bill, and that the original Bill was never produced by Forsa. C&C accordingly claims that Forsa had not been able to prove that it was entitled to the Goods, and that it had acted in accordance with the instructions received from World Road when it returned the Goods to World Road in Korea on 2 January 2009.

4.  In its Reply, Forsa admits that it had not produced any original Bill, as it had never received it from either World Road or C&C. It claims that the Bill was never signed by World Road, and that the common contractual intention of Daesan and World Road was to treat the Bill not as a bill of lading, but as a sea waybill only evidencing the contract between Daesan and World Road to ship the Goods to Forsa. Forsa claims that it was entitled to immediate possession of the Goods even without production of the original Bill.

Issues

5.  The parties have framed 2 issues for determination by the Court:

(1)    whether C&C was entitled not to release the Goods to Forsa in view of its failure to produce the original Bill; and

(2)    whether Forsa was entitled to immediate possession of the Goods although it did not have the original Bill.

6.  Determination of the issues framed by the parties depends on the following questions raised from the pleadings filed and the evidence produced at trial, which I will deal with in turn:

(1)    Is the Bill a bill of lading or a sea waybill?

(2)    Was Forsa entitled on any ground to the release of the Goods without production of the original Bill?

Is the Bill a bill of lading or a sea waybill?

7.  It was argued on behalf of Forsa that the parties had never intended the Bill to operate as a bill of lading. Mr. Choi, the Managing Director of Daesan, explained in his evidence that Daesan had been doing business with Forsa for more than 7 years, and that World Road had been the courier for shipment of the goods between Daesan and Forsa for the past 4 years.  Mr. Choi claims that World Road had handled all the shipping procedure required for Daesan’s shipment of goods, and that in the period of 4 years, neither Daesan nor its consignees had ever been asked to present the original of any bill of lading for collection of the goods in question. Mr. Choi accepted that he had left all the shipping and delivery procedures to World Road and he had not stipulated the documents required for the delivery of the goods, but Counsel for Forsa has emphasized that no one from World Road has been called to give any evidence to rebut Mr. Choi's evidence, despite the fact that World Road has all along been aware of the existence of these proceedings.

8.  There is no dispute that in the construction of the Bill, the law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent (para 1.05, The Interpretation of Contracts, 2004 Edition). The contract must be interpreted objectively. Forsa relies on the evidence of Mr. Choi to show the factual matrix against which the Bill is to be construed, in order to ascertain what would have been the intention of reasonable persons in the position of the actual parties to the Bill.

9.  Counsel for Forsa emphasized that in determining the true nature and effect of the Bill, the Court is not bound by the label which the parties chose to apply to it, referring to Addiscombe Garden Estates Ltd. v. Crabbe [1958] 1 QB 513 and to passages of the judgment of Ribeiro PJ in Carewins Development (China) Ltd. v. Bright Fortune Shipping Ltd. (2009) 12 HKCFAR 185, and references made therein to Lord Steyn's judgment in The Rafaela S [2005] 2 AC 423.

10.  Although the Bill calls itself and carries the label "bill of lading", Counsel for Forsa highlights the fact that the Bill was not signed by the issuer, World Road. None of the witnesses called at trial have seen the original or any signed copy of the Bill. Daesan, the shipper, was never given the original or any copy of the Bill. That did not cause any concern to Daesan, as the price for the Goods had been settled between Daesan and Forsa by offsetting a debt due from Daesan to Forsa.

11.  C&C claims that according to World Road, Daesan had never collected the original Bill from World Road. However, according to Forsa’s evidence, when C&C refused to deliver the Goods upon their arrival in Hong Kong even after it had been pointed out that no freight charges were due from Forsa, Forsa had attempted to meet with World Road to collect the original Bill and to resolve the matter, but World Road refused even to meet with Forsa and Daesan.

12.  In any event, the original signed copy of the Bill has never been produced, whether at trial or in the course of these proceedings. It was argued on behalf of Forsa that this supports Mr. Choi's evidence that there had never been any practice throughout the course of dealings between Daesan and World Road for the original bill of lading to be produced as a condition for delivery of the goods carried, and further, that this constitutes evidence of the fact that the Bill is not a bill of lading.

13.  Counsel for Forsa also highlights the fact that the Bill was expressed to be non-negotiable, and for delivery to Forsa only as the named consignee. The mere fact that the Bill does not specify that the Goods are consigned to the consignee's or the shipper's order cannot per se be taken to mean that the Bill is not a bill of lading. What are conventionally known as "straight bills" are nevertheless bills of lading, and it has been clearly held by the Court of Final Appeal in Carewins Development (China) Ltd. v. Bright Fortune Shipping Ltd. (2009) 12 HKCFAR 185 that the presentation rule, under which a carrier should only make delivery against presentation of the original bill, applies to a straight bill of lading, even if it contained no attestation clause.

14.  It was also argued on behalf of Forsa that despite the fact that the usual form of attestation clause for a bill of lading is shown on the face of the Bill, it was not signed by or on behalf of World Road. Counsel argued that there is therefore no evidence that the attestation clause has been incorporated or was intended to be incorporated by the parties into the Bill or the contract between Daesan and World Road for carriage of the Goods. Counsel has emphasized that the traditional practice of issuing a set of three original bills and the inclusion by signature of the "time honored language used in the attestation clause", as emphasized in the passages of the judgments in Carewins and The Rafaela S, are all absent.

15.  There is force in Forsa's argument that the attestation clause may not have been incorporated into the contract evidenced by the Bill since it was not signed. However, it is clear from the judgment of Ribeiro PJ in Carewins that save perhaps in exceptional circumstances, production of the original bill of lading applies to a straight bill of lading even if it contained no attestation clause. The mere failure to include or incorporate the attestation clause is not, in my judgment, sufficient to demonstrate that the Bill is not, or not intended to be, a bill of lading.

16.  Lord Bingham observed in The Rafaela S that where the court is considering a bona fide mercantile document issued in the ordinary course of trade, it will ordinarily be slow to reject the description which the document bears. On a balance of probabilities, bearing in mind the contents and provisions of and the language used in the Bill, I am not satisfied on the available evidence that the Bill is not a bill of lading.

17.  If the Bill is a bill of lading, as I have found, then presentation of the original Bill is required, as held in Carewins.

18.  In my judgment, Mr. Choi's evidence on the course of dealings between Daesan and World Road is more relevant to the question of whether Daesan and World Road would strictly enforce the presentation rule requiring production of the original Bill.

Was Forsa entitled on any ground to the release of the Goods without production of the original Bill?

19.  There is clear evidence in this case that on 29 November 2008, Daesan had issued instructions in writing to C&C to release the Goods to Forsa immediately. Despite C&C's insistence that the Goods can only be released to Forsa upon production of the original Bill, Miss Cho, who gave evidence on behalf of C&C, had to acknowledge that under a bill of lading, one of the ways by which goods can be released if the original bill is not presented is by "tele-release".

20.  Daesan's letter to C&C of 29 November 2008 is in unambiguous terms, comprising the shipper's instructions to C&C that the Goods should be released. Bearing in mind Miss Cho's acknowledgment that the production of the original bill of lading is aimed at protecting the interests of the shipper to secure payment for the Goods, there is no valid justification on C&C's part to refuse delivery on receipt of Daesan's instructions for release. The only explanation given by Miss Cho was that the release did not come from C&C's principal, World Road. In my Judgment, that does not afford any good reason for C&C to withhold delivery to Daesan.

21.  In fact, Miss Cho accepted that World Road was not the owner of the Goods. On 25 November 2008, World Road had also acknowledged in writing to Daesan, with copy of the communication to C&C, that World Road had no reason to hold the Goods. Despite Miss Cho's acceptance that C&C had no right to the Goods, C&C ignored Daesan's instructions, withheld delivery to Forsa, and instead shipped the Goods to World Road on 2 January 2009.   The evidence suggests that Miss Cho was under the impression that Daesanowed World Road money which was not related to the Goods, and that was the reason why C&C withheld delivery of the Goods to Forsa and ignored Daesan's instructions to release the Goods to Forsa, but as this is not C&C's pleaded case, the real reason for C&C's refusal to make delivery is irrelevant.  The fact that C&C was not aware of the payment terms between Daesan and Forsa, is also not relevant to C&C’s liability to effect delivery upon receipt of the instructions to release the Goods.

22.  I find therefore that by virtue of the written instructions issued by Daesan to C&C dated 29 November 2008, authorizing the release of the Goods to Forsa, Forsa was entitled to the release of the Goods from C&C without production of the original Bill.

23.  C&C, as World Road’s agent, was not entitled to withhold the release of the Goods to Forsa notwithstanding Forsa's failure to produce the original Bill, as presentation of the original had obviously been waived by the shipper, namely Daesan.

Conclusion

24.  I accept the submissions made on behalf of Forsa that as evidenced by the Arrival Notice issued by C&C to Forsa on 17 October 2008, C&C was at the material time C&C’s bailee of the Goods by attornment. I am also satisfied from the evidence that as the consignee named in the Bill and as acknowledged in the letter from Daesan to C&C of 29 November 2008, Forsa had the immediate right to possession of the Goods at the material time. Daesan has also accepted in evidence that Forsa had settled the price of the Goods, and was at the material time the owner of the Goods. 

25.  The answer to the first issue framed by the parties is: No; and the answer to the second issue framed is: Yes.

26.  By retaining and withholding delivery of the Goods to Forsa, and arranging for the shipment and delivery of the Goods to World Road, C&C had converted the Goods. C&C is accordingly liable for the value of the Goods, and there is no evidence to dispute or challenge that the value is US $65,926.

27.  There will accordingly be judgment in favor of Forsa in the sum of US $65,926, with interest.

28.  I will further make an order nisi that the costs of the action are to be paid by C&C to Forsa, to be taxed if not agreed, with certificate for counsel.