EMERY AIR FREIGHT CORPORATION v. EQUUS TRICOTS LTD

[No stay of execution against an admitted claim for air freight]

1988, No. A6778

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This is an appeal by the plaintiff from a decision of the master on the plaintiff's application under 0.14 of the Rules of the Supreme Court. The plaintiff succeeded in obtaining judgment on the claim; but the master granted the defendant a stay of execution, to which the plaintiff objects. The circumstances are as follows.

2. The plaintiff is an airfreight forwarder; the defendant is a manufacturer of goods in Hong Kong. The defendant entrusted to the plaintiff goods for forwarding. The freight charges amounted to approximately HK$350,000, which the plaintiff claims. The defendant counterclaims that the goods or some of them were lost or damaged in transit and claims damages against the plaintiff in excess of the freight charges to which I have referred. It does not now dispute the claim itself.

3. The air waybills subject to which the goods were accepted by the plaintiff for transportation contain terms and conditions. Condition 6 includes the following provisions :-

"No claim will he entertained by [the plaintiff] until all transportation charges have been paid. The amount of a claim may not be deducted from the transportation charges."

The plaintiff contends that, on its true construction, Condition 6 excludes the right of set-off for loss or damage to the goods. The defendant contends that it is couched in language which is merely declaratory of the plaintiff's position and is not to be read as a contracting out by the defendant of its right of set-off.

4. I prefer the plaintiff's construction. It seems to me that the provisions which I have set out do indeed exclude, by contract, the defendant's right to deduct the amount of any claim for loss or damage to the goods from the transportation charges.

5. There remains the question which is at the heart of the case now, whether the defendant should, nevertheless, be granted a stay of execution. The plaintiff (it is not in any way argued otherwise) was entitled to the judgment which it has obtained. The only question is whether or not there should be a stay. In this connection, it is I think important to appreciate the nature and special incidents of a contract for freight. The common law rule in relation to the carriage of goods by sea is that a claim in respect of cargo cannot be asserted by way of deduction from a claim for freight; for a recent and authoritative re-statement of the rule, see Aries Tanker Corporation v. Total Transport Ltd. [1977]1 All E.R. 398. That rule has comparatively recently been applied to contracts of carriage by road; see R.H. & D. International Ltd. v. IAS Animal Air Services Ltd. [1984]12 All E.R. 203. (That was a decision at first instance but it was a case in which the judge followed six unreported cases, also at first instance, which had been cited to him; and it is a decision I would follow in appropriate circumstances.)

6. Before me, it has been pointed out, correctly (so far as I am aware), that there is no case in which this rule has been applied to a contract of freight by air. There exists, in parallel but in contradistinction with the common law rule relating to claims for freight, the rule that a deduction in relation to claims arising out of a contract for sale, or work and labour, may, usually, be allowed by way of set-off or counterclaim : see, for example Gilbert-Ash (Northern) Ltd. v. Modern Engineering (Bristol) Ltd. [1973]3 All E.R. 195. I have not the least doubt that the appropriate rule to apply to a contract of freight by air is not this latter rule, but the rule which has existed for a very long time in relation to carriage of goods by sea and has recently been held to apply to carriage of goods by road. There is no logical or any other sensible distinction to be made between these three different means of transport. The essence of the matter is that each of them involves a contract of carriage with its well-established rights and duties on the part of the carrier.

7. In an action on a dishonoured bill or cheque, the defendant will not be allowed to set up a set-off or counterclaim and the plaintiff is entitled to judgment without a stay of execution: see the cases cited in the Supreme Court Practice, 1988, 14/3 - 4/10 (p.146). The editors suggest that the same practice applies in an act ion for freight : see 14/3 - 4/3 (p.145). They cite the R H. & D. International case (see above). Although that case does not in fact in terms support this (it was concerned only with the question whether the defendant could claim a set-off, not with the question whether it should have a stay of execution) I agree with the editors. I hold that in an action for freight (whether over land, sea or air) the rule is that the defendant will not be allowed to set up a defence or counterclaim; that the plaintiff (if he can satisfy the requirements of Order 14) will be entitled to summary judgment; and that the defendant will not be entitled to a stay of execution (which would negate the effect of the rule).

8. Accordingly, I will reverse the decision of then matter and allow the appeal, with costs. It has been suggested to me that the point I have decided is or may be of some general importance. The parties not objecting, I give leave for this judgment, although delivered in Chambers, to be released for publication.