XCHRX SAMMITEX CO. v. BIRKART-EAST WEST FREIGHT LTD.

1996, No. A7309

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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The Appeal

1. These two cases were dealt with together because the facts and background are similar, the plaintiffs are associated and the defendant is the same. In respect of both cases, the Master gave interlocutory judgment for the plaintiffs on 9 July 1996 for damages to be assessed and costs. The defendant appeals against these orders.

2. The statements of claim allege that the plaintiffs suffered loss and damage, but do not specifically claim damages in the prayers. However, Mr Chow does not make any point of this.

The Contracts

3. On 2 August 1994, AC International (AC), as shipper, entered into a contract with the defendant relating to the shipment of 302 cartons of clothing from Hong Kong to Europe. This contract is contained in, or evidenced by, a document called a "Not Negotiable Air Waybill (Air consignment Note)". Under this contract it was agreed "that the goods described are accepted in apparent good order and condition (except as noted) for carriage subject to the conditions of contract on the reverse hereof." The shipper's attention was drawn "to the notice concerning carrier's limitation of liability" and the shipper was told that he "may increase such limitation of liability by declaring higher value for carriage and paying a supplementary charge if required". The consignee was Credit Suisse of Lucerne and the notify parties were Modenmueller and C.B Sportswear. The words "Freight Collect" appeared on the bill.

4. On 3 October 1994, Sammitex Company (Sammitex) entered into a similar contract, subject to identical conditions, with the defendant. In this case, the goods were 348 cartons of clothing, the consignee was ABN Amro Bank in Vienna and the notify party was C.B. Sportswear.

5. My attention has been drawn to the following clauses in the conditions of the two contracts -

"3. CONTRACTUAL STATUS OF AGENT

(i) The Agent is not a carrier (common or private actual or contracting) and may in its sole and absolute discretion refuse to offer its service to any person. The Agent does not contract hereunder for the carriage of goods.

(ii) The Agent is a forwarding agent whose principal business it is to act as an agent in arranging for the transportation of goods on behalf of customers from Hong Kong to overseas destinations principally by means of air and sea transportation.

(iii) Related to its principal business the Agent also arranges for the securing of ancillary services on behalf of the Customer including

(a) Taking delivery of goods at places designated by the Customer, transporting and handing over such goods to the Air or Sea Carriers at places, designated by such Air or Sea Carriers

(b) Warehousing or otherwise storing the goods before handing over the goods to the Air or Sea Carriers,

(c) Receiving the goods from the Air or Sea Carriers at overseas destinations, transporting the goods to places where the goods will be collected by the consignees or other persons designated by the Customer or consignees and attending to such collections,

(d) Warehousing or otherwise storing the goods before the goods are collected by the consignees or other persons designated by the Customers or consignees,

(e) Customs clearance of the goods,

(f) Placing of insurance in respect of the goods,

(g) Packing of the goods,

(h) Otherwise handling of the goods pursuant related or incidental to the instructions of the Customers.

(iv) Notwithstanding (iii) above the Agent is entitled to perform any or all of the ancillary services specified therein by itself. The Agent is not a professional haulier, carrier, packer, warehousemen, customs broker or insurance broker.

4. THE AGENT'S PARENT SUBSIDIARY OR ASSOCIATED COMPANIES ETC

The Agent shall be entitled to perform all or any of its obligations or exercise all and any of its discretions hereunder by itself or by its parent, subsidiary or associated companies, or by any other person, firm or company carrying out the functions of a forwarding agent. Any contract to which these Conditions apply is made by the Agent on its own behalf, and also as agent for and on behalf of any parent, subsidiary or associated company, other person, firm or company; any such parent, subsidiary or associated company, other person, firm or company shall be entitled to the benefit of these Conditions. The Customer shall not seek to impose upon any such parent, subsidiary or associated company, other person, firm or company a liability greater than that accepted by the Agent under these Conditions.

5. AUTHORITY TO CONTRACT FOR THE CUSTOMER ETC

(i) Pursuant to Conditions 3(ii) and (iii), the Agent is authorised to select and engage on behalf of the Customer carriers, truckmen, forwarders, foreign agents, warehousemen, and others. The Agent shall be entitled to enter into any contract on behalf of the Customer, whether in the name of the Customer or not, with any person

(a) for the carriage of the Customer's goods to overseas destinations by any route or any carrier,

(b) for the storage, packing, local transportation or otherwise handling of the goods by any person at any place or places and for any length of time,

(c) for any other purposes related or incidental to the Customer's instructions,

AND to do such acts as the Customer's agent as may be necessary or incidental thereto in the absolute discretion of the Agent. The Agent may but is not obliged to depart from the Customer's instructions in any respect if in the opinion of the Agent it is necessary or desirable to do so in the Customer's interests or it is otherwise expedient to do so, and subject thereto the Agent may arrange for the goods to be transported to overseas destinations by means of transport other than transport specified in the Customer's instructions.

(ii) The Customer expressly authorises the Agent to do such acts and enter into such contracts as are referred to in (i) above on behalf of the Customer so as to bind the Customer by such acts and contracts in all respects, notwithstanding any departure from the Customer's instructions as aforesaid. The Customer agrees that the Agent is not obliged to consult the Customer before the Agent enters into any such contracts or does any such acts. The Customer further agrees that the Agent is not obliged to advise the Customer of the terms and conditions of such contracts or details of such acts unless specifically requested to do so by the Customer in writing provided that the Customer shall have no right to enquire into the actual charges paid by the Agent to any third party, and the Customer acknowledges that any difference between the charges paid by the Customers to the Agent and the charges paid by the Agent to any third party is the Agent's commission or remuneration or profit.

6. WHERE THE AGENT CONTRACTS IN ITS OWN NAME

(i) Pursuant to Condition 5 if the Agent enters into a contract on behalf of the Customer in its own name with any other person for the carriage (overseas or local), storage, packing or otherwise handling of the goods the Agent is not itself a carrier for the purposes of the Carriage by Air (Overseas Territories) Order 1967, the Carriage by Air Acts (Application of Provisions) (Overseas Territories) Order 1967, the Carriage by Air Act 1961, the Carriage by Air (Supplementary Provisions) Act 1962, the Carriage of Goods by Sea Act 1971, or for any other purposes, nor does it make or purport to make any contract for the carriage (overseas or local), storage, packing or otherwise handling of the goods with the Customer as a principal. The Agent's sole obligation is to procure contracts for the carriage (overseas or local) storage, packing or otherwise handling of goods by other persons.

21. DELIVERY OF GOODS

Except otherwise specifically instructed by the Customer in writing the Agent shall arrange for the goods to be delivered only to the consignee named on the front side hereof or to a party authorized by such consignee. Notice of arrival of the goods shall be sent to the notify party or the consignee by ordinary methods, the Agent is not liable for non-receipt or delay of such notice. Any charges including storages incurred pending collection will be for the account of the customer or the consignee or the owner.

24. THE AGENT'S LIABILITY

The Agent shall not be liable to the Customer or the consignee or the Owner

(a) for loss or damage (physical or otherwise), including but not limited to loss or damage resulting from non-delivery of the goods or misdelivery of the goods to a wrong party, caused by any failure to carry out or negligence in carrying out the Customer's or the consignees or the owner's instructions, or by any failure to perform or negligence in performing the Agent's obligations (whether such obligations arise by contract or otherwise) unless such loss or damage is due to the wilful misconduct of the Agent or its own servants and to circumstances within its control,

(b) for consequential loss, or loss of market or profit, or delay, or deviation, or fire, or theft howsoever caused.

(ii) Notwithstanding any other provisions in these Conditions the Agent's responsibility or liability hereunder shall cease upon the Agent handing over the goods to any Air or Sea Carriers or any other third party. The Agent shall not be responsible in any event for loss or damage (physical or otherwise) to or in connection with the goods if the nature or value thereof has been misstated by or on behalf of the Customers or the owner whether or not such misstatement is due to any negligence.

(iii) In no case whatsoever shall any liability of the Agent, howsoever arising, and notwithstanding that the cause of the loss or damage (physical or otherwise) be unexplained exceed

(a) the invoice value of the relevant goods calculated on fob basis, or

(b) a maximum of Hong Kong $500.00 (Dollars five hundred) in respect of any one consignment or any package of goods whichever shall be the lesser."

The AC Case

6. In its statement of claim, AC alleges that, in breach of its duty, the defendant, its servants or agents, delivered the goods to someone other than the consignee. In the alternative, AC makes allegations of negligence and conversion. AC alleges that it has suffered loss and damage in the sum of US$16,526.59, being the value of the goods, US$52,120.80, less the sum of US$35,594.21 prepaid.

7. In its defence, the defendant admits that the contract required that the goods be delivered to the consignee or to its order, but denies that it delivered them to someone other than the consignee, denies negligence and denies conversion. The defendant says the contract for the carriage by air was entered into by the defendant acting for AC. Thereafter, the defendant says, the goods were "safely collected and stored, pending delivery, by Birkart Austria, an associated company of the Defendants within the meaning of Condition 4 of the Conditions of Contract". The defendant goes on to say that "Thereafter, on the order of Credit Suisse in Lucerne as the consignees, Birkart Austria delivered 202 pieces out of the 302 pieces" to Modenmueller and a further 16 pieces "to a company named Kaldo in Graz on the order of the consignees". The defendant says that of the balance of 84 pieces, Birkart "on behalf of the Defendants" hold 74 pieces "which they will deliver to the order of the consignees" on the payment of freight storage and other charges and 10 pieces "have been lost or mislaid". The defendant says any liability for loss is governed by Condition 24 of the contract.

8. In an affirmation filed in support of summary judgment, Ms Irene Ng, the manager of the plaintiff, confirms the allegations in the statement of claim. She says that the goods were mentioned in two invoices; 207S for 202 cartons, and 208S for 100 cartons. She says that difficulties arose over delivery of the goods. She produces a copy of telex from Birkart Austria to the defendant dated 14 October 1994 in which Birkart Austria says that, in relation to the 202 cartons under invoice 207S "payment-confirmation in our hands" and, in relation to the 100 cartons under invoice 208S "cargo still in our warehouse". On 18 October 1994, AC wrote to the defendant asking for the return of the 100 cartons. This instruction was repeated on 29 November 1994. The goods were not returned. On 1 December 1994, Birkart Austria wrote to the defendant. In this communication, Birkart Austria said, in relation to the goods under invoice 208S, "Today I hv spoken with Mr Mag Christian Bauer (CB Sportswear), which is a owner fm AC Int (Sammitex), and he will fax us today a payment confirmation for the invoice No 94 208/S. I will fax it to you ASAP (tomorrow morning).". This letter, together with a letter from Mr Bauer dated 1 December 1994, were faxed to AC the next day. The letter from Mr Bauer is written on paper bearing AC's letterhead. It is addressed to Birkart Austria and the defendant. It says -

"This is a message from Mr Christian Bauer, I'm as well as Mr Allan Lee an owner and a manager of A/C International.

It is agreed, that I give to Birkart the good's free (Inv. 94-208S), and I take all responsibilities against A/C or Sammitex.

So, inform Mr. Allan Lee accordingly."

9. This letter is signed by Mr Bauer "For A/C International".

10. Ms Ng says that Mr Bauer "is not and never has been an 'owner' of [AC] and has no beneficial or legal interest in [AC]".

11. On 2 December 1994, Sammitex, which is associated with AC, wrote to Birkart Austria, with a copy to the defendant, quoting invoice 208S, and complaining that the goods had been released to Mr Bauer. On the same day, Birkart Austria wrote to AC, with a copy to the defendant, quoting invoice 208S and saying "Generall the shipment to A.M. invoice is still in our warehouse and it's no problem to send back to HKG all.", but that Mr Bauer had said that "he will transfer the many to A.M. invoice on 05.12.94 to yr bank".

12. Ms Ng says that the payment confirmation in respect of the 202 cartons under invoice 207S has not been received, and that the bank documents, without which Birkart Austria could not have properly released the goods, were returned to AC.

13. In an affidavit filed on behalf of the defendant, Mr Mahncke, the managing director of the defendant, says that "202 cartons were delivered on the order of Credit Suisse the consignee and with the approval of Mr Christian Bauer of the Plaintiff. 74 cartons are still held by Birkart Austria, and 6 cartons are in the possession of the Defendant." Mr Mahncke does not challenge the evidence that Ms Ng gives about the bank documents. He makes no attempt to explain how, in these circumstances, the 202 cartons were delivered on the order of the consignee.

The Sammitex Case

14. The statement of claim by Sammitex makes much the same allegations, save that there were 348 cartons, the value of which is US$66,852, of which US$44,568 was prepaid and US$22,284 remains outstanding.

15. The defence dated 21 November 1995 makes similar allegations as in the AC case, but here says that "on the order of ABN Amro Bank in Vienna as the consignees, Birkart Austria delivered 95 pieces to companies named Leber, Hasibutz and Zimm. Leber received 1 piece, Hasibutz 24 pieces and Zimm 70 pieces". The defence goes on to say that of the "balance of 253 pieces, Birkart Austria on behalf of the Defendants hold in their warehouse at Graz 211 pieces, which they will deliver to the order of the consignees on payment of freight, storage and other charges owing to the Defendants . . . The remaining 42 pieces have been lost or mislaid.

16. In this case, the defendant makes a counterclaim of HK$768,074.74 reflected in 9 invoices, the last two of which relate to the two cases with which I am concerned.

17. In this case, Ms Ng has filed a similar affirmation, including an allegation that the bank documents relating to this shipment were also returned. Ms Ng refers to the telex of 1 December 1994 in which Birkart Austria says that the 348 cartons "are still in our warehouse". On 7 December 1994, the solicitors for AC and Sammitex wrote to the defendant saying that the defendant should ensure that the goods were not released without payment. On 20 December 1994, the defendant replied to this letter saying that the "feed back from our Graz office" was that the goods were still "in the Graz warehouse". However, on 29 December 1994, Birkart Austria wrote to Sammitex saying that "we made the mistake to release 134 crt from total 348 crt (yr invoice 94-245S) without orig fcr. Because we thought, that a personal promise from CB Sportswear to become the orig in the next day is ok. This was a storry from Mr Bauer". On 6 January 1995, the defendant wrote to the solicitors for Sammitex saying "As you may note from the fax of our Graz office . . . they released the shipments to the consignee without bank endorsement was only based on the personal promise of the consignee".

18. In this case, Mr Mahncke also filed an affidavit dated 3 April 1996. In this, apart from similar allegations to those in the AC case, he says "the delivery by Birkart Austria was in accordance with the instructions from the consignees, I would submit that the Defendants are simply not responsible or liable for any misdelivery of the cargo. They were acting as freight forwarders on behalf of the Plaintiff and in any event their liability in respect of the goods ceased upon handing the goods to the actual carrier". He goes on to say "From the total 348 cartons of goods on the order of ABN Hanbro Bank in Vienna the consignees, Birkart Austria delivered 95 cartons to companies named Leber, Hasibutz and Zimm. Leber received one carton, Hasibutz 24 cartons and Zimm 70 cartons. Of the balance of 253 cartons, Birkart Austria hold 226 cartons (wrongly stated as 211 cartons in the Defence). The remaining 27 cartons have been lost or mislaid". Again, Mr Mahncke does not challenge Ms Ng's evidence that the bank documents were returned. In these circumstances, one might expect him to explain how it is that goods were delivered to the order of the consignee, but he does not do so.

19. Mr Mahncke maintains the counterclaim, and this in spite of the fact that the items not connected with these cases were paid on 11 January 1996.

Liability for the Acts of Birkart Austria

20. Mr Chow argues that the defendant is not liable for the acts for Birkart Austria because, as I understood him, the defendant contracted with Birkart Austria as agent for the plaintiffs, and thus Birkart Austria is the agent of the plaintiffs, not the defendant. I reject this. It is quite clear from the defences, and the evidence, that the goods were "collected and stored, pending delivery, by Birkart Austria, an associated company of the Defendants within the meaning of Condition 4 of the Conditions of Contract". This means that the defendant elected to perform its obligation to collect, store and deliver the goods through Birkart Austria, making Birkart Austria its agent, not the agent of the plaintiffs.

The Defendant's Liability

21. In these circumstances, the defendant is liable for the acts of Birkart Austria as if those acts had been performed by the defendant itself. The question that arises is: If the acts of Birkart Austria are to be taken as the acts of the defendant, is the defendant liable to the plaintiffs?

Misdelivery

22. In the first place, Mr Chow argues that the defendant cannot be liable for damages in respect of the whole of the two consignments because it was not the whole of the two consignments that were misdelivered. Mr Chow says that some of the cartons from both consignments are available for delivery to the plaintiffs. That assumes that the defendant has put up a credible case that this is so.

23. In the AC case, the defendant says in its defence that 218 cartons were properly delivered, which is clearly not so. Its says that Birkart Austria holds 74 cartons and 10 cartons have been lost. In October 1994, Birkart Austria said 100 cartons were in their warehouse, but they were not returned when AC asked for them on two occasions. In his affidavit, Mr Mahncke says that 202 cartons were properly delivered, which cannot be so, that 74 cartons are held by Birkart Austria and that 6 cartons are with the defendant. On this basis, there being no consistent, coherent defence, I cannot hold that the defendant has put up a case that raises an issue fit for trial.

24. In the Sammitex case, the defence alleges 95 cartons were properly delivered, which is nonsense, that 211 cartons are in Graz and that 42 cartons have been lost. On 1 December 1994, Birkart Austria said that the 348 cartons were "are still in our warehouse". On 7 December 1994, the defendant was told to ensure that the goods were not released without payment. On 20 December 1994, the defendant said the goods were still "in the Graz warehouse". However, on 29 December 1994, Birkart Austria said that 134 cartons had been delivered improperly. Mr Mahncke says that 95 cartons were properly delivered, 226 cartons were held by Birkart Austria and 27 cartons have been lost. Again, the defendant does not raise a case that is anywhere near fit for trial.

25. I conclude that the defendant has not made out a case on which it can be said there should be a trial to determine just how many cartons are available for delivery back to the plaintiffs.

Exclusion of Liability

26. Next, Mr Chow argues a case on the basis of clause 24 of the contract. I repeat this clause for convenience -

"24. THE AGENT'S LIABILITY

The Agent shall not be liable to the Customer or the consignee or the Owner

(a) for loss or damage (physical or otherwise), including but not limited to loss or damage resulting from non-delivery of the goods or misdelivery of the goods to a wrong party, caused by any failure to carry out or negligence in carrying out the Customer's or the consignees or the owner's instructions, or by any failure to perform or negligence in performing the Agent's obligations (whether such obligations arise by contract or otherwise) unless such loss or damage is due to the wilful misconduct of the Agent or its own servants and to circumstances within its control,"

27. The clear undertaking of the defendant from the contents of the face of the contracts is to arrange for the goods to be delivered only to the consignees or to their order. In addition, clause 21 of the contracts provides the same thing. Clause 21 reads -

"21. DELIVERY OF GOODS

Except otherwise specifically instructed by the Customer in writing the Agent shall arrange for the goods to be delivered only to the consignee named on the front side hereof or to a party authorized by such consignee. Notice of arrival of the goods shall be sent to the notify party or the consignee by ordinary methods, the Agent is not liable for non-receipt or delay of such notice. Any charges including storages incurred pending collection will be for the account of the customer or the consignee or the owner."

28. Although this is the primary obligation of the defendant, and what may be said to be the main purpose of the contracts, the defendant argues that it is not liable if it fails to carry out this primary obligation and main purpose, unless it is guilty of wilful misconduct or its own servants are guilty of wilful misconduct and the loss is due to circumstances within its control. So, what the defendant says is that at the time of the contract it said to the plaintiffs, in effect "I agree that, in exchange for payment by you, I will arrange delivery of the goods to the consignees or to their order, but, if I do not do so, I am not liable to you. In other words, although you pay me, I am not bound to do what I undertake to do." That is totally unreasonable, and something that no honest businessman should be heard to say. In these circumstances, it is the duty of the court to interpret the exemption clause to avoid this ridiculous situation, if that is at all impossible.

29. Firstly, it seems to me that when one has two printed standard clauses that are in conflict; one saying that "I bind myself to do this" and the other saying "I am not bound to do this", then one must give way. And I am of the view that the one that must take precedence is the one that defines the primary obligation or main purpose of the contract.

30. Secondly, an exemption clause will protect only when it specifically covers the event on which liability is sought to be founded. Clause 24 purports to protect the defendant only where the loss or damage is "caused by any failure to carry out or negligence in carrying out the Customer's or the consignees or the owner's instructions, or by any failure to perform or negligence in performing the Agent's obligations". In the cases before me, the defendant has not only failed or neglected to carry out its obligations, which are omissions, but has committed the positive acts of treating the goods as its own and has either improperly handed them out, pretending that this was to the order of the consignees, well knowing this was not so, or kept them when asked expressly on at least two occasions to return them. In my view, that sort of behaviour is not covered by the exemption clause.

31. If I am wrong in this respect, then I believe that the defendant's behaviour, through its servant, in circumstances within its control, constituted wilful misconduct, and, on this basis also, the exemption clause does not apply.

Limitation of Liability

32. In this event, Mr Chow argues that the defendants liability is limited to HK$500. He cites, again, clause 24 to this effect -

"(iii) In no case whatsoever shall any liability of the Agent, howsoever arising, and notwithstanding that the cause of the loss or damage (physical or otherwise) be unexplained exceed

a) the invoice value of the relevant goods calculated on fob basis, or

b) a maximum of Hong Kong $500.00 (Dollars five hundred) in respect of any one consignment or any package of goods whichever shall be the lesser."

33. In my view, such a clause, to be effective in limiting the defendant's liability to a paltry amount of HK$500, which, in the ordinary case, would be far less than the value of any cargo, would need to spell out in very clear terms that it covers the case where the defendant has been guilty of acts of commission cutting across the primary obligation and main purpose of the contract, and, more so, it would need to say specifically that the defendant is liable to pay only HK$500 even when it has been guilty of wilful misconduct. It does not do so, and I hold that it is not applicable in this case.

Title to Sue

34. The defendant's last attempt to avoid liability is based on a technical point.

35. Mr Chow says that the plaintiffs are not limited liability companies, and there is no suggestion that they are partnerships so that they may sue in the firms' names. There is, it is true, no allegation that the plaintiffs are partnerships, but it does not seem to me that this is necessary. It is clear that the rules do not contemplate that partners should disclose their names when suing because they provide for a defendant to serve a notice to disclose these. In any event, even if the plaintiffs are not partnerships, this is a mere irregularity, and can be cured by amendment. I do not accept that this point enables the defendant to avoid liability.

Result

36. I have found no reason to differ from the findings of the Master. The appeals are dismissed.

Costs

37. I know of no reason why costs should not follow the event. I make an order nisi that the defendant pay the costs of the plaintiffs, with a certificate for counsel.