LINKS INTERNATIOINAL RELOCATIONS LTD t/a LINKS RELOCATIONS v. SWIFT CHRISTOPHER LEE

DCCJ817/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 817 OF 2012

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JUDGMENT

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Background

1. This matter arose in 2008 when the defendant, a senior commercial lawyer with the Hong Kong office of an international firm, engaged the plaintiff, a relocation company, for the defendant’s relocation to Japan, which involved shipment of the majority of his family’s physical possessions to Japan and some to England and France.

2. The dispute concerns 85 bottles of valuable wines (the “Wines”) which were supposed to be shipped by the plaintiff to Japan for the defendant.  On 18 August 2008, a quotation for the shipment was signed by the defendant (the “Quotation”) wherein the price of HK$15,335 was agreed.  The Quotation form signed by the defendant had these words appearing near the signature of the defendant: “The Links Relocations Conditions of Business shall apply.” (“Standard Conditions”)  The plaintiff took delivery of the Wines on 19 August 2008 in contemplation of shipment.

3. However, the Wines never left Hong Kong.  The plaintiff claims that it was because the defendant breached or changed the contract by failing to provide the necessary instructions and documentation and just left the Wines with them. The defendant claims that it was because of the plaintiff’s negligence in failing to ascertain the customs procedures in Japan and made proper advance arrangements.  By the time of the hearing of this action, the Wines have been with the plaintiff for over five years.  Simply put, the issues of this case are: whether the defendant should pay the plaintiff storage charges for the Wines, and if so, for what period of time and how much.  Further material facts and their significance will appear in the judgment below.

4. At the trial, both sides were represented by able counsel.  Each made extensive written submissions (totalling over a hundred pages) in addition to oral arguments and cited dozens of authorities.  Issues on negligence, incorporation of contractual terms by reference, bailment, unjust enrichment, mitigation and lien were extensively argued.  With no disrespect to their diligence, it seems to me my decision could be based on a few uncontroversial facts and well established legal principles.  This case is not an occasion for me to write a treatise on those issues, even assuming that I have such ability.  Also, each counsel made criticisms, at times rather harsh, on the other side’s witnesses.  I do not think that was necessary.  There are sufficient uncontroversial facts in this case for me to base my decision without resorting to any assessment of the credibility of the witnesses.  In fact, if I may say so, all witnesses have given truthful evidence to assist the court within their ability.

Cause(s) of action - Contract and/or unjust enrichment

5. In the statement of claim, the plaintiff pleaded that the Quotation was the contract between the parties and that the Standard Conditions were incorporated by reference to become terms of the contract (para 5 and 6).  The defendant pleaded in his defence and counterclaim that “There was no contract for storage or shipment of the wine.” (para 8)  At the beginning of the hearing, I asked the plaintiff’s counsel Mr Chan if he would consider pleading an additional cause of action in unjust enrichment in response to this allegation by the defendant of no contract.  I emphasized that this was just a preliminary observation on my part and he would only need to do so if he was not very confident about his case in contract.

6. On the second day of the trial, Mr Chan applied to amend the statement of claim to add the cause of action in unjust enrichment.  Mr Sheppard for the defendant protested that such amendment could only be allowed if the plaintiff was to pay all the costs of the action up to the time of the amendment.  He relied on a commentary in Hong Kong Civil Procedure 2013, vol 1, 20/8/12, which says:-

“Where the amendment asked for is a substantial one, such that the plaintiff could not succeed without it, he will in a proper case be only allowed to amend at the trial on payment of all costs incurred up to date, and any costs thrown away by reason of the amendment.”

7. I do not think the consequences of Mr Chan’s amendment should be so drastic.  The addition of the cause of action in unjust enrichment was out of prudence that the court might agree with the defendant’s position of no contract.  A newly appointed Deputy District Judge could be rather unpredictable and Mr Chan’s prudent measure could well be understood.  The amendment does not require any new evidence to be adduced by either side.  Though the application was made after the plaintiff’s main witness Ms Jacqueline Tiberis had given evidence, Mr Sheppard did not request her to be recalled after I allowed the amendment, and it seems the defendant’s evidence did not need to be changed to any significant extent.  I am not able to see much prejudice caused by this amendment to the defendant which is not adequately compensated by the costs of and occasioned by it, even though it was made in the course of the trial.  Let us not lose sight of the true purpose of litigation: it is to seek the truth and do justice as far as possible within human constraints.  Rules are to be the servants for achieving such purpose. They are not the master in themselves. They are to be abided by no doubt.  However, the consequences of breaches must be commensurate with their seriousness and the prejudice to the other party.  I shall have more to say on the effects of the plaintiff’s amendment in paragraphs 15 and 16 below after I deal with the issues of the existence of the contract, implied term and the measure of damages.

Is there a contract?

8. It is not very clear to me what the defendant’s basis was to allege in para 8 of the defence and counterclaim that there was no contract.  He admitted in para 6 that “immediate shipping was confirmed and contracted”.  In para 7 he pleaded that “The plaintiff then failed to ship the wine as contracted due to its negligence, having failed to make proper advance arrangements.”  Then he pleaded in para 8 that there was no contract for the storage or shipment of the Wines.

9. I do not think I need to decide whether the plaintiff had been negligent, though I tend to think that it had not.  The defendant was not claiming any loss flowing from the plaintiff’s alleged negligence (apart from using it to deny liability for storage charges).  There was nothing in the defendant’s case for him to contend that the time of shipment was so essential that the failure to ship immediately would mean complete repudiation of the contract.  There was nothing to show, and it was not pleaded, that the defendant was in urgent need of the Wines in Japan.  Quite the contrary, the defendant gave evidence that once he arrived in Japan, he was so overwhelmed by his work and other chores arising from the relocation that he had given little thought to the Wines.

10. The general policy of the court should be to uphold a contract as far as possible even though there are uncertainties in its terms (see Hillas v Arcos (1932) 147 LT 503).  In this case, I do not think the lack of detailed agreement on the handling and charges for Wines not shipped as originally planned is enough to destroy the contract.  In fact, the defendant’s claim that there was no contract is hardly consistent with the position exemplified by the emails exchanged between the parties.  On 4 September 2008, when asked to provide a list of the Wines with brand, year and approximate value for shipment and customs purpose, the defendant replied “Please do not send this until confirmed.  I should have paperwork somewhere but it is in transit.”  The plaintiff replied “Well noted Chris, will wait for your green light.”  These emails clearly show that after the alleged negligence resulting in failure to ship the Wines immediately, the parties still treated the contract as subsisting and were making efforts to arrange for shipment.  However, the paperwork and green light were never given by the defendant to the plaintiff, despite numerous chasers from the plaintiff.  That, it seems to me, is the true reason why the Wines were never shipped.

Implied term

11. Though it is my ruling that there was indeed a contract between the parties in relation to shipment and storage of the Wines, there were no express terms in the contract dealing with the storage charges.  Clause 79 of the Standard Conditions may seem relevant. It provides that: “In the event that instructions are given to abort a shipment after packing, the Client shall pay LR for all services rendered, materials used, costs of redelivery or any further handling, warehousing charges and administrative time. The Client will be provided with documented expenses in such a case.”  It will be noted that it does not provide how storage charges are to be calculated.  The parties take opposite position as to whether Clause 79 has been incorporated.  Though not essential for my decision, I shall briefly deal with their arguments.  The defendant denies that this clause applies as his position is that the contract for carriage was terminated by the plaintiff’s negligence/breaches and that the Standard Conditions had never been properly incorporated into the contract.  I do not agree.  Clause 79 is not a very unusual term. The defendant, a senior solicitor, should not be allowed to plead that he was not aware of the Standard Conditions which were expressly incorporated by reference in the Quotation that he signed.  (See DBS Bank (Hong Kong) Ltd v San-Hot HK Industrial Co Ltd [2013] HKEC 352.)

12. As neither Clause 79 nor any other provisions in the contract specify how the warehousing charges are to be calculated, a term need to be and could be implied into the contract as a matter of business efficacy and necessity.  When the original carriage plan under a contract for carriage was departed from, it could readily be implied that the carrier could store the goods properly and it would be entitled to reasonable storage charges (see The Great Northern Railway Company v Swaffield (1874) LR 9 Ex 132).  

The measure of damages

13. In my view, the plaintiff’s claim could be based either on contract or unjust enrichment. There should be little difference in the measure of damages between the two causes of action. The appropriate measure should be the market value of the benefit at the time it is obtained by the defendant.  (See: para 34(2), A Restatement of the English Law of Unjust Enrichment, 2012 ed. Andrew Burrows).  It would be my ruling that whether based on implied term or unjust enrichment, the plaintiff is entitled to impose reasonable storage charges at market rate.

14. My ruling on this point is in line with the case of Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1987] EWCA Civ 6.  In that case Interfoto delivered 47 photographic transparencies to Stiletto in a jiffy bag.  Stiletto was planning to use them for a presentation, but in the event it did not.  It never opened the bag or read Interfoto's standard terms and conditions, which were inside the bag.  Condition 2 said there was a holding fee of £5 per transparency for each day over fourteen days.  After around a month, Interfoto sent a bill for £3,783.50.  The Court of Appeal held that the holding fee was ineffective.  Dillon LJ said that a ‘particularly onerous or unusual’ term must have special notice.  However, Interfoto was entitled to a restitutionary charge of £3.50 per transparency per week for their holding.  This figure was arrived at by reference to the charges of ten other photographic libraries.

Effects of the plaintiff’s amendment

15. It was very heavily emphasized by Mr Sheppard in his submissions that had the plaintiff pleaded unjust enrichment and based its claim on quantum meruit, the trial would not have taken place and so the plaintiff should be liable for all the costs up to the amendment of the statement of claim adding the unjust enrichment claim. Apart from the reasons I set out in paragraph 7 above, Mr Sheppard faces other hurdles arising from the facts of the case.  The defendant has never offered to pay the plaintiff reasonable storage charges.  When the plaintiff sent him invoices based on the rates on its website, the defendant promptly replied that “There are no storage charges applicable.”  He did not say “Your charges are too high.  I’ll only pay you reasonable charges.”  Neither did the subsequent letters from his solicitors to the plaintiff demanding for re-delivery make any offer to pay reasonable charges.

16. The defendant did plead in the defence and counterclaim (para 12) that “… if [the plaintiff] had transferred the wine to a wine storage facility, the defendant would have been fairly responsible for reasonable storage costs resulting”.  I do not think that is sufficient to support Mr Sheppard’s contention.  This statement is equivocal and does not amount to a clear offer.  Whether the plaintiff had transferred the Wines to a third party wine storage facility or its own in-house facility, the defendant is liable to pay reasonable storage charges.  Yet up to the day when the defendant amended his defence and counterclaim on 1 August 2013, the defendant still expressly denied liability to pay any storage charges (see paras 25B, 30A of the defence and counterclaim). The denial in para 25B was only crossed out on the third day of the trial when the defendant amended his defence and counterclaim, and in para 30A the defendant still maintained a total denial of liability.  In light of these facts, it seems to me speculative to say that the defendant would have settled the case as soon as the plaintiff pleaded its claim in unjust enrichment.

17. In any event, if properly advised, the defendant could have protected himself in costs by making a sanctioned payment into court pursuant to Order 22 of the Rules of the District Court for an amount that he thinks the plaintiff’s claim should be worth.  Of course, I would not have known if the defendant had done so until I give my judgment herein due to the good filing system of the court and careful handling of the court clerks.

Lien and mitigation

18. Much ink has been spilled by counsel on the issue of lien.  It arose because on 12 March 2010 and some subsequent dates, the defendant demanded the plaintiff to re-deliver the Wines to him.  The defendant argues that the plaintiff should have done so to mitigate its loss, and he claims damages for conversion as a result of the plaintiff’s refusal to re-deliver.  The plaintiff argues that it has a lien on the Wines.  Not only did the defendant fail to pay the storage charges, he completely denied liability for any charges all along.  Hence, it is entitled to withhold delivery.

19. In my view, there are ample authorities to support the plaintiff’s claim of a lien over the Wines for the storage charges.  How such lien arises is conveniently summarized by Harris J in the recent case of Hong Kong Aircraft Engineering Co Ltd v The Joint and Several Liquidators of Oasis Growth and Income Investments Ltd [2011] 2 HKLRD 471 (para 9 and 10):-

“I do not understand it to be in dispute that the following requirements…must be satisfied for a particular lien to arise:-

(1) The person asserting the lien must be in possession of the chattel;

(2) The possession of the chattel must be “lawful”: the transfer of possession to the person asserting the lien must have been with the express or implied authority of the chattel’s owner;

(3) The possession of the chattel must be continuous. The surrender of possession of the chattel usually results in the extinction of the lien. The lien is not regained if possession of the chattel is regained.

(4) The person asserting the lien must have done work on the chattel in respect of which he asserts the lien;

(5) The work on the chattel must usually have been completed and the sum in respect of which the lien arises must be due to the person asserting the lien.

This type of lien allows a person who has done work on a chattel to retain it until his charges for work done on the chattel have been paid.”

20. By taking delivery of the Wines and storing them in suitable conditions the plaintiff should be regarded as having done work on them.  The conditions listed out by Harris J are satisfied.

21. Mr Sheppard argues that as a reputable solicitor, the defendant would not ruin his career by refusing to pay reasonable storage charges.  Hence, it is unreasonable for the plaintiff to refuse delivery and seek to recover the charges from the defendant later.  I do not agree.  For if it holds, a claim of lien would be lost on wealthy people but not the ordinary folks.  This could not be the right legal position.  In this case, the defendant never even offered to pay any storage charges.  I rule that the plaintiff is entitled to exercise a lien over the Wines such that failure to re-deliver on 12 March 2010, or upon subsequent demands by the defendant, does not constitute failure to mitigate its loss.  The defendant’s counter-claim in conversion is dismissed.

The charging period

22. Upon my suggestion at the end of the trial, the plaintiff has re-delivered the Wines to the defendant on 19 September 2013.  So that day would be the end point.  As regards the starting point, the plaintiff’s case is that it had promised to store the Wines free for one month (para 4, statement of claim).  The defendant does not seem to have a concrete positive case.  He pleaded that “the plaintiff undertook to hold the wine … free of charge … until proper arrangements were made.” (para 8, defence and counterclaim)  However, neither is the evidence of the plaintiff on this point very clear.  On 12 November 2008, almost three months after the plaintiff took delivery of the Wines, the plaintiff sent an email to the defendant as follows:-

“Good evening Chris

How are you? I hope your goods have arrived well in Tokyo and you and your family have settled in nicely.

I have to follow up with you on your wine shipment. As you know, our original arrangement was to keep your wine for a couple of days/weeks until you would be able to provide us with the purchasing invoices which are needed for customs clearance in Japan. In your email from September 4 you stated you should have this paperwork but it would be in transit. Ever since, we have followed up with you in various emails (September 11, October 10, 17 and 22, November 5) asking for the invoices and for green light to ship but unfortunately you never replied.

Since your sea shipment has arrived in Tokyo a couple of weeks ago, I am sure you will be able to locate the purchasing invoices or some statement on the value of the wine.

Your wine has been stored in our office since 19th of August – that is almost 3 months. Please understand that we cannot keep your wine in our office any longer. If we are not able to ship it latest by end if this month because the paperwork is still missing, we will have to transfer your wine cases to a wine storage facility and start charging you storage fees.

Thank you for your understanding.

I am looking forward to receiving the necessary paperwork and get this shipment going.”

23. The underlined sentence provides the ammunition for the defendant to argue that the plaintiff could only start charging from 1 December 2008, if at all.  I think the correct answer should be somewhere in between.  It could be seen from the email that the plaintiff’s tone was very courteous and it still wished to maintain a good relationship with the defendant.  It was also mentioned therein that “our original arrangement was to keep your wine for a couple of days/weeks until you would be able to provide us with the purchasing invoices which are needed for customs clearance in Japan….”  The defendant did not seem to have replied to this email.  I might infer from this email that if the defendant had facilitated the shipment of the Wines by providing the necessary documentation and giving the green light, the plaintiff would, out of good will, probably have waived the storage charges.  However, that does not mean the plaintiff was only entitled to charge as from 1 December 2008.  It is clear that the understanding was that the free storage period would not be as long as three months.  I would hold that the free storage period would be the reasonable time for the defendant to locate and provide the paperwork to the plaintiff, plus a short grace period. Doing the best I could in the circumstances, I rule that it would start to run after six weeks, ie, from and including 1 October 2008.

The proper charging rate

24. The plaintiff claims storage charges based on the rates published in its website, namely, HK$36 per bottle per month.  There are considerable difficulties in the way of the plaintiff’s claim on such basis.  First, the plaintiff admits that this rate of charge has never been expressly brought to the attention of the defendant.  In fact, the plaintiff itself had been confused about it own charges.  It sent invoices, and alleged in the original statement of claim, that the charge was HK$40 per bottle per month.  In fact, according to the plaintiff’s own website, the HK$40 rate was only applicable to storage of a smaller quantity.  The plaintiff only became aware of this mistake and applied to amend its claim to HK$36 per bottle 10 days before the trial.  Not only was this rate of charge never brought to the defendant’s attention, the plaintiff’s witness Mr Eric Yin was not able to tell when this rate was published on its website and how the plaintiff arrived at this figure.  He was not even sure if it was published before 19 August 2008.  On the other hand, the defendant has as early as 19 September 2011 by a letter from his solicitors informed the plaintiff, and in his defence filed in May 2012 pleaded, that the HK$40 per bottle per month charge was exorbitant and that by comparison Crown Wine Cellars only charges HK$250 per case (of 12 bottles) per annum.

25. On 17 February 2009, the plaintiff sent an invoice to the defendant for storage charges on the basis of HK$40 per bottle per month.  The plaintiff argues that this constitutes the requisite notice to the defendant of its charging rate.  There are several problems with such argument.  First, that is not the pleaded case of the plaintiff.  Secondly, the actual charge is HK$36, not HK$40.  A notice that was inaccurate in the most important particular could hardly be an effective one.  More importantly, as the defendant had never been aware of the high charge of either HK$36 or 40 before his receipt of this invoice, the term regarding the storage charge before and after the issue of the invoice could not be unilaterally imposed or changed by the plaintiff.  The plaintiff would have a much stronger case if it sent an explicit notice to the defendant telling him that “if you don’t take away your wine and pay us outstanding reasonable storage charges, we’ll henceforth charge you HK$36 per bottle per month.”  Such a notice, if coupled with the defendant’s inaction, may constitute a change of the term for storage charge.  However, that was not what the plaintiff had done.

26. The plaintiff put forward various arguments that the rates in its website should be adopted, such as: the plaintiff was sort of an involuntary and reluctant bailee; that it was in a completely different business than the wine storage service providers (such as Crown and Vintage) such that it was unfair to compare their prices to the plaintiff’s.  The plaintiff cited the analogy of photocopying charges of a law firm and a photocopy shop.  Whilst I do have some sympathy with such arguments, the problem is that the plaintiff has not adduced any evidence to justify its charge of HK$36 per bottle per month other than the reference to its own website.  The difference in operating costs between a law firm and a photocopy shop may be obvious enough for me to take judicial notice.  But how does the storage cost (and level of service) of a relocation company compare to a wine storage company?  The plaintiff has not explained that to me.  There is also no material before me for me to arrive at a mid-way house.  For example, if the plaintiff could show to me that because of their lack of economy of scale for storing wine, the electricity cost for keeping a few cases of wine at 15 degree Celsius 24 hours a day would be much higher than the specialist wine storage companies. However, that was not pleaded or argued by the plaintiff and no such evidence has been adduced.  It was also argued by Mr Chan that the high rates were adopted to deter and discourage unreasonable delay in the collection or shipment of goods. The problem is such statement came from Mr Chan but not any witnesses. I have no way to determine the appropriate rate to achieve such purpose.

27. The defendant put forward the price lists of two wine storage companies: Crown and Vintage.  These were not disputed by the plaintiff. There are different kinds of services provided by them at different prices.  No one has cared to explain to me which service is most akin to that provided by the plaintiff.  Doing the best I could in the circumstances, taking into account the facts that :-

(1) the plaintiff is somewhat involuntary and reluctant in providing the service;

(2) it may not have the cost-efficiency enjoyed by the specialist service providers; and

(3) it is ready to arrange shipment of the Wines promptly for the defendant upon getting the green light and necessary documentation from the defendant

I would adopt the more generous rate of the service provided by Vintage.  According to the price list of Vintage, the charge for self-accessed private cellar for storing 11 cases (which seems to be the minimum) is HK$438 per month.  I shall assume that they would charge a month’s fee even if the storage is less than a month.  Hence, the appropriate quantum would be HK$438 x 12 x 5 = HK$26,280.  I also rule that the plaintiff is entitled to a handling charge of HK$1,500.

28. The plaintiff further argues that on the unjust enrichment basis, reasonable administration costs are to be paid by the defendant representing the opportunity costs of the defendant in looking after the Wines like seeking quotations from various wine cellars, site visits, settling payment every month (ie 12 payment per annum), periodic inspection of the Wines, etc totalling 12 hours for the past 5 years with an hourly rate of a commercial lawyer of the defendant’s standing at HK$4,000 per hour.  I have little hesitation in rejecting this head of claim.  Firstly, not every hour spent by the defendant is worth his professional charging rate.  Secondly, in all likelihood, much of these chores would be delegated to the defendant’s wife (with no disrespect) or subordinates.

29. Hence, I would award the sum of HK$27,780 to the plaintiff.

Interest

30. Relying on the case Sempra Metals Ltd v Inland Revenue Commissioners and another [2008] 1 AC 561, the plaintiff argues that interest should be awarded on compound basis with monthly rest from 19 August 2008 at the prime rate plus 1%.  Such argument was made in his reply to the defendant’s closing submissions so that the defendant could not respond to it.  I can see many problems with this argument.  Why should interest start to accrue from 19 August 2008?  The storage charges were incurred over a span of 5 years.  How could interest on the whole sum begin to accrue from the beginning of the 5 years period?  Assuming such storage charges are to be paid on a monthly basis (as is Vintage’s practice), the calculation of interest would be extremely complicated whether on simple or compound basis.  Further, for the court to award compound interest on the Sempra principles, evidence has to be adduced concerning aspects of the financial management of both parties.  All these would be entirely out of proportion for the amount we are concerned with here.  Doing rough justice, I would award simple interest for the whole judgment sum at 1% over the Hong Kong Dollar prime rate of the Hongkong and Shanghai Banking Corporation from approximately the middle of the five years period, that is, 1 April 2011 until judgment and thereafter at judgment rate.

Costs

31. I award costs nisi to the plaintiff with certificate for counsel, to be made absolute within 14 days.

32. As indicated above, both counsel have made very extensive submissions citing numerous authorities.  I am afraid I have only referred to a small portion of them.  Otherwise this judgment could easily more than double in length.  I thank them anyway.