WING HING (TANGS) FABRICS MANUFACTURING CO LTD v. EVER REACH FREIGHT LTD AND ANOTHER

-----------

-----------------

JUDGMENT

-----------------

Sir Derek Cons, V.P., delivered the judgment of the court:

1. This is an appeal by the 2nd defendant only, the Kong Ngai Container Transport Co, against a judgment given against it by Liu, J., as carrier or bailee of goods belonging to the plaintiff, Wing Hing (Tangs) Fabrics Manufacturing Co. Ltd , in the sum of HK$303,991.75 and by way of an indemnity against damages which the plaintiff may be held liable to pay or may reasonably pay to a named third party to whom the plaintiff had agreed to sell the goods. Both liability and quantum are challenged.

2. By the Statement of Claim it was alleged that on 15th March the plaintiff agreed with the 1st defendant, the Ever Reach Freight Ltd., for the latter to carry for the plaintiff 88 bales of cotton sheeting from Shenzhen in China to Gothenburg in Sweden. Separate fees were agreed for the two stages of the journey, i.e. from Shenzhen to the container yard in Hong Kong on the one hand and from there to Gothenburg on the other.

3. It was further alleged that on or about 21st March the 1st defendant advised the plaintiff that it had sub-contracted the first stage of the carriage to the 2nd defendant, giving the registration number of the container truck and the name of the staff member of the 2nd defendant who would come to collect the goods at Shenzhen the following day. Paragraph 7 of the Claim pleaded that on or about 22nd March the goods were delivered to the specified container truck and received by the specified member of staff:

4. Paragraphs 8 and 9 are as follows:

5. The remainder of the Statement of Claim, insofar as it concerned the 2nd defendant, dealt with the question of loss and damage, to which we shall have to return later.

6. The Defence filed by the 2nd defendant consisted largely of non-admissions, but paragraph 4 admitted the sub-contract to the 2nd defendant and paragraph 5 that the goods were delivered to the specified container truck at Shenzhen. At the same time it was averred that the 2nd defendant had itself further sub-contracted the carriage to a third party, to whom the truck in question belonged. However even if that were established, it would not improve the position-of the 2nd defendant : see British Road Services, Ltd. v. Arthur V. Crutchley and Co., Ltd. [1968] 1 All E.R. 811.

7. It was further averred that the customs officers of the PRC refused to allow the goods to pass through the Man Kam Road Crossing; and that when the driver failed to obtain clearance the following day the sellers of the goods had ordered the driver to return and release the goods to them in their warehouse, with which order he duly complied.

8. At the trial the plaintiff called two witnesses, a director and the manageress of the company. Both testified to the delivery of the goods to the 2nd defendant. Both were cross-examined at length, their evidence not being concluded until late on the fourth day. By that time, during an adjournment between the third and fourth days, the plaintiff had compromised the action as against the 1st defendant. . It would seem that the latter consented to judgment. A formal order of the judge below made in chambers is to be found in the file of the lower court. No mention is made in the record kept by the judge.

9. On the morning of the fourth day counsel then appearing for the 2nd defendant obtained leave from the judge to re-amend the Defence, leave to amend having already been given on the morning of the second day. We note however that neither pleading has as yet been filed. But this perhaps is of no moment, for neither introduced any significant challenge to the facts set out in the Statement of Claim.

10. When counsel for the plaintiff closed his case late that day he abandoned any claim that may have rested on negligence as such and moved immediately for judgment on the basis that the 2nd defendant was a baillee for reward and had no arguable defence in that respect. He did not indicate under what authority or jurisdiction he was moving, and has frankly admitted that he did not at the time even consider the question. He was concerned, he says, that the. trial had by then already' taken four days and appeared, from the way it was being conducted, to be heading for many days more. He felt that it would be unjustly detrimental to his client to allow it to so continue when it was obvious that no defence could be successfully maintained.

11. Likewise the judge, in giving his reasons for granting the motion, gave no specific indication of the authority by which he was acting. But he summed up his reasons with these words:

The judge must therefore have had Order 18 rule 19 in mind and have been intending to strike out the Defence under that rule and then enter judgment in default of defence under Order 19 rule 7. Indeed solicitors then advising the 2nd defendant drafted the notice of appeal on that assumption. Unfortunately the judge did not express it that way when he came to record his actual decision; nor is it reflected in the formal order that was subsequently drawn up and filed.

12. The question then is whether he was right to take that course. Mr. Jimmy Kwong, who now appears for the 2nd defendant, argues that in principle it was wrong and unfair to do so without giving the 2nd defendant the opportunity to put forward his defence which may, when the evidence was given, have disclosed matters absolving him from fault. His difficulty is that it has long been established that where a bailee fails to return or deliver the goods entrusted to his care the burden is fairly and squarely upon him to establish that the failure was not due to his fault: see for example Joseph Travers and Sons, Ltd. v. Cooper (1915) 1 KB 73. In the present instance there is nothing apparent from the pleadings which indicates that the 2nd defendant was not at fault. And it is to be observed that nothing further was suggested on its behalf when the plaintiff moved for judgment below. Indeed counsel then appearing sought to rescue the 2nd defendant instead by an application for a yet further amendment to plead that there had been an assignment rather than a sub-contract of the defendant's liability; which application was refused.

13. The duty of a bailee when there is a hostile claim to the goods in his custody, which is what is suggested in the present instance, is:

At least the 2nd defendant should have notified the plaintiff. It was undisputed, as the judge noted, that it did not do so. In our view it would in the circumstances have been an abuse of the process of the court to allow the trial to continue: c.f. Steamship Mutual Underwriting Association Ltd. and Another v. Trollope and Colls (City) Ltd. and Others (1986) 33 BLR 77.

14. For these reasons we are prepared to dismiss the appeal as regards liability upon the plaintiff's undertaking to apply to the judge below for a correction of the order giving effect to his judgment under Order 20 rule 11.

15. Having dealt. with liability the judge entered upon an enquiry as to damages. Neither counsel desired to call further evidence. Each simply made his submission to the judge who made the orders we referred to at the outset.

16. The challenge now is limited to the amount awarded in respect of the goods themselves. Mr. Kwong accepts, on behalf of the 2nd defendant, that the plaintiff is entitled to an award for lost profit in the region of HK$100,000 and to an indemnity against the now unlikely event of a claim by the Swedish purchaser.

17. He argues, however, that in view of the admitted fact that the plaintiff has not paid the sellers, apart from a deposit of HK$20,000, coupled with the possibility that the sellers have already repossessed the goods, no award should be made for the goods themselves, or at best, it should be in the form of an indemnity against a claim by the sellers.

18. This latter suggestion was not made to the judge below who came, in our view, to the correct conclusion. The plaintiff did not admit repossession by the sellers; there was no evidence to support it; indeed there was exhibited to the judge a letter written just over a month before the trial which indicates that the sellers do not have the goods and are keen to receive the payment due to them. There was in addition evidence that the price to the plaintiff had been HK$220,000. We see no reason therefore to interfere with the award of the judge below.