MAINTEK COMPUTER (SUZHOU) CO LTD AND OTHERS v. BLUE ANCHOR LINE AND OTHERS

HCAJ 106/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY JURISDICTION ACTION NO. 106 OF 2008

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

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

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

J U D G M E N T

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

I.   INTRODUCTION

1.  ECT Delta Terminal applies to set aside an Interlocutory Judgment for liability with damages to be assessed.

2.  The Judgment was made in the Plaintiffs’ favour against ECT on 19 November 2009.  The Judgment was entered in default of ECT giving notice to defend despite service of the Writ on ECT in the Netherlands.  ECT contends that the Judgment should be set aside because service was irregular or because ECT has a defence with a real prospect of success on the question of liability.

3.  As a separate matter, ECT applies for a stay to arbitration of all outstanding issues (whether as to liability or quantum) between itself and the Plaintiffs.

II.  BACKGROUND

4.  On 9 August 2007 the Plaintiffs consigned 11 containers (including Container HLXU 506006-7) to Transpac (operating as Blue Anchor Line) for carriage from Shanghai to Tilburg via Rotterdam.  The contract of carriage is evidenced by an Express Cargo Bill of Lading (ECB).  The containers were stuffed with Sony Play Stations.  I shall refer to Container HLXU 506006-7 as Container X.

5.  Transpac sub-contracted the sea carriage of the goods from Shanghai to Rotterdam to Hapag-Lloyd.  The containers having arrived in Rotterdam on 3 September 2007, they were stored at ECT’s terminal there pending customs clearance.  Such storage with ECT was effected by Hapag-Lloyd pursuant to a pre-existing Terminal Contract between (among other lines) Hapag-Lloyd and ECT.

6.  In the meantime, Transpac’s Rotterdam agents (various Kuehne & Nagel companies) cleared the consignment through customs and obtained the requisite customs clearance document (known as “the Sagitta”).  The agents also arranged for the containers to be carried from Rotterdam to Tilburg by barge through inland waterways.  As a result, the containers (including Container X) became registered in ECT’s barge system.

7.  On 5 September 2007 Nico (Gierros’ truck driver) arrived at ECT’s Rotterdam terminal, presented a copy of the Sagitta, gave the release number for Container X, and asked for Container X to be released to him for on-carriage by truck.  Gierros had obtained the copy of the Sagitta from (and had been instructed to collect Container X from ECT by) unknown criminals claiming to act for a non-existent company (i-Tronics).

8.  The ECT employee handling Nico’s request was a trainee named Jimmy Timmas.  When Jimmy attempted to comply with Nico’s request, he discovered that Container X was registered for delivery via ECT’s barge system and not ECT’s trucking system.  At that stage, ECT’s internal procedures required Jimmy to check with others whether Container X had in fact been re-routed from the barge to the trucking system.  However, Jimmy did not carry out any checks.  Instead, he re-routed Container X to the trucking system himself.  He then issued Nico with the data card needed to obtain release of Container X from ECT’s terminal.

9.  Nico drove Container X to the persons who had instructed Gierros.  The latter unloaded Container X from Nico’s lorry and disappeared with the contents of Container X.  Container X was later found abandoned.

10.  By a Writ issued on 10 July 2008 the Plaintiffs claimed the value of the lost goods from the 1^st to 5^th Defendants.  On 4 September 2008 the Plaintiffs applied to amend the Writ to include the 6^th to 11^th Defendants (including ECT) as parties to the action.  Stone J gave leave for the Writ to be amended on 5 September 2008.

11.  On 1 October 2008 the Plaintiffs obtained leave to serve the Amended Writ on (among others) ECT and MTC Havenservice in the Netherlands.

12.  ECT was served with the Amended Writ and supporting documents on 22 May 2009.  This was done pursuant to Article 5 of the Hague Convention 1965.  Paragraph 4 of Article 5 allows a document to be served “by delivery to an addressee who accepts it voluntarily”.

13.  In this case, ECT was served by courier delivery of the relevant packet of documents to ECT’s post department.  The packet was accepted by G. Kuipers, an employee working in ECT’s post department.  It appears that (through some mix-up) the packet included a cover sheet which was addressed to MTC rather than ECT.  The cover sheet meant for ECT wrongly found its way into a similar packet sent to MTC.

III. DISCUSSION

A.  Alleged improper service

14.  Mr. Russell Coleman SC (appearing for ECT) argues that service on ECT was improper and so should be set aside as of right.  Mr. Coleman submits that service was irregular because of the error in the cover sheet and because, Kuipers having accepted the packet from the courrier delivery person without any opportunity of examining the contents of the packet, Kuipers cannot be said to have “voluntarily” accepted service of the documents on ECT’s behalf.

15.  In my view, service was regular and there is nothing in the improper service argument.

16.  First, the mistaken cover sheet was a trivial error.

17.  There could have been no doubt in ECT’s mind (once it looked through the documents) that it was being sued by the Plaintiffs in Hong Kong in connection with the matters set out in the Amended Writ.  The cover sheet could not have misled ECT in any way.  ECT’s own evidence establishes that, having examined the documents, it was under no illusion as to what was happening.  On the contrary, ECT straightaway requested its lawyers (Schipper Noordam) to advise on what to do.

18.  Second, Kuipers accepted the packet without complaint or protest.  He then forwarded it to the appropriate ECT person for consideration.  On any view, Kuipers accepted delivery “voluntarily” in the sense that he did what he did without coercion and of his own free will or choice.

19.  I add (as Mr. Edward Alder (appearing for the Plaintiffs) notes) that there is nothing in the evidence adduced by ECT supporting Mr. Coleman’s bare allegation that Kuipers had no opportunity to inspect the contents of the packet before acceptance.

B.  Alleged real prospect of success

20.  Mr. Coleman submits that the Plaintiffs’ suit against ECT is time-barred.  For this he relies on clause 3 of the ECB.  Clause 3 provides that:-

“The Carrier shall be discharged of all liability under this Document unless suit is brought within 9 months after:-

(i)  the delivery of the Goods or,

(ii) the date when the Goods should have been delivered,

unless international Conventions of statutory regulations compulsorily applicable in the individual case are stipulating a longer term of prescription.”

21.  Mr. Coleman argues that, although not a party to the ECB, ECT is entitled to rely on clause 3 by reason of clause 17(C) of the ECB.  Clause 17(C) is a Himalaya clause which (Mr. Coleman says) extends the benefits of exemption and limitation clauses in the ECB (such as clause 3) to sub-contractors and sub-sub-contractors of Transpac.

22.  Clause 3 does not provide ECT with an arguable defence.

23.  Assume (without necessarily accepting) that clause 17(C) enables ECT to rely on clause 3.  There would remain the question whether clause 3 applies to the present case.

24.  Mr. Coleman accepts that the situation here does not fall under limb (i) of clause 3.  It is true that, in a manner of speaking, Container X and its contents were “delivered” to Nico on 5 September 2007.  But plainly the word “delivery” in limb (i) must mean “delivery in accordance with the terms of the ECB”.  Otherwise, one would have the absurd result where ECT could just “deliver” the goods to a stranger and claim that time for suit began to run from the date of such wrongful release.

25.  Mr. Coleman must then establish that limb (ii) of clause 3 is applicable.  But what is the date “when the Goods should have been delivered”?  Mr. Coleman says that 5 September 2007 or thereabouts is the relevant date for limb (ii).  But I do not think that is right.

26.  By analogy with the way in which “delivery” is used in limb (i), the word “delivered” in limb (ii) must have the sense of “when the Goods should have been delivered in accordance with the terms of the ECB”.  See Cheong Yuk Fai v. China International Freight Forwarders (HK) Co. Ltd. [2005] 4 HKLRD 544 (at para. 58 per Yuen JA).  That means on the facts of the present case that limb (ii) refers either to a reasonable time:-

(a) after the Plaintiffs demand that Transpac (or its agent) deliver Container X and its contents to the Plaintiffs in Tilburg; or,

(b)    after Transpac (or its agent) notifies the Plaintiffs that Container X and its contents are at the Plaintiffs’ disposal and available for collection in Tilburg.

27.  Neither eventuality materialised.  Container X never reached Tilburg.  Transpac (or its agent) never notified the Plaintiffs that Container X had reached Tilburg and never called upon the Plaintiffs to take delivery of Container X in Tilburg.  The Plaintiffs, on the other hand, never demanded that Transpac (or its agent) deliver up Container X to the Plaintiffs in Tilburg.

28.  It follows that, on the facts, limb (ii) is as inapposite as limb (i).  The 9 month limit was never triggered.  On its true construction, clause 3 affords no defence for ECT.

29.  Mr. Coleman faintly suggests that ECT has a defence because ECT was not negligent in releasing Container X to Nico.  But ECT’s negligence or lack of it is not a relevant issue.  Conversion is a tort of strict liability.  A person X converts Y’s goods by handing those goods to a person Z who is not entitled to possession of the same.  This is regardless of whether X was or was not negligent in handing the goods to Z.

30.  In any event, for what it is worth, it seems to me negligent for a bailee or sub-bailee in ECT’s position to have released Container X to Nico without following ECT’s own internal procedures.  In accordance with those procedures, Jimmy ought to have checked whether Container X had been re-routed from the barge to the trucking system.  He did not do so, apparently because the volume of cargoes being processed at the time was such that there would be massive delay in ECT’s operations if he had checked.  Jimmy took a short-cut.  In that case, Jimmy may have been reckless (not just negligent) as to the risks involved and the possible adverse consequences of not checking.

31.  For those reasons, ECT has no real prospect of success on the question of liability.

C.  Stay to arbitration

32.  Mr. Coleman relies for this on clause 7.4.3 of the Terminal Contract between Hapag-Lloyd and ECT.  That provides:-

“Parties shall attempt to resolve any dispute or claim arising out of or relating to this Terminal Contract through an Alternative Dispute Resolution (ADR) procedure recommended to the Parties by the Nederlands Mediation Instituut (NMI) in Rotterdam.

If the matter has not been resolved by an ADR procedure within 6 (six) months after the initiation of the procedure, the Parties shall refer the dispute to Arbitration in Rotterdam in accordance with the Rules of the Nederlands Arbitrage Instituut (NAI) in Rotterdam.

A dispute shall be deemed to exist if one of the Parties declares this to be the case.  The Terminal Operator is entitled to waive the provisions of this clause in respect of claims for unpaid and undisputed invoices, in which event the competent civil court of Rotterdam shall have jurisdiction.”

33.  Mr. Coleman submits that he is entitled to rely on clause 7.4.3 by application of the doctrine of “sub-bailment on terms”.  In short, the ECB authorised Transpac to engage bailees and sub-bailees as necessary in carrying out the requisite carriage from Shanghai to Tilburg.  Container X having been sub-bailed by Hapag–Lloyd to ECT on the terms of the Terminal Contract, it must be presumed that the Plaintiffs are also bound by terms in the Terminal Contract.

34.  Assume (without necessarily accepting) that there has been a sub-bailment with ECT on terms set out in the Terminal Contract.  Even on that assumption, I do not see why clause 7.4.3 should be applicable to the current dispute between the Plaintiffs and ECT.

35.  On its own terms, clause 7.4.3 is explicit.  It does not apply to everyone.  It is restricted in its application to “the Parties”.  The latter is a precisely defined term.  According to clause 2.1 of the Terminal Contract, the expression refers to “the signatory Lines to this Terminal Contract, which are the constituent members of the Grand Alliance and the Terminal Operator”.

36.  None of the Plaintiffs are “signatory Lines”.  None of the Plaintiffs are members of “the Grand Alliance”.  Obviously, none of the Plaintiffs are ECT, “the Terminal Operator”.

37.  Mr. Coleman suggests that the word “Parties” must be understood to include all those to whom the terms of the Terminal Contract might apply by reason of the “sub-bailment on terms” doctrine.  But why should such an understanding be imported here?  The convoluted gloss on “Parties” advocated by Mr. Coleman is not so necessary for the commercial efficacy of the Terminal Contract that it should be read in as self-evident.  Nor is there anything in the Terminal Contract expressly indicating that, despite clause 2.1, “Parties” should be given some wider meaning in a particular context.

38.  On the contrary, the specificity of clause 2.1 suggests that as far as clause 7.4.3 is concerned, the signatories to the Terminal Contract intended the arbitration requirement to apply to themselves alone.

39.  A stay to arbitration of the dispute between the Plaintiffs and the ECT is accordingly refused.

IV. CONCLUSION

40.  ECT’s application to set aside the Interlocutory Judgment is refused.  ECT’s application for a stay to arbitration is likewise dismissed.

41.  There will be an Order Nisi that ECT pay the Plaintiffs’ costs, such costs are to be taxed (if not agreed) in any event.