Mozard (HK) Co. Ltd v. Dachser Hong Kong Ltd

DCCJ5823/2015

[2018] HKDC 574

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5823 OF 2015

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

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

Before: Deputy District Judge W H Wong in Court

Date of Hearing: 7 March 2018

Date of Written Closing Submissions: 16 & 23 March 2018

Date of Written Further Submissions: 30 April & 2 May 2018

Date of Judgment: 21 May 2018

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

JUDGMENT

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

Background

1.This is an assessment of damages hearing, judgment on liability being entered against the defendant (“D”) by consent on 27 April 2017.

2.The plaintiff (“P”) is a garment exporter in Hong Kong. 

3.D was engaged by P in January 2015 for carriage of some 20 cartons of garments (the “Cargo”) by air from Hong Kong to Lyon, France.

4.The Cargo was eventually received by its buyer but P did not receive payment of the price.  P now claims against D for the price of the Cargo, in the sum of EURO44,447.75.

P’s pleaded claim[1]

5.The air waybill herein, no. HKG32501264 (the “AWB”), contained or evidenced the contract of carriage, with these terms:-

(a)  An express term that the Cargo shall be delivered to the consignee bank;

(b)  An implied term that the Cargo shall be delivered to the person designated by the consignee bank upon:-

(i) express authorization by the consignee bank; or

(ii) presentation of the original AWB by the buyer to whom the consignee bank has transferred or indorsed the original AWB.

6.The parties intended the original AWB to be a document of title.

7.D released the Cargo to the buyer without the buyer producing the original AWB.

8.D therefore was in breach of the contract of carriage.

9.D was further guilty of conversion of the Cargo as P was the owner of the Cargo having proprietary and possessory right to the same.

D’s Pleaded Defence

10.P did engage D for shipment of the Cargo but the contract of carriage between them contained the following limitation clauses:-

(a)  P signed a Shipper’s Instructions to D, which expressly referred to and expressly incorporated into the contract of carriage “HAFFA’s Standard Conditions” (the “HAFFA STCs”);

(b)  The AWB on its reverse side expressly referred to and expressly subject the carriage to rules relating to liability established by the Montreal Convention;

(c)  Pursuant to the Carriage by Air Ordinance (Cap 500) (the “CAO”), the provisions of the Montreal Convention have the force of law in Hong Kong.

11.The original of the AWB was not, and parties did not intend it to be, a document of title.

12.D denies that the AWB contained the implied terms as pleaded by P or that it was liable for conversion.

13.D accepts that it is liable to pay as per the limitations under either the Montreal Convention or the HAFFA STCs.

P’s Reply

14.P mailed the original of the AWB and originals of other documents to the consignee bank, as the Cargo was to be paid by letter of credit.  The buyer was to obtain the originals from the bank after it had paid for the Cargo.

15.D released the Cargo to the buyer without the original AWB, which was against “international trade convention”.

16.P admits to the effect of CAO but contends that Montreal Convention ceased to apply at the release of the Cargo to the buyer as it took place outside the airport.

17.If however the Montreal Convention applied at the time of the release, then the limitation provisions therein will govern D’s liability.

18.D is not entitled to rely on HAFFA STCs as D failed to perform at all, committed a fundamental breach of, and/or rendered performance drastically, substantially different from what P had contracted for under, the contract of carriage.

19.Further the HAFFA STCs limitation provisions do not cover wrongful release without original AWB and/or fall foul of the Control of Exemption Clauses Ordinance (Cap 71) (the “CECO”).

Agreed facts and issues

20.P[2] and D jointly filed a Statement of Agreed Issues in Dispute and Agreed Facts pursuant to an order dated 31 August 2017.

21.Parties agreed the following facts:-

(a)  P engaged D to ship 20 cartons of garment pursuant to an undated Shipper’s Instruction;

(b)  On or around 20 January 2015 the Parties entered into a contract of carriage by air in respect of P’s 20 cartons of garment.  The shipment was from Hong Kong to Lyon, France by air;

(c)  On around 20 January 2015 D issued an Air Waybill No. HKG-32501264 to P covering the Cargo.  The air shipment or the Air Waybill was subject to the provisions of Montreal Convention by virtue of the Carriage by Air Ordinance Cap 500.  The consignee on the said Air Waybill is a bank.

(d)  The invoice value of the Cargo is EURO44,447.75;

(e)  In end of January 2016 D’s agent released the Cargo in Lyon to a company known as “ET Compagnie”.

22.Parties agreed on 8 issues and there are also 2 non-agreed issues.  P has since not been represented and neither party followed these issues in their submissions[3], I therefore will not strictly follow these issues in my analysis but will incorporate or modify them as necessary.

23.Given the parties’ pleaded case and having considered their submissions, in particular D’s delineation of its 3 grounds of partial defence, I gather the following issues requiring determination :-

(a)  Whether the Montreal Convention limitations have “direct compulsory” application (the “Direct Compulsory Ground”), which turns on:-

(i) whether the loss or damage occurred during actual air flight or during ancillary services within an airport;

(b)  Whether the Montreal Convention limitations apply through “contractual extension” of their effect (the “Contractual Extension Ground”), which turns on :-

(ii) whether the terms printed on the reverse side of the AWB form part of the contract between P and D;

(iii) if so, the interpretation of these terms; D specifically relies on clause 2/2.1 thereof;

(iv) if so extended, whether the limitations cover the present situation;

(c)  If the above fails, whether the HAFFA STCs limitations apply (the “HAFFA Ground”), which turns on:-

(v) whether the HAFFA STCs have been incorporated into the contract of carriage by reference to them in the Shipper’s Instruction signed by P;

(vi) if so, whether the limitation under clause 21.5 therein cover the present situation;

(vii) if so, whether the HAFFA STCs satisfy the reasonableness test under the CECO.

Issue (i)

24.The loss or damage “during actual air flight” limb is clearly not the case here, so D can only rely on the “within an airport” limb.

25.Since it is D’s burden to establish its defence and this ground requires the element of within an airport, it follows that D has to prove that the loss or damage occurred within an airport.

26.The only evidence before me is this: P’s sole director, Ms Wong Hoi Kwai (“Wendy Wong”), stated in her witness statement herein that she was told that D did not have a warehouse inside Lyon airport.  D has not filed any evidence in this regard.

27.D therefore fails to prove that the loss or damage occurred within an airport and it follows that its “Direct Compulsory Ground” does not get off the ground.

Issue (ii)

28.Factually there is of course no dispute that the AWB was issued for the Cargo and the reverse side of it contains clause 2/2.1.  It cannot be disputed also that the front of the AWB in the 3^rd right side cell from the top clearly has these words printed:-

“…SUBJECT TO THE CONDITIONS OF CONTRACT ON THE REVERSE HEREOF…THE SHIPPER’S ATTENTION IS DRAWN TO THE NOTICE CONCERNING CARRIER’S LIMITATION OF LIABILITY Shipper may increase such limitation of liability by declaring a higher value for carriage and paying a supplemental charge if required.”

29.P’s argument on this point is this: Helene Wong handled this shipment, she was not aware of the limitation of liability terms as she did not and was not asked to read them; even if she did, she would not be able to read such small texts or understand them given her poor eye sight and understanding of the English language, not to mention legal language.

30.I cannot accept P’s argument :-

(a)  Firstly on evidence, P did not call Helene Wong to give evidence, the only witness it called, Wendy Wong, cannot give evidence on such factual matters personal and subjective to Helene Wong; there is therefore no proper evidential basis for this argument;

(b)  Secondly on law, in any event P’s argument is not sustainable:-

(1) In Flying Transportation (Macau) Ltd v Pacific Air Freight (HK) Ltd [2002] HKCFI 1082, the air waybill in question had the exact same capitalised words “SUBJECT TO THE CONDITIONS OF CONTRACT ON THE REVERSE HEREOF” on its front but the evidence only suggested that the front of it was faxed to the defendant therein;

(2) The Court, citing Chitty on Contract (28^th ed) para.12-008 (now para 13-008 in the 32^nd ed) held that the sufficiently clear and bold print words constituted sufficient notice of the conditions; it was no answer for the defendant to say the handler did not read the notice, the conditions or even English;

(3) The Court went further to hold that “…freight forwarding contracts and air waybills are documents of a class which a party receiving them would expect there were contractual conditions…” and “…that everybody dealing with such documents would expect to find the conditions printed on the reverse of the document.” (para 15 of the judgment);

(4) The above was fully adopted in Federal Express Pacific Inc. v Tung Sau Kam t/a Ting Shun Company [2008] HKDC 67, where conditions printed on the back of an airway bill were held to be incorporated by express reference to them on the front, and the argument based on inability to read English firmly rejected.

31.I therefore find that the conditions printed on the back of the AWB form part of the contract of carriage between P and D.

Issue (iii)

32.Clause 2/2.1 of those conditions reads:-

“Carriage is subject to the rules relating to liability established by the Warsaw Convention or the Montreal Convention unless such carriage is not “international carriage” as defined by the applicable Conventions.”

33.D’s argument is that the word “carriage” in this clause means all services performed by D for the entire exercise of carriage, and so covers services performed outside the airport.  In its Closing Submissions D referred to also clause 4 and cited the Australian High Court case of Simens Ltd v Schenker Int’l (Australia) Pty Ltd & Anr (2004) 216 CLR 418, which D says involve substantially similar clauses on the air waybill therein, which were also numbered 2.1 and 4 therein and read:-

“2.1 Carriage hereunder is subject to the rules relating to liability established by the Warsaw Convention unless such carriage is not ‘international carriage’ as defined by that Convention.

…

4 Except as otherwise provided in carrier’s tariffs or conditions of carriage, in carriage to which the Warsaw Convention does not apply carriers’ liability shall not exceed USD 20.00 or the equivalent per kilogram of goods loss, damaged or delayed, unless a higher value is declared by the shipper and a supplementary charge paid.”

34.Facts therein relevant for consideration herein are that the defendants caused damage to the plaintiff’s consignment when it was being transported by a lorry from the destination airport to the destination warehouse. 

35.The defendants sought to limit their liability by reference to the Warsaw Convention or to the conditions of the air waybill.  The Warsaw Convention was held not to apply as the loss or damage occurred outside of the airport.

36.As to limitation of liability under the air waybill, as I read it, although the Australian High Court found that “carriage” in clause 4 therein had a different meaning from Art. 18 of the Warsaw Convention, the Court’s conclusion was not that any conditions in the air waybill extended the effect of the Warsaw Convention to cover also the land transportation in question, but rather clause 4 therein kicked in to cover that part of the carriage and limited liability according to its own terms.

37.D acknowledges this in its Closing Submissions, but argues that the word “carriage” in clause 2/2.1 herein should also carry a different meaning than in the Montreal Convention and the terms of clause 2/2.1 herein extend the Montreal Convention to this wider defined “carriage”.  Clauses 2/2.1 and 4 herein read:-

“2/2.1  Carriage is subject to the rules relating to liability established by the Warsaw Convention or the Montreal Convention unless such carriage is not “international carriage” as defined by the applicable Conventions.

…

4.  For carriage to which neither the Warsaw Convention nor the Montreal Convention applies, Carrier’s liability limitation shall not be less than the per kilogram monetary limited set out in Carrier’s tariffs or general conditions of carriage for cargo lost, damage or delayed, provided that any such limitation of liability in an amount less than 19 SDR per kilogram will not apply for carriage to or from the United States.”

38.I am unable to accept this interpretation of clauses 2/2.1 herein because other than accepting “carriage” bore a different, presumably wider, meaning than in the relevant convention, the actual analysis in Simens Ltd. is conceptually against D’s argument:-

(a)  Clause 4 therein was effectively the “safety net” for a lacuna arising from the wordings of clause 2.1 therein: “carriage” the relevant convention did not apply; this was the finding and also fully consistent with the express wording of clause 4 therein;

(b)  There would be no logical reason for such a “safety net” to exist, let alone forming the basis of the decision in Simens Ltd, if no such lacuna could exist;

(c)  The effect of D’s interpretation of clause 2/2.1 would be a total elimination of such lacuna, because according to its argument the relevant convention would always apply to all “carriage”;

(d)  Also, I fail to see any meaningful difference in wording between the clause 2/2.1 herein and the clause 2.1 therein, hence if the clause 2 therein gave rise to a lacuna, I cannot see how clause 2/2.1 could be read to eliminate such a lacuna.

39.Further, even if clause 2/2.1 herein were capable of such a wide interpretation to extend the Montreal Convention, there is also a narrower interpretation that it cannot, as adopted in Simens Ltd.  By contra proferentem, it must be read against D and hence the narrower interpretation must prevail.

40.D has not sought to argue this but for completeness I shall also add that clause 4 herein cannot be relied upon as a “safety net” in any event because:-

(a)  Different from the clause 4 in Simens Ltd, clause 4 herein does not provide for an actual limitation in its own terms but merely referred to “Carrier’s tariffs or general conditions of carriage for cargo lost, damaged or delayed”, for which there is no evidence of what they are or how they are incorporated in the contract of carriage between P and D;

(b)  The reference to of “19 SDR per kilogram” as a lower limit is irrelevant to the present case as it relates only to carriage to or from the US.

Issue (iv)

41.With my conclusion on Issue (iii) above Issue (iv) does not arise.

Issue (v)

42.The pleaded basis for incorporation of the HAFFA STCs is that they were expressly referred to in the Shipper’s Instructions and further, by signing the same, P confirmed that HAFFA STCs form part of the contract as per the express provisions of the Shipper’s Instructions.

43.The Shipper’s Instructions contain the following reference to the HAFFA STCs:-

(a)  “All and any business is to be transacted subject to the HAFFA Standard Terms and Condition, which can be viewed at www.haffa.com.hk or provided by the Company upon request.”

(b)  “The undersigned authorized officer of the Customer hereby declares that he has read the HAFFA’s Standard Terms and Conditions and the terms and conditions appearing on this page and that he fully understands them and agrees on behalf of the Customer that they should form part of the contract which, upon accepting to the above instructions by the Company, will be concluded between the Customer and the Company.”

44.P’s pleaded case, insofar as incorporation of the HAFFA STCs is concerned, is a non-admission.  On evidence, P again relies on matters referred to in paragraph 29 hereinabove.

45.As pointed out in paragraph 30(a) hereinabove, I am unable to accept P’s factual case or base my determination on such a factual basis.  I am only able to proceed on the basis that the HAFFA STCs have been expressly referred to in the Shipper’s Instructions and P duly signed the same through Helene Wong.

46.D refers to the case of Jardine Freight Services (HK) Ltd. v A Class Fashion Manufactory [1995] HKCA 627, where the CA said this: “Having rejected the defendant’s version of the contract and held that the terms were to be found in or evidenced by the document, there is no doubt that the HAFFA conditions were expressly incorporated by the words “all business is transacted subject to Hong Kong Association of Freight Forwarding Agent’s standard trading conditions obtainable on request” which appeared at the bottom of the plaintiff’s written quotation”.

47.The present factual context is almost identical:-

(a)  The words actually used in the respective “reference clauses” are identical in that they expressly referred to the HAFFA standard conditions and further clearly stated that all business is transacted subject to those conditions;

(b)  Both “reference clauses” provided that such conditions could be obtained on request[4];

(c)  In both cases the “reference clauses” appeared in pre-contractual documents.

48.D also referred to Bewise Motors Co Ltd v Hoi Kong Container Services Co Ltd [1997] HKLRD 986, where the CA also held that this sentence “all business is transacted subject to the standard terms of business of the company obtainable on request” appearing in a quotation effectively incorporated such standard terms into the relevant contract as between 2 business entities (as opposed to one of them being a consumer) (p 994C-995D). 

49.I therefore find that the HAFFA STCs are incorporated into the contract of carriage between P and D.

Issue (vi)

50.Clause 21 of the HAFFA STCs provides for “Liability and Limitation” of the freight forwarder, the relevant sub-sections read:-

“21.1 Notwithstanding any negligence of the Company, its servants or agents or sub-contractors or other persons for whom the Company is responsible, the Company shall not be responsible or liable for any damage to or loss or non-delivery or mis-delivery of goods or for any delay or deviation in respect of the transportation or delivery or other handling of goods, unless it is proved that such damage, loss, non-delivery, mis-delivery, delay or deviation occurred whilst the goods were in the actual custody of the Company and under its actual control and that the damage, loss, non-delivery, mis-delivery, delay or deviation was due to the wilful neglect or wilful default of the Company or its own servants.

21.2 Notwithstanding any negligence of the Company, its servants or agents or sub-contractors or other persons for whom the Company is responsible, the Company shall not be liable for any non-compliance or mis-compliance with instructions given to it unless it is proved that such non-compliance or mis-compliance was caused by the wilful neglect or wilful default of the Company or its own servants.

21.3 Save as provided in Clause 21.1 or Clause 21.2, the Company shall be under no liability whatsoever and howsoever arising and whether in respect of or in connection with any goods or any instructions, business, advice, information or service or otherwise, and whether or not there is negligence on the part of Company, its servants or agents or sub-contractors or other persons for whom the Company is responsible.

…

21.5 Save where Clause 21.6 or Clause 21.7 is applicable, in no case whatsoever shall the liability of the Company howsoever arising and notwithstanding any lack of explanation exceed the value of the relevant goods or a sum of HK$200.00 per shipping package or unit or HK$10.00 per (weight) kilogram, whichever is the least.

51.To determine applicability of clause 21.5 in the circumstances of the present case, its proper ambit must first be ascertained.

52.Clause 21.5 does not exist and must not be read in isolation; it must be read together with other clauses in the same “Liability and Limitation” section of the HAFFA STCs:-

(a)  Clauses 21.1 to 21.3 provide for a total exclusion of liability on D’s part arising in practically all imaginable way direct losses may occur “unless it is proved that” there has been “wilful neglect or wilful default of [D] or its own servants”;

(b)  Clause 21.4 provides for a total exclusion of liability as to consequential losses and expenses, and in case of fire, howsoever caused;

(c)  Clause 21.5, as noted above, provides for a limitation of liability on D’s part “howsoever arising and notwithstanding any lack of explanation”, and thus apparently applies to every imaginable liability and every imaginable way they may arise; the only exception is clauses 21.6 and 21.7;

(d)  Clause 21.6 provides for precedence of convention limitation rules, i.e. when any set of such rules applies then clause 21.5 is overridden;

(e)  Clause 21.7 provides for a mechanism for parties to contract-out clause 21.5 limitation, by way of D levying additional charges.

53.The language used in each clause is clear and I see no ambiguity.  The only matter that is not clear on express language is the interaction of their respective effects, or more specifically their respective coverages.

54.Clause 21.5 covers all liabilities, ie be it for direct losses or for consequential losses and expenses; irrespective of seriousness, ie be it wilful or not; and lastly even unexplained/inexplicable events of loss.  Such liabilities are not excluded but limited as per the formula provided therein.

55.On the other hand, coverage of clauses 21.1 to 21.3 all have a common limit, ie they do not cover losses etc. occurring when D is in actual custody of the goods and due to “wilful neglect or wilful default of [D] or its own servants”. 

56.In my view it is clear that, when read together with other clauses in the same section, clause 21.5 should be construed as follows:-

(a)  The ambit of clause 21.5 is subject to the total exclusion of liability under clauses 21.1 to 21.3, ie for liability arising from anything other than while the goods were in the actual custody of D and due to “wilful neglect or wilful default of [D] or its own servants” clauses 21.1 to 21.3 apply to totally exclude D’s liability;

(b)  The ambit of clause 21.5 is further subject to the total exclusion of liability under clause 21.4, ie for consequential losses and expenses and cases of fire, clause 21.4 applies to totally exclude D’s liability;

(c)  Clause 21.5 is further subject to applicable convention limitation rules and contract-out by parties as per clauses 21.6 and 21.7 respectively.

57.In short, clause 21.5 covers that which is not covered by other clauses.  Also, as the other clauses cover causes of loss etc known or capable of being defined/characterised, clause 21.5 must also cover causes of loss etc. not known or not capable of being defined/characterised, which accords with its express wording.

58.This deductive approach in interpreting clause 21.5 is also methodologically in line with Frans Maas (UK) Ltd v Samsung Electronics (UK) Ltd [2004] 2 Lloyd’s Rep 251, where the Court held that clause 27(A) of BIFA Standard Trading Conditions (2000 edition), which read: “…the Company’s liability howsoever arising and notwithstanding that the cause of the loss or damage be unexplained shall not exceed…[the various limits in the clauses]”, validly covered wilful default or negligence (§152 at p 279 col 1).

59.P’s pleaded case against application of the HAFFA STCs (in its entirety and not just any particular clause) is 2-prong: the first being that they are “insufficient to cover wrongful release [the Cargo] without presentation of original [AWB] and shall have no effect”; the second being that they fall foul of the CECO, which will be dealt with in the next issue.

60.For the first prong, P in its submissions further argues that what happened in this case is of the same nature of the breach by the freight forwarder in Mau Wing Industrial Ltd. v Ensign Freight Pte Ltd. [2009] 5 HKLRD 240, ie an “entirely advertent misdelivery of the goods”, and therefore fall outside of the ambit of clause 21.5 limitation.

61.D on the other hand describes what happened as a “mishap” and is a “common enough “risk of the trade””.

62.Dealing with D’s argument first, which is purely factual and therefore comes down to the available evidence.

63.P was not involved in the delivery of the Cargo and D having called no witness evidence, the only evidence on what actually took place in relation to the delivery is an 13 March 2015 email sent to Helene Wong of P by Kenji Chiang of D, which enclosed the screen-capture of another email apparently between Kenji Chiang and D’s staff in France dated 12 March 2015 (“Screen-cap Email”). 

64.The Screen-cap Email shows the following content:-

“Dear Kenji,

Sorry, I try to understand all steps & background of this file.

After checking with Najia. shipment was handed over their own forwarder in Jan Bank was contacted but the latter had asked to check directly with ET COMPANY.

They said that L/C had expired. Do you have some info about LC & the date of shipment mentioned on L/C because no information was mentioned on hawb.

I called also ET COMPANY to clarify the situation & they said that the payment term had changed since the date of expiry of L/C. Payment term was based on usual payment term with MOZARD.

Sincere salutations/Best regards

Olivier FAURE

Airfreight coordinator

Dachser France” [sic.]

65.The author of this email, Olivier Faure, did not give evidence and neither did Kenji Chiang.  Even if they did, they were apparently not the ones who actually handled the matter.  Hence, despite the contemporaneous nature of this email and absence of any suggestion of fabrication, I still feel unable to rely on it to find what is stated therein is what actually happened.

66.On such evidence I am therefore unable to find as D argued, ie it was a “mishap” (whatever it means) and “a common enough risk of the trade.”

67.As such, on evidence, I am inevitably left with no explanation of how the loss in this case arose.

68.Turning then to P’s pleaded case and argument, it turns on both issues of fact and law.

69.Firstly as to P’s pleaded case:-

(a)  It is premised upon an alleged duty to release the Cargo only upon presentation of the original AWB; this duty is pleaded as to arise from an implied term and that parties intended the original AWB to be a document of title[5];

(b)  The basis for implication of such a duty is not expressly pleaded and the only related plea is that the parties intended the original AWB to be a document of title; while the original AWB being a document of title could give rise to a duty to require presentation of it for release, there being such a contractual duty does not necessitate the original AWB being a document of title, therefore they must be separately analysed;

(c)  Starting firstly with the status of an air waybill, “[i]t is generally agreed that an air waybill is not a document of title in the traditional common law sense, so that transfer of the air waybill does not operate as transfer of constructive possession of the goods.  For an air waybill to become a document of title in this sense, it would be necessary to prove a mercantile custom by which transfer of an air waybill operated in this way” (Benjamin’s Sale of Goods (9^th ed, 2014) §21-054 at p 1923-1924);

(d)  It seems therefore proof of a mercantile custom is necessary and the parties merely intending it does not suffice in making an air waybill a document of title;

(e)  In any event, there is no evidence in this case either to establish any such custom or to enable a finding of such an alleged intention: P’s evidence regarding intention is at best a belief on the part of Wendy Wong, as she was not the person dealing with D and thus adduces no evidence of the communication or any understanding etc. with D;

(f)  Further, there is nothing on the face of the AWB herein, or any other documents disclosed, to take the AWB above and beyond the “generally agreed” ambit of an air waybill; quite to the contrary, the AWB herein is not a “bearer bill” or “order bill” (see ibid at p 1924, and §18-020, 021 at p 1180-1181);

(g)  Quite the contrary, the AWB herein is marked “Not Negotiable” in the top right hand box and such marking was held sufficient to defeat even an established custom of treating a mate’s receipt as a document of title in Kum & Anr v Wah Tat Bank Ltd. [1971] 1 Lloyds’ Rep 439 at p 445 col 2;

(h)  Turning then to the alleged implied term, the pertinent question is this: is such a term obvious, necessary to give business efficacy or a matter of convention between the parties?

(i)  Having found that the AWB is not a document of title, I see no basis for finding that it is either obvious or necessary for the original of it to be presented for the release of the Cargo;

(j)  As for convention, P has adduced no evidence as to the release mechanism agreed or adopted in its previous shipments arranged through D: Wendy Wong only referred to successful shipments arranged through another forwarder, which is clearly irrelevant to this question;

70.For the above reasons I find that the AWB herein is not a document of title, either in general or as between the parties, and I also find that there is no such implied duty to release the Cargo only upon presentation of the original AWB.

71.Hence, P’s pleaded case against application of the HAFFA STCs is not established on law or on fact.

72.Secondly, turning to P’s argument based on the Mau Wing case:-

(a)  In the Mau Wing case, the agent of the defendant freight forwarder release the goods to the buyer without the buyer producing an original bill of lading, but against a letter of indemnity;

(b)  the defendant freight forwarder sought to rely on a limitation clause under the bill of lading, which read “…the liability of the Carrier howsoever arising shall in no event exceed a sum whichever is the lower of…”;

(c)  The Court construed the limitation clause as not covering the release of the goods not against an original bill of lading but a letter of indemnity, for reason that it was “entirely advertent misdelivery” and to read the limitation clause to include such conduct would be “wholly contrary to the understanding of traders and bankers as to the overarching role of bill of lading in international trade” (§61, 63 at p 254); the most explicit language would be required (§62);

(d)  In the present case where the original AWB is not a document of title as a bill of lading and there is no implied term that the original is required for the release, there is insufficient (if any) basis to find D guilty of “entirely advertent misdelivery” because neither the advertence nor the misdevliery could be established;

(e)  By the same token, there is nothing “wholly contrary to the understanding of traders and bankers as to the overarching role of bill of lading in international trade”.

73.It is therefore my conclusion that the Mau Wing case does not apply to exclude what happened herein from the ambit of clause 21.5 because whatever happened herein is different in nature to what happened in the Mau Wing case.

74.The net result of the above analysis is that there is no legal or factual basis to find what happened here as a fundamental breach or deviation, and the specific cause of the loss herein is unknown.  I find therefore clause 21.5 does cover the present situation for it covers liability of D arising in situations where explanation is lacking.

Issue (vii)

75.It appears to me that in deciding reasonableness the Court does differentiate between exclusion/exemption clauses and limitation clauses, as the majority in the Bewise Motors CA decision held so, each citing a different English case (p 998F-G; p 1001D-E respectively)[6].

76.The Mau Wing case should not be taken as an example of rejection or even departure from this differentiation: the Court therein merely dealt with a question of construction, namely whether an “entirely advertent misdelivery” could be covered by the limitation clause in question (§60-63 at p 254).  The proposition, as I see it, is that even with a lesser degree of hostility, a freight forwarder would still have to use the most explicit language before it could limit its liability for such “entirely advertent misdelivery”, and that was why making the differentiation in that case was said to be a futile exercise.

77.Of the majority in the Bewise Motors CA decision, Bokhary JA (as he then was) went on to comment on the validity of the limitation clause in question on obiter.  In coming to the conclusion that the limitation clause therein passed the reasonable test under the CECO, his Lordship pointed to 3 factors in his consideration (p 998D-J):-

(a)  The evidence showed that the limitation clause was in line with limitation clauses common in the trade;

(b)  Such terms are inherently relevant to the rates charged;

(c)  The opportunity of the other party to effect insurance on the goods.

78.Mortimer VP, the other member of the majority, when considering reasonableness of the relevant clauses[7] referred to these matters (p 1001E-1002D):-

(a)  It was demonstrated therein that such clauses are usual in Hong Kong, and no doubt they were usual elsewhere as well;

(b)  The clauses dealt with risk and the advisability of insuring, hence his Lordship entertained no doubt that the plaintiff would have entered into the contract even if it had been aware of these terms (citing Circle Freight Int’l v Medeast Gulf Experts [1988] 2 Lloyd’s Rep 427).

79.In SKNL (UK) Ltd v Toll Global Forwarding [2013] 2 Lloyd’s Rep 112, a case relied on by D for its submissions on reasonableness, the Court said the following when finding the clause in question reasonable as required under the UK Unfair Contract Terms Act 1977 (§27-28 at p 119 col 2-p 120 col 1):-

(a)  The clause was “exactly the sort of clause which is to be expected, as appears from Miss Hobb’s eighth witness statement and paras 6 through to 9”;

(b)  Referred to this passage in Rohlig (UK) Ltd v Rock Unique Ltd (CA) [2011] EWCA Civ 18:-

“In principle the question must be considered separately in each case, because the circumstances surrounding the contract may differ from case to case, but where a standard condition of this kind is involved I do not think that the court should be astute to draw fine distinctions between cases that in broad terms are very similar. It is important for those engaged in any commercial activity, whether as providers of goods or services or as customers to know whether a particular clause will generally be regarded as reasonable in the context of contracts of a routine kind, made between commercial parties.”

and held that “[t]here is no reason on the evidence that I have seen why this case should be treated any differently from the Rohlig case”.

80.In the Frans Maas case, the Court also dealt with reasonableness of the limitation clauses in question (ie clauses 27(A) & (D) under the BIFA Standard Trading Conditions (2000 edition), which clauses 21.5 and 21.7 closely resemble) under the UK Unfair Contract Terms Act 1977 and said the following (p 279 col 1-p 280 col 1):-

(a)  Argument in support of reasonableness was put on these bases:-

(i) There had been no inequality of bargaining power;

(ii) Such terms are routinely used in the freight industry;

(iii) It was open to the customer to agree to pay additional charges to obtain a higher limit;

(b)  The limitation clauses were reasonable because :-

(i) The parties were of equal bargaining power;

(ii) It was justified for the limitation to be calculated by reference to weight as opposed to value, because the evidence was that no freight forwarder in his right mind would contract on the basis of value, as freight forwarders may well not know the value of the goods; thus the limit being “derisory” would not negate reasonableness per se;

(iii) The customer could have obtained a higher limit by paying additional charges, if it so wished to do so;

(iv) It was shown on evidence that clauses such as these are commonly used by freight forwarders;

(v) The customer could, and in fact did, obtain insurance cover in respect of the goods.

81.The CECO is modelled on the UK Unfair Contract Terms Act 1977, an identical reasonable test appears in s 3 and s 11 respectively.  The guidelines for application of reasonable test (appearing in Schedule 2 in both statutes) do not directly apply to the above cases or the present one, as the guidelines applies only to sale or otherwise passage of goods (s 11 & 12 in the CECO and s 6 & 7 of the UK Act).

82.Hence, in none of the above cases referred to under this issue did the Court referred to Schedule 2 in dealing with the reasonableness question.  As indeed, the Court in the Frans Maas case expressly referred to only s 11 of the UK Act.

83.Factors (2) and (3) of s 3 of the CECO (same for (2) and (3) of s 11 of the UK Act) are not relevant to the present case as they deal with sale or otherwise passage of goods and reasonableness of non-contractual notice.

84.Factors (1) and (4) thus represent the relevant considerations and obviously they were the subject of consideration in all of the above cases.  Following the analyses in those cases, I find the following in this regard:-

(a)  The parties’ bargaining power are equal: P could have, and indeed did have, engaged other freight forwarders and the reason why it engaged D was simply due to their usual agent switching to work for D;

(b)  Clause 21.5 is inherently relevant to the rates charged by D as P had the option under clause 21.7 to contract out the clause 21.5 limit by paying additional charges;

(c)  P could have effected insurance on the Cargo and it was in fact in a better position to do so as there is no evidence that D knew of the value of the Cargo and it would be cheaper for P to effect indemnity insurance than for D to effect liability insurance (see Freight Forwarding and Multimodal Transport Contracts (1^st ed, 2004)[8] §2.284 at p 170-171, citing Singer Co (UK) Ltd v Tees and Hartlepool PA [1988] 2 Lloyd’s Rep 164); hence modesty of clause 21.5 limitation does not defeat its reasonableness;

(d)  There is however no evidence as to whether the HAFFA STCs or similar limitation clauses are common or usual in the trade, and hence it cannot be found whether this sort of clauses are to be expected by customers.

85.Finding (d) above goes against reasonableness of the limitation clauses in question, but the impact is somewhat diluted by the following observations I have:-

(a)  The present shipment was not the only one done by D for P, Wendy Wong in her witness statement stated that P had engaged D on a few occasions before and since 2014;

(b)  The present shipment being in January 2015, the likelihood is that D’s terms of contract had not changed during this relatively small window of time;

(c)  Although no evidence of exactly how common similar limitation clauses are found in the trade, given the general sentiment shown in cases in HK and in the UK, it must be exceedingly rare, if not impossible, to find a freight forwarder that operates with no limitation clause at all.

86.I therefore conclude that clause 21.5 of the HAFFA STCs satisfies the reasonableness requirement under the CECO.

Quantification

87.Clause 21.5 provides for 3 bases of calculation and limit D’s liability to the least of them:-

(a)  Value of the goods;

(b)  HK$200 per shipping package or unit;

(c)  HK$10 per (weight) kilogram.

88.As pointed out by D, clause 4 of the AWB has an impact on clause 21.5 in this way: clause 4 of the AWB provides that “For carriage to which neither the Warsaw Convention nor the Montreal Convention applies, Carrier’s liability shall not be less than the per kilogram monetary limit set out in Carrier’s tariffs or general conditions …” hence clause 4 sets the bottom line at per kilogram calculation.  I accept this point.

89.Therefore, D’s liability in the present case is limited to HK$10 x 300kg[9] = HK$3,000.

Conclusion

90.Having come to my findings and conclusions in relation to the 7 issues, I assess damages to P at HK$3,000 and interest thereon at 8% pa from the date of the Writ to the date hereof, and thereafter at judgment rate until payment.

91.Pursuant to invitation by D’s counsel, I also order that parties to lodge and exchange their respective written submissions on costs within 14 days hereof.

The plaintiff appeared in person, represented by its director Ms Wong Hoi-kwai

Mr Edward Alder, instructed by Reynolds Porter Chamberlain, for the defendant