Airsupply International Logistics Group Ltd v. Tai Shing Transport (H.K.) Co Ltd

DCCJ 1202/2018

[2020] HKDC 307

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1202 OF 2018

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

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

Before:  His Honour Judge Kent Yee (Paper Disposal)

Dates of Written Submissions:  8 & 23 April 2020 (Plaintiff) 7 & 27 April 2020 (Defendant)

Date of Decision:  8 May 2020

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

DECISION

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

Prices Introduction

1.By a Notice to Appeal dated 16 December 2019, the defendant seeks to appeal against the order of Master Jacqueline Lee dated 3 December 2019 (“the Order”). The master acceded to the plaintiff’s application for summary judgment by summons dated 13 March 2019 (“the Summons”) and final judgment in the sum of HK$440,000 was entered against the defendant with costs including certificate for counsel by the Order.

2.The parties agree that this appeal should be disposed of on paper. This court has received written submissions from counsel on both sides.

3.It is trite that I should deal with this appeal by way of a rehearing of the summary judgment application of the plaintiff.

The respective pleaded cases of the parties

4.The pleaded case of the plaintiff is simple and straightforward. The defendant is a locally incorporated company carrying on the business in the provision of logistics services whereas the plaintiff is a locally incorporated company providing import and export air freight services.

5.In this action, the plaintiff claims that the defendant has failed to pay the handling charge, criminal charge, few surcharge and airfreight charges provided by the plaintiff from July to August 2017 as demanded by its six invoices totalling HK$442,332.52 (“the Invoices”) except a partial payment made on 17 November 2017 in the sum of HK$2,332.52. The outstanding amount stands at HK$440,000 and this is the sum that the plaintiff now claims against the defendant.

6.The defendant made a total denial in its Defence filed on 1 June 2018.  The defendant denies any business relationship with the plaintiff; it denies having made any request for any service to the plaintiff. It further denies having been provided with any service by the plaintiff. It lastly denies having received any invoices from the plaintiff and made any partial payment to the plaintiff. Essentially, the defendant shifts all the blame on one Mr Chung who allegedly dealt with the plaintiff without its consent and authority.

7.The following is an outline of the pleaded case in the Defence. The directors of the defendant are Mr Ho and his wife Madam Tsao. They are also the directors of Great Legend International Limited (“Great Legend”). On 2 October 2015, Mr Chung became an employee of Great Legend holding the position of General Manager. Mr Chung had previously worked in freight forwarder business.

8.In or about late 2015, Mr Chung proposed to Mr Ho and Madam Tsao that the defendant should attempt to start freight forwarder business with his consignor clientele of his former employer. He suggested that the defendant could contract other freight forwarders to arrange the carriage and transportation of the goods to the consignees of the consignors. Mr Chung reassured to them that no payment was required to be paid by the defendant to the freight forwarders before the consignors settled their payment to the defendant. Mr Chung undertook to handle the operation of this new business.

9.The defendant accepted the proposal of Mr Chung in reliance of his representations. The defendant agreed to authorize Mr Chung to carry on the freight forwarder business under the name of the defendant. Mr Chung agreed to account to Mr Ho and Madam Tsao the full details of all the transactions. In these circumstances, the defendant commenced its freight forwarder business managed by Mr Chung in December 2015.

10.However, in August 2016, due to the failure of Mr Chung to give a full account of the freight forwarder business and some cash flow problems, the defendant expressly instructed and ordered Mr Chung to stop all such business and he ceased to be authorized to carry on such business on behalf of the defendant any further. Mr Chung agreed.

11.On 27 September 2017, the defendant received a demand letter from a freight forwarder demanding payment of a sum of HK$11,293,398.26 being outstanding transportation service charges.

12.The defendant then confronted Mr Chung with the demand and he admitted that after being expressly instructed to cease all freight forwarder business, he nevertheless continued such business and contracted with other freight forwarders including the plaintiff under the name of the defendant without the defendant’s authority, knowledge and consent.

13.The alternative plea is that Mr Chung contracted with the plaintiff to render transportation services to the consignors without the authority, knowledge and consent of the defendant.

14.Another alternative plea is that the plaintiff rendered such purported transportation service directly to the consignors and/or Mr Chung but not the defendant.

15.On the same day when the Defence was filed, the defendant also issued a Third Party Notice to Mr Chung alleging a breach of fiduciary duty on his part.

16.In the Reply, the plaintiff pointed out that Mr Chung on behalf of the defendant started engaging the plaintiff for its airfreight services in April 2016. From 15 April 2016 to 25 July 2017, Mr Chung placed altogether 7 shipment orders (“the Previous Orders”). The Previous Orders were duly completed and the plaintiff issued 7 invoices for those transactions. The defendant duly settled all those 7 invoices.

17.The plaintiff pleads that Mr Ho only informed the plaintiff of the termination of the employment of Mr Chung with the defendant by his email dated 15 March 2018 (“the Email”). Prior to that, the plaintiff relied on the representations of the defendant in its belief that Mr Chung dealt with the plaintiff as General Manager of the defendant.

Parties’ evidence

18.The Summons was taken out after the close of pleadings. Mr Yang, Overseas Sales Manager of the plaintiff, made an affirmation in support of the application. There, Mr Yang gave an account of his dealings with Mr Chung in respect of the aforesaid services provided by the plaintiff.

19.Mr Yang first explained that he came to know Mr Chung when he worked for his previous employer which is also a freight forwarder in the PRC known as Proair International Logistics Group Limited (“Proair”) in December 2015. Mr Chung as General Manager of the defendant placed a number of shipping orders with Proair and duly settled all the charges on behalf of the defendant.

20.On 15 April 2016, Mr Yang emailed to Mr Chung his new contact information relating to his employment with the plaintiff. From that day to 25 July 2017, Mr Chung continued to place the Previous Orders on behalf of the defendant with the plaintiff and all those Orders were completed. Mr Chung on behalf of the defendant duly settled the invoices issued therefor.

21.From 31 July to 7 August 2017, Mr Yang received 6 shipment orders from Mr Chung by way of emails as usual. These six shipment orders (“the Subject Orders”) are the subject transactions covered by the Invoices.

22.On 17 November 2017, Mr Yang received from Mr Chung a text message enclosing a cheque deposit advice which showed that a cheque for a sum of HK$442,332.52 deposited into the plaintiff’s bank account had been rejected. Mr Chung deposited the said cheque into the bank account of the plaintiff in purported payment of the Invoices.

23.Mr Yang made enquiries with Mr Chung about the purported payment and Mr Chung replied that he would arrange another payment shortly afterwards. After repeated demands, Mr Chung eventually deposited into the plaintiff’s bank account on 17 November 2017 a cheque of HK$2,332.52.

24.The plaintiff continued to press for payment and on 15 March 2018, Mr Ho claiming to be the managing director of the defendant sent the Email to the plaintiff, which read as follows:

“Please note that your usual contact Mr Vivian Chung Wah Fai was terminated by our company on 29 December 2017 due to suspicion of committing fraud which has seriously been damaging our company’s goodwill and credit. The case has now been filed and under judicial procedure.

Due to above reasons stated, we will not answer or comment any Mr Vivian Chung Wah Fai related questions or issues. Thank you.”

25.Mr Yang contends that the defendant had never informed the plaintiff of the purported revocation of the authorisation given to Mr Chung prior to the completion of the Subject Orders. The plaintiff could not possibly have any knowledge of such purported revocation too.

26.Despite the plaintiff’s references to Mr Ho, Mr Ho did not file any evidence in opposition. Instead, his wife, Madam Tsao, made an affirmation to substantiate the allegations in the Defence and oppose the Summons.

27.Madam Tsao explained that the defendant had long been engaged in the warehouse management and local logistic services and had no experience in freight forwarding business prior to the proposal of Mr Chung in late 2015. Therefore, Mr Ho and she relied heavily on the representations of Mr Chung in their decision to branch out into the freight forwarding business.

28.She went on to allege that Mr Chung failed to account to the defendant the transactions in the new business and that they found out in August 2016 that the total amount paid out on account of the freight forwarding transactions far exceeded the total revenue attributable thereto. Mr Chung was then ordered to stop all freight forwarding business and he agreed.

29.Then, Madam Tsao concluded that between July and August 2017, when the Subject Orders were placed, Mr Chung had no authority to do the freight forwarding business with the plaintiff.

30.She added that in September 2017, in view of the demands from certain freight forwarders claiming huge amounts of outstanding transportation service charges, Mr Chung was confronted and he admitted that since August 2016 he had continued to carry on the freight forwarding business in the name of the defendant without the defendant’s authority, knowledge and consent. Given this admission, the defendant made a report to the police and the investigation is still ongoing.

31.The rest of her evidence consists of her forensic analysis of the documentary evidence relating to the Subject Orders and her legal opinion on the merit of the plaintiff’s claim.

Analysis

32.On the pleadings and the evidence adduced by the parties, obviously the central issue is whether Mr Chung had the authority to place the Subject Orders with the plaintiff and procure its freight forwarding services. If Mr Chung did not have the actual authority, the plaintiff relies on his apparent authority.

33.It is not disputed that at the outset the defendant expressly gave Mr Chung the authority to carry on freight forwarding business in the name of the defendant. In doing so, Mr Chung had to contact freight forwarders to arrange carriage of goods for the consignors whom Mr Chung knew. The defendant does not challenge the validity of the Previous Orders. Nor does it allege that those transactions should be set aside and the payments made to the plaintiff should be refunded.

34.The key question is whether the defendant can discharge its onus to show that there is at least a triable issue as to whether such an authority had been revoked before the Subject Orders were placed.

35.On this critical issue, the evidence of the defendant is demonstrably unsatisfactory. The evidence relating to the alleged revocation is tenuous. In the affirmation of Madam Tsao, the exact identity of the individual who allegedly told Mr Chung to cease the freight forwarding business in August 2016 is even not disclosed.  It must be apparent to the defendant that the transactions then handled by Mr Chung would not, without further ado, be terminated immediately upon the alleged revocation of his authority. Alarmingly, the defendant did not find it necessary to follow up such transactions or at the very least made enquires with Mr Chung as to whether there were any outstanding matters of the freight forwarding business. I find it unreasonable for the defendant to do nothing after the alleged revocation and was content to give Mr Chung a free hand to wind down the business especially when its financial interest was at stake.

36.I am also aware that in the Email, Mr Ho merely told Mr Yang that Mr Chung was dismissed in December 2017 but said nothing about the alleged revocation in August 2016, which should be more relevant to the validity of the Subject Orders.

37.I can well accept that such a revocation could be made orally. But here, apart from the bald assertion, there is a glaring lack of collaborative evidence. I am unable to accept the alleged revocation on such evidence and that the defendant has shown a triable issue as to whether Mr Chung ceased to have actual authority to contract with the plaintiff by the Subject Orders in July and August 2017.

38.Even if there is a triable issue as to actual authority, I accept the submission of Mr Wang, counsel for the plaintiff, that the plaintiff is entitled to rely on the rule in Turquand’s case. Mr Chung had the apparent authority to place the Subject Orders with the plaintiff rendering the defendant liable for the Invoices.

39.The leading authority in the law of apparent/ostensible authority is Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Limited and Anor. [1964] 2 QB 480. At pp. 505 – 506, Diplock LJ set out the following four conditions which must be fulfilled to entitle a contractor to enforce against a company a contract entered into on behalf of the company by an agent who had no actual authority to do so:

	(a)	that a representation that the agent had authority to enter on behalf of the company into a contract of the kind sought to be enforced was made to the contractor;
	(b)	that such representation was made by a person or persons who had ‘actual’ authority to manage the business of the company either generally or in respect of those matters to which the contract relates;
	(c)	that he (the contractor) was induced by such representation to enter into the contract, that is, that he in fact relied upon it; and
	(d)	that under its memorandum or articles of association the company was not deprived of the capacity either to enter into a contract of the kind sought to be enforced or to delegate authority to enter into a contract of that kind to the agent.

40.In the present case, the defendant’s consent to Mr Chung’s due completion of the transactions in respect of the Previous Orders on its behalf gave rise to a representation to the plaintiff that Mr Chung did have the authority to enter on behalf of the defendant into such contracts for carriage/transportation services with the plaintiff.

41.The effect of such a representation was continued to be relied upon by the plaintiff when the plaintiff completed the Subject Orders, which were no different from the Previous Orders in nature. There was nothing to cast doubt on the authority of Mr Chung.

42.There is no suggestion, let alone evidence, that the plaintiff had any knowledge of the alleged revocation of authority in August 2017.

43.The representation came from the defendant and not just by Mr Chung himself. It suffices for the purpose of establishing apparent/ ostensible authority: Yip Lai Fong and Anor. v Sin Tung Hing and Ors., unreported, CACV116 of 2003, 16.4.2004 per Lam J (as he then was) at §25.

44.I am aware that any reliance of the rule in Turquand’s case must be pleaded: Pacific Foundation Finance Ltd v Fairyoung Holdings Limited [1999] 3 HKLRD 153 per Mortimer VP at p.157 agreed by Rogers JA.

45.I have reviewed the Reply. I am of the view that the material facts pleaded therein (in particular, the completion of the Previous Orders) are sufficient to support a plea of apparent/ostensible authority of Mr Chung.

46.By reason of the foregoing analysis, I come to the conclusion that the defendant has failed to show any triable issue as to the authority of Mr Chung at the material time. It is clear to me that Mr Chung did have the actual or apparent authority to place the Subject Orders with the plaintiff to procure its carriage/transportation services on behalf of the defendant. The defendant is hence liable to pay for the outstanding amount of the Invoices.

47.Curiously enough, Mr Fung and Mr Pang, the defendant’s counsel, did not make any submission on the issue of authority and the alleged revocation at all. Instead, as far as I can understand, they have raised three other issues.

48.First, they submit that the plaintiff’s pleaded case is not a contractual claim and there is not an express plea of a contract. They further rely on the assertion of Mr Yang in his affirmation that the booking forms or shipping orders pertaining to the Subject Orders are not contractual documents. The court cannot, thus, give judgment on the basis that there was a contractual relationship between the parties.

49.I find no merit in these submissions. It is clearly pleaded that the plaintiff provided services in its ordinary course of business pursuant to the requests of the defendant and the claim is for the outstanding charges for such services. There can be no question that the claim is made on the basis of the contractual relationship between the parties. I cannot accept the defence counsel’s submission that the parties acted in the absence of a contract. It is not the pleaded case in the Defence. There can be no other legal relationship subsisting between the parties on these pleaded facts.

50.On the other hand, how Mr Yang characterized the booking forms and shipping orders cannot in any way alter their legal nature and is not a matter of concern to this court.

51.I believe that their real complaint is that the plaintiff has failed to plead expressly the agreements between the parties and their terms. Instead the plaintiff has pleaded the Invoices and the outstanding amount only.

52.I would agree that the plaintiff could have provided fuller particulars of the transactions in the pleading. However, it appears to me that these matters have nothing to do with the actual disputes between the parties.

53.Solely as a matter of the integrity of the pleading, I am of the view that the statement of claim does serve its function. If all the material facts pleaded therein are proven, I see no reason why the plaintiff should be deprived of the outstanding charges, particularly in the absence of any dispute about the quantum of those charges in the Defence or by way of evidence.

54.Next, the defence counsel submit that the defendant merely acted as the agent of the shippers and the actual contracting parties should be the plaintiff and the shippers. Being an agent, the defendant could not be personally liable for the contracts entered into on behalf of its principals. They rely on some booking forms which show that the defendant was neither the shippers nor the consignees.

55.This submission has no substance. In the first place, it is against the defendant’s own pleaded case. The business which the defendant expressly authorized Mr Chung was to contract with freight forwarders to arrange carriage/transportation of the goods of the consignors to their consignees: §5(c) of the Defence. 

56.The defendant did not say in the Defence that the defendant entered into contracts with freight forwarders merely as an agent of the consignors.

57.This submission is further against the wealth of contrary evidence too. In the emails exchanged between Mr Yang and Mr Chung, there is not a shred of evidence that the defendant procured the shipping services as an agent of its consignors only. The fact that the services were to be rendered to a third party upon the requests of the defendant does not alter the legal position of the defendant as a contracting party.

58.The evidence of Mr Yang about the transactions is not rebutted and I have no reason to disbelieve him. The plaintiff is only a freight forwarder and it had to subcontract the shipping tasks in the Subject Orders to two other onward shipping agents, namely, A-Sonic Logistics (H.K.) Limited and Scan-Shipping (HK) Ltd. Neither the plaintiff nor the defendant was the actual carriers, consignors or consignees and there is no surprise that their names did not feature in the shipping documents. Such shipping documents per se are not contracts between the plaintiff and the defendant. They came into being for the purpose of the fulfillment of the Subject Orders. The fact remains the defendant procured the plaintiff to provide freight forwarding services to its clients and the plaintiff duly did so by its sub-contractors.

59.Lastly, the defence counsel says that the plaintiff’s pleaded case is one of quantum meruit and as such, the plaintiff has failed to establish the essential element that the enrichment was at the expense of the plaintiff.

60.With respect, I cannot understand this submission. On any view, the pleaded case of the plaintiff consists of no plea of quantum meruit. The plaintiff does not say that the parties had no agreement on the charges or that there was no contract for the services procured by the defendant at all. It is simply not a restitutionary claim.

Conclusion and costs

61.For the reasons stated above, I conclude that the defendant does not have a bona fide defence to the claim of the plaintiff and is unable to show any triable issues. The Order was rightly made and the defendant’s appeal must be dismissed. 

62.Costs should follow the event and I make an order nisi that the plaintiff’s costs of and occasioned by the defendant’s appeal be paid by the defendant with certificate for counsel, to be taxed if not agreed. 

Mr. Justin Wang, instructed by Lam Lee & Lai, for the plaintiff

Mr Danny Fung and Mr Lawrence Pang, instructed by Huen & Partners, for the defendant