Tokio Marine & Fire Insurance Co. Ltd. v. Ace Protrans Forwarding Ltd.

HCCL000131/1989

1989, No. CL-131

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

COMMERCIAL LIST

________________

________________

Coram: The Hon. Mr. Justice Mayo in Court

Dates of hearing: 1, 2, 3 and 4 February 1994

Date of handing down of judgment: 25 February 1994

________________

J U D G M E N T

________________

1. The Plaintiff is suing as the Assignee of Sea Horse Container Lines Inc. in respect of a cargo claim. The Defendants are freight forwarders in Hong Kong and at the relevant time were acting as Agents for Sea Horse who is a non vessel operating common carrier (NVOCC).

Rather than attempting to precis the relevant facts I propose referring to the Agreed Statement of Facts which was agreed by the parties.

"_____________________________

AGREED STATEMENT OF FACTS

_____________________________

1. On 25th December 1987, two cargoes consisting of 1,212 cartons of polyester/cotton 50/50 CVC yarn and 606 cartons of polyester/cotton 50/50 yarn respectively were shipped breakbulk on board the vessel "LINGJIANG" from Ningbo, PRC for carriage to Hong Kong.

2. Bills of lading Nos. 39 and 40, dated 25th December 1987, were issued by the China Ocean Shipping Company in respect of the two said cargoes, which were respectively consigned to the order of the Defendant under the said bills of lading.

3. Upon arrival in Hong Kong, the said cargoes were discharged from the "LINGJIANG" and containerised as follows:

3.1 the cargo of 1,212 cartons of yarn was stuffed into four containers, namely NYKU-670338/1, TOLU-216272/2, NYKU-695112/0 and NYKU- 678021/7; and

3.2 the cargo of 606 cartons of yarn was stuffed into two containers, namely NYKU-6602257 and NYKU-6924021.

4. The containerised cargo of 1,212 cartons of yarn was shipped in Hong Kong on board the m.v. "CALIFORNIA JUPITER" for shipment from Hong Kong to Los Angeles, California.

5. The Defendant issued a bill of lading No. NB WC005 dated 25th December 1987 on the Sea Horse Container Lines Inc. bill of lading form in respect of the cargo of 1,212 cartons of yarn indicating the shipment of the said cargo at Ningbo, PRC for carriage to Los Angeles, California.

6. A memo bill of lading No. 480-01806 was issued by NYK Line on its own form in respect of the shipment of the cargo of 1,212 cartons of yarn in Hong Kong for carriage to Los Angeles, California on board the "CALIFORNIA JUPITER".

7. The containerised cargo of 606 cartons of yarn was shipped in Hong Kong on board the m.v. "YAMATAKA MARU" for shipment from Hong Kong to Charleston, South Carolina.

8. The Defendant issued a bill of lading No. NB EC002 dated 25th December 1987 on the Sea Horse Container Lines Inc. bill of lading form in respect of the cargo of 606 cartons of yarn indicating the shipment of the said cargo at Ningbo, PRC for carriage to Charleston, South Carolina.

9. A memo bill of lading No. 480-02351 was issued by NYK Line on its own form in respect of the shipment of the cargo of 606 cartons of yarn in Hong Kong for carriage to Charleston, South Carolina on board the "YAMATAKA MARU".

10. Upon arrival in Los Angeles, California and Charleston, South Carolina respectively:-

10.1 the cargo of 1,212 cartons of yarn was surveyed by Hull and Cargo Surveyors Inc.; and

10.2 the cargo of 606 cartons of yarn was surveyed by Lucas and Brown Inc.; and both cargoes were allegedly found to be damaged by mildew and mould caused by wetting from fresh water and were rejected by the receivers thereof.

11. Both of the said cargoes were disposed of by salvage sales as follows:-

11.1 the cargo of 1,212 cartons of yarn was sold at US$0.8025 per lb. for a total of US$48,631.50; and

11.2 the cargo of 606 cartons of yarn was sold at US$0.7327 per lb. for a total of US$85,286.28.

12. A suit was brought by the Plaintiff, as insurer of the cargoes for the owners thereof and/or the indorsees of the said Sea Horse bills of lading, against Sea Horse in Admiralty Case No. 89 0189 SVW (JBX) in the US District Court for the Central District of California ("the US Suit") claiming damages in respect of the said damage to the cargoes in the respective sums of US$183,896.76 and US$87,493.50.

13. The US Suit was settled by Sea Horse on the terms of a Settlement Agreement and Mutual General Release in writing signed by Sea Horse on 26th June 1989, whereunder Sea Horse agreed to consent to judgment against it in the US Suit in the sum of US$271,390.26 with pre-judgment interest thereon in the amount of US$40,708.54 and costs in the sum of US$505.47.

14. Under the said Settlement Agreement and Mutual General Release, Sea Horse assigned its rights of action in connection with the carriage, storage or movement of, or insurance for, the said cargoes against the Defendant to the Plaintiff and notice of such assignment was given by the Plaintiff to the Defendant by a written notice dated 17th November 1989."

2. The main issue between the parties is the question as to whether the Defendant had authority to issue the Bills of Lading referred to having regard to the fact that the contract of carriage was from Ningpo PRC to ports in the United States and not from Hong Kong.

3. It is the Plaintiffs' case that by virtue of the freight Tariff which Sea Horse are required to comply with they would be contravening the Laws of the United States of America if they permitted their Agent to ship goods to United States ports otherwise than in accordance with the requirements of the Federal Maritime Commission.

4. Consequent upon this they claim that it is clear from the express authority given to the Defendants that they were in breach of their Agency Agreement.

Sea Horse's letter of the 16th June 1987 is in this form.

"Sea Horse Container Lines, Inc. P.O. Box 90099, Long Beach, Ca 90809-0099

(213) 595-0616 Telex 656342

June 16, 1987

Ace Protrans Consolidation Service
132-135 Tai Lin Pai Road
1/F King Sing Ind. Bldg.
Kwai Chung, New Territories
Hong Kong

To Whom It May Concern:

Please consider this letter as our notification that Ace Protrans Consolidation Service has been appointed as a Hong Kong agent for Sea Horse Container Lines, Inc.

As such, Ace Protrans has the authority to issue Sea Horse Container Lines bills of lading for all cargos shipped from Hong Kong to all United States Ports as named in Sea Horse Container Lines, Inc., Freight Tariff No. 5, FMC No. 5 and in accordance with the rules and regulations prescribed by the Federal Maritime Commission.

If further information is required, please contact this office. Thank you.

Sincerely,

Signed
Len Skoczen
President
LS:yyk"

5. It is the Defendants' case that there was express agreement between the parties that the scope of the authority should be extended so as to authorise the Defendants to issue Bills of Lading on behalf of Sea Horse even where goods were shipped from PRC ports. They also contended that during the course of dealings between the parties it was contemplated that Bills of Lading would be issued in respect of goods being shipped from PRC ports and that the contract of carriage of goods would be based upon this premise.

6. Again rather than attempting to spell out the various issues between the parties I propose referring to the Agreed List of Issues agreed by the parties.

"___________________________

AGREED LIST OF ISSUES

__________________________

1. What was the scope of the Defendant's authority to issue bills of lading on the Sea Horse Container Lines Inc. form and, in particular, was the Defendant authorised by Sea Horse Container Lines Inc. ("Sea Horse") to issue bills of lading Nos. NB WC003 and NB EC002 containing or evidencing contracts of carriage from Ningbo, PRC to Los Angeles, California and Charleston, South Carolina respectively?

2. Were bills of lading Nos. NB WC003 and NB EC002 issued by the Defendant in breach of its authority to sign bills of lading on behalf of Sea Horse? Alternatively, if the said bills of lading were issued in breach of the Defendant's authority, is Sea Horse estopped from claiming in respect of that breach of authority?

3. Were the cargoes shipped under bills of lading Nos. NB WC005 and NB EC002 found damaged upon arrival at Los Angeles and Charleston respectively and, if so, when had such damage occurred and what was the cause and extent of such damage?

4. If the Defendant was in breach of its authority in issuing the bills of lading Nos. NB WC003 and NB EC002, what was the loss and damage of Sea Horse caused by such breach?

(a) Did Sea Horse reasonably settle its liability to the claimants in the US Suit? Alternatively, what was the extent of Sea Horse Container Lines Inc.'s liability to the claimants in the US Suit?

(b) Did Sea Horse incur or was it rendered liable for legal fees in the sum of US$33,756.48 in connection with the US Suit?"

7. In this connection Mr, Fok for the Plaintiffs submitted that the issues of ratification and estoppel were sufficiently intertwined as to constitute in reality just one issue.

8. Mr. Skoczen, the President of Sea Horse gave evidence concerning the background to the business relationship between Sea Horse and the Defendants. Sea Horse had taken over from an Associated Company Interocean Express Ltd. (IEC) who had previously been conducting business with the Defendants.

9. Although some of the earlier bills of lading were IEC bills I do not think that it was a matter of great significance that the original dealings had been with IEC as Mr. Skoczen accepted that to a large extent IEC staff had been seconded to work for Sea Horse.

10. The main thrust of Mr. Skoczen's evidence was that it was at all times his understanding that the scope of the Defendants' authority was limited to the shipment of goods from Hong Kong to United States ports. He accepted a substantial proportion of the goods which would be shipped would originate from Southern China but it was his evidence that the goods would be consolidated in Hong Kong and that in essence the Defendant would assume the role of freight forwarders.

11. Mr. Skoczen was subjected to a searching cross examination by Mr. Jat for the Defendants. He was taken through correspondence which had been exchanged and shown Bills of Lading which on their face stated that the goods being shipped had been shipped from Ningpo PRC.

12. His answers to the questions put to him were generally along the lines that Sea Horse transacted a very large volume of business and that it was only if attention was specifically addressed to the port of origin that anyone would notice this. The documentation was in the normal course of events processed by clerical or accounting staff who would not primarily be concerned with the origin of goods which had been shipped.

13. Certainly this was not a matter which would come to the attention of senior management unless the specific issue was raised. What needed to be borne in mind was that Sea Horse had 6 Branch Offices and documents dealt with by a Branch Office would not usually be referred to the Head Office at Long Beach California.

14. Mr. Jat put to Mr. Skoczen his fax to the Defendants dated the 22nd June 1987 which dealt amongst other matters with 3 IEC Bills which on their face stated that Ningpo had been the port of discharge of the cargo. Mr. Skoczen maintained his evidence that he had considered the accounting problems referred to in the fax and that he would have had no reason to personally scrutinise the Bill of Lading. This being the case he had not become aware of the shipment under the Bills of Lading from Ningpo.

15. Mr. Jat also referred Mr. Skoczen to the letter he had written to the Defendants on the 22nd November 1988 from which it was evident that he had definitely been aware of this fact at the time that the goods had been shipped from Ningpo to Hong Kong. Mr. Jat asked him why he had not at that stage raised the question of the breach of the terms of the Agency Agreement between the parties.

16. Mr. Skoczen said that he had focused his attention upon trying to obtain the background information which would enable him to provide the Insurers with the information they were seeking. His mind had been focused on the damages which were being claimed and how Sea Horse could deal with any claim being made by the Plaintiffs.

17. The next witness to give evidence was Mr. Michael Dugan who is the Chief Financial Officer of Sea Horse. He is also the President of the Holding Company which controls Sea Horse so notwithstanding his title in Sea Horse he would in effect be Mr. Skoczen's superior.

18. He gave evidence along similar lines to Mr. Skoczen's and there were no obvious or manifest deviations in their evidence. Mr. Dugan had made 3 visits to Hong Kong and had had meetings with Mr. Arthur Wong of the Defendants. He emphasised that it was at all times in the contemplation of the parties that goods should be shipped from Hong Kong although he accepted that they might and probably would originate from China.

19. He was also cross examined on the correspondence I have referred to when commenting on Mr. Skoczen's evidence. He said that Sea Horse's main concern was to find a solution to the problem which was being encountered and that attention was focused on how damage had occurred to the cargo rather than upon whether there had been a breach of the terms of the Agency Agreement.

20. I found both Mr. Skoczen and Mr. Dugan to be excellent witnesses. I had no hesitation in accepting their testimony.

21. Captain Brown a Marine Surveyor gave evidence concerning the survey he conducted at Charleston South Carolina of the 606 cartons containing polyester cotton yarn which had been stuffed into the container in Hong Kong. It will be helpful to refer to the conclusions which were reached by him in his Report.

"NARRATIVE REPORT

It is our understanding that the shipment had been consolidated from various suppliers at the port of Ningbo, thence forwarded by break-bulk vessel to Hong Kong. It had then been discharged to barge before being loaded into containers for shipment via "YAMATAKA MARU" to Charleston.

On receipt at Commercial Bonded Warehouse, no damage had been sighted to the container and exceptions noted on truck waybills related only to physical condition, ie., "Mashed, torn, contents exposed". However, a strong odor of mildew was noted that was subsequently shown on warehouse receipts issued.

At the time of survey, the containers had been stripped and the goods were in store in the warehouse. Packing consisted of double-faced corrugated fiberboard cartons, each 51 x 51 x 72 cms with gross weight 114 lbs. and net weight 100 lbs. The yarn was wound on fiberboard cones, individually wrapped in polyethylene. They were packed 36 per carton, four tiers high, with layer pads between the tiers. Carton flaps were stapled and taped and each was secured with four x 1/2" plastic bands.

Physical damages noted consisted of comparatively minor crushing and tearing of cartons such as are frequently sustained in breakbulk handling. In addition, all cartons had a uniform appearance of having been wet or damp, the fiberboard being softened and deformed in places. They had dried out before the time of survey.

Cartons were opened at random and spotted mildew was found throughout the shipment and from both containers, approximately 20% of the yarn being affected to various extents.

After discussing the condition with our principals, it was agreed that sorting and repacking the material was impractical and that the shipment should be sold on the secondary market. Invitations to bid were sent to twenty prospective buyers, resulting in a high bid of 0.68 per lb. being received from Messrs. Southern Industries Inc. This bid was refused by the importer and sale was subsequently negotiated to Messrs. Texspun Yarns, Gastonia, NC at a price of $0.8025 per lb. This price was considered by the undersigned to be fair and reasonable. Gross proceeds of salvage sale in the amount of $48,631.50 have been taken over by the consignee.

Cause of Damage:

Numerous tests by silver nitrate gave no reaction for chlorides indicating that the damage was caused by fresh water wetting.

As stated above, the goods were shipped from Ningbo to Hong Kong by break-bulk vessel thence discharged to barge before containerized in Hong Kong. In view of the nature of the damage, it is my opinion that the cartons were exposed to rain shortly before being containerized and that the mildew was caused by excessively high humidity in the containers during the voyage due to the wet cartons."

22. Captain Brown was cross examined by Mr. Jat but his testimony was not seriously shaken.

23. The Surveyor who inspected the yarn shipped to Los Angeles, Mr. Arthur Wray did not give evidence. A Hearsay Notice was served in respect of his testimony and the reason advanced for his non attendance was that in addition to his being beyond the seas he was unable to attend due to the fact that he apparently suffers a heart condition and is unable to travel long distances by air.

24. Mr. Wray's detailed report was before the Court. The conclusions he reached and the action he took was not dissimilar to the evidence given by Captain Brown.

Paragraphs 11 and 12 of Captain Wray's statement read :-

"11. I note that the cargo was said to be first carried break bulk on the "LIN JIANG" from Ningbo (loading dated 25th December 1987) to Hong Kong (arriving 30th December 1987) and there discharged by lighter and containerized on 2nd January 1988, to be carried aboard the "California Jupiter". I found no sign of any heavy wetting of the cargo which could have been a possible cause of damage had this occurred a considerable time before stuffing. The sound condition of the containers suggests that no water could have entered the containers to damage the goods following containerization. The cartons tested negative for a sea water wetting. The damage is indicative of the yarn coming into contact with moisture conditions. The most probable cause of this is fresh water wetting of the cardboard cartons in which the yarn was stored at sometime before stuffing in Hong Kong. The most likely cause of damage is that light rain fell on the cargo probably shortly before containerization and as the hatches on the "LIN JIANG" would presumably have been sealed for the voyage from China to Hong Kong the most likely time of wetting of the cartons was during or following discharge from the "LIN JIANG" at Hong Kong, prior to containerisation. Consequently, some partial drying out of the cartons would be possible, but cardboard is hygroscopic, i.e., it is able to hold (and give out) relatively large quantities of moisture. As the containers were sound, moisture introduced would not be able to escape. The moisture then absorbed by the cardboard cartons would be released within the containers during the ocean voyage giving rise to high humidity conditions. The damage is indicative of the yarn coming into contact with this diffusion and condensation of moisture. In the presence of such humidity, mold growth would be encouraged.

12. In light of the damage, on instructions from insurers we sent out invitations to bid to 27 salvors known to us, for the 116,400 lbs of yarn remaining after Mr Meisel's test. The best offer received was from Saw Mill International Corporation of New York being US$0.7327/lbs (US$85,286.28 total), (see pages 30-34 of "ABW-I"). Assuming the 4,800 lbs (48 cartons) used for testing suffered an equal diminution in value i.e., US$0.7327/lb that value amounts to US$3,516.96. Given a sound market value of US$2.25/lb which was ascertained on enquiry, a loss of US$183,896.76 arose from the damage."

25. While taking cognisance of the fact that Captain Wray was not subjected to cross examination I can see no legitimate reason not to attach considerable weight to his evidence. I say this as his statement and survey have obviously been carefully prepared and it is noteworthy that in important respects his evidence corresponds to the evidence given by Captain Brown.

26. The main witness for the Defendants was Mr. Arthur Wong. He said that he is effectively the owner of the Defendants.

27. He described the business relationship which had developed. Initially, that is in 1984, it had been with Mr. Robinson of IEC. He said that at the end of 1986 there had been a reorganisation of IEC, and its Associated Companies Western Overseas Corporation and Sea Horse.

28. The end result of this had been IEC's freight forwarding business was taken over by Sea Horse and Western mainly did business as a Customs Broker.

29. In early 1987 he had met Mr. Dugan who had represented himself as the President of Western and who was in charge of Sea Horse. Mr. Skoczen was responsible for the day to day business.

30. He claimed that when he had met Mr. Dugan he had outlined his modus operandi and had made it clear that he obtained goods from China and arranged for their shipment in containers to other parts of the world.

31. Besides the relationship with IEC he had not shipped goods to United States ports as the Defendants were not NVOCCs. He was aware of the regulations laid down by the F.M.C. and knew that Sea Horse was an NVOCC. He also knew that if goods were shipped to United States ports freight rates had to be in accordance with the Tariff laid down for this. Mr. Dugan had appeared to be keen to develop a business relationship with the Defendants.

32. Mr. Wong's evidence concerning the supply of blank IEC and Sea Horse Bills of Lading forms was similar to the Plaintiffs' evidence. He also accepted he had signed the 2 Indemnity forms referred to but claimed that he had not read them before doing so. I did not attach any great weight to this as the forms were-principally designed to protect Sea Horse from misconduct on the Defendants' part. I do not think that the Defendants' conduct amounted to the sort of matters covered by the Indemnities.

33. What is of more importance was Mr. Wong's evidence in relation to the letter of Authority I cited earlier in this judgment. At first Mr. Wong attempted to claim that as the document was addressed to "To whom it may concern" it was not really intended to govern the relationship between the Defendants and Sea Horse.

34. When pressed by Mr. Fok in cross examination he accepted that the authority was clearly limited to cargoes shipped from Hong Kong and that he had not taken any steps to inform Sea Horse that the authority did not accurately reflect the business discussions he claimed to have had with Mr. Dugan.

35. Even more unsatisfactory than this was Mr. Wong's evidence concerning the practice adopted for issuing Bills of Lading when goods were shipped from Ningpo.

36. He accepted that on account of the matters he referred to in paragraph 12 of his statement of evidence that there was a higher risk involved in shipping goods from PRC ports. Notwithstanding this the Bills of Lading had been issued by a member of his staff in Hong Kong when there had been no sufficient opportunity to inspect goods before they left Ningpo. He also reluctantly accepted that the statement on the face of the Bills to the effect that they had been issued in Ningpo was false. He did not though think that he had done anything wrong.

37. Also Mr. Wong's evidence concerning communications with Sea Horse left much to be desired. He agreed that when eventually in April 1989 Sea Horse had claimed that the Defendants had been in breach of the terms of the Agency Agreement between them he had at no time denied this although he had written to Sea Horse claiming that he was doing all he could to resolve the situation.

38. Mr. Gary Choy, the Operation Assistant of the Defendant gave evidence concerning the system adopted. His evidence was in conformity with Mr. Wong's. I regret that it reinforced the impression I had gained that the Defendants adopted a somewhat cavalier approach to documentation and were prepared to make statements without too much regard for their accuracy. That is not to suggest that I found Mr. Choy to be an untruthful witness.

39. I have provided a brief summary of the evidence of the main witnesses. It is of course also necessary to consider the background correspondence.

40. I have already referred to what I regard as being the most important document namely Sea Horse's letter of the 16th June 1987 which I am satisfied set out the basis of the Agency Agreement between Sea Horse and the Defendants.

41. It is also of importance to consider the correspondence which was exchanged between the parties at the time when it was agreed that Sea Horse Bills of Lading should be used by the Defendants. I would refer in particular to the letter sent by Mr. Skoczen to Mr. Wong on the 5th July 1987 which was as follows :

"5/07/87

To: Ace Protrans - Attn: Arthur Wong From: Sea Horse Container Lines - Len Skoczen

Dear Arthur:

This acknowledges receipt of the two agreement forms which we received by fax on May 6, 1987.

We are forwarding to you today Sea Horse bills of lading for your future use. Please note, however, that we must inform the F.M.C. of your selling rates by commodity before the Sea Horse bills of lading can be issued. We must file the rates in our tariff and submit them to the F.M.C. forty eight hours in advance of shipment.

We are sending photocopies of our Hong Kong/USA tariff so you can see the rates we currently have on file. It is imperative that you notify us by fax at least 72 hours in advance of issuing S.H. B/L so we can file tariff rate with the F.M.C. Please note that filing a lower tariff rate for any item that appears in the tariff requires only 48 hours notice but to file an increase of an existing rate requires 35 days notice. Filing a rate for a new commodity requires 72 hours advance notice.

To file rates, please fax the following information to my attention:

1) Commodity description (Exact description)

2) U.S. destination port

3) Selling rate, per CBM for LCL and per 20' or 40' if F.C.L.

4) Effective date

Please review the above and let me know if you have any questions on the above. Thank you.

Sincerely,

Signed
Len Skoczen
President"

42. It is in my opinion significant to note that as reference is made to compliance with FMC requirements the letter clearly contemplates that the port of loading would be Hong Kong and that FMC tariff rates would be applicable. Mr. Wong agreed in his evidence that he did not in any way query this letter after receiving it and I consider that this is rather strange if his version of the position is correct. If indeed Mr. Wong had agreed with Mr. Dugan that shipments would be made from PRC ports and that Sea Horse Bills of Lading would reflect this fact it is surprising to say the least of it that Mr. Wong did not raise this issue with Sea Horse after receiving the letter dated the 5th July 1987.

43. When considering the oral testimony in conjunction with the correspondence it is almost impossible to escape coming to the conclusion that the Plaintiffs' version of the evidence must be preferred to the Defendants.

44. I find it very difficult to believe that either Mr. Dugan or Mr. Skoczen would have countenanced any arrangement whereby Sea Horse Bills of Lading would be used for the shipment of goods from PRC ports to ports in the United States of America. Any such arrangement would require the adoption of Sino Chart rates and with the exception of one letter to the New York Branch Office. This was never the subject of discussion or negotiations between the parties. The letter I refer to reads :-

"ACE PROTRANS
CONSOLIDATION SERVICE
132-135 TAI LIN PAI RD.,
1/F., KING SING IND., BLDG.,
KWAI CHUNG, NEW TERRITORIES

TEL: 0-4876118
TELEX: 40387 ACEPR HX

HONG KONG FAX NO. 0-296909

REF	:	2159	DATE	:	21ST JULY, 1987
TO	:	SEA HORSE	DEST	:	NEW YORK
		CONTR LINES
ATTN	:	LINDA KANNE	FAX	:	00212129259866
FROM	:	ROSON LAI	C.C.	:

	V HV QUOTE TO CHINA NATL TEXTILES
	BASED ON SINO-CHART RATE.
	ROUTING IS HKG/NEW YORK - ALL
	WATER SERV.
	EXTRA COST FOR VIA MLB/NYC WL BE
	AROUND USD1,200/40' 9 1/2'
	PLS ADV MR ABUCHER, V ONLY WL SHIP
	GOODS VIA MLB TO NYC IF HE ACCEPT
	THE DIFF.
	FURTHERMORE, THE SAILING TIME
	HKG/NYC IS 35 DAYS, N MLB TO NYC IS
	28 DAYS
	ONLY 1 WK. DIFF.
	E. GRAND ETD HKG 26/7
	E. GENTRY ETD HKG 2/8
	FYI, AOJIANG ARR, HKG TO-DAY, AS IT
	IS BREAK-BULK VESSEL, EXPECT GOODS
	ONLY BE PICKED-UP ON NEXT MONDAY.
	THEREFORE, PREDICT THAT IT WL SHIP
	EX E. GENTRY.
	RGDS"

45. Even this letter does not indicate any Agreement between the parties that there should be a departure from the FMC tariff and it is by no means certain that Ms. Kanne who was the manager of the New York Branch Office would have appreciated that this reference to Sino Chart Terms might mean that a deviation from the terms of the Agency Agreement between Sea Horse and the Defendants may be contemplated. In this connection it should be observed that it is evident on the face of the letter that the relevant shipment was stated to be from Hong Kong to New York.

46. What is certainly true is that there is no evidence whatever to suggest that the procedure which was eventually adopted by the Defendant of issuing Bills of Lading in Hong Kong for shipment of goods from Ningpo to United States ports and stating wrongly that the Bill was issued in Ningpo would have been acceptable to Sea Horse.

47. For the reasons I have given I have no hesitation in coming to the conclusion that the Agreement which was reached between the parties was the Agreement recorded in the letter of the 16th June 1987 and that there was no agreement between the parties to extend this in the way referred to by Mr. Wong.

48. I have also borne in mind the observations of Diplock LJ at p.502 of Freeman & Lockyer v. Buckhurst Park Properties (Mangal) Ltd. [1964] 2 QB 480.

" It is necessary at the outset to distinguish between an "actual" authority of an agent on the one hand, and an "apparent" or "ostensible" authority on the other. Actual authority and apparent authority are quite independent of one another. Generally they co-exist and coincide, but either may exist without the other and their respective scopes may be different. As I shall endeavour to show, it is upon the apparent authority of the agent that the contractor normally relies in the ordinary course of business when entering into contracts.

An "actual" authority is a legal relationship between principal and agent created by a consensual agreement to which they alone are parties. Its scope is to be ascertained by applying ordinary principles of construction of contracts, including any proper implications from the express words used, the usages of the trade, or the course of business between the parties."

49. Adopting this criteria I have no doubt that the Defendants did not have actual authority to issue Bills of Lading on behalf of Sea Horse for shipment of goods from PRC ports.

50. The question of the existence or otherwise of implied authority can be disposed of shortly. I accept the validity of the passage in paragraph 52 of Vol. 1(2) Halsbury's Laws of England 4th Edition.

52. Necessary and incidental acts. The implied authority of an agent extends to all subordinate acts which are necessary or ordinarily incidental to the exercise of his express authority (Bayley v Wilkins (1849) 7 CB 886; Collen v Gardner (1856) 21 Beav 540; Montaignac v Shitta (1890) 15 App Cas 357, PC; Financings Ltd v Stimson [1962] 3 All ER 386, [1962] 1 WLR 1184, CA (implied authority of dealer when acting as agent for hire purchase finance company); Benmag v Barda [1955] 2 Lloyd's Rep 354 (implied authority of agent to warrant quality of goods); Blandy Bros & Co Lda v Nello Simoni Ltd [1963] 2 Lloyd's Rep 393, CA (authority of ship's agent to incur loading expenses on charterers' accounts). See also Wright v Pepin [1954] 2 All ER 52, [1954] 1 WLR 635 (implied authority of solicitor, instructed to 'clear up' client's affairs, to acknowledge debt for the purposes of the Limitation Act 1939 (repealed: see now the Limitation Act 1980)); Gavaghan v Edwards [1961] 2 QB 220, [1961] 2 All ER 477, CA (solicitors acting for both parties already in agreement may have implied authority to make additional memorandum for the purpose of recording a final term agreed by the parties); and Heatons Transport (St Helens) Ltd v Transport and General Workers Union [1973] AC 15, [1972] 3 All ER 101, HL (implied authority of shop stewards to act in the interests of members including by industrial action provided acts are not outside union rules or policy).). It does not, however, extend to acts which are outside the ordinary course of his business, or which are neither necessary nor incidental to his express authority (An agent authorised to deliver a horse has no authority to give a warranty (Woodin v Burford (1834) 2 Cr & M 391); nor has an agent authorised to sell a horse privately (Brady v Todd (1861) 9 CBNS 592), unless he is the agent of a horse dealer (Howard v Sheward (1866) LR 2 CP 148; Bank of Scotland v Watson (1813) 1 Dow 40 at 45, Baldry v Bates (1885) 1 TLR 558,DC); but an agent authorised to sell at a fair may give such a warranty (Brooks v Hassall (1883) 49 LT 569). An agent to sell a car may have implied authority to give warranties concerning its insurance: Abrahams v Spitz (1963) 107 Sol Jo 113, CA. An agent authorised to get a bill discounted may warrant it good, but not indorse it in the principal's name: Fenn v Harrison (1790) 3 Term Rep 757; and see Dingle v Hare (1859) 7 CBNS 145. The depositary of a policy of insurance on a ship at sea has no implied authority to give notice to the underwriter of abandonment as for a total loss: Jardine v Leathley (1863) 3 B & S 700. As to the extent of implied authority of a bank manager to advise a customer see Banbury v Bank of Montreal [1918] AC 626, HL; and of a solicitor to sign a contract for sale of land see Blackburn v Walker (1920) 150 LT Jo 73. A person employed merely to deliver milk has no implied authority to sell (Whittaker v Forshaw [1919] 2 KB 419), nor a furniture salesman to cancel a sale (Leckenby v Wolman [1921] WN 100), nor, in general, an agent for sale of goods to receive payment (Butwick v Grant [1924] 2 KB 483; see further pare 53 post). Similarly, a mercantile agent has no authority, implied or statutory, to give goods of his principal to another to pledge for him, even though he may have authority to pledge them himself: see De Gorter v Attenborough & Son (1904) 21 TLR 19. As to the statutory protection of third parties dealing with mercantile agents see paras 160, 161 post. A managing director of a theatre company has implied authority to refuse admission (Said v Butt [1920] 3 KB 497), and an agent for the sale of property has implied authority to sign an open contract (Keen v Mear [1920] 2 Ch 574), but not to make conditions as to title (Keen v Mear supra; see also para 56 post). It is only in very special circumstances that an agent has implied authority. to pay his principal's cheques into his own account: Australia and New Zealand Bank Ltd v Ateliers de Construction Electrique de Charleroi [1967] 1 AC 86, [1966] 2 WLR 1216 PC)."

51. Having regard to the facts as I have found then there can be no question of there being implied authority in the present case.

52. The next matter to be considered is whether on the Defendants' case Sea Horse are estopped from contending that the Defendants had authority to issue Bills of Lading from PRC ports. Mr. Jat accepted that this was what needed to be considered and not whether there had been ratification of the particular contracts. I do not therefore propose commenting upon whether there was ratification. I will though deal with estoppel.

53. For there to be an Estoppel the representations relied upon must be clear and unequivocal. The remarks of Lord Hailsham at p.755 of Woodhouse AC Israel Cocoa Ltd. SA v. Nigerian Produce Marketing C. Ltd. [1972] AC 741 are helpful.

" I do not myself think there was ambiguity. But, on the assumption that there was, I agree with the Court of Appeal that such cases as Low v. Bouverie [1891] 3 Ch. 82 and Canadian and Dominion Sugar Co. Ltd. v. Canadian National (West Indies) Steamships Ltd. [1947] A.C. 46 are authority for the proposition that, to give rise to an estoppel, representations should be clear and unequivocal, and that, if a representation is not made in such a form as to comply with this requirement, it normally matters not that the representee should have misconstrued it and relied upon it.

In commenting on these authorities counsel for the appellants drew our attention to a number of dicta and cases which, he claimed, told in a contrary sense. The argument was that it was or could be the representor who was responsible for ambiguities if the representee reasonably misunderstood what was said to him and acted upon it. The short, and to my mind conclusive, answer to this line of reasoning in the present case is that the ambiguity, if any, in the whole correspondence originated from the alleged representee and not from the alleged representor. In such a case, I would have thought that justice, law and common sense demanded that the alleged representor should not be made to bear any financial loss arising from the ambiguity. To my mind, this also disposes of the entire sequence of authority which the appellant sought to pray in aid. But, since the matter is of some general importance, I desire to add some general comments upon the authorities and quotations relied on by the appellants. The first of these was a dictum of McNair J. obiter in Marquess of Bute v. Barclays Bank Ltd. [1955] 1 Q.B. 202. In the course of a judgment in which he held that a particular representation relied on as giving rise to an estoppel was not clear and unequivocal in the required sense McNair J. is reported as saying, at p. 213: "the representation must be clear and unequivocal or at least reasonably understood to be clear and unequivocal" (italics mine). These words clearly give rise to considerable logical difficulties in exegesis, since, one would have thought, words are either clear and unequivocal, in which case they would be reasonably so understood, or not clear or not unequivocal, in which case a representee would not be reasonable in so understanding them. However that may be, it is reasonably clear that the words italicised above are unnecessary to the decision, and it is therefore for consideration how far, apart from them, there is or was any authority for the proposition. The researches of counsel led him to the citation of the well-known passage of Bowen L.J. in Low v. Bouverie [1891] 3 Ch. 82. But I do not think that this citation bears the weight sought to be placed upon it. Bowen L.J. said, at p. 106:

"... an estoppel, that is to say, the language upon which the estoppel is founded, must be precise and unambiguous. That does not necessarily mean that the language must be such that it cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed."

I am satisfied that, in the second sentence of the above quotation, the meaning is to exclude far-fetched or strained, but still possible, interpretations, whilst still insisting on a sufficient precision and freedom from ambiguity to ensure that the representation will (not may) be reasonably understood in the particular sense required. I do not regard this second sentence as any authority for general qualification of the first. On the contrary, the first sentence governs the second and contains the very proposition for which Low v. Bouverie is rightly cited as an authority."

54. It is necessary to bear in mind that in essence the Defendants are placing reliance upon the failure of Sea Horse to notice that it was manifest from the face of a few of the documents submitted to them that goods were being shipped from Ningpo.

55. I accepted the evidence of Mr. Skoczen and Mr. Dugan that Sea Horse process an enormous volume of Bills of Lading. The work relating to this is understandably performed by comparatively junior clerical staff. What they are concerned with is ensuring that the consignees of goods receive them and that payment is effected in accordance with the agreed terms.

56. I can see no reason why the staff of Sea Horse who are engaged in this work should be expected to check details which may not be of immediate concern to the tasks they are performing. Certainly their duties would not extend to checking whether the terms of an Agency Agreement of the company had been duly complied with.

57. Both Mr. Skoczen and Mr. Dugan gave evidence that they had no knowledge at the relevant time that the Agency Agreement had been breached and I can see no reason to disbelieve their evidence.

58. For these reasons I am satisfied that there can be no question of the doctrine of estoppel arising.

59. I will now consider the question of damages.

60. Mr. Jat conceded that on the evidence the damage to the cargoes occurred prior to containerisation in Hong Kong.

61. That then leaves the question of quantum.

62. I accept the submission made by Mr. Fok that a Principal is entitled to recover the loss and liability he has been exposed to as a consequence of an Agents breach. The authority for this being paragraph 100 Vol. 1(2) of Halsbury's Laws of England 4th Edition.

“100. Action for damages. Upon an agent's breach of duty the principal's remedy is, as a rule, to bring an action for damages for breach of contract (For forms of indorsement on writ and statement of claim in actions by the principal against the agent, see 4 Court Forms (2nd Edn)(1989 Issue) 21-23, 25-34, Forms 1-4, 10-19. Where the agent has accepted al may alliteratively claim the amount of the bribe as money had and received: Mahesan v Malaysia Government period of Officers ' Co-operative Housing Society Ltd [1979] AC 374, [1978] 2 All ER 405, PC.), and the limitation (See the Limitation Act 1980s 5; and LIMITATION OF ACTIONS.) runs in the agent's favour from the date of the breach (Wood v Jones (1889) 61 LT 551; Metropolitan Bank v Heiron (1880) 5 ExD 319, CA (fraud). This is so even where the agent acted in a fiduciary capacity, unless he has been guilty of fraud, or unless the claim is for property entrusted to him, or for the proceeds or value of such property: Limitation Act 1980 SS 21, 32; North America Land and Timber Co Ltd v Watkins [1904] 1 Ch 242; affd [1904] 2 Ch 233, CA; Re Lands Allotment Co [1894] 1 Ch 616, CA. As to whether a claim lies in tort or in contract see para 92 ante. See also LIMITATION OF ACTIONS.).

Where an agent is sued by his principal for breach of contract, the measure of damages is the measure recoverable under the general law of contract, which is the full amount of the loss actually sustained (Smith v Price (1862) 2 F & F 748; Maydew v Forrester (1814) 5 Taunt 615; Neilson v James (1882) 9 QBD 546, CA. If there has been no actual loss, the principal is entitled to nominal damages (Van Wart v Woolley (1830) Mood & M 520). As to the measure of damages where an agent to sell land signs a contract in excess of authority and the principal is sued for specific performance see Lewcock v Bromley (1920) 127 LT 116; and as to the measure where an agent to sell land fails to disclose a higher offer see Keppel v Wheeler [1927] 1 KB 577, CA. As to the right of the principal to an indemnity where an agent has abused powers of which he is a trustee see Eastern Shipping Co Ltd v Quah Beng Kee [1924] AC 177, PC.), and no more (Waddell v Blockey (1879) 4 QBD 678, CA; Cassaboglou v Gibb (1883) 11 QBD 797, CA; and see Michael v Hart & Co [1902] 1 KB 482, CA; affd sub nom Hart & Co v Michael (1903) 89 LT 422, HL; Johnston v Braham and Campbell [1917] 1 KB 586, CA. Nominal damages only will be awarded where the principal is unable to show that any damage has been suffered: Carreras Ltd v Levy (1970) 215 Estates Gazette 707 (misrepresentation as to amount of office space in building to be taken in sub-lease; no damages proved since rent paid might equally represent the market value of the smaller space actually available).), provided that such loss is the natural and probable consequence (Cf Mainwaring v Brandon (1818) 2 Moore CP 125, with Re United Service Co, Johnston's Claim (1871) 6 Ch App 212.) of the breach of duty, or such as was within the contemplation of the parties (Hadley v Baxendale (1854) 9 Exch 341; Boyd v Fitt (1864) 11 LT 280. As to the measure of damages in contract and tort see DAMAGES.). This may include profit which has actually been lost, but not merely expected profits which might have been made if the agent had performed his duty (Salvesen & Co v Rederi Aktiebolaget Nordstjeman [1905] AC 302, HL; Cassaboglou v Gibb (1883) 11 QBD 797, A; Johnston v Braham and Campbell [1917] 1 KB 586, CA. See also Laskin v Bache & Co Inc [1972] 1 OR 465 (Ont CA) (damages recovered in respect of loss of opportunity to sell stock certificates in a declining market where broker failed to obtain possession of certificates).). Where the agency is gratuitous, the action by the principal for damages will be in tort (See para 92 ante.)."

63. I am also satisfied that this extends to the recovery of costs and damages in previous proceedings. I reject the submission made by Mr. Jat that on the wording of the Settlement Agreement concluded between the Plaintiff and Sea Horse the Plaintiff's recovery is limited to the payment of US$20,000.00. My reason for rejecting this contention is that I am satisfied on looking at the document as a whole that it did include an assignment of the right of action and that this is now vested in the Plaintiffs. I consider that the Plaintiffs can accordingly recover damages in accordance with the principles referred to in paragraphs 670 and following in the 15th Edition of McGregor on Damages, Sweet & Maxwell 1988.

64. Mr. Jat complains that the settlement which was concluded between the parties amounted to a complete surrender.

65. Having regard to the evidence of the surveyors and of the strength of the case I consider that the Defendants are indeed fortunate that this was the case. Had there not been a surrender at this stage the claim would have been much inflated by legal costs.

66. I am satisfied that the Plaintiffs have proved their case in its entirety and are entitled to judgment in the amount claimed.

67. For the sake of completeness I will attempt to address the issues raised specifically. My answers are :-

1. The scope of the Defendants' authority was confined to issuing Bills of Lading evidencing contracts of carriage from Hong Kong to United States ports.

2. Yes.

3. Yes. According to the concession made by Mr. Jat.

4. The loss and damage was as claimed.

(a) Yes.

(b) Yes.

68. At the conclusion of the hearing it was agreed that costs should follow the event. This being the case the Plaintiffs will have their costs. Interest will be payable from the date of the issue of the writ until payment of the amount due.

Representation:

Mr. Joseph Fok inst'd by Clyde & Co. for Plaintiff

Mr. Jat Sew Tong inst'd by Stevenson, Wong & Co. for Defendant