Wing Hing Provision, Wine & Spirits Trading Co. Ltd. v. Hanjin Shipping Co. Ltd.
Read the full judgment text of HCA 9510/1995 on BabelCite. This High Court CFI judgment was delivered on 24 December 1998.
1. The Plaintiff was a Hong Kong trader in wine, spirits and beer and regularly imported these goods into Hong Kong for resale. One of the sources of the Plaintiff's purchase was beer from Pabst in USA, Pabst being a well known producer of beer. The Defendant was one of the sea carriers engaged by Plaintiff to carry Pabst beer from USA to Hong Kong. Between mid 1995 and September 1995, the Defendant a Korean shipowner with office in Hong Kong and USA, carried some 7 shipments of Pabst beer for t
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HCA009510/1995 HCA 9510 of 1995 IN THE HIGH COURT OF THE HONG KONG SAR COURT OF FIRST INSTANCE _________________________________
_________________________________ Coram: The Hon. Mr. Justice Waung in Court Date of Hearing: 12, 13, 14, 15, 16 and 23 October 1998 Date of Handing Down of Judgment: 24 December 1998 _____________________ J U D G M E N T _____________________ 1. The Plaintiff was a Hong Kong trader in wine, spirits and beer and regularly imported these goods into Hong Kong for resale. One of the sources of the Plaintiff's purchase was beer from Pabst in USA, Pabst being a well known producer of beer. The Defendant was one of the sea carriers engaged by Plaintiff to carry Pabst beer from USA to Hong Kong. Between mid 1995 and September 1995, the Defendant a Korean shipowner with office in Hong Kong and USA, carried some 7 shipments of Pabst beer for the Plaintiff from USA to Hong Kong. The 7 shipments, at the Trial known by the last 3 digits of the relevant bills of lading are the following with the relevant particulars:-
Although there were problems in relation to the first 5 shipments, these problems were resolved by the parties at the time. Serious dispute however arose over the 6th and 7th shipment and the dispute was whether the Defendant was entitled to insist on payment from the Plaintiff for the Terminal Handling Charges ("THC"). The Defendant said yes, notwithstanding that these THC were not charged in respect of the five previous shipments whereas the Plaintiff said no, because there was an oral agreement made as early as late June/early July 1995 between the parties whereby it was agreed that the specific rate agreed to be paid by the Plaintiff to the Defendant for the carriage of each container was an all inclusive rate, namely inclusive of all terminal charges. The dispute resulted in the Defendant refusing to release the 52 containers under the 6th and 7th shipment, thereby causing the Plaintiff to lose its resale contract and to incur a great deal of extra truck costs, which formed the second part of the claim of the Plaintiff. In response to the claim of the Plaintiff, the Defendant counter-claimed for the disputed THC and instead of merely limiting the counterclaim to the two disputed shipments, the Defendant for good measure also included in the Counter-claim the THC in respect of each of the previous 5 shipments. 2. In this Action, the Plaintiff was originally represented by Solicitor and Counsel but with the long attrition of a complex expensive commercial dispute, the Plaintiff found itself unable to afford the heavy costs of legal representation and the Trial before me was conducted in person by Mr. Steven Yip Chun Nam, a director of the Plaintiff speaking for the Plaintiff. In the circumstances, the Plaintiff and the Court were both handicapped by the lack of proper representation of the Plaintiff's interest. Mr. Shieh for the Defendant gave his very fair assistance to the Court but that was no substitute for a party's usual full representation which is essential in a commercial case of this nature. It seems to me in these unusual circumstances that I ought to set out in this judgment a full history of the matter before proceeding to consider the legal effect of what happened. HISTORY 3. The servicing of the active trade between North America and the Far East by container ships carrying cargo from North America to the Far and vice versa, generated healthy but intense competition amongst the Pacific carriers. One of these active and competitive carriers was the Defendant, which as indicated by its name, is a Korean carrier with operation in Hong Kong and Seattle, USA. The Defendant provided a westbound container service and it competed for the carriage business with a number of other carriers. This case is the story of a competition which went wrong. 4. The Plaintiff was a family company headed by the father Yip Shu Lam, who was ably assisted in the running of the family company by his three sons, Yip Chun Tung, Steven Yip Chun Nam ("Steven") and Adrian Yip Chung To ("Adrian"). Steven is the most commercial minded of the three brothers and he therefore played a central commercial role in the Plaintiff company. Adrian was so to speak assisting Steven. 5. In June 1995, a Mr. Weipz of Pabst ("Weipz") informed Steven that the Defendant in Seattle was offering carriage from Seattle to Hong Kong at US$1,025 for 40 footer and US$897 for 20 footer inclusive of THC and Bunker Adjustment Factor ("BAF") and that the Plaintiff should talk directly to the Defendant in Hong Kong on this. Steven instructed Adrian to talk to the Defendant about these offered rates and around the end of June 1995, Adrian spoke with Jeffrey Lui ("Jeffrey") of the Defendant. Jeffrey was in the sales department of the Defendant in Hong Kong and it was his responsibility to solicit potential customers and to generate business. Jeffrey was known to Adrian as there were previous dealings between the Plaintiff and the Defendant. Jeffrey was not able to confirm the $1025/$897 all inclusive rates in the first telephone conversation but in the second telephone conversation a few days later, he confirmed these rates and attempted to convince Adrian to accept these rates because they were good rates being "all in", namely inclusive of THC and BAF. It would seem that the competitors' rates at the time were just slightly less. In the same second telephone conversation, it was also suggested that each side must give 3 months notice if this freight rate was to be changed. Adrian consulted Steven and telephoned Jeffrey the same day of the second call and on behalf of the Plaintiff accepted the Defendant's offer. For the Plaintiff at least, it regarded itself as having a binding agreement with the Defendant (hereinafter referred to as the "Oral Agreement") that:-
Later the same day of the 2nd and 3rd telephone calls, the Plaintiff instructed Pabst that the Defendant should be used for the carriage of the 1st Shipment. 6. In due course, the 1st Shipment of 45 containers (BL800) arrived in Hong Kong. BL800 showed the freight payable being $46,125 or $1,025 per 40 feet container and this freight was paid by the Plaintiff. Nothing was payable for THC. The same freight of $1,025 per 40 feet container was also shown in the BL704 in respect of the 2nd Shipment of 5 containers and the Plaintiff paid that freight. Again nothing was payable for THC. 7. The BL601 in respect of the 3rd Shipment of 22 containers however stated in the Bill in addition to the freight of $1,025, a THC of HK$2,250 (about US$290) for each container. When the Plaintiff received that BL601 on 14th August 1995, it took the view that there must have been a mistake as $1,025 was supposed to be an all inclusive freight, including therefore the THC. Adrian telephoned Jeffrey and asked the mistake to be corrected and Jeffrey immediately admitted that it was an internal Hanjin mistake but suggested that to avoid any delay in the release of the 22 containers, the Plaintiff should issue to Hanjin a cheque post-dated by one month, of $49,500 (the extra THC charges) which post-dated cheque would not be presented and would be returned immediately to the Plaintiff upon the documents in respect of the mistake being corrected. Adrian agreed to this course to assist Hanjin and to enable the 3rd Shipment to be released immediately. Accordingly the Plaintiff gave to Hanjin not only the bank draft for the freight but also a separate post dated cheque in the sum of HK$49,500. The day after the sending over of that post-dated cheque, the accounts department of Hanjin telephoned to inform the Plaintiff that the mistake had been rectified and that the Plaintiff could collect the post-dated cheque which was done. 8. The same problem arose over the 4th Shipment under BL802 in respect of 20 containers (20 feet) and the 5th Shipment under BL506 in respect of 36 containers (the normal 40 feet) as both Bills of Lading showed in addition to the agreed freight for the 20 feet container and for the 40 feet container, the additional THC payable in the sum of HK$1,690 for 20 feet container and HK$2.250 for 40 feet container. Adrian thought the same mistake was being made as with the 3rd Shipment and telephoned Jeffrey to require the mistake be corrected immediately. According to Adrian he also required a meeting to be held so that the Plaintiff would have a signed written document evidencing the Oral Agreement. Jeffrey agreed to come to come to the meeting and informed Adrian that he and Woody Lau, the sales manager of Hanjin would attend. 9. In anticipation of the meeting, Steven prepared a draft memorandum ("Draft Memo") setting out the agreed all inclusive charge of US$897 for the 20 feet container and US$1025 for the 40 feet container and the three months notice to change the rates, intending that Jeffrey or Woody Lau ("Woody") would sign the document. The meeting in the office of the Plaintiff started at about 1.40 p.m. on the 17th August 1995. Jeffrey and Woody acknowledged that the same mistake had been made in the documentation of the BL charging THC and agreed that Hanjin would correct the mistake. In order to enable Hanjin to immediately release the containers under the 4th and 5th Shipments, they asked that the same arrangement to be made as with the 3rd Shipment, namely the handing over of a post-dated cheque in respect of the THC charges in respect of both Shipments which cheque would be returned immediately upon the mistake being rectified. What then happened was that a post-dated cheque of Steven's sister was given in respect of the THC amount for both Shipments. It would seem that the containers of the 4th and 5th Shipment were released immediately and on the 18th August 1995 (the day after the meeting and the handing over of the post-dated cheque), the accounts department of Hanjin telephoned the Plaintiff to collect the post-dated cheque. This was done. 10. The much more important event which took place at the meeting of the 17th August 1995 however was the matter of signing of the Draft Memo. The Draft Memo sets out the three matters agreed to by the parties under the Oral Agreement, namely:-
At the meeting the Draft Memo was handed to Woody but it was not signed because Woody said that as the mistake in relation to 20 footer was only made the first time, he wished to clarify the position before giving a written confirmation but there was no problem of confirming in writing the other two items, namely the 40 footer all in rate and 3 months mutual advance notice to change the rate. At the meeting Stephen therefore prepared a new Memorandum setting out the Oral Agreement in relation to all in rate for the 40 footer and the 3 months advance note and this document ("17th August Memorandum") was then signed by Woody and Steven. 11. A few days after that meeting on the 17th August, Woody telephoned Adrian to solicit for more business and Adrian indicated that the Plaintiff wanted to have a cooling off of orders to Hajin since there had been mistakes and the Plaintiff wanted to see whether things would progress well after the 17th August Memorandum. 12. The fateful 6th Shipment with 50 containers (BL501) arrived around the 24th August 1995, one week after the important meeting of the 17th August 1995. The Bill of Lading showed in addition to the agreed freight, another HK$2,250 per container payable for THC. In other words, there was the same problem which occurred with the 3rd, 4th and 5th Shipments. This time however the matter became complicated. Although Woody on the telephone immediately admitted the mistake to Adrian and said the Defendant would be rectifying it immediately, there was no request for post-dated cheque as previously. Adrian spent several days chasing Woody for the release of the goods and every time Woody said they would be released very soon. Eventually on the 29th of August 1995 a letter of complaint was written by Steven to Hanjin and thereafter Steven took over this matter from Adrian and dealt directly with Woody. On the 30th of August in the morning, there was an oral agreement between Steven and Woody by which in return for the Plaintiff sending over immediately not only the draft for the freight but also a post-dated cheque for the THC, Hanjin agreed that the containers would be immediately released. Later that afternoon the elder Yip brother, Yip Chun Tung went personally to the office of Hanjin and he said he personally gave the draft, the cheque and the letter dated 30th August 1995 ("30th August Memo") to Woody. This is an important Memo and there was at the trial a serious dispute by Woody that he was not given that Memo on 30th August by Yip Chun Tung and that he did not see that Memo until much later. But what was not disputed is that in exchange for the draft and the cheque in the sum of HK$112,500 ($2,250 times 50 containers), Hanjin on the 30th August did give to the Yip Chun Tung the Release Order. With that Release Order, the Plaintiff then proceeded to move the 50 trucks to the Terminal in order to collect the containers. However, the goods were still not released notwithstanding that the Plaintiff had in their hands the Release Order issued by Hanjin. The 50 trucks were sent away and told by the terminal people to go back on 1st September. Woody also told Steven on 30th August to go back for the containers on the 1st September. Stevens was not told to go back the 31st August because there was a coming typhoon and nothing would be happening on 31st. On 1st of September when the trucks went back to the Terminal they waited and waited and still there was no release of the containers and when Steven was told, he instructed the drivers to report this to the police which was done. Apparently even though on the 1st September 1995 the trucks were not given delivery of the trucks, Woody still kept up the hopes of Steven by informing him to wait with the trucks as Woody was expecting any minute to be able to have the goods released. The fact that there was a daily charge payable for container storage seemed to have propelled both Woody and Steven to have the trucks waiting for what Woody called any minute release of the containers. The case of the Plaintiff is that Woody said to Steven have the trucks wait as the goods would be ready any time and that is why Steven kept the trucks waiting. At no time did Woody say to Steven why did you send trucks to the Terminal when it was wholly unnecessary. It would seem that Solicitors for the Plaintiff became involved sometime on the 1st of September but that as 2nd and 3rd were the weekend, it was only on Monday, the 4th of September that Herbert Smith managed to arrange with Woody that the appropriate THC amount of HK$117,00 for 52 containers (the 2 containers of the 7th Shipment under BL903 showing no THC payable on the face of the BL arrived on 31st August 1997 but there was the same problem about release as with the 6th Shipment of 50 containers) would be sent by the Plaintiff to Herbert Smith to be held by Herbert Smith pending the resolution of the dispute. The agreement made by Herbert Smith with Hanjin was that upon receipt of the money by Herbert Smith from the Plaintiff, Hanjin would immediately release the goods. It would seem that pursuant to this agreement with Herbert Smith, the 52 trucks were sent to the Terminal on the 4th September (having not been sent the previous day Sunday the 3rd). However there were further complications. Despite an agreement made that the goods would be released upon the said sum of $117,000 of the Plaintiff being held jointly by Solicitors for the Plaintiff and Solicitors for the Defendant, the goods were still not released by Hanjin on 4th September. Trucks were sent again on the 5th September but only 6 containers were released and eventually on the 6th of September, the Plaintiff managed to secure the release of the remaining 46 containers. In the meantime the customer of the Plaintiff, Sunshine had called off the contract of sale by the Plaintiff to Sunshine and as I understand it when the goods were finally all released by Hanjin, the Plaintiff had to dispose of the goods in some other way. 13. This Action was commenced on the 19th of September 1995 by the Plaintiff against the Defendant Hanjin whereby the Plaintiff claimed against Hanjin for:-
The Defendant on the other hand counterclaimed against the Plaintiff for THC charges in respect of all 7 Shipments, alleging that there was no oral agreement and that if there was such oral agreement it was illegal as contrary to American law on registered tariff and further that in relation to the 1st, 2nd, 3rd, 4th and 5th Shipments it was due to internal mistakes that THC were not charged. The Defendant therefore counterclaimed in the sum of $393,800. Issues The issues which have to be decided by the Court at the trial are:-
14. It can be readily seen from the above Issues that the first issue of whether there was an oral agreement in late June 1995 between Adrian and Jeffrey is the central issue of the whole Trial. Before I turn to consider that issue and the other issues, I will first say something about the credibility of the various witnesses as so much of this case turns on the credibility of the witnesses. CREDIBILITY OF WITNESSES 15. Let me say immediately at the outset that I have no doubt that the witnesses of the Plaintiff are reliable and witnesses for the Defendant are not. So far as individual witnesses are concerned, I find Adrian to be the most impressive witness of all. He was quietly spoken without given to any exaggeration but he was firm when it was necessary. For me he was undoubtedly a responsible person and completely honest. I totally accept his evidence about the making of the oral agreement with Jeffrey and the subsequent events including in particular the events up to and including the 17th August meeting. Whenever there is any conflict between his evidence and that of Jeffrey or Woody, without hesitation I prefer Adrian's evidence. 16. Steven is of course the more senior of the Yip brothers in the company and he struck me as being very able and dedicated and knew his business. He gave his evidence well but of course with the considerable tension of having the conduct the case on behalf of the Plaintiff, he was sometimes nervous and edgy. He was however for me a man of integrity and reliability and I accept his evidence and would prefer his evidence over the evidence of Jeffrey and Woody. 17. The evidence of Yip Chun Tung, the eldest brother was within a narrow scope basically on the event of 30th August. The contest is between his evidence and that of Woody. There is for me no contest as Yip Chun Tung is a solid witness who I assess to be someone who might not be very clever but who is totally straight. By contract Woody is clever but bent. 18. Woody for me is a thoroughly bad witness. He tells audacious lies. Without battling an eyelet, he could tell the court that although trucks were sent to the Terminal, he did not know, not even when the drivers of the trucks were so angry with waiting day after day that they reported to the Police. His saying the 17th August Memorandum as merely a quotation rather than a binding agreement is merely another of his indifference to truth. Time and again he gave outrageous evidence with a straight face. I reject in total his evidence. There is for me hardly any aspect of his relevant evidence that I can accept. 19. Jeffrey his subordinate for me is not much better as a witness. He is less bright but equally unreliable. As a witness he is more evasive but that did not help him as having seen him in the witness box I have no confidence that he was telling the truth or even capable of telling the truth. Both he and Woody are the worst examples of dishonest salesmen. I find both of them to be very unpleasant people. ISSUE 1-ORAL AGREEMENT 20. Whether there was the oral agreement in late June between Adrian and Jeffrey is largely a matter of credibility of the two witnesses and I have said earlier I have no doubt whose evidence I prefer. In addition to however the reliable oral evidence of Adrian and the wholly unreliable evidence of Jeffrey, there is also the inherent probability of there having been an agreement reached before the Plaintiff started using the Defendant which went on continuously for 7 Shipments. By the time the 17th August Memorandum was signed, it should be noted that the 7th Shipment was already on its way. For me the commercial reality is that Hanjin was competing for business and the deal which the slick salesman Jeffrey wanted to offer was the oral agreement. It must be remembered also that it was not such a super deal as the rate offered by Jeffrey was not lower than the competitors and according to Adrian was in fact slightly higher than the competitors but the Plaintiff chose the Defendant because of the more punctual sailing record. 21. The other feature which is also significant is the creation of the draft Memo and the 17th August Memorandum. The draft Memo suggests to me that there was already in existence an oral agreement with agreed rates long before the 17th August. In fact it simply does not make sense for the Plaintiff to use the Defendant again and again without an agreed rate. And once it could be seen that from the 1st Shipment of 12th July onwards there was an agreed rate, then it is only another step to the agreed rate being inclusive of THC, namely the existence of the late June oral agreement between Adrian and Jeffrey. I have no doubt that all the evidence point to the existence of the oral agreement. 22. Mr. Shieh points to various factors against the existence of the oral agreement, such as the alleged fax of 6th July 1995 (I do not accept that it was sent) or the points arising out the 17th August meeting (which I reject) or the internal telexes (the contents of which I do not accept to be the truth even though the authenticity of these copy documents [originals were not available although expressly sought by the Court]) are deemed to be admitted by the Plaintiff). I do not accept the explanations of mistakes offered by the Defendant. I have read all the Affidavits, the Statements and documents put forward on behalf of the Defendant but in the circumstances (specially having regard to the fact that no one I could believe from the Defendant side had come forward to give reliable evidence) I do not accept that the contents of these documents are true. Notwithstanding the deceptively attractive arguments presented to me by Mr. Shieh, I am wholly unpersuaded by the Defendant's contentions and I am confident and I find as a fact that there was an oral agreement as told to me by Adrian. I have therefore no hesitation in finding for the Plaintiff on this main issue. ISSUE 2-WAS ORAL AGREEMENT ENFORCEABLE BY ITSELF 23. The argument of Mr. Shieh is that the Oral Agreement cannot be enforceable on its own because there is no consideration for the Oral Agreement. The argument can be disposed of shortly. It was suggested that because there was no commitment on the part of the Plaintiff to at least ship all the cargo of the Plaintiff with Hanjin or to ship a certain number of containers for a certain period therefore there is no detriment on the part of the Plaintiff as to amount to consideration. But Mr. Shieh overlooked the agreement of the Plaintiff that there can be no alteration to the agreed rates unless 3 months prior notice is given. This is a detriment to the Plaintiff. As I see it, the Oral Agreement is perfectly valid and is not void for lack of consideration. Furthermore, the Oral Agreement was performed again and again by the Plaintiff and the Defendant and reliance was placed by the Plaintiff on the Oral Agreement and the Plaintiff acted on it instead as it could have easily done gone to one of competitors payable a comparable rate. I do not see how the Defendant could renege on it. Having reached this conclusion, it is therefore not necessary for me to consider Issue 3 on the proper law of carriage contract which incorporated the oral agreement or whether such carriage contract is enforceable if it is Hong Kong law (Issue 4) or if it US law (Issue 5). Once it is held that the Oral Agreement is enforceable and has legal effect, it follows that the Defendant was not entitled in Hong Kong to insist upon the payment of THC or to withhold delivery of the containers and therefore the Defendant must be liable for all consequences arising from their breach of the Oral Agreement. ISSUE 6-ORAL AGRREMENT OF 30TH AUGUST 1995 24. The Plaintiff however also seeks to rely on the 30th August Agreement, namely the oral agreement of 30th August 1995 made between Steven and Woody whereby Woody agreed that in consideration of the Plaintiff giving that day a post-dated cheque in the amount of the disputed THC (which cheque was to be returned as previously), the Defendant would immediately that day release the containers to the Plaintiff. That 30th Agreement was evidenced by the 30th August Memo which was given to the Woody according to Yip Chun Tung and which Woody denied having received. Woody's evidence, as I said earlier I reject and I find as a fact that there was the 30th August Agreement and that in breach of that 30th Agreement, the Defendant did not release the containers as it should have done. ISSUE 7-DAMAGES FOR WASTED TRUCKS 25. The evidence of the Plaintiff on this issue is clear, namely that Woody kept saying yes to the Plaintiff thereby causing the Plaintiff to send the trucks and have them on standby on the 30th August, 1st, 2nd, 4th and 5th September and incurring the heavy costs of these trucks which costs were wholly wasted as the goods were not released until the 5th of September when only 6 containers were released. The documents in respect of the costs of the trucks for the five days are clear and I have no doubt that the evidence of Steven is correct and that he did what was reasonable in the circumstances. In this connection I find the evidence of Woody to be truly astonishing. There was someone chasing him everyday for the goods and sending trucks to the Terminal and even reporting to the Police for the non delivery of the goods and Woody could claim that he had no knowledge of trucks being sent or police being called and that he did not keep misleading Steven again and again. For me the choice of the where the truth lies is simple and clear. Woody is the sort of person who should not work for a decent company. Under this Issue, I find that the Plaintiff is entitled to damages in the sum of $585,144 as claimed in the Statement of Claim. ISSUE 8-LOST CONTRACT COMPENSATION 26. The Plaintiff also claimed damages in the form of compensation which it will have to pay to Sunshine. This is an area where it was agreed at the trial that the Court should defer the trial of this question to a later date after the issue of liability had been determined. The Plaintiff having succeeded, I therefore order that this question of damages suffered by the Plaintiff as result of the breach of the Oral Agreement by the Defendant be heard at a date to be fixed. ISSUE 9-COUNTERCLAIM FOR THC 27. It follows from my decision earlier that the Counterclaim for THC on all 7 Shipments must fail and therefore should be dismissed. CONCLUSION 28. The result is that judgment is to be entered in favour of the Plaintiff in the sum of $585,144 together with interests thereon at 3% above prime from the date of the Writ until Judgment. The other damages which the Plaintiff has suffered will be assessed at a later date to be fixed. The Counterclaim is dismissed. The Plaintiff is to have the costs of the Action and costs of the Counterclaim. The sum of $117,000 in the Joint Account of Herbert Smith and Sinclair Roche & Temperley together with any accrued interest theron is to be released immediately to the Plaintiff. I also make an order nisi that the costs awarded to the Plaintiff is to be on an indemnity basis which costs will be assessed by me by way of a gross sum assessment under Order 62 rule 9(4)(b) at a date to be fixed.
Representation: Mr. Stephen Yip Chun Nam (Director of the Plaintiff) for the Plaintiff acting in person Mr. Paul Shieh instructed by Messrs Sinclair Roche & Temperley for the Defendant |
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