Choi Hung & Sons Transportation Co Ltd v. Tat Ming Air Forwarding Ltd

HCA004671/1981

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Hon. Kempster, J.

Date: 10th October, 1983

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J U DG M E N T

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1. On or about the 4th April 1981 an agreement was concluded between the defendants and Transgroup (HK) Ltd., a company which owned some 50% of the defendants' shares, whereby the defendants undertook to convey to Whampoa by barge 131 containers filled with tobacco from M V Golden Park, then expected to moor in Hong Kong harbour on the 27th April, in consideration of the payment by Transgroup to the defendants of $2,500 per container or HK$327,500 overall. Transgroup was indebted to the defendants at the time.

2. By what was described as a "booking note" dated the 16th April the defendants, who had no barges licenced for the job in question, subcontracted their obligations under the 4th April agreement to the plaintiffs who were prepared to discharged them for the sum of HK$1,600 per container or HK$209,600 "all in". The booking note read:-

"It is hereby expressly agreed that TOPMAN, (that is the defendants) will deliver by vessel's derricks and at vessel's expense 131 x 20' sealed containers tobacco, from the vessel "GOLDEN PARK" on or about 27th April 1981 (dates to be mutually agreed) to the barges of the plaintiffs alongside the said vessel in Hong Kong harbour".

It is to be inferred from the conduct of the parties that the earliest date upon which the vessel, having reached the harbour, was in a position to discharge cargo was mutually agreed. The booking note continued:

"CHOI HUNG expressly undertake to transport at their risk and expense the said 131 containers of tobacco from alongside in Hong Kong harbour, by barge, to the port of Whampoa, China, and there deliver the said 131 containers tobacco onto the quay by barge derrick free of expense to the cargo. Time lost and all expenses relating thereto, due to waiting for berth and awaiting redelivery of empty containers (for return to HK) will be for CHOI HUNG account.

TOPMAN will endeavour to arrange berth at Whampoa, but all berthing costs, dues etc. for same are to be for CHOI HUNG account.

On redelivery of the 131 empty containers to the quay in Whampoa, CHOI HUNG to reload same to barges by barge crane and return same at their risk and expense to waterfront of Container Yard in Hong Kong nominated in advance by TOPMAN, discharge being by barge crane.

The 'all-in' charge for the operation will be HK$1,600 nett per 20' container payable by TOPMAN to CHOI HUNG 50% on completion of loading into barge Hong Kong and 50% on complete redelivery of empty containers to nominated Container Yard in Hong Kong. Failure to perform the above mutually agreed terms will result in damages payable by CHOI HUNG to TOPMAN, assessed at a sum not less than the actual losses incurred by TOPMAN  in arranging alternative full fulfilment of the exercise  by another operator".

3. CHOI HUNG confirmed that their barges, by which were understood those of Mr. Chan Fook Kwei, had the appropriate licences and it was provided that the booking-note was to be deemed a fully enforceable contract subject to the Laos of Hong Kong. It was signed on behalf of the plaintiffs by Mr. Tao Pai Yuk, their general manager, and witnessed by Mr. Chan who, as was known to all parties, would in fact transport  the containers from Hong Kong to Whampoa. On behalf of the defendants the agreement was signed by Mr. Fung, a director and his signature was witnessed by Mr. Chu Ka Cheong.

4. As just remarked the plaintiffs subcontracted the greater part of their obligations under the 16th April agreement to Mr. Chan Fook Kwei. The name of the business which he. carried on was Luen Tai Quarry and Transportation Co. and he undertook to carry the containers to Whampoa for the sum of about HK$855 per container or HK$112,000 overall. Since Mr. Chan's obligations were not comprehensive the Plaintiffs would have had to incur further expenses for pilotage, customs and the services of a tug in order fully to implement their contract with the defendants. These additional expenses, I was told, would have left the plaintiffs with a profit of HK$80 per container or HK$10,481 only.

5. In the event M V Golden Park did not reach Hong Kong harbour until the 2nd May where she remained until the 4th. During that time, at the instance of Transgroup, the 131 containers were unloaded into barges belonging to a lighterage concern called Dawin Container Transportation Co.

6. There is a strong conflict of evidence as to what transpired between the 16th April and the 25th May when the plaintiffs' solicitors wrote to the defendants in these terms:

"we have been consulted by (the plaintiffs) in connection with a contract dated the 16th April 1981 made between our client and your firm, whereby our client undertook the transportation of 131 containers from Hong Kong to Whampoa, China, at the agreed charges of HK$1,600 per 20' container, subject to the terms and conditions more particularly set out in the said contract.

We are now instructed that in breach of the said contract and notwithstanding the arrival of the said containers on board the vessel 'Golden Park', you failed to provide the aforesaid Assignment and our client has reason to believe that you entrusted the loading and transportation work to another contractor."

7. It would seem that the expression "the aforesaid assignment" was a reference to the delivery note which would have entitled a party to take delivery from stevedores of the relevant containers. The letter continued:

"In the circumstance, we are instructed to hold your firm fully responsible for all loss and damages suffered by our client, namely, for loss of profit amountint to $52,450 and a further sum of $56,000 being barges charges.

Unless we hear from you with your remittance for the sum of $108,450 within 7 days from today's day, we have instructions to commence proceedings for the recovery thereof without further notice".

8. The only common ground in relation to the period between the 16th April and the 25th May is that the contract between the parties to this litigation was discharged by the oral repudiation of one or the other of them on the 2nd May and that since such date both parties have treated their respective obligations as at an end. Each party has claimed from the other damages for breach of contract.

9. On or about the 18th April Mr. Tao, Mr. Chan and the defendants' representative Mr. Ching visited Whampoa to look for a berth. According both to Mr. Tao and to Mr. Chan the expedition was inconclusive though Mr. Tao told me the Chinese Authorities wanted $100,000. For what he was not quite sure. Mr. Chan said this payment was for the defendants' account. The matter must have remained uncertain because on the 24th April the defendants sent a telex to their correspondents in Canton, China Ocean Shipping Agency Co., in these terms:

"Please be advised that vessel 'Golden Park' now estimated time of arrival Hong Kong 29/4 on carrying barges estimated time of arrival Whampoa 2/5.

Please advise total estimated costs of this operation in details enable us to arrange remittance as early as possible."

10. Having regard to the terms of the contract it is reasonably apparent that the defendants were seeking to ascertain details of the charges on behalf of the plaintiffs for whose account they fell. A reply was received on the following day which read: -

"Due to hard arrangement Whampoa harbour refuse to accept your 131 containers tobacco temporarily".

11. So that at that stage there appeared to be a hitch. Mr. Fung told Mr. Tao about this telex by phone the same day. Mr. Tao said he and Mr. Chan would call at Mr. Fung's office to discuss the matter as he and Mr. Chan had been doing from time to time in order to check the expected arrival dates of the Golden Park.

12. On or about the 27th April Mr. Tao and Mr. Chan duly called at Mr. Fung's office and were shown the telex. Mr. Tao said he knew people in China who could arrange a berth if appropriate bribes were offered and would travel to Whampoa to make the necessary arrangements. He also told Mr. Fung about the demand for $100,000 to be paid into the Hank of China in Hong Kong and asked for an improved contract price.This request was refused. Mr. Fung suggested that Mr. Tao should go to Canton to hand out bribes and see what arrangements he could make.

13. Be that as it may the defendants received the delivery order, which oddly enough was dated the 4th May, on the first of that month; the vessel being due to arrive on the following day. The delivery order was directed to the stevedores, Dawin Godown Ltd., and Mr. Fung told Mr. Tao by phone that this document was to hand. According to Mr. Fung the communication was ignored and all that happened was as recounted by Mr. Chu, the witness to Mr. Fung's signature to the agreement of the 16th April. Mr. Chu, being the manager of and a shareholder in the defendant company, gave the following account of material events: -

"I first saw the delivery order in Mr. Fung's room on or about the 1st May. The delivery order should have been given to Mr. Tao so that the plaintiffs could collect the containers over the ships rail. On the morning of the 2nd May Mr. Tao telephoned me and said that he had failed to make the personal arrangements with the Canton Authorities and therefore could not carry out the transaction involving the carriage of containers. He asked me tad fix the matter up myself; that is, to collect the consignment of tobacco and transport it to Whampoa or to arrange for some other subcontractor to do so. He then hang up. I immediately reported this conversation to Mr. Fung. On Saturdays the defendants' offices are open until 4.00 p.m. in the afternoon.They are closed on the Sundays".

14. According to Mr. Tao what transpired on the 2nd May was totally different. He said:-

"On the 1st of May, in the morning, Chan Fook Kwei and I went to the defendants' office because the vessel was about to arrive. That afternoon I received a phone call calling for me or requiring me to collect the delivery order on the following day when it was to arrive. I was told to get on with the preparatory work.

On the 2nd of May I went to the defendants' office together with Mr. Chan Fook Kwei to get the delivery order. The golden Park arrived that afternoon. We reached the defendants'office during the morning. We met Chan Kwa, a former employee of mine. We had a chat Other staff of the defendants were present. In due course Mr. Fung arrived. He told me to wait for a while saying that the delivery order would arrive soon. We remained together in his office. His office was adjacent to the place where we were sitting with a partition between. He was sitting at a desk. We talked about the contract, particularly about the delivery order, and Mr. Fung was involved in many phone calls. After about an hour he said he did not require our services. That meant he did not require the plaintiffs to transport the containers. He said the delivery order was with the consignee. I said: 'Are you going to compensate us for our loss then?' Mr. Fung said: 'No compensation'. Chan Fook Kwei was present. I asked Mr. Fung to write me a note certifying that the plaintiffs' services were no longer required so that I could explain the matter to their shareholders. Mr. Fung said: 'O.K. Let us tear up the booking-note'. I said: 'I would rather not. I would prefer you to write me a note'. I said to Chan Fook Kwei: 'Our services are no longer required' and we left.

I returned to my office and a few days later instructed solicitors to act on behalf of the plaintiffs".

15. Mr. Chan substantially corroborates Mr. Tao's account of the matter: -

"When on the morning of the 2nd May about 10 a.m. we went to the defendants' office to fetch the delivery order we were told it was not available. When Mr. Fung arrived we asked him when the delivery order would be available".

He described the accommodation.

"Mr. Fung and Mr. Tao had a discussion. I was not in the room long. I heard Mr. Fung say to Mr. Tao: 'Your company's services are no longer required'. Then Mr. Tao said to me 'Now this job is no longer required, the same applies to you"'. I understood this to mean that Mr. Tao was then repudiating his agreement with me. "Then Mr. Tao said to Mr. Fung 'If you don't require my services any longer. you should write me a note to that effect'. Mr. Fung said: 'I will not write you a note. Let's just cancel the contract'. Mr. Tao said that he would call a shareholders' meeting to discuss the matter. I remember the remarks that affected me. I told Mr. Tao he had to give me compensation. This was a little later when we had left Mr. Fung's office; in fact when we were downstairs".

16. So on the one hand we had Mr. Fung saying that no one called for the delivery order and Mr. Chu that Mr. Tao rang up to repudiate; on the other hand we had the account by Mr. Tao and Mr. Chan of a visit when the defendants repudiated.

17. In determining which account is the more probable I am not much assisted by reference to the pleadings before they reached their final form. As is unhappily not uncommon they were originally settled by solicitors on scant and incomplete instructions and had, by amendment and reamendment immediately before or during the hearing, to be reduced to a form more closely approximating to the evidence expected to be given in court and to the tardily disclosed documents. I might add that the advantages of seeking to clarify an opponent's case by requesting further and better particulars; of administering interrogatories; of seeking discovery of specific documents and of securing an Advice on Evidence from counsel do not appear widely to be sappreciated. I will consider the pleadings in their final form in due course.

18. The plaintiffs had expected to make some $10;000 profit from the implementation of their contract with the defendants; a profit which, Mr. Tao conceded, had almost been wiped out by the 2nd May due to the late arrival of the Golden Park. If no berth was immediately available in Whampoa the fulfilment of their obligations might have resulted in a loss for the plaintiffs. Mr. Tao had already asked Mr. Fung for increased remuneration in vain. The defendants had. hoped to make $117,900 from the contract and were unaffected by the delay the cost of which, by the terms of the 16th April agreement, was to be born by the plaintiffs. prima facie they had nothing to gain and everything to loose by repudiating. However, Transgroup was not an assured paymaster. It already owed them money and, by reason of their close association with Transgroup, Mr. Tao was in all probability aware of the financial difficulties which subsequently brought it to liquidation. If the contract had taken it's proper course the defendants would shortly have become liable to pay out $10,480 and a week or so later a like sum. Both parties had a motive for repudiating and for risking a claim for damages from the other. In the case of the defendants they risked a claim for damages from Transgroup into the bargain if they did not immediately find another subcontractor. They did not make a strenuous search but forthwith told Transgroup that they could not fulfil their obligations to them.

19. Transgroup, who were the local agents for the vessel, acted with the greatest alacrity arranging both the transhipment of the containers, as already mentioned, and for their carriage to Whampoa by China Merchant Steam Navigation Co. Ltd., a company registered in China. They paid that company $327,500 for their services; the exact sum which they would have been liable to pay the defendants had the defendants performed their obligations.

20. I return to the letter from the plaintiffs' solicitors of the 25th May which is consistent with the account of the termination of the contract given by. Mr. Tao and Mr. Chan. The defendants did not reply tad it. Insofar as the plaintiffs' claim is concerned I would hesitate to draw any inference adverse tad the defendants based on silence. Mr. Fung described a telephone conversation in which Mr. Tao said he was prepared to settle for "tea money". Insofar, however, as the defendants received a warning letter from Transgroup also dated the 25th May and claim a breach by the plaintiffs of what was for the defendants a relatively important contract and now counterclaim $117,900 and a declaration covering a contingent liability of a further $55,090 and more I would have expected a reply if not an original letter before action. The plaintiffs had no knowledge of the counterclaim until the defendants served their pleading in its original form on the 25th September 1981; over 4 months after the material events.

21. Paragraph 11 of the Defence and Counterclaim read and still reads after amendment and reamendment:

''The defendant contacted the plaintiff after the plaintiff's failure to collect the delivery order and the plaintiff indicated that as a result of port congestion in Whampoa Port there would be a considerable delay before unloading could take place and for that reason the plaintiff did not wish to proceed with the contract".

22. Mr. Chu's evidence, it will be recalled, was that Mr. Tao on behalf of the plaintiffs contacted him by phone. A disparity of this nature between final pleading and evidence cannot be overlooked. Furthermore, though Mr. Tao was obviously confused over a number of letters and did not read English he was quite prepared to make significant admissions in the context of the plaintiffs' claim for damages and struck me as a witness who was providing the court with the best of his recollection. I also accept that, in relation to the morning of the 2nd May, Mr. Chan recalled the remarks made as between Mr. Tao and Mr. Fung which affected him. The demeanour of Mr. Fung and of Mr. Chu struck me less favourably. I only mention specifically Mr. Fung's unconvincing assertion that the defendants did not reply to the plaintiffs' letter before action because of the difficulties involved in convening a board-meeting.

23. In the premises I accept the plaintiffs' account of !chat transpired on the critical day, the 2nd May 1981. I therefore find that it was the defendants who repudiated the agreement of 16th April 1981.

24. The plaintiffs' claim for $52,045 by way of damages was in no way supported by the evidence. Indeed, I am not satisfied that the plaintiffs demonstrated any loss at all. As to the declaration sought I am satisfied that in order to ensure the availability of licenced barges as soon as the Golden Park moored in Hong Kong harbour, the plaintiffs entered into an oral agreement with Mr. Chan to reserve 3 of his licenced barges for 14 days running from the 27th April at a charge of $8,000 a day but that the barges were released on the 2nd May. This rendered the plaintiffs liable to him for 6 days' hire amounting to $48,000. Mr. Chan freely admitted that the supporting document in the plaintiffs' bundle was prepared for the purposes of this litigation which, however, does not affect the validity of the plaintiffs' claim for a declaration. I am also satisfied that the agreement between the plaintiffs and Mr. Chan was, to put it no higher, within the contemplation of both parties to the agreement of 16th April. The plaintiffs have not discharged their liability to Mr. Chan.

25. In the circumstances there will be judgment for the plaintiffs for $25 nominal damages and a declaration that the defendants are liable to indemnify the plaintiffs against Mr. Chan's claim in a sum not exceeding $48,000. There will also be judgment for the plaintiffs on the counterclaim.

Representation:

Ismail (Raymond Tang & Co.) for plaintiffs

Simon Westbrook (Hampton, Winter & Glynn) for defendants