Cheung Lee Warehouse & Transportation Ltd v. Berthier Godown Ltd

DCCJ003933/1984

Contract - Exemption clause in godown warrant - whether term can be implied from course of dealing,

Negligence - Damages to stored goods by water from burst pipe in warehouse - Whether repairmen are agents of godown operator -Incidence of liability.

Held:     Godown warrant issued and signed by Defendant is an acknowledgement of receipt of chattel for storage and not a contract. Exemption clause in godown warrant not known to Plaintiffs at the time of deposit of goods is not binding on Plaintiffs. Term on exclusion of responsibility for damages cannot be implied from occasional transactions between the parties. Repair to warehouse by building management plumbers with Defendant's consent is deemed to be work carried out by Defendant's agent and damages thereby to Plaintiffs' stored goods are held to be from Defendant's negligence. Judgment to Plaintiffs.

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

ACTION NO. 3933 OF 1984

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BETWEEN

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Coram  : H.H. Judge H. Wong in Court

Date     : 15th June, 1984

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JUDGMENT

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1. This is an action for damages between parties which are engaged in the same business of godown operation.

2. These brief facts are not in dispute. On 13.1.1982 Plaintiffs received a consignment of 261 rolls of newsprint from Universal Press for storage but, being short of space within their own premises, passed on the required task to Defendant. Nothing unusual had happened since then until early April 1983 when Plaintiffs were informed that water had damaged that lot of goods and thereupon instructed Messrs. Andrew & Paulmann (HK) Ltd., Carge Surveyors and Measurers to investigate the matter. LOO See-tak, a representative of that surveyors' office stated that he went to Defendant's godown on 10.4.1983 and on arrival noted that the floor and walls thereof were wet. An inspection by him in the presence of NG Keung-cheung (D.W.2), Defendant's store-keeper, revealed that 40 out of the said 261 rolls of newsprint were still damp and bore water marks on different aspects or in varying degrees, ranging in depth from the outer layer inward toward the core or vice versa. He concluded that the soiled paper had become discoloured and unfit for printing and his report formed the basis of a claim for damages by Universal Press against Plaintiffs which in turn sued Defendant in this action.

3. The defence appears to be set up under three grounds: (1) warning/advice was given by Defendant to Plaintiffs to take out insurance cover on their goods, (2) responsibility for the mishap ought to fall on a third party and (3) exoneration of Defendant's liability for damages was provided in the contract.

4. Ground (1) - YICK Cho-chak (D.W.1) Defendant's director/manager put forth the story that he had ordered his employee MUI Fook-tong (D.W.3), who dealt with KWAN Chak-cheung (P.W.3), Plaintiffs' general manager, to tell P.W.3 to insure goods that would be kept in Defendant's godown. P.W.3 denied having been so urged by D.W.3 and D.W.3 himself remained silent on that contention, in spite of questions in that direction having been raised by defence solicitor. In this regard I have no hesitation in rejecting D.W.1's said allegation and accept P.W.3's testimony. I am reinforced in that preference by the fact that whilst P.W.3 said that prior to 15.1.1982 he had transacted with Defendant on about two occasions, D.W.1. put that number to over twenty. It later transpired that D.W.1 had grossly exaggerated on his statement because he produced only 13 copies of godown warrant of which 11 were, except for marks and quantity, identical in all particulars, such as dates of issue and payment, type of merchandise, storage charges etc. In other words, the two sides had, up to 15.1.1982 3 dealings in all with each other. Coming back to the gist of ground (1), I am of the view that even if D.W.1's said instruction had been carried out, the advice to or warning on P.W.3 to insure his stored goods would not be here or there, as far as liability for damages is concerned. In short, there is no merit in ground (1) which must fail.

5. Ground (2) - D.W.1 contended that the blame for the damage ought to fall on the Association of Incorporated Owners of the block in which his godown was situated, because that corporate body handled the management of the building, including the maintenance of and the repair to its drainage system. Evidence from NG Keung-cheung (D.W.2), Defendant's store-keeper, discloses that in the early part of April 1983 the flow of liquid waste inside the duct fixed to the ceiling of his godown was blocked and plumbers were sent by the building management to effect remedial measure. With D.W.2's consent and in his presence those men unscrewed the lid of the duct, removed the blockage, re-sealed that lid and restored the system back to its normal function. However, when D.W.2 resumed duty on the next morning, he noticed that that lid had burst open and dirty water coming out therefrom had fallen and was falling on Plaintiffs' rolls of newsprint. He observed that some of those rolls were dampened and in order to stop a deterioration of the incident, immediately caused the leakage to be repaired. There is a common point in his evidence and that of P.W.3 and D.W.1 in that Plaintiffs had, two years earlier, stored some similar newsprint with Defendant and were compensated by Defendant on damage to their goods by water of public pipes which had entered and flooded the godown. From the evidence I say that, first of all, since Plaintiffs were given possession of the goods in question by Universal -Press, they stepped into the shoes of that owner and thus had the right to sue in their own name. Second, as those goods were delivered to Defendant to keep in its godown in return for remuneration to be paid by Plaintiffs, the contract between the parties is one of custody for reward. Defendant therefore became, not pure custodian of the goods as suggested by defence counsel, but bailee of those goods and it was incumbent upon it to exercise the care and diligence exercised by a careful man in the custody of his own chattels of a similar kind ("Coggs v. Bernard" (1'703) 2 Ld. Raym. 909, 916). On this basis it is, furthermore, not open to Defendant to tell Plaintiffs to sue a third party, who clearly was Defendant's agent and/or acting within the apparent scope of its authority, for damage to the goods which were in Defendant's control and supervision at the material time. Ground (2) of the defence inevitably falls, as it must.

6. Ground (3) - Defendant heavily relied on the exemption clause in godown warrants which it issued to Plaintiffs. That clause reads:

7. Terms and Condition of Storage

8. Defendant maintains that a godown warrant is a contract between the parties with the consequence that Plaintiffs are bound by the aforesaid exemption clause. In this connection it should be noted that the godown warrant of the subject goods bears the signatures of Defendant's staff but none from Plaintiffs' representative and that although storage began on 13.1.1982 that document was not issued until 18.1.1982.

9. A godown warrant can be defined as a receipt issued by a warehouse on the deposit of a chattel for custody by a customer who will use that document to later, upon payment of agreed storage charges, obtain delivery of his goods. It is in no way a contract between the godown operator and the owner of the goods and for this reason the exemption clause printed at its back cannot be regarded as a condition of contract. Furthermore, since the godown warrant in question was made out long after Defendant had received Plaintiffs' goods, it would be idle to claim that Plaintiffs ought to know its terms before placing their chattel in Defendant's godown. A case decided on this principle is "Olley v. Marborough Court Ltd" (1948) 1 K.B. p.532, where it was held that:-

"the terms of the notice in the bedroom formed no part of the contract made between the guests and the proprietors of the hotel. The contract had been made before the guests could see the notice. "

10. Another argument advanced by the defence is on previous course of dealing between the parties which should have brought Plaintiffs' attention to the exemption clause. Here I feel that as Plaintiffs had, prior to 13.1.1982, patronised Defendant three times on 7.3.1981, 20.3.1981 and 2.7.1981, there is no justification for saying that they had such a large number of dealings with Defendant as to make them aware of that clause. In the case of "Hollier v. Rambler Motors (A.M.C.) Ltd" (1971) 2 Q.B. p.71 the plaintiff had had his car repaired at the defendants' garage on three or four occasions over a period of five years. On at least two of the occasions he had signed a form, but had not read the printed words: "The company is not responsible for damage caused by fire to customers' cars on the premises." By an oral agreement made between plaintiff and the defendants, the defendants agreed to repair his car and, while at their premises, the car was damaged by a fire caused by the defendants' negligence. The plaintiff claimed damages. It was held that:

"There was no sufficient course of dealing, so that the condition relied on could not be imported into the oral contract to exempt the defendants from their own negligence; but that, in any event the language of the condition was not so plain that it clearly excluded liability for their negligence; and, accordingly the defendants were liable to the plaintiff. "

11. It can be seen that the Hollier's case is almost at all four with the present issue. As far as negligence is concerned, Defendant's case is not greatly dissimilar from "Smith v. Taylor" (1966) 2 Q.B. 231 in which plaintiff's car was destroyed by fire while being repaired at defendant's garage. In defendant's office a notice exempting defendant from liability for damage by fire was displayed. Plaintiff claimed damages against defendant as bailee. Defendant denied negligence. It was held that defendant was liable.

12. It can also be seen that in the present case the wording of the exemption clause is vague and ambiguous on the reference to "the Company", i.e. it could mean either party. In those circumstances and under the basic rules of interpretation the ambiguity must be resolved against the maker of the document, i.e., Defendant. In the light of the foregoing, ground (3) cannot stand.

13. To sum up, I believe that, with the exception of D.W.1 whose testimony is unreliable in at least some parts as I have earlier mentioned, other witnesses are all truthful ones. I therefore hold that if there is a discrepancy between the evidence of D.W.1 and P.W.3 I would prefer that of the latter. In the upshot, I have no doubt, from facts, that damage to Plaintiffs' goods was caused by Defendant's negligence and, since I have found that the language of the godown warrant does not exclude Defendant's liability for such negligence, I conclude that Defendant should be held liable to Plaintiffs.

Representation:

Mr. K. Leung, of Kenneth W. Leung & Co. for Plaintiffs.

Mr. C. Yuen, of Johnson Stoke & Master for Defendant.