Dfds Transport (HK) Ltd v. Max Trade Ltd

DCCJ 2953/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2953 OF 2003

__________

BETWEEN:

__________

Coram : Her Honour Judge H.C. Wong in Court

Date of Hearing : 25^th August 2004

Date of Handing Down Judgment : 22^nd September 2004 

JUDGMENT

1.In this case the Plaintiff is claiming against the Defendant for air freight charges.  A total of eight airfreight shipments from Hong Kong to Bangladesh were forwarded at the requests of the Defendant between June and July 2000.  It is the Plaintiff’s claim that by seven Shipper’s Letter of Instructions & Guarantee for Carriage of Goods signed by the Defendant in favour of the Plaintiff, the Defendant guaranteed payment of all charges due to the Plaintiff or to the carriers involved on a “freight collect” basis in case of dishonoured payment by the consignees.

2.It is the Plaintiff’s case that at the requests of the Defendant, all shipments were duly delivered to the Defendant’s consignees and the Plaintiff applied to Woolworths in U.K. and to the Defendant’s partner Shanin Company in Bangladesh for payment of the unpaid air freight charges.  Unfortunately, neither party paid any of the air freight shipment charges.  By a letter dated 12^th March 2002, the Plaintiff gave notice of dishonoured payment to the Defendant and sent an invoice to the Defendant for payment of outstanding freight charges for the 8 shipments sent on the request of the Defendant.  Total freight charges claimed is HK$96,342.65.  The Plaintiff claimed that the Defendant failed to pay any part of the $96,342.65, therefore the Plaintiff commenced action against the Defendant.

3.In the Defendant’s defence, it admitted that the Defendant signed seven Shipper’s Letter of Instructions & Guarantee for Carriage of Goods in favour of the DFDS Dan Transport (HK) Limited (the Plaintiff’s former name).  The Defendant further admitted that the charges should be on “freight prepaid” basis instead of “freight collect” basis.

4.The Defendant also claimed that payments should be made by Woolworth (“the consignee”).  The Defendant claimed that it is liable only for local transport charges under the party agreement and denied that it had ever guaranteed payment of any freight charges due to the Plaintiff or to the carriers as alleged.

5.In the agreement between the Plaintiff and the Defendant under the Shipper’s Letter of Instructions & Guarantee for Carriage of Goods signed by the Defendant, the endorsement at the bottom of the Shipper’s Letter of Instructions & Guarantee states:-

“It is understood that the shipment is to be carried by air subject to the terms and conditions/provision stated on the airway bill of the carrier.  We hereby guarantee the payment of all charges due to DFDS DAN TRANSPORT or to the carrier involved on “freight collect” basis in case the shipment is abandoned, or refused acceptance by the consignee, or in case shipment cannot be delivered due to Customs’ confiscation or legal seizure or is returned to owner at the latters’ request, or dishonoured payment by consignee or charges were reversed to “prepaid” by carrier.”

“In consideration of your granting us a “Freight Prepaid” airway bill on the above shipment, we guarantee that freight will be paid to you on receipt of your invoice/debit note.  We further agree that the issuance of this “Freight Prepaid” airway bill in no way constitutes a receipt for the payment of freight which is now outstanding.  In the event of a dispute or claim arising out of this cargo, we agree to settle all charges due before lodging such claim and to your Informing Bankers, Underwriters or other interested parties that you hold this Letter of Guarantee.”

6.The Shipper’s Letter of Instructions & Guarantee for Carriage of Goods had been endorsed and marked by the Defendant, under the column of “charges” it was endorsed with the remarks: ‘prepaid on account of Woolworth’, as to other charges it was marked ‘prepaid by Max Trade Limited except local transport charges which are on account of Woolworth’.  Under the column of special remark it states”-

“We, being the shipper of the consignment, agree to pay for the service charges of “Counter-sign” at a cost of HK$75 per house air waybill.  We agree to settle the total amount”

The column of special remark referred to above is next to the signature and company chop mark of the Defendant on each of the Shipper’s Letter of Instructions & Guarantee for Carriage of Goods for the eight shipments.

7.According to the evidence of the Plaintiff’s witness Mr. Jakob Jeppesen, the General Manager of the Plaintiff, this document referred to as the Shipper’s Letter of Instructions & Guarantee for Carriage of Goods would be sent to a customer who requested for the Plaintiff’s services.  The Plaintiff would only process the order after the customer filled in the Shipper’s Letter of Instructions & Guarantee and signed the document giving instructions to the Plaintiff and the name and address of the consignee, the shipper, and the shipping marks, freight terms etc.  According to Mr. Jeppesen, if this document was not completed or if the customer amended the terms of the document, the Plaintiff would not ship the cargo until all the terms have been confirmed.  After the instructions were given, the Plaintiff would require the customer to give a date and time of the collection of the cargo and the Plaintiff would then book the airline on behalf of the customer.  After collection of the consignment, the Plaintiff would weigh and measure the consignment and endorse those particulars on the airway bill.  After filling in the airway bill, the Plaintiff would send a copy of the airway bill to the customer for it to check for accuracy and approve.  After the customer approved the particulars on the airway bill, the Plaintiff would send to the customer the original airway bill and they would then dispatch the shipment and pay the airline the freight charges.

8.The Plaintiff relies on clause 10 of the condition of contract on the airway bill and which states:- 

“10.1         Except when the carrier has extended credit to the consignee without the written consent of the shipper, the shipper guarantees payment of all charges for carriage due in accordance with carrier’s tariffs, conditions of carriage and related regulations, applicable laws (including national laws implementing the Convention), government regulations, orders and requirements;

10.2           When no part of the consignment is delivered, a claim with respect to such consignment will be entertained even though transportation charges thereon are unpaid.”

9.The relevant airway bills can be found on pages 40 to 46 of the agreed bundle.  The name of the shipper on the airway bill is the Defendant “Max Trade Limited”, consignee’s name ‘to be order of National Bank Limited’, the Issuing Carrier’s Agent Name and City ‘DFDS Dan Transport (HK) Limited Hong Kong’.  The Plaintiff produced Exhibit P-1, the airway bill for shipment executed on 29^th June 2000.  It is apparently an amended airway bill amending the earlier airway bill on page 44 of the bundle, its serial number of 86914623 is identical to the one on page 44.  The amendment was endorsed by a chop under the Issuing Carrier’s Agent Name and City and it was amended from DFDS Dan Transport (HK) Limited Hong Kong to Union Travel Co/HKG and the airfreight charges endorsed was a total of $807.50.

10.Exhibit P-1 also included an invoice to the consignee ‘Shanin Limited’.  It is also marked on the invoice 26067 dated 29^th June 2000 that the consignor was the Defendant ‘Max Trade Limited’.  A second invoice 26066 was issued on the same date addressed to Max Trade Limited.  This is an invoice for the terminal charge of HK$81.30, whereas the invoice 26067 is an invoice for ‘collect’ freight charges of $807.50, handling charge of $283, fuel charge of $23.80, airline documentation $15, toll fee $40 and CFS charge $160, a total of HK$1,329.50.  This invoice was sent by DFDS Dan Transport to DFDS Transport Limited Unit 1, Lakeside Industrial Estate, Lakeside Road, Colinbrook, Berkshire, United Kingdom.

11.According to Mr. Jeppesen, the Plaintiff requested its UK office to collect the freight charges from Woolworth UK as directed by the Defendant, however the Plaintiff UK office was not able to obtain any payment from Woolworth UK.  Woolworth UK had requested the Plaintiff to obtain payment directly from the consignee in Bangladesh.  When the Plaintiff requested for payment from the consignee in Bangladesh, Shanin Limited, the Plaintiff was told to demand payment from the Woolworth agent Rowley in UK which the Plaintiff was unable to locate.  Consequently, the Plaintiff failed to obtain any payment in spite of writing to different people in the UK and to Bangladesh.  Eventually the Plaintiff turned to the Defendant and requested payment under the guarantee contained in the Shipper’s Instructions & Guarantee of Carriage of Goods and the airway bill clause 10. 

12.Under cross-examination, Mr. Jeppesen told the Court that it is the Plaintiff’s policy for shipments to certain countries not to accept “freight collect”.  Bangladesh was one of those countries, and that, according to Mr. Jeppesen, was why the Plaintiff had the guarantee endorsed on the Shipper’s Instruction and the airway bill.  Mr. Jeppesen further claimed that the Plaintiff granted the “freight prepaid” airway bill because the Plaintiff was assured that freight would be paid by Woolworth UK and the guarantee clause under the Shipper’s Letter of Instructions & Guarantee of Carriage of Goods in addition to the guarantee under clause 10 of the airway bill.

13.According to Mr. Jeppesen, these eight consignments were the first consignments that the Plaintiff carried out for Woolworth.  Mr. Jeppesen claimed that the Plaintiff had never dealt with Woolworth directly before, it had only dealt with Woolworth’s agent previously.  And since the Plaintiff had no direct dealing with Woolworth UK as far as these eight shipments were concerned, there were no contracts between Woolworth UK and the Plaintiff, it had not been able to obtain any payment of freight charges from Woolworth UK.  It is Mr. Jeppesen’s evidence that the Plaintiff accepted the air freight request from the Defendant because the Defendant gave a guarantee for the freight charges.  Consequently, if the Plaintiff could not collect from the consignee the Plaintiff would collect the freight charges from the shipper in accordance with the Plaintiff’s trade practices. 

14.Accordingly to the evidence of the Defendant’s witness Mr. Malhotra, in or about June 2000, the Defendant received certain purchase orders for garment accessories from the Shanin Limited, a garment manufacturer, with whom the Defendant had certain business dealings for about 2 to 3 years at the time.  The instruction from Shanin was that the purchaser of these transactions was Woolworth UK and the destination of the shipment of the accessories was Dhaka, Bangladesh.  That the related freight charges were to be paid on “freight prepaid” basis also to be on account of Woolworth, other charges were also to be paid on “freight prepaid” basis but on account of the Defendant except for local transportation charges also to be on account of Woolworth.  Further, Woolworth had nominated the Plaintiff as the forwarder in all these transactions with which the Defendant had never had any business dealings previously.  According to Mr. Malhotra, it is universally understood in his trade that so far as the destination of a shipment is Bangladesh, the freight charges involved must not be paid on “freight collect” basis but should be on “freight prepaid” basis due to the foreign exchange restriction adopted by the Government of Bangladesh.

15.Therefore, accordingly to Mr. Malhotra, only the local transportation charges would be payable by the Defendant on account of Woolworth.  These included (a) terminal handling charges at a fixed rate of HK$1.70 per kilogram and (b) documentation charges to be paid to forwarder as a fixed sum of $15.  Since the forwarder was named by Woolworth and Woolworth would have reached an agreement with the Plaintiff as to the freight charges, the Plaintiff failed to make an offer on the rate of freight charges to the Defendant.  The Defendant claimed it consequently did not at any stage negotiate or agree on the rate of freight charges with the Plaintiff for these eight shipments.  Mr. Malhotra also admitted in his witness statement that in spite of his knowledge of the existence of the guarantee provisions on the Shipper’s Letter of Instructions he did not pay much attention to the guarantee provisions.  According to him, they were only applicable in normal cases where the rate of freight charges had been agreed by the shipper and the forwarder and where the shipper was certain about the amount to be guaranteed.

16.On the other hand, Mr. Malhotra admitted the freight charges of each consignment was known to the Defendant because it was endorsed on the airway bills.  According to Mr. Malhotra, he had used other forwarding companies and he knew of their charges.  He claimed that different rates are charged by different freight forwarding companies.  Mr. Malhotra also complained that the invoices sent to the Plaintiff by the Defendant were only sent 9 to 10 months after the shipments were delivered.  The Defendant claimed that it is bound by the terms of contract and the terms of contracts specified the payment on Woolworth’s account.  The Defendant further claims that this particular term of the contract superseded other contract terms on this basis the Defendant is not liable to the Plaintiff for the freight charges. 

The Law

17.The Plaintiff’s counsel, Mr. Tang, referred me to The Law of Guarantees 3^rd edition by Andrews and Millett.  Para. 1.04 on page 3 states:-

“Contracts of Guarantee

Definition

A contract of guarantee, in the true sense, is a contract whereby the surety (or guarantor) promises the creditor to be responsible, in addition to the principal, for the due performance by the principal of his existing or future obligations to the creditor, if the principal fails to perform those obligations.  In Wardens and Commonalty of the Mystery of Mercers of the City of London v. New Hampshire Insurance Company (1991) 3 J.I.B.F.L. 144, Phillips J. cited with approval the following definition of a guarantee which is given in Halsburys Law of England (4^th ed. 1993 reissue) at para. 101:-

“A guarantee is an accessory contract by which the promisor undertakes to be answerable to the promisee for the debt, default or miscarriage of another person, whose primary liability to the promisee must exist or be contemplated.”

18.In Halsbury’s Laws of Hong Kong Vol. 13 (2) 2003 Reissue at page 279 para. 200.004 the definition of Guarantee was adopted from the Halsbury’s Laws of England para. 101 (4).  Mr. Tang, counsel for the Plaintiff, further submitted that in the full construction of the terms of the guarantee, it should be read as ‘in case the Plaintiff fails to be paid the Defendant hereby guarantee to pay the Plaintiff on freight collect basis’.  That “freight collect” basis only governed the payment method made by the Defendant i.e. the guarantor to the Plaintiff.  It is not on the payment method from Woolworth (the consignee) and the Plaintiff (the carrier).  The Plaintiff’s alternative submission was that the two separate terms governed two situations, one for “freight collect” situation, the other for “freight prepaid”.  However the Defendant is liable to pay under the guarantee agreement.  Mr. Tang further argued that the Defendant is bound by the guarantee, once the consignee failed to pay, the Defendant is liable to pay.  The Plaintiff alleged that it had informed the Defendant and demanded payment in an earlier letter of 15^th March 2001.  Miss Lee, representing the Defendant, argued that the agreement between the Plaintiff and the Defendant had been varied before the conclusion of the contract.  She relied on Chitty on Contracts 29^th Ed. vol. 1 page 260 para. 3-080 (4) “Variation” before conclusion on contract:-

“Fourthly, there is the apparently paradoxical possibility that the parties may agree to vary a contract even before the contract has been concluded.  This may be the position where A and B negotiate on the basis of formal documents and A represents that the proposed contract will be on terms less favourable to himself than those set out in the documents.  If the documents are nevertheless executed without alteration, the representation may then be enforceable as a collateral contract.  The consideration for the promise contained in A’s representation is provided by B when he executes the documents, and so enters into the principal contract, at the request of A and in reliance on the representation.”

19.The Defendant claimed that the Defendant had dealt with Mr. Leo Poon, the Operation Clerk of the Plaintiff.  That the Defendant had told Mr. Poon that the Defendant would only be liable for local charges.  He claimed that Mr. Poon, on behalf of the Plaintiff, had agreed to the Defendant to be liable only for local charges.  On this basis, an oral agreement was reached that the Defendant would only be liable for local charges and not the air freight charges.  Therefore, the Defendant claimed that the Plaintiff is not allowed to rely on the broadly drafted clauses of the Shipper’s Instruction and the airway bill.

Findings

20.The Defendant did not produce any documentary evidence of amendments to the Shipper’s Letter of Instructions & Guarantee for Carriage of Goods.  Nor did the Defendant exhibit any correspondences to show that they had a collateral agreement that the Defendant would not be liable for the air freight charges or that there was an amendment of the terms of the guarantee in the eight Shipper’s Instructions and the airway bills.  The Defendant did not call Mr. Poon to give evidence on the alleged oral amendment varying the written guarantee of payment of air freight charges.  Consequently, under the Parole Evidence Rule, the Defendant cannot now come to court and say the written terms do not apply.  In any event, the Letter of Shippers’ Instructions and Guarantee signed by the Defendant clearly superseded the previous oral agreement even if there was an oral agreement prior to the signing of the Letter of Shippers’ Instructions and Guarantee.

21.Further, the Defendant admitted that it has full knowledge of the freight charges requirement of the Plaintiff when shipments were sent to the Plaintiff to be sent to Bangladesh, a country where “freight collect” cannot be effected.  The Defendant was also aware of the terms endorsed on the Letter of Shipper’s Instructions & Guarantee for Carriage of Goods that the Plaintiff’s granting of “freight prepaid” airway bill on the shipment was based on the Defendant’s guarantee that freight will be paid to the Plaintiff on receipt of invoice or debit note.  Therefore, in spite of the endorsement under “charges” ‘prepaid on account of Woolworth’ the Defendant understood what it had guaranteed under the Letters of Shipper’s Instructions & Guarantee for Carriage of Goods.

22.This guarantee was further reinforced when the Defendant received the airway bill on each occasion a shipment was sent to Dhaka in Bangladesh because clause 10 of the condition of contract of the airway bill specified that the shipper has guaranteed all charges for carriage due in accordance of carrier’s tariff.  It is not disputed that the goods the Defendant sent through the Plaintiff had been duly delivered to his consignee who took delivery in Dhaka, Bangladesh.  Since the consignee in Bangladesh failed to pay the freight charges and Woolworth UK also refused to pay the charges, the Plaintiff is entitled to demand the payment of air freight charges under the guarantee signed by the Defendant.  The Defendant is liable to the Plaintiff to pay these air freight charges under the guarantee.    

Conclusion

23.I find the Plaintiff has proved on the balance of the probability that the Defendant is liable under the guarantee to pay the air freight charges of the eight shipments of goods to Dhaka, Bangladesh, the total sum of HK$96,342.65 is due and payable by the Defendant to the Plaintiff.  I give judgment to the Plaintiff.

Interests 

24.Interests at the rate of half judgment rate from the date of writ to the date of judgment and thereafter at full judgment rate until full payment. 

Costs nisi

25.Costs to follow the event, the Defendant shall pay the Plaintiff’s costs to be taxed if not agreed with certificate for Counsel.

Miss Jacqueline K.L. Lee instructed by Messrs. Kong & Chang for the Defendant.