Birkart Globistics Ltd v. Bomafa Armaturen Ltd
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DCCJ 1527/2005 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 1527 OF 2005 ____________ BETWEEN
____________ Coram: Her Honour Judge H.C. Wong in Court Dates of Hearing: 27th – 29th September 2006, 23rd- 24th October 2006 Date of Handing Down Judgment: 21st December 2006 _________________ JUDGMENT _________________
1.The Plaintiff is and was a company incorporated in Hong Kong carrying on the business of providing freight forwarding/logistic services with a head office and branches in Europe. The Defendant is and was a company incorporated in Hong Kong carrying on business as a trader of valves. 2.The Plaintiff have been providing transportation and logistic services to the Defendant to and from places all over the world including North America, South America, Europe and South East Asia since 2003. 3.By an agreement made on or about the end of June 2004 between the Plaintiff and the Defendant, the Plaintiff agreed on the Defendant’s instruction to arrange the forwarding of a shipment of actuators from Italy to Mexico (“ the first agreement”). 4.The Plaintiff claims that it had performed the first agreement and delivered the shipment from the Italian port of Genoa to the Mexican port of Veracruz on about 13th August 2004 (“the first shipment”). The Plaintiff claims the Defendant had refused to collect the shipment from the designated port of Veracruz on or about September 2004. Consequently, the Plaintiff had no alternatives but to arrange for the cargo to be delivered to a warehouse and paid a storage charge of US$30.00 per day. The Plaintiff therefore claims against the Defendant the following charges:-
5.By a second agreement made on or about the end of June 2004, the Defendant instructed the Plaintiff to arrange for a shipment of actuators to be forwarded from Italy to Hong Kong (“the second agreement”). The shipment duly arrived on or about 27th August 2004 in Hong Kong (“the 2nd shipment”). They were collected by the Defendant on or about 2nd September 2004, however, the Defendant refused in spite of repeated demands to pay the freight charge of HK$8,821.70. The Defence Case 6.It is the Defence case that on or about March 2004, the Defendant entered into an agreement with its customer in Mainland China to supply and deliver a mechanic device called “Quick Closing Check Valve” (“the device”) (hereinafter referred as “the supply agreement”). 7.The device consists of 2 major components, namely “Rack and Pinion Actuator” (“the actuator”) and “Check Valve” (“the main body”). In order to comply with the supply agreement, the Defendant purchased the two major components separately from different parts of the world and it was the Defendant’s contractual duty to provide the technical service to assemble the device. 8.The Defendant purchased five actuators from a supplier named Servovale in Italy and the main bodies from a US company whose factory ‘Xanik’ is located in Mexico. The Defendant had arranged for two of the actuators to be shipped to Mexico (“the 1st shipment”) and had them installed by the manufacturer of the valve’s main body “Xanik” in Mexico. Upon completion of installation, the device will be shipped to Hong Kong and trans-shipped to mainland China. The remaining 5 pallets of actuators would be shipped directly from Italy to Hong Kong (“the 2nd shipment”) to be assembled in Hong Kong before delivery in mainland China in October 2004. 9.It is the Defendant’s case that an agreement for carriage of the 1st shipment, namely 1 pallet of 2 actuators from Italy to Mexico, was to be shipped on a door-to-door basis. The Defendant further claimed that the first and second agreements for the two shipments were entered in late July 2004 and that the details of those two shipments were only finalized then. 10.It is the Defendant’s case that the details of the Defendant and the Plaintiff’s agreements of the two shipments were communicated between Miss Michelle Leung, the Defendant’s financial controller, with the Defendant as the shipper and Mr. Thomas Chan, the sales executive of the Plaintiff, the freight forwarder. 11.It is further the Defendant’s case that Mr. Chan was fully informed that the 1st shipment of 1 pallet of 2 actuators was intended to be shipped to Mexico City to be assembled by the manufacturer of the main body of the valve for reshipment to Hong Kong and China thereafter. Whereas the 2nd shipment of 5 pallets of actuators were to be shipped to Hong Kong from Italy directly. 12.The Defendant further claimed that it was an implied term of the agreement that the Plaintiff shall:
Undisputed facts 13.The two shipments were passed on to the Plaintiff for forwarding arrangements in late July 2004 and a bill of lading was issued accordingly on 27th July 2005 for the 1st shipment and on 30th July 2005 for the 2nd shipment. 14.The 1st shipment left the Italian port of Genoa on 27th July 2004; it arrived at the Mexican port of Veracruz on 13th August 2004. The arrival date of the 1st shipment at Veracruz was not known to either the Plaintiff or the Defendant until sometime in September 2004. Upon repeated enquiries by the Defendant, the Plaintiff informed the Defendant on 22nd September 2004 that the 1st shipment had arrived and remained uncollected at the port of Veracruz. The Defendant was further informed that certain extra local charges had to be settled by the consignee’s customs broker and the Plaintiff’s local agent in Mexico before the goods could be collected. 15.The Plaintiff then nominated a Mexican company, RH - Shipping & Chartering (“RH”) as its Mexican agent to handle the local delivery including customs clearance. RH Shipping eventually quoted the handling charges and fees inclusive of all necessary documentary works and delivery expenses. The Defendant accepted and agreed to pay such charges and fees on about 23rd September 2004. However, the cargo was not released by the Mexican customs authority until late November 2004 and had been stored in the warehouse of RH Shipping to date since early December 2004. The Defendant’s Counterclaim 16.In late October 2004, due to repeated delay of delivery to the consignee, the Defendant decided to forego the import of the 1st shipment into Mexico and requested the Plaintiff to ship the 1st shipment to Hong Kong. The Plaintiff informed the Defendant that import charges have to be settled before the 1st shipment can leave the port of Veracruz. 17.Because of the delay of delivery of the 1st shipment, the Defendant requested the Mexican supplier of the main body Xanik to airfreight the main bodies to Hong Kong in two shipments at the end of October and early November 2004 without the actuators. 18.As a result of the Plaintiff’s breach of contract, the Defendant claims against the Plaintiff the sum of HK$214,539.00.
The Plaintiff’s Case 19.The Plaintiff denied any knowledge that the 1st shipment to Mexico was for processing by the consignee “Xanik”, the manufacturer of the main body of the valve, or that upon completion of installation of actuators, the valves would be shipped to Hong Kong as the final destination before onward shipment to mainland China. 20.The Plaintiff’s first witness Mr. Ip Yiu Fai, senior manager of the Plaintiff, said in his evidence that the Plaintiff had liaised with its Italian agent, Saving Group (“Saving”) which was handling the Plaintiff’s freight forwarding in Italy. Saving further nominated RH Shipping (“RH”) in Mexico as its Mexican agent. 21.Mr. Ip claimed that upon the arrival of the 1st shipment at Veracruz, Xanik refused to pay for the charges incurred including the import duty charged by the Mexican customs authority. Upon the Defendant’s agreement to bear all the costs including DDP (door delivery with duty paid), the Plaintiff’s Mexican agent RH discovered that Xanik’s customs agent was not on the import authorizing register at Veracruz which took two days to arrange. Mr. Ip further complained that its agent RH was not able to proceed further without the proof of a certificate of origin ‘EUR1’. Furthermore, the Plaintiff was informed by RH that an original bill of lading had to be presented in order to obtain the release of the 1st shipment from the Mexican customs. The Defendant insisted on the usual practice by means of ‘telex release’ to the consignee while RH claimed the original bill of lading must be produced. Consequently, as the original bill of lading was not received by RH until 22nd October 2004, the 1st shipment was not released until after that date and upon payment of relevant charges against the presentation of the original bill of lading. 22.It is the Plaintiff’s case that since Xanik was the consignee, it was its duty to request its own customs broker to arrange for customs clearance. Unfortunately, Xanik’s customs broker was unable to obtain customs clearance on or about 27th October 2004 and the 1st shipment was detained by the Mexican customs authorities for failure to complete customs clearance. 23.When customs clearance in Mexico was finally completed on about 25th November 2004, the Plaintiff requested the Defendant to settle customs clearance and other charges incurred by RH including engaging an exclusive truck to transfer the 1st shipment to Xanik in the total sum of US$5,025.50 on or about 26th November 2004. The Defendant refused to make the payment and the Plaintiff instructed RH to unload the 1st shipment from the truck and deliver the shipment to RH’s warehouse. The 1st shipment remained in RH’s warehouse up to the present. The Plaintiff claimed that the delay of delivery of the 1st shipment was caused by the customs broker of Xanik. That the Plaintiff had duly performed its duty as the forwarder and provided the forwarding services of the 1st and 2nd shipments which duly arrived in Mexico and Hong Kong on 13th August 2004 and 27th August 2004 respectively. It claimed the delay of delivery of the 1st shipment was caused entirely by the failure to obtain customs clearance and the non-payment of service charges by the Defendant. Agreed Facts 24.The parties agreed the following facts at the trial:
Issues 25.The following issues are to be determined:
Findings 26.The documents exhibited indicated there were other emails and letters exchanged by various parties not disclosed which may be relevant to determine the issues. My findings are based on and limited to the facts disclosed from the evidence of the witnesses and the emails exhibited. In the emails referred to below I have retained their original form. 27.It is not disputed that the Plaintiff supplied the 1st shipment quotation to the Defendant on 7th June 2004. It was contained in a fax document sent by Mr. Thomas Chan of the Plaintiff for the attention of Michelle Leung of the Defendant (page 63a of the bundle). It is Miss Leung’s evidence that she requested the “to-door charges” in Mexico. This can be seen from the email she sent to Mr. Thomas Chan on 10th June 2004 requesting for a door-to-door quotation setting out the details of the address and name of the consignee at Naucalpan in Mexico City (page 224 of the bundle). Miss Leung claimed that on or about 17th June 2004, she received a 2nd quotation from the Plaintiff with particulars of charges breakdown for the “to door services” in Mexico (page 63 of the bundle). This information is supported by the emails exchanged between Rosario Cruz of RH to Saving’s Caterina setting out the inland charges from Veracruz up “to door” at Naucalpan, i.e. the address of the consignee (pages 220 to 221). Miss Leung claimed that on 23rd June 2004, she had confirmed the 1st shipment booking with the Plaintiff. She further claimed that the contract of carriage between the Plaintiff and the Defendant could be found in the written quotation on page 63 of the bundle although there was no shipping order, shipping confirmation or shipping advice in writing. She further claimed that she had started making enquiries about the 1st shipment by telephone with the Plaintiff on or about 10th August 2004 which was only a few days before the 1st shipment arrived at the Mexican port of Veracruz. However, the Plaintiff failed to confirm the arrival of the shipment until sometime after 22nd September 2004. 28.On the other hand, the 2nd shipment of actuators arrived in Hong Kong on 29th August 2004. Since that date, Miss Leung had been chasing after the Plaintiff for the arrival date of the 1st shipment in Mexico. She was not told of the arrival date of 13th August 2004 until 22nd September 2004. 29.Miss Leung’s evidence was that both shipments were to be shipped on a door-to-door basis. She also claimed that on or about 23rd June 2004, she had informed Mr. Thomas Chan that the 1st shipment would be shipped from Italy to Mexico and upon completion of installation, two main bodies of valves would be shipped back to Hong Kong with the actuators installed from Mexico to Hong Kong and then onward import to China when she placed the shipment order with the Plaintiff. She also claimed that that was why Mr. Chan had been chasing her for an update of the shipping arrangements from Mexico because he had wanted to secure the contract for the subsequent forwarding of the main valve bodies with the actuators installed from Mexico to Hong Kong and onward to China. 30.From the evidence adduced by the Defendant, there is no good reason for the Defendant to ask for a “to door” delivery quotation if a “to port” delivery was intended. There is ample evidence from the quotation at page 63 to show a “to door” service supported by the emails exchanged between the Plaintiff, Saving’s Caterina Vischi and Riccardo Bono and Saving’s Mexican agent RH’s Rosario Cruz, Araceli Cortez and Rudoff Hess. These emails showed that the Plaintiff’s Mr. Thomas Chan, Mr. William Law, Mr. Rudi Lai and Mr. Boson Ip had been involved in this shipment and its follow up. It was quite clear that after Miss Leung requested a “to door” quotation to the factory of the consignee in Naucalpan in Mexico City, Saving obtained a “to door” quotation from RH in Mexico on 17th June 2004. There was even a request from Caterina of Saving to the Plaintiff to include profits on top of the quotation from Mexico for both Saving and the Plaintiff before the quotations were sent to the Defendant. It was clear from the emails exchanged and the page 63 quotations from the Plaintiff that the Plaintiff did increase the prices from Mexico to include a profit for itself and its Italian agent (pages 220 to 222 of the bundle). These quotes from Saving’s Caterina to William Law of the Plaintiff was dated 17th June 2004, it is unlikely for the Plaintiff to have sent the profit added “ to door” quotation to the Defendant three months later as alleged by the Plaintiff. 31.It is more likely as Miss Leung claimed that she was given the “to door” quotation to the consignee in Naucalpan soon after 17th June 2004 which she claimed she had accepted on or about 24th June 2004 after she was sent the page 63 quotations. Even though the page 63 quotations bore the same date as page 63A, 7th June 2004, it is apparent from the emails exchanged (pages 221 to 222) that the Plaintiff could not have had the “to door” prices before 17th June 2004 to send to the Defendant (page 63). Further, it is quite unlikely that the page 63 quotation should have been sent to the Defendant after the 1st shipment was located on 22 September 2004 as claimed by the Plaintiff, for it is meaningless to send these quotations on page 63 by fax to the Defendant by that late stage unless maybe to be signed to signify their acceptance by the shipper. Unfortunately, there was no such evidence adduced. 32.For the aforesaid reason, I accept the contract of freight forwarding between the Plaintiff and the Defendant before the 1st shipment left Genoa was for it to be delivered to the door of the consignee, Xanik. I also accept that the Defendant had accepted the page 63 quotation for a delivery to the door of the consignee which included delivery charges, customs clearance and CFS charges excluding taxes and duty as stated on page 63. However, the Plaintiff did not follow it up until Miss Leung chased up the 1st shipment in September 2004 when the cargo had already arrived in Veracruz. I also accept that Miss Leung had informed the Plaintiff through Mr. Thomas Chan that the Defendant was shipping the actuators in the 1st shipment to a factory in Mexico where they would be installed into two valve bodies purchased by the Defendant from the consignee. Upon completion of installation in Mexico, the two valve bodies with the actuators installed would be shipped to Hong Kong to be forwarded to Mainland China. Consequently, it was within the Plaintiff’s knowledge that the consignee was not the owner or the purchaser of the actuators, it was the shipper, the Defendant, who was the owner of the actuators shipped from Italy to Mexico. 33.I find the evidence adduced by the Defendant’s witnesses on the question of whether the forwarding contract was a “to door” contract or “to port” contract to be unreliable. The person who was responsible at the time of contract acting on behalf of the Plaintiff was Mr. Thomas Chan, he did not give evidence. The Defendant adduced evidence from other witnesses who were not in charge of the 1st and 2nd agreements and did not have any personal or direct contacts with either Miss Leung or Mr. Victor Wan of the Defendant prior to September 2004. Consequently, the only first hand evidence on the quotations and the 1st and 2nd agreements came from Miss Leung of the Defendant. Furthermore, Miss Leung’s evidence was supported by the emails exchanged between 4th June 2004 and 17th June 2004 (pages 220 to 226 of the bundle) between the Plaintiff, its Italian agent Saving and Saving’s Mexican agent RH. It is unlikely as mentioned above, for the Defendant to accept a quotation of freight charges which the Plaintiff received from Saving in mid June and had only faxed to the defendant in late September i.e. after the 1st shipment arrived and located at Veracruz on 23rd September 2004. Who was responsible for the delay of delivery to the consignee Xanik? First Period of Delay 34.From the documents exhibited, the reason for the initial delay was due to the lack of follow up action and communication between the Plaintiff, its Italian agent Saving and its Mexican agent RH and the consignee Xanik in Mexico. It is apparent from the emails exchanged and the evidence of the witnesses at the trial that Miss Leung had to chase after the Plaintiff repeatedly after she received the 2nd shipment to Hong Kong in late August and finding she had not heard from the consignee or the Plaintiff on the delivery of the 1st shipment in Mexico. The emails exchanged between the Plaintiff’s Hong Kong office and Saving showed that Saving had no idea even on 20th September where the 1st shipment was. The matter was complicated by Saving’s staff Caterina who was in charge of the two shipments being away on leave on 20th September, and therefore, the Defendant was not informed until the late evening of 22nd September 2004 that the cargo had in fact arrived at the port of Veracruz on 13th August 2004. 35.From information contained in the emails exchanged between 26th July 2004 and 16th August 2004 by the Plaintiff and Saving, neither party had any idea whether the 1st shipment was a delivery to the Mexico port or to Mexico City terminal. Saving’s Caterina on her 11th August 2004 email (page 213) said:
The Plaintiff’s email said in reply:-
It is, therefore, apparent that the Plaintiff’s Italian agent Saving had no idea that the Mexico City port is in Veracruz which is some 200 kilometres from Mexico City and the Mexico City terminal is not located in Mexico City but at Veracruz . This can be seen from Caterina’s email to the Plaintiff’s Mr. William Law on 16th August 2004 and page 221. They were still discussing the charges for the ocean freight, pick up charges from shipper to the port in Italy, stuffing at the warehouse, bill of lading, export customs clearance and EUR1 charges and share of profit on the 1st shipment for the Plaintiff and Saving. This 16th August 2004 email from Saving’s Caterina to William Law set out the charges because Saving claimed that it had misquoted the ocean freight charges to the Plaintiff previously. From these email exchanges it can be seen that even after the 1st shipment had arrived at Veracruz the Plaintiff was still negotiating with its Italian agent the freight charges and the profits to be shared between them. Instead of locating the 1st shipment, to see if it had arrived at Veracruz in Mexico and notify the Defendant and the consignee Xanik to clear customs, the Plaintiff was more interested in the profits it and Saving could derive from the freight. Instead of finding out exactly where the Mexico City terminal was and informing the consignee as soon as the 1st shipment arrived at Veracruz and to clear customs as promised in the 12th August 2004 email between Mr. William Law and Caterina, the Plaintiff was clearly negligent in failing to follow closely the arrival of the 1st shipment in Mexico. This was the first period of delay and clearly it was caused entirely by the Plaintiff and the Plaintiff’s agents in Italy and Mexico. The second period of delay 36.It was not until 17th September 2004 after the Defendant had repeatedly urged the Plaintiff to find out if the 1st shipment had arrived in Mexico that the Plaintiff began to make enquiries through Saving and RH about the arrival date of the 1st shipment in Mexico. Clearly, the Plaintiff had failed to follow up the 1st shipment after it left Italy on 27th July 2004. 37.It is apparent from Mr. Thomas Chan’s email to Caterina of Saving of 20th September 2004 (pages 209 to 210) that the Plaintiff was anxious because the Defendant had been pressing for the whereabouts of the 1st shipment. Mr. William Law had to email Saving the documents containing information on this particular shipment (page 209) to remind Saving of the details. In the answer following this email from Saving on the same day it said:-
38.There followed further emails exchanged between Saving and the Plaintiff referring to the Plaintiff’s client having agreed to absorb all the local charges (page 208 of the bundle). On the next day 21st September 2004, Mr. William Law in his email to Saving’s Riccardo informed Saving that he had confirmed with his client on the DDP terms. This was in answer to Riccardo’s query on whether the terms are DDP (duty paid) or DDU (delivered up to door of consignee duty not paid). Further on 22nd September, Mr. Thomas Chan emailed his colleague Mr. William Law (page 206 of the bundle):-
39.Mr. William Law then related to Saving:
40.It was only in the next email dated 22nd September 2004 11:45 p.m. (pages 205 to 206) that the arrival of the cargo at Veracruz was confirmed for the first time by the shipping company Interlines NVOCC to one Silvia Malabarba, it said:-
41.On 28th September 2004, Caterina quoted a new set of charges to Mr. William Law. These included: “import taxes US$2,936.60, POD charges, break down charges US$83.00 and pedimento charges at US$50.00, custom agent documentation coordinator and a total of US$3,901.85”. There was no evidence that the consignee or its customs agent was informed to proceed to register for import authorisation at Veracruz by Saving or RH. 42.In the reply email on 28th September 2004, Mr. William Law requested Saving to negotiate for a lower fee and asked it to check if the goods would be delivered to the door of the consignee. 43.On 30th September 2004, Mr. William Law emailed Caterina and informed her that the Hong Kong shipper asked for the 1st shipment to be airfreight to Hong Kong requesting an airfreight charges quotation. 44.Mr. William Law further requested Caterina to clarify if the cargo were shipped back to Hong Kong whether Mexican import duty would be chargeable and whether there would be any other charges involved. When Mr. William Law received no concrete reply from Caterina, he sent a further email to her on 5th October 2004 asking for the up to date local charges at Mexico excluding to door delivery and import duty informing her that the Hong Kong shipper would make a decision after information on charges were known. 45.On the same day, Mr. William Law emailed Caterina the following:
46.From the emails exchanged, it is quite clear that because there were changes to previously quoted local charges, the Plaintiff, Saving and its Mexican agent had to re-negotiate the local charges and delivery charges to the door of the consignee. At this stage, the Defendant was clearly considering the option of not importing the two actuators into Mexico but shipping them to Hong Kong for installation due to the delay already caused. Mr. William Law’s email to Caterina on 5th October 2004 (page 199 of the bundle) showed that the Defendant was unhappy about the delay caused by the Plaintiff’s agent failing to inform the consignee at the arrival of the cargo on 13th August 2004, thus causing delay in the installation of the two actuators into the two valve bodies by the consignee Xanik in Mexico. By 5th October 2004, it is clear from the emails exchanged that Saving was blaming its sub agent, Miss Silvia Malabarba of Euro Italian Freight, for failing to inform either the consignee or the Defendant of the arrival of the 1st shipment at Veracruz. 47.Later on the same day, Mr. William Law emailed Caterina, informing her that the cargo may be returned to Hong Kong asking her to wait for their further instruction, he said further:
48.It is apparent that the Defendant by that stage was quite frustrated, it can be seen from the email of Mr. Rudi Lai, the sales manager of the Plaintiff, to Mr. A. Presti of Saving requesting his assistance in clarifying the charges of the 1st shipment and he said in the final paragraph:
49.On 8th October 2004, Mr. Rudi Lai wrote to Riccardo Bono of Saving requesting it to clarify with its Mexican agent RH where the cargo was at that time and further asked Saving to obtain RH’s response on the charges at a reasonable level. He added further:-
50.On 9th October 2004, Mr. Riccardo Bono informed Mr. William Law that RH had contacted the consignee Xanik’s Mr. Victor Herdandez, he was informed that Xanik was still interested in taking delivery of the cargo. The demurrage and detention charges up to date was set out on the same email (page 191 of the bundle). It is apparent from later emails that those charges included import duty, taxes and VAT charges. These, however, were not further clarified until 13th October 2004 RH Shipping’s Rosario Cruz’s email to Mr. Rudi Lai setting out the warehouse charges calculated up to 20th October 2004 (page 187 to 188 of the bundle). It is apparent from the email of Mr. Victor Wan to Mr. Rudi Lai on 13th October 2004 that he was very unhappy about the delay:
51.On 16th October 2004, Xanik’s Mr. Victor Hernandez went to the Customs office to apply for the authorization to allow the actuators to clear customs. He told Cruz that as soon as he obtained the authorization he would inform him to transfer the actuators to Mexico City right away; he further said:-
52.On 18th October 2004, he told Cruz that Xanik’s customs agent, Adela de Luna, had obtained the authorization. He gave the agent’s address to Cruz reminding him to release the actuators quickly and forward them to Mexico City. The 16 October 2004 email from Mr. Hernandez clearly showed Xanik was willing to pay for the charges incurred to obtain release of the 1st shipment, contrary to Mr. Ip’s evidence. 53.Unfortunately, there was another obstacle before the 1st shipment could be released. RH requested on 19th October 2004 the original bill of lading for the agent in Veracruz to get the cargo released. From the emails exchanged on 20th October 2004, Caterina claimed she had dispatched the original bill of lading for L/C negotiation to the shipper on 30th July 2004. Later on that day, the Defendant confirmed that a full set of original bill of lading was kept by the Italian supplier and they had requested it to send the full set of original bill of lading to the consignee in Mexico immediately by courier. At the same time, the Plaintiff requested the cargo to be released by telex without the original bill of lading. The Defendant as the shipper agreed and authorized the release of the cargo without the original bill of lading. 54.On 27th October 2004, an exclusive cargo truck was hired for the purpose of delivery of the two actuators to Xanik at it’s factory in Naucalpan. Unfortunately, the cargo could not obtain custom clearance due to documentation failure or lack of the certificate of original (EUR1) issued under the free trade agreement between Mexico and Europe. Without the EUR1, the Mexican customs authority thought the customs broker was trying to evade payment of the appropriate custom duties. Consequently, the truck was detained at Veracruz incurring a daily demurrage. Meanwhile, the Plaintiff was demanding payment from the Defendant for the charges incurred in the approximate sum of $40,073.87 including ocean freight, pick up and stuffing charges, customs clearance, bill of lading and other document handling charges in Italy, the storage charges at Mexico with customs clearance plus the exclusive delivery truck. Mr. Victor Wan objected to the further delay and escalating costs. He requested the Plaintiff to ship the cargo back to Italy and threatened to claim against the Plaintiff for the Defendant’s loss. 55.In Mr. Wan’s email of 13th November 2004 to the Plaintiff, he informed the Plaintiff the Defendant would pay the shipping charges from and return to Italy but refuse to pay any other charges. He further requested the Plaintiff to follow his instructions and return the cargo to Italy immediately. 56.The 1st shipment remained at Veracruz waiting for customs to be cleared, it was not completed until late November or early December 2004. Since that date, the 1st shipment remained in RH’s warehouse. 57.From the oral and documentary evidence produced, the delay in customs clearance of the 1st shipment was due mainly to RH’s failure to follow up the cargo upon its arrival at Veracruz on 13th August 2004. Up to 8th October 2004, the Plaintiff had no idea of its whereabouts. The second period of delay was a result of the misunderstanding and mislaying of documents of the Plaintiff’s agent and shipping line agent in Italy compounded by the Mexican agent’s inefficiency. The Plaintiff’s Italian agent Saving should have notified the Mexican agent, sent them all the necessary documents and reminded them to inform the consignee Xanik in Mexico to appoint a Veracruz registered agent to obtain customs clearance of the cargo. The Plaintiff should have seen to it that its Italian and Mexican agents have delivered to the consignee all the necessary documents such as the bill of lading and the EUR1 for importation documentation well in advance of the arrival of the cargo. The second period of delay clearly was due to the mishandling by the Plaintiff, its Italian agent and the Mexican agent compounded by their inefficiency and lack of attention to the freight details. 58.After the 1st shipment was located in 8 October 2004, it took another 7 weeks later (up to late November or early December 2004) before it was released from the Mexican customs. There was a suggestion that the EUR1 was missing leading to the Mexican customs authority’s misunderstanding that the 1st shipment was ‘valves’ being imported to Mexico. It was also claimed that EUR1 was not issued, however, the freight charges quoted by Saving had included the charges for the issuance of EUR1 and the charges in Italy quoted by Saving also included the issue of documentation such as the bill of lading. In Xanik’s email to RH, the 1st shipment was described as ‘two actuators’. In both the bill of lading and the letters of credit, the 1st shipment was clearly stated as ‘actuators’. However, Caterina in her emails referred to the cargo as ‘valves’. That means the Plaintiff had failed to remind its Italian agent that the shipment was ‘actuators’ not ‘valves’. This confusion could have been the reason why the Mexican customs authority might have been under the impression that the consignee’s customs broker in Veracruz was trying to avoid payment of higher duties charged for the importation of valves from China. In fact, the valve bodies were manufactured by Xanik in Mexico, the actuators were from Italy; the shipper’s intention was to have the actuators installed into the valve bodies by Xanik in Mexico, the valves would then be shipped to Hong Kong to be trans-shipped to China. 59.I accept that Miss Leung had informed the Plaintiff’s Mr. Thomas Chan the true nature of the 1st shipment. It is possible that there was a misunderstanding within the Plaintiff’s different departments but that does not mean the Italian agent, Saving, should have made the same mistake because it had been in contact with the Italian supplier ‘Servovale’ and should have known that the two shipments were in fact ‘actuators’ not ‘valves’, the EUR1 clearly stated the product as ‘actuators’. 60.Furthermore, Mr. Victor Wan had repeatedly since 13th October 2004 indicated he wanted the actuators to be shipped either to Hong Kong or back to Italy, the port of origin, because of the delay it had already caused. By late October and early November 2004, he was left with so little time that he had to request Xanik to air-freight the two valve bodies to Hong Kong without the actuators. He was forced to give up on the 1st shipment. In order to fulfil the supply agreement with its Mainland Chinese customer, the Defendant had to make the actuators from parts purchased in Hong Kong. As there was total failure by the Plaintiff to carry out the contract of delivery to the consignee, the Defendant is entitled to accept the breach and repudiate the contract. 61.The Plaintiff was fully warned repeatedly by Mr. Wan, but the Plaintiff and its Italian and Mexican agents persisted in trying to import the two actuators into Mexico in spite of the 2½ months delay contrary to the instructions of the Defendant. The Defendant therefore should not be liable for the charges incurred because the Defendant had repeatedly extended the time of delivery to accommodate the incompetency of the Plaintiff and its agents. It was forced to abandon the importation of the two actuators into Mexico in mid October 2004. The Defendant had agreed to pay the charges for the freight to Mexico and back to Italy and that was what the Plaintiff should have done. Even though the consignee had indicated in his email to RH on 16 October 2004 it would accept the 1st shipment and pay the charges incurred, the date of release after customs clearance did not take place for another 1½ months. The delay is inexcusable and long after the delivery date under the supply agreement of the Defendant and his Mainland Chinese customer. As the 1st shipment never reached the consignee, the forwarding contract was never completed. On the aforesaid basis, I dismiss the Plaintiff’s claim on the 1st shipment. I allow the freight charges for the 2nd shipment of $8,821.70. 62.As to the Defendant’s counterclaim, the Defendant asks for:
63.I accept that the Defendant had to take up immediate measures after waiting patiently for over 2½ months for the 2 actuators to be forwarded to Xanik in Mexico. It was reasonable for the Defendant to abandon any hope of installing the actuators into the valve bodies in Mexico by late October 2004 because it had a deadline to meet based on the supply agreement. It would be unreasonable to expect the Defendant to wait until late November or early December 2004 for the actuators to be forwarded to Xanik and then for the actuators to be installed before the two valve bodies are sent to Hong Kong. Mr. Wan had warned the Plaintiff in September that he would stand to lose a lot of money if the shipment was delayed in Mexico. In early October, the Plaintiff was warned again that the Defendant would stand to lose US$99,000 odd should the actuators not be delivered by 13th October 2004. 64.I am satisfied the loss and damages incurred by the Defendant of $214,539.00 was reasonable. The Defendant had mitigated the damages it would have incurred had it waited for the Plaintiff to deliver the actuators to the consignee Xanik, which had not taken place to date. Even if they were delivered in late November 2004 to Xanik, the delivery would have long passed the contractual delivery date of the Defendant to its customer in China. Therefore, I would allow the Defendant’s counterclaim in the sum of $214,539.00. The Defendant will recover damages after setting off the freight charges for the 2nd shipment of $8,821.70 in the sum of: $(214, 539.00-8,821.70) = $205,717.30 Interests 65.Interest on the Defendant’s counterclaim from the date of writ to the date of judgment at half judgment rate and thereafter at full judgment rate until full payment. Costs 66.The major part of the Plaintiff’s claim has been unsuccessful; though the freight charges for the 2nd shipment was not disputed, the amount was small compared to the Defendant’s counterclaim, it was set-off against the Defendant’s counterclaim. The Plaintiff shall pay the Defendant’s costs to be taxed if not agreed. If the parties do not make further representations to this Court on costs within 14 days hereof, the order will be made absolute.
Parties: Mr. Chan Chi Keung of Messrs. K.Y. Lo & Co for the Plaintiff. Mr. Chak Man Lai of Messrs. Chak & Associates for the Defendant. |