Italia Marittima S.P.A. and Another v. Translink Shipping (Hong Kong) Ltd

DCCJ 5080/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5080 OF 2006

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BETWEEN

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Coram: Deputy District Judge Bernard Mak in Court

Date of Trial: 12^th –13^th , 16^th March 2009  

Date of Handing Down Judgment: 19^th November 2009  

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JUDGMENT

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The Claim

1.The 1st Plaintiff, an ocean carrier, and the 2nd Plaintiff, the 1st Plaintiff’s agent in Hong Kong, claimed against the Defendant, a freight forwarder, for contractual and/or common law indemnity in respect of container demurrage and expenses incurred in connection with two containers carried by the 1^st Plaintiff from Hong Kong to Barcelona. The total sum claimed amounted to Euro €30,342.67.

Factual Background

2.Whilst there were a large number of documents not admitted by the opposite sides, after trial, the factual disputes between the parties were indeed within a short compass. I set out in the following paragraphs such facts as were either not in dispute or I found to have existed.

3.On 13 May 2005, the Defendant faxed a shipping order to the 2nd Plaintiff reserving shipping space on vessel Ever Growth. On the same day, the 2^nd Plaintiff issued a "booking confirmation" to the Defendant (“1^st Booking”). On 18 May 2005, Future Star International Ltd ("Future Star"), a customer of the Defendant for whom the Defendant made the 1^st Booking, collected an empty container from the Plaintiffs and packed goods into it. The stuffed container was then delivered to the terminal operators in Hong Kong. The Terminal receipt dated 18 May 2005 named the Defendant as the Shipper.

4.On the shipping order of the 1^st Booking filled in by staff of the Defendant, the “Exporter” was named as “Translink Shipping (HK) Ltd”; at that time the Consignee was not named yet and the Notify Party was stated as “same as consignee”. On 19 May, 2005 the Defendant by fax notified the 2^nd Plaintiff that the Shipper shall be “Translink Shipping (Hong Kong) Ltd O/B Future Star International Ltd”; the bill was supposed to be an Order bill and “Hamann International SA” in Spain was named as the Notify Party. On 20 May 2005, the Defendant, by a fax which was a copy of the draft Bill of Lading (No. 854585144419) with manuscripts of staff of the Defendant, requested that there should not be any reference to the Defendant in the description of the Shipper and that “Hamann International SA” should be named as both the Consignee and Notify Party. The ultimate bill issued, backdated to 19 May 2005, bears description of the various parties pursuant to the said request of the Defendant (“the 1^st Bill of Lading”). The goods were described in all these documents as “Glass Cup”.

5.The Defendant made another booking for Future Star on 23 May 2005 via another shipping order. Again, the 2nd Plaintiff issued a "booking confirmation" to the Defendant on the same date (“2^nd Booking”). Notwithstanding the Defendant’s specific requests regarding descriptions of the various parties in respect of the 1^st Bill of Lading, the shipper order of the 2^nd Booking contained descriptions of parties identical to that in the shipping order of the 1^st Booking. The container was picked up and packed by Future Star and the terminal receipt was dated 29 May 2005. Again the Defendant was named as the Shipper in the terminal receipt.

6.On 3 June 2005, the Defendant faxed a document under its own letterhead titled “Bill of Lading Information” to the 2^nd Plaintiff in which it was stated that, for the 2^nd booking, the Shipper should be “Translink Shipping (Hong Kong) Ltd O/B Future Star International Ltd”, the notify party should be the same as the consignee which should be “Hamann International SA”. There is another undated document from the Defendant, which I found to have been sent by the Defendant soon after 3 June 2005 to the 2^nd Plaintiff, by which the Defendant requested that for the “Bill of Lading (LTNV854585154406) … delete Shipper Name “Translink Shipping (Hong Kong) Ltd” other particular remain unchange [sic]”. The Bill of Lading (No. 854585154406) dated 1 June 2005 bears amendments by the 2^nd Plaintiff as per the said request by the Defendant (2^nd Bill of Lading). Again the goods were described as “Glass Cup” in all the documents.

7.The two containers were then shipped to Barcelona and arrived on about 18 June 2005 and 2 July 2005 respectively. The Consignee and Notify party, Hamann International SA, was notified but refused to take delivery. On about 26 August 2005, the Spanish Customs Authorities inspected the containers and found that the containers were packed with fireworks behind a few layers of cartons of glass cups. As a result, 'classification' or 'certification' was conducted by the Spanish Customs Authority on 17 September 2005 and 1 October 2005 respectively. The English translations of the official documents indicated that after the containers had been emptied and inspected, they were re-filled by the Spanish Customs Authority. Further, the documents provided by the 1^st Plaintiff’s Spanish Agent suggested that the contents of the two containers were confiscated on about 17 September 2005 and 1 October 2005 respectively.

8.On 25 November 2005, the 19th Court of First Instance of Barcelona made an order that the confiscated goods should be destroyed and that the containers, once emptied, should be returned to their legal owner. But the goods were only destroyed on about 26 November 2006 and 27 January 2007, and the containers were returned to the Plaintiffs on 28 November 2006 and 3 February 2007 respectively.

Liability

9.The Plaintiffs alleged that the Defendant was liable for breach of contract as regards each shipment, the Defendant was a contracting party with them on two contracts: (1) an “antecedent contract” contained in or evidenced by the respective shipping order and corresponding booking confirmation; and (2) the “bill of lading contract” contained in or evidenced by each of the 1^st and 2^nd Bills of Lading. The Defendant agreed with such “double-contract” analysis but contended that it was not liable to indemnify the Plaintiffs’ loss and damage. The Defendant’s arguments were that firstly the Antecedent Contracts had been superseded by the Bill of Lading contracts, and that it was not a party to the Bill of Lading Contracts.

10.I reckon that there are indeed the following issues:

1)  Whether the Defendant contracted with the Plaintiffs as principal or agent in the Antecedent Contracts?

2)  Whether the Bill of Lading Contracts superseded the Antecedent Contracts?

3)  If answer to question (1) is yes, whether any supersession affected the liability of Defendant to the Plaintiffs?

The position of the Defendant as a forwarding agent

11.The nub of the Defendant’s contentions was that, being a forwarding agent, it would only contract with the Plaintiffs as agent of its client and not as a principal, which position must be understood or ought to have been known by the 2^nd Plaintiff.

12.I disagree. In Hong Kong Hua Guang Industrial Co v Midway International Ltd [2000] HKEC 278, in the context of whether a forwarding agent acted as the carrier vis-à-vis its client, the Court of Appeal observed that:

“As the cases show, what is included within the scope of what a forwarding agent may undertake to do by a specific contract is not fixed. It is clear that the mere title freight forwarder or forwarding agent may not of itself decide the nature of the liabilities. The distinction between a carrier and freight forwarder does not, it seems to me, depend upon the title that one contracting party is given or chooses to adopt. Nor does it depend solely upon the kind of business which the person in question carries on or holds himself out as carrying on. Obviously, a person who usually acts as a forwarding agent, pure and simple, can act as a carrier and vice-versa.”

13.Turning to the oral evidence, Mr. Chiu Man Yiu, Senior Manager of the Defendant, who did not have personal knowledge of the bookings, gave evidence that he believed that when making the booking, staff of the Defendant company made known to the Plaintiffs that there was an underlying customer and that the shipment was not for the Defendant company itself. Naturally, Mr. Chiu was not able to provide any documents to support such an assertion, nor did anyone else from the Defendant give evidence to say that they had such a conversation.

14.Mr. Chiu’s evidence was to the effect that the Defendant only acted as agents; the Defendant only booked space and effected contracts of carriage on behalf of customers. They would, in such capacity, give instructions regarding the content of the bill of lading on behalf of customers, as well as make payments and collect bills.

15.But the question is whether the Defendant dealt as a principal vis-à-vis the Plaintiffs. On this point the following further observations in Hong Kong Hua Guang Industrial Co v Midway International, ibid, are helpful:

“Bean J said in Hair and Skin Trading Co. Ltd v. Norman Air Freight Carriers and World Transport Agencies Ltd [1974] 1 Lloyd's Rep. 443 at 445 :-

"... when a judge has to decide whether a party is acting as a principal or an agent it is very much a matter of impression, what impression the evidence forms."

“… The nature and basis of charging, in particular whether an all-in fee was charged, leaving the contracting party to make such a profit as it could from the margin between what it charged and the costs incurred, is a factor which Hobhouse J considered highly important in the case of Elektronska Industrija Oour TVA v. Transped Oour Kintinentalna Spedicna [1986] 1 Lloyd's Rep. 49.”

16.In this case, the evidence of Mr. Chiu on the business practice of the Defendant clearly points to the conclusion that the Defendant was itself undertaking the contract of carriage vis-à-vis Future Star. Whether the Defendant has issued a house bill of lading to Future Star is neither here nor there, because in the absence of such a bill the Defendant could still have bound itself contractually to Future Star to deliver the containers to Spain even if there were some other party, whether the Plaintiff or otherwise, who would also be a carrier.

17.It is clear from the dealings between the 2^nd Plaintiff and the Defendant up to the time when the 1^st and 2^nd Bills of Lading were issued that the 2^nd Plaintiff was dealing with the Defendant as a principal rather than an agent. The containers were released to the Defendant and then received by the Plaintiffs for carriage before the identity of Future Star was known to them. I find that the Defendant contracted with the Plaintiffs as a principal in the Antecedent Contracts.

18.The standard Form Shipping Order of the 2^nd Plaintiff contained the following clause:

“The Shipper hereby guarantee that all the details of the cargo as stated herein which include (but are not limited to) the description, weight and measurement are true and correct and agree to indemnify the carriers and their servants and agents. (sic) Lloyd Triestino Pacific Ltd from and hold them harmless against any and all claims, losses, expenses and/or fines which may be asserted by any other party or parties or government on account of any misleading, incorrect and/or inaccurate information provided by the shippers in the said shipping order and bill of lading”.

19.The Defendant submitted that they are not bound by such clause on the ground that it was illegible when the shipping order forms were faxed to them. I find the Defendant's argument unsustainable. The Defendant accepted that they had previous dealings with 2^nd Plaintiff. As such, the Defendant should at least be aware of such clause. Further, having been aware that such a clause existed, it was the Defendant's duty to clarify the wordings of such clauses if it was not clearly legible or comprehensible before it contacted with the Plaintiffs. Mr. Alder, counsel for the Plaintiffs, has helpfully cited the case of Flying Transportation (Macau) Ltd. v Pacific Air Freight (HK) Ltd [2002] HKEC 690 where Deputy High Court Judge Saunders (as he then was) observed that:

“15.  I am satisfied freight forwarding contracts and air waybills are document of a class which a party receiving them would expect there were contractual conditions….

“16.  … It is no answer for [the witness for the Defendant] to say that he did not read either the notice drawing his attention to the conditions or the conditions themselves.  If a business man chooses to conduct himself without knowing the terms of his contract, that is his problem.  It is up to him to find out what they are.”

20.Such a clause is indeed not exceptional or particularly onerous. Insofar as dangerous goods are concerned, such a clause provides no more than what common law implies in a contract of affreightment, see Scrutton on Charterparties and Bill of Lading, 20^th Ed., Article 53:

“By the common law there is an implied term (probably innominate) term in a contract of affrieghtment that the shipper of the goods will not ship goods of such a dangerous character or so dangerously packed that the shipowner or his agent could not by reasonable knowledge and diligence be aware of their dangerous character; and the shipper is therefore strictly liable for damage resulting from the shipment of such dangerous goods.  Put another way, unless the shipowner knows or ought to know the dangerous character of the goods, there will be implied warranty by the shipper that the goods are fit for carriage in the ordinary way and are not dangerous”.

21.“It should also be noted that the liability of a forwarder when contracting as a principal with a carrier should not be confused with the fact that a forwarder will be absolutely liable at common law to the carrier as consignor for any damage caused by the goods delivered by him to the carrier” (Freight Forwarders, Hill, ¶72). It does not matter that the containers were not stuffed by the Defendant – they were delivered in its name, for whom the space on board the vessel were reserved by the Plaintiff. In the premises, even if the Defendant had contracted with the Plaintiffs as a mere agent, the Defendant would be nevertheless personally liable at common law to the Plaintiffs under the implied warranty of fitness.

22.In the premises, I find that the Defendant was in breach of the Antecedent Contracts as a principal thereto by failing to inform the Plaintiffs of the dangerous nature of the goods to be shipped under two bookings. On the facts, the Defendant was also liable to the Plaintiff for breach of the implied warranty of fitness. I fully appreciate that this is a case where the Defendant could well be regarded as a victim because the real culprit was Future Star. But taking a reality check, the Defendant could have protected itself by extracting a similar indemnity from Future Star and hence would have been in a position to seek indemnity from it for any loss or damage it suffered as a result of Future Star’s misdescription. The personal liability of freight forwarder for dangerous goods was also essential because without it, the carrier would have no recourse against the forwarder whose credit-standing they knew, but would have to have recourse to an unknown shipper whose financial position might be quite unknown to them.

Whether the Bill of Lading Contracts superseded the Antecedent Contracts and whether any supersession affected the Defendant’s liability

23.As noted by the learned authors of Carver on Bills of Lading, 1^st Ed., “where a bill of lading is issued after the making an informal antecedent contract, there is some conflict, or at least a shift of emphasis, in the authorities as to the status, between carrier and shipper of that bill” (para 3-004).

24.But in the present case, I am not concerned with a case where the terms of the bill of Lading conflict with that of the antecedent Contract; rather the issue of supersession was relied on by the Defendant to contend to the effect that by supersession, the Defendant would have in any event been absolved from any breach of the Antecedent Contracts it has committed. No authority was cited to me to support such a result.

25.It was also the Plaintiffs’ argument that, if the Bill of Lading Contracts superseded the Antecedent Contracts, which they deny, the Defendant nevertheless fell within the definition of “Merchant” in the terms of the Bill of Lading, which provides in Clause 1(9) that “’Merchant’ includes the shipper, …”, and therefore the Defendant was liable under Clause 13(2) which provides that “the Merchant shall indemnity the Carrier against all loss, damage and expenses arising or resulting from inaccuracies in, or inadequacy of, such particulars. …”. The Defendant argued that it could not have fallen within the description of “Shipper” because the Shipper as stated in both the 1^st and 2^nd Bill of Lading was Future Star.

26.The Defendant submitted that the issue of supersession is to be resolved by the objective intention of the persons involved to be ascertained by reference to the circumstances at the time of the contract. Carver on Bills of Lading, ibid, at para 3-005 noted that:

“The most obvious such reason [for the terms of the bill to prevail over those of the antecedent contract] is that the parties make it clear that this is their intention by expressly providing that the carriage is to be undertaken “subject to the terms and/or exceptions of [the carriers’] bill of lading.  The position would be the same where the antecedent contract contained in implied term to that effect, e.g. where the incorporation of the bill of lading terms resulted from a course of dealing between the parties or from trade custom or usage.  The bill of lading terms may likewise prevail because the circumstances in which the bill was issued show that the parties intended it to supersede the antecedent contract. … The bill of lading may likewise “supersede” the original or antecedent contract even though that contract does not expressly so provide; this result can be explained either by reference to an implied term to this effect in the antecedent contract or on the ground that the parties have by their subsequent agreement novated that contract into a new one on the terms of the bills of lading.  …”

27.I do not find that there existed circumstances in the present case to support the Defendant’s contention that the 1^st and 2^nd Bills of Lading superseded the corresponding Antecedent Contracts. If the Defendant does not fall within the definition of “Shipper” in the “Merchant” definition, then it would be against commercial reality to infer that the Plaintiffs intended that the guarantee by the Defendant in the Antecedent Contract should be discharged and replaced only by an indemnity from a party with whom the Plaintiffs had no direct dealing. If the Defendant falls within the definition of “Merchant”, then there is no express term in either the Antecedent Contract or the Bill of Lading Contract, or there existed any circumstances for the Court to draw the inference that the Plaintiffs intended to confine their remedy against the Defendant under the Bill of Lading Contract. Further in such event, the Defendant would likewise be liable to the Plaintiffs for their claim. Short of a novation, I am unable to see how the Defendant’s liability for breach of the Antecedent Contracts could be absolved by the coming into existence of the Bill of Lading Contracts. After all, the Defendant remained personally liable to the Plaintiffs for the breach of the implied warranty of fitness. I am therefore satisfied that the supersession contended by the Defendant, or at all, would not affect the Defendant’s liability to the Plaintiffs’ claim.

Quantum

28.The following serves as a summary of the evidence on the various items of charges and expenses that the Plaintiff claimed:

1)  Firework company invoices: Mr. Lam Lap Tsing of the Plaintiffs gave evidence that this invoice was passed on to them by the Spanish agent and that is the cost for the destruction of the fireworks.

2)  Inspection fee: This fee was incurred because the Spanish customs had to inspect the two containers. Mr. Lam gave evidence that regardless of whether the goods were legal or not, they would seek to redeem the costs from the shipper.

3)  Container Demurrage: Mr. Lam gave evidence that for the first ten days, demurrage was Euro 6.55 per day. The subsequent seven days at Euro13.1 per day and all days subsequently at Euro 19.65. Mr. Lam accepted that all the figures were based on calculations given to them by their Spanish agent. It was canvassed in the cross-examination of Mr. Lam that the containers for the 2 shipments were emptied or de-stuffed respectively on 17 September 2005 and 1 October 2005. Their contents were confiscated and/or forfeited at the latest by the court order dated 17 November 2005. From the court orders, it is also clear that the Spanish Authorities did not want to keep the containers. Mr. Lam accepted under cross-examination that it should be easy for the Plaintiffs’ agent in Spain to have those 2 containers back. Under Re-examination, Mr. Lam said he has no knowledge of Spanish procedural law relating to seized containers containing contraband.

4)  Storage: Mr. Lam gave evidence that this was charged at a daily rate of Euro €2.16. Again, the figure was based on calculations given to them by their Spanish agent.

5)  Haulage: The fees incurred were for towing the containers from the port to a designated place where the fireworks were to be destroyed. However, there is no receipt for such costs except the Spanish agent’s invoice to Hamann.

6)  Wharfage: This is in relation to unpacking the containers. However, Mr. Lam was unsure as to whether this cost was incurred because the goods were dangerous or if such costs would have been incurred regardless of the nature of the goods.

7)  ISPS: they represented Security charges that would have been incurred in any event, regardless of whether the goods were dangerous or not.

8)  THC/D: they stand for Terminal handling charges/destination charges which would have been incurred in any event, regardless of whether the goods were dangerous or not.

9)  Customs: Mr. Lam did not know what these charges relate to. They were given to the Plaintiffs by the Spanish agent.

29.In short, all charges claimed by the Plaintiffs are based on invoices issued by their Spanish agent to Hamann International SA. Some of which were accompanied by receipts while some were not. Some charges were incurred directly as a result of the goods being illegal goods while other charges would have been incurred regardless of whether the goods were illegal or not. Mr. Lam’s evidence was that for the charges that would nonetheless have been incurred, in the normal course of events, the Plaintiffs would still ask the shipper to indemnify them for the costs.

30.The Plaintiffs’ claims against the Defendant are for loss and damage suffered as a result of the Defendant’s breach of the Antecedent Contracts and/or common law warranty, and in the premises, I find that save and except all such expenses which the Plaintiffs proved on a balance of probabilities to have incurred but for the Defendant’s breach, otherwise they could not be regarded as loss and damage caused by the breach of the Defendant.

31.The Plaintiffs were undoubtedly under a duty to mitigate. The duty imposed on the Plaintiffs was “the duty of taking all reasonable steps to mitigate the loss consequent on the breach, and debars him from claiming any part of the damage which is due to his neglect to take such steps” (Chitty on Contract, 30^th Ed., para 26-103). In the absence of proof of foreign law as a special fact couple with credible evidence that the delay between the 25 November 2005 order of the Spanish Court and the ultimate destruction of the fireworks was normal under the Spanish law and system, I am not satisfied that the Plaintiffs had taken all reasonable steps to retrieve the containers after 25 November 2005 when the Spanish Court ordered that samples be taken from the content of the containers, the rest of the content destroyed and that the containers be return to the Plaintiffs’ Spanish Agent. For the purposes of assessment, taking into account the intervening Christmas Holidays, I find that had the Plaintiffs’ Spanish Agent taken all reasonable steps, they ought to have retrieved the containers by end of Feb 2006 at latest.

32.The Storage charges appear to have been calculated as if the containers were not collected and the Plaintiffs had to store the containers on behalf of the Shipper, which is clearly not the case. It seems that the containers were inspected and moved to the Spanish Government custody after the inspection on 26 August 2005. I am not satisfied that the Plaintiffs have proved that they suffered such loss at all after 26 August 2005 and I accordingly disallow this claim for such times beyond 26 August 2005.

33.I assess the damages as follows:

	1st Booking	2nd Booking
1)   Container Demurrage:	10 x 6.55 + 7 x 13.1 + 231 x 19.65 = 4696.35	10 x 6.55 + 7 x 13.1 + 210 x 19.65 = 4283.7
2)   Storage	69 x 2.16 = 149.04	55 x 2.16 =118.8
3)   Transport/haulage	1,136.21	2,521.03
4)   Firework Company Invoice	1400	1400
Total (in Euro €):	7381.60	8323.53

34.I award interest on the total sum of €15,705.13 to the Plaintiffs on the assessed sums from date of the writ up to the date of judgment at the rate of 5% per annum and thereafter at judgment rate until payment.

35.I also make a costs order nisi that the Plaintiffs do have the costs of this action, to be taxed if not agreed, and the order shall be made absolute unless any party applies within 14 days to vary.

Representation:

Mr. Edward Alder instructed by Messrs Tsui & Co. for the 1^st and 2^nd Plaintiffs.

Mr. George Hui instructed by Messrs William W. L. Fan & Co. for the Defendant.