Max Components Ltd v. Cyclo Transportation Co Ltd

DCCJ 1397/2009

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1397 OF 2009

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BETWEEN

Coram : Deputy District Judge K. H. Hui in Court

Dates of Hearing : 10 and 11 April 2012

Date of further written submission : 20 April 2012

Date of handing down of Judgment : 14 May 2012

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JUDGMENT

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Introduction

1.This is a claim for damages against the Defendant, a local courier company, for failing to deliver goods to the Plaintiff.

Background

2.On or about 20 November 2008, the Plaintiff engaged a Shiyu Express Limited (“Shiyu”) to deliver 28,130 pieces of SD RAM (model number S1638165TS-6G) (“the Goods”) from Mainland to Hong Kong.

3.Shiyu collected the Goods on 28 November 2008 and passed them through  深圳市天鷹速递有限公司 (“Tian Ying”), COE Logistics (“COE”) and the Defendant (which is a local courier) for onward delivery to the Plaintiff.

4.It is not clear as to whether Shiyu passed the Goods to Tian Ying first or COE first.

5.On 1 December 2008, the Goods were lost at Kwun Tong, Hong Kong while on the way of delivery to the Plaintiff.

6.The Plaintiff claims for the value of the Goods at US$11,533.30.

The Plaintiff’s Case

7.Mr. Ng Shun Kwok (“Mr. Ng”) is the only witness for the Plaintiff. Mr. Ng is a director and shareholder of the Plaintiff.

8.Mr. Ng told the Court that the Goods were part of the goods sold by the Plaintiff but were rejected by the purchaser, Express Luck Industrial Ltd, for quality reason.

9.On 20 November 2008, the Plaintiff engaged Shiyu to retrieve the Goods from the purchaser in Shenzhen, China. The written authorization to collect the Goods for this purpose is dated 26 November 2008 (Bundle p63).

10.Shiyu collected the Goods on 28 November 2008.

11.On 1 December 2008, a Mr. Wu of the Defendant telephoned Mr. Ng and informed him that the Goods were lost on the way of delivery at Kwun Tong. The matter was reported to the Hong Kong Police.

12.Mr. Ng learned, only after this incident, that Shiyu sub-contracted the delivery of the Goods to Tian Ying which in turn sub-sub-contracted the delivery of the Goods to the Defendant.

The Defendant’s Case

13.The Defendant called one witness, Ms. Sui Ching (“Ms. Sui”), who is a director of the Defendant.

14.The Defendant had entered into an agreement dated 27 November 2008 with Tian Ying (“the Agreement”). Under the Agreement, the parties agreed to deliver goods for the other party at an agreed fee as per Annexure 1 thereto for the period from 27 November 2008 to 31 December 2009 (Bundle p103-104).

15.In other words, the Defendant will deliver goods for Tian Ying in Hong Kong. These goods are shipped by the customers of Tian Ying in Mainland and to be delivered to Hong Kong. On the other hand, Tian Ying will also deliver goods for the Defendant in Mainland.

16.On 1 December 2008, the Goods were delivered to the office or godown of the Defendant. Tian Ying instructed the Defendant to deliver the Goods to the Plaintiff and to collect transportation fee at HK$180 from the Plaintiff. The Defendant only charged Tian Ying RMB 58 for this delivery.

17.The Defendant denies owing any duty of care to the Plaintiff. Further, the Defendant relies on Clause 3.4 of the Agreement to limit their liability to RMB 1,200 (“the Limitation Clause”).

Discussion

18.The issues are: (1) whether the Defendant owes any duty of care to the Plaintiff in respect of the Goods; (2) whether there is any breach of duty on the part of the Defendant; (3) quantum of damages.

(1)  Duty of Care

(a)   Negligence

19.While the Defendant denied owing any duty of care under negligence to the Plaintiff in the pleading, Mr. To, Counsel for the Defendant, rightly not pressed on with this argument.

20.The Defendant is a bailee for reward. The Plaintiff is the owner of the Goods. There can be no dispute that the Plaintiff will be affected by the conduct or omission of the Defendant that the Defendant ought reasonably to have the Plaintiff in contemplation as being so affected when the Defendant is directly its mind to the act or omission which is called in question.

21.It is my ruling that the Defendant owes a duty of care to the Plaintiff under negligence.

(b)  Bailment

22.Mr. To submitted that since the Plaintiff only mentioned negligence in the pleading and that the solicitors for Plaintiff stressed that the cause of action was negligence in their letter dated 17 June 2009 (“the Letter”), the Plaintiff is not entitled to run its case under the law of bailment.

23.I do not accept Mr. To’s submission. Firstly, the Plaintiff had already pleaded the factual matrix to support a claim against the Defendant under the law of bailment. While it is always good practice to spell out clearly the cause of action by making express reference to the area of law concerned, the omission to mention bailment is not against the pleading rules as it is not necessary for a party to plea law. Further, the omission is not material here. There is virtually no dispute as to the facts leading to this claim and thus the Defendant cannot really deny owing a duty of care to the Plaintiff under the law of bailment.   

24.Secondly, the Letter is not written for the purpose of stating the nature of the claim of the Plaintiff. It is a letter in reply to the intended application for security for costs. The solicitor for the Plaintiff just reiterated the Plaintiff’s stance under the Statement of Claim.

25.Thirdly, the Defendant relies on the Limitation Clause. It can only be introduced under the law of bailment. I am of the view that the Defendant is not entitled to run a defence under the law of bailment on the one hand and argue that the Plaintiff cannot make a claim under bailment on the other hand.

26.It is my ruling that the Plaintiff is entitled to run its case under the law of bailment.

27.At all material times, the Plaintiff is the owner of the Goods. It is thus obvious, while not admitted by the Defendant, that the Plaintiff is entitled to immediate possession of the same. The Plaintiff is thus entitled to claim against a sub-bailee or sub-sub-bailee who owes all the duties of a bailee for reward (Morris v C. W. Martin & Sons Ltd [1966] 1 QB 716, p728-729). A bailee for reward must exercise reasonable care for the safety of the goods entrusted to him.  (Halsbury’s Laws of England, 5^th edition, Vol. 4, p94, paragraph 146). It is my finding that the Defendant owes a duty of care to the Plaintiff under bailment.

(2)  Breach of Duty

28.The Defendant accepts there is a breach of duty under negligence if the Court finds that the Defendant owes such a duty of care.

29.Indeed, under the law of bailment, it is trite law that the bailee has to establish that he has exercised all due care for the Goods and that he is not negligent (Halsbury’s Laws of England, 5^th edition, Vol. 4, p94, paragraph 147; Samsung Electronics Ltd and Others v J & C Cargo Services Co Ltd and Another [2008] 2 HKLRD 243, paragraph 51).

30.The Goods are left unattended in the street for 35 minutes. It is a clear breach of duty owing to the Plaintiff whether under negligence or bailment.

(3)  Quantum of Damages

31.The Defendant relies on the Limitation Clause to limit their liability to RMB 1,200 with reference to the weight of the Goods which is around 50 kg.

32.The Limitation Clause in Chinese reads like this:-

“對於甲乙雙方在貨物交付後的運輸過程中如出現損毀丟失, 如委托運輸方購買保價運輸的按聲明價值由運輸方負責賠償, 交貨方提供相關的如貨值証明(但不限於), 否則按如下標準由運輸方賠償: 5公斤內賠300元, 以上每公斤加賠20元/公斤, 破損的按運輸費3倍賠償, 並運輸方不接受除協議雙方以外的任何一方及上述規定外的任何追償, 雙方之間賠償是指直接損失而不承擔任何連帶責任。”

33.The parties are unable to agree on the translation of the phrase “丢失” under the Limitation Clause. Mr. Lai, Counsel for the Plaintiff, submitted that “丢失” means “abandoned or thrown away loss” while Mr. To submitted that it means “thrown away, trashed, left, missed, mislaid, misplaced or lost”. I am of the view that “丢失” simply means “loss” no matter how it arises.

34.It should be noted for cases where no insurance policy is taken out, there are different provisions within the Limitation Clause governing the compensation (i) as between Tian Ying and the Defendant; and (ii) as between the transporting party and any other party.

35.As between Tian Ying and the Defendant, the effective phrase is “… 按如下標準由運輸方賠償: 5公斤內賠300元, 以上每公斤加賠20元/公斤, 破損的按運輸費3 倍賠償...” (“Limitation Provision”) which means the transporting party is responsible to compensate according on the following basis: RMB300 for the first 5 kg and then RMB20 for each additional kg; compensation for damaged goods shall be 3 times of the transportation fee.

36.As between the transporting party and any other party, the effective phrase is “...運輸方不接受除協議雙方以外的任何一方及上述規定外的任何追償...” (“Exemption Provision”) which means the transporting party does not accept any claim brought by any party other than the two parties hereto or any item of claim other than that specified above.

37.It should also be noted that the Defendant only seeks to rely on the Limitation Provision but not the Exemption Provision in these proceedings.  

38.There are 2 main sub-issues here: (a) whether the Defendant is entitled to rely on the Limitation Clause? (b) If so, is the scope of this clause wide enough to cover the present scenario?

Entitlement to rely on the Limitation Clause

39.The Limitation Clause only appears in the Agreement to which the Plaintiff is not a party. How can it apply against the Plaintiff?

40.The judgment of Lord Denning in Morris v C. W. Martin & Sons Ltd provides a useful guideline to this question. His Lordship said:-

“The answer to the problem lies, I think, in this: the owner is bound by the conditions if he has expressly or impliedly consented to the bailee making a sub-bailment containing those conditions, but not otherwise” (p729G).

His Lordship’s view is approved by the Privy Council in The Pioneer Container [1994] 2 AC 324.

41.Is there any consent by the Plaintiff here? The Defendant can only rely on implied consent as there is clearly no express consent because the Plaintiff did not know the sub-bailments until after the loss of the Goods.

42.Mr. To submitted that the Plaintiff would raise no objection to any sub-bailment because of what Mr. Ng said at  paragraph 11 of his witness statement “… 我在事前並不知道世裕會委託其他運輸公司運送, 不知道世裕會找天鷹或被告運送, 但根據一般做法原告是不會反對或不會理會世裕是親自運送或委託其他公司代為運送, 只要貨物能妥善運到原告手中便可。” which in essence means Mr. Ng did not know any sub-bailment (whether involving Tian Ying or the Defendant) and that the Plaintiff will not oppose to sub-bailment and will not care if Shiyu delivers the goods themselves or sub-contract the delivery to other company provided that the goods are delivered to the Plaintiff properly.   

43.I am of the view that the Plaintiff leaves the entire delivery work to Shiyu which is free to decide whether they will complete the whole delivery job on their own or sub-contract part of the transportation work to other carriers.

44.That is however not the end of the story. In Marine Blast Ltd v Targe Towing Ltd and Scheldt Towage Co NY [2004] EWCA Civ 346,  Mance LJ said:-

“… for a bailor to be bound by terms in a sub-bailment (or in a contract to which he is not party), the bailor must have consented to such terms. That does not mean that he must know of them in detail, but they must be of a nature that he impliedly consents to them. Even if they appear in a contract of sub-bailment, they may be so unusual or so unreasonable that they could not reasonably be understood to fall within the consent granted …” (paragraph 26).

45.Is the Limitation Clause so unusual or so unreasonable?  I do not think that exclusion clause or limitation clause is of unusual or unreasonable nature in carriage of goods contract. It is therefore my finding that the Plaintiff impliedly granted consent to Shiyu to sub-contract the delivery of the Goods to other carriers and subject to their limitation or exclusion clause. The Plaintiff is therefore bound by or subjected to the Limitation Clause.   

The Scope of the Limitation Clause

46.The issues here are whether the wordings of the Limitation Clause covers the Plaintiff and if so whether it also covers negligence.

47.Mr. Lai referred the Court to the limitation clause of COE (Bundle p105-106). Before I move on, I should say that it is not entirely clear as to the role played by COE. The Plaintiff says that COE is the sub-bailee and Tian Ying is the sub-sub bailee. The Defendant says Tian Ying should be the sub-bailee and COE is the sub-sub-bailee. This however does not affect the present case.

48.Mr. Lai relied on the evidence of Ms. Sui and submitted that the limitation clause of COE governs the compensation between COE and its consumer client with a maximum compensation at US$60. The Limitation Clause governs the compensation between two business entities or business clients, namely Tian Ying and the Defendant, by reference to the weight of goods involved. Since the Plaintiff is a consumer client, the Limitation Clause does not apply against the Plaintiff. In other words, the Plaintiff will only be subjected to a limitation clause which limits maximum compensation at a certain amount and not by reference to weight.

49.In my view, Mr. Lai has misunderstood the evidence of Ms. Sui who only explained why there are different basis of compensation.

50.Nevertheless, the Limitation Clause indeed makes distinction between transporting party (it may be Tian Ying or the Defendant) and any other party. The Limitation Provision applies, in the present case, against Tian Ying only.  As to any other parties, the Exemption Provision applies. The fact that the Defendant is not relying on the Exemption Provision does not mean that I can totally ignore it.

51.Since there are different compensation provisions against the transporting and any other parties, it is my ruling that the Defendant cannot rely on the Limitation Provision against the Plaintiff (Morris v C. W. Martin & Sons Ltd, p730C to F).

52.This is sufficient to dispose of the case subject to the assessment of damages. However, for completeness sake, I shall examine the case further assuming that the Limitation Clause covers the Plaintiff.

53.The next issue is whether the Limitation Clause covers negligence.

54.Mr. To refers me to Ailsa Craig Fishing Co Ltd v Malvern Fishing Co Ltd [1983] 1 WLR 964 and George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd [1983] 2 AC 803.

55.In Ailsa Craig Fishing Co Ltd, the relevant clause of limitation is as follows:-

“If, pursuant to the provisions set out herein, any liability on the part of the Company shall arise (whether under the express or implied terms of this Contract, or at Common Law, or in any other way) to the customer for any loss or damage of whatever nature arising out of or connected with the provision of, or purported provision of, or failure in provision of, the services covered by this Contract, such liability shall be limited to the payment by the Company by way of damages of a sum ...”

56.Lord Fraser of Tullybelton at p972C said:-

“Having considered these particular criticisms of paragraph (f) the question remains whether in its context it is sufficiently clear and unambiguous to receive effect in limiting the liability of Securicor for its own negligence or that of its employees. In my opinion it is. It applies to any liability “whether under the express or implied terms of this contract, or at common law, or in any other way.” Liability at common law is undoubtedly wide enough to cover liability including the negligence of the proferens itself, so that even without relying on the final words “any other way”, I am clearly of opinion that the negligence of Securicor is covered.”

57.In George Mitchell (Chesterhall) Ltd v Finney Lock Seeds Ltd, the relevant part of the limitation clause is as follows:-

“1. In the event of any seeds or plants sold or agreed to be sold by us not complying with the express terms of the contract of sale ... or any seeds or plants proving defective in varietal purity we will, at our option, replace the defective seeds or plants, free of charge to the buyer or will refund all payments made to us by the buyer in respect of the defective seeds or plants and this shall be the limit of our obligation.

2. We hereby exclude all liability for any loss or damage arising from the use of any seeds or plants supplied by us and for any consequential loss or damage arising out of such use or any failure in the performance of or any defect in any seeds or plants supplied by us or for any other loss or damage whatsoever save for, at our option, liability for any such replacement or refund as aforesaid.

3. In accordance with the established custom of the seed trade any express or implied condition, statement or warranty, statutory or otherwise, not stated in these conditions is hereby excluded.”

58.Lord Bridge of Harwich found that the relevant clause, read as a whole, unambiguously limits the appellant’s liability to replacement of the seeds or refund if the price. His Lordship further said:-

“I know of no principle of construction which can properly be applied to confine the effect of the limitation to breaches of contract arising without negligence on the part of the appellant” (p814D).

59.None of these two cases concerns the liability of carrier.

60.Mr. Lai relied on Always Win Ltd v Autofit Ltd and Citybase Property Management Ltd (Third Party) (HCA10735/1993, Cheung J (as he then was), 28 March 1995). The relevant exemption clause is as follows:-

“The Company (i.e. the Defendant) shall not be responsible for any loss and/or damage to the Customer's vehicle or any articles attached to or left inside the vehicle whilst on the Company's premises or under the Company's control from whatsoever cause arising.”

61.The Court, after referring to the judgment of Lord Alverstone CJ in Price & Co. v. Union Lighterage Company [1904]1 KB 412 ,concluded that:-

“[i]n a contract for bailment, [the exemption clause] can have a contractual and businesslike construction and have effect without including in the exemption the consequence of negligence of the bailee. A bailee must exercise reasonable care of the articles under its possession and custody. If it wishes to exclude liability for negligence, it should say so. In the absence of any express words, [the exemption clause] would not exempt the bailee from negligence.” (p17)

62.I note that the Limitation Provision only limits the compensation. I also note  the submission of Mr. To that the Court should ascertain he natural and plain meaning of the Limitation Provision in the light of the surrounding circumstances within the parties knowledge (HIH Casualtyand General Insurance Ltd v Chase Manhattan Bank [2003] 1 All ER (Comm) 349 at 368).

63.First of all, I do not think there is any ambiguity of the wordings as suggested by Mr. Lai. Secondly, the general principles about bailment for reward is that if the goods are lost, whilst in the possession of the bailee, the bailee is liable unless he can show, and the burden is on him to show, that the loss occurred without any neglect or default on his part (Morris v C. W. Martin & Sons Ltd, p726B). Thus, if the bailee wishes to exclude liability for negligence, he should expressly say. It is therefore my finding that the Limitation Clause (for both Limitation Provision and Exclusion Provision) does not cover negligence.

Wilful Neglect

64.If I am wrong and that I should have held that the Limitation Clause covered negligence, the next issue is whether the conduct of the Defendant amounts to reckless, wilful neglect or wilful misconduct? If it is so, it will take the case outside the ambit of the Limitation Clause.

65.In Orient Technologies Ltd v A Plus Express (HK) Ltd [2004] HKDC 87, HH Judge Ng referred to Thomas Cook Group Ltd v Air Malta Co Ltd (t/a Air Malta) [1997] 2 Lloyd's Rep. 399 where Cresswell J who set out the relevant principles at p405-8:-

“1. The starting point when considering whether in any given circumstances the acts or omissions of a person entrusted with goods of another amounted to wilful misconduct is an enquiry about the conduct ordinarily to be expected in the particular circumstances.

2. The next step is to ask whether the acts or omissions of the defendant were so far outside the range of such conduct as to be properly regarded as “misconduct”. (An important circumstance would be a deliberate disregard of express instructions clearly given and understood.)

3. It is next necessary to consider whether the misconduct was wilful.

4. What does not amount to wilful misconduct? Wilful misconduct is far beyond negligence, even gross or culpable negligence.

5. What does amount to wilful misconduct? A person wilfully misconducts himself if he knows and appreciates that it is misconduct on his part in the circumstances to do or to fail or omit to do something and yet (a) intentionally does or fails or omits to do it or (b) persists in the act, failure or omission regardless of the consequences or (c) acts with reckless carelessness, not caring what the results of his carelessness may be. (A person acts with reckless carelessness if, aware of a risk that goods in his care may be lost or damaged, he deliberately goes ahead and takes the risk, when it is unreasonable in all the circumstances for him to do so.)

6. The final step is to consider whether the wilful misconduct (if established) caused the loss of or damage to the goods.”

66.These principles are approved and followed by Morison J in Micro Anvika Ltd v TNT Express Worldwide (Euro Hub) NV [2006] EWHC 230 (Comm).

67.The Plaintiff must therefore show:-

(1)Misconduct on the part of Mr. Wu (the employee of the Defendant who was responsible for delivery of the Goods);

(2)That he was aware of a risk that the Goods might be stolen, but deliberately and unreasonably went ahead and took that risk;

(3)That that misconduct caused the loss of the Goods.

68.Ms. Sui said that each employee is responsible for his own district alone. Mr. Wu is the only person responsible to deliver the Goods (5 boxes each measures 2 ft x 1 ft x 1 ft and weighing 10 kg) and other items on 1 December 2008.

69.What really had happened on 1 December 2008? Mr. Wu was taken to Kwun Tong by the van/lorry of the Defendant. At around 0955 hrs, he arrived at No. 61 Shing Yip Street, Kwun Tong. He unloaded all the goods (including the Goods) to be delivered from the van/lorry to the pavement outside No. 61 Shing Yip Street. He then picked out 22 items and delivered the same to Shing Yip Industrial Building at No. 19-21 Shing Yip Street. The Goods and other items were left at the street unattended. He returned to No. 61 Shing Yip Street at around 1030 hrs (35 mins later) and found the Goods were missing.  

70.In my judgment, leaving the Goods unattended at the street for such a long period of time is clearly an act of wilful neglect or misconduct. It is not merely a moment of inadvertence in failing to keep an eye on the Goods.   There is an obvious risk of loss.

71.It is my ruling that there is wilful neglect on the part of the Defendant and thus the Defendant cannot rely on the Limitation Clause.

Control of Exemption Clauses Ordinance, Cap 71 (“CECO”)

72.If I am wrong and that I should have held that the Limitation Clause covered the loss of the Goods (i.e. it covers negligence and there is no willful neglect), the next issue would be whether it should be struck down by reason of the CECO.

73.The issues here are (i) whether the CECO applies? (ii) If so, whether the Limitation Clause satisfies the reasonableness test?

74.Mr. To submitted that the CECO does not apply by reason of s16 which provides that:-

“(1) The limits imposed by this Ordinance on the extent to which a person may exclude or restrict liability by reference to a contract term do not apply to liability arising under an exempted supply contract.

(2) The terms of an exempted supply contract are not subject to any requirement of reasonableness under section 8 or 9.

(3) For the purposes of this section, an exempted supply contract means a contract-

(a) that is either a contract of sale of goods or a contract under or in pursuance of which the possession or ownership of goods passes;

(b) that is made by parties whose places of business (or, if they have none, habitual residences) are in different countries or territories or are in and outside Hong Kong; and

(c) in the case of which-

(i) the goods in question are, at the time of the conclusion of the contract, in the course of carriage, or will be carried, from one country or territory to another country or territory, or to or from Hong Kong from or to a place outside Hong Kong; or

(ii) the acts constituting the offer and acceptance have been done in different countries or territories or in and outside Hong Kong; or

(iii) the contract provides for the goods to be delivered to a country or territory other than the country or territory where the acts constituting the offer and acceptance were done; or

(iv) the acts constituting the offer and acceptance were done in Hong Kong and the contract provides for the goods to be delivered outside Hong Kong; or

(v) the acts constituting the offer and acceptance were done outside Hong Kong and the contract provides for the goods to be delivered to Hong Kong.”

75.Counsel submitted that s16(3)(a) expressly stipulates that:-

“an exempted supply contract means a contract … under or in pursuance of which the possession … of goods passes …”

Carriage of goods contracts, like a delivery under the Agreement, involve passing of the possession of goods, fall within the ambit of s16(3)(1). I accept counsel’s submission (See Palmer on Bailment, 13^th edition, Sweet & Maxwell, paragraph 17-089).

76.I also accept that s16(3)(b) is satisfied because, according to Ms. Sui, Tian Ying is a Mainland based company while the Defendant is a Hong Kong company.

77.I am of the view that the Agreement is not entered specifically for the delivery of the Goods in question. In fact, it records the co-operation arrangements between Tian Ying and the Defendant. The Defendant has nothing to deliver until goods are sent from Tian Ying. Therefore the true nature of the Agreement is an agreement to enter into subsequent delivery agreements. It means that an agreement to deliver a particular piece of goods concludes, at the earliest, when Tian Ying informs the Defendant of the delivery. For the Goods, it is not clear when Tian Ying informed the Defendant about the delivery. There is no evidence as to when and how the agreement for the delivery of the Goods is concluded. Without such evidence, the Defendant is unable to show that s16(3)(c) is satisfied.

78.It is therefore my ruling that the Limitation Clause is subject to the CECO.

79.If I am wrong in that I should only consider the Agreement or the conclusion of the Agreement for the purpose of s16(3)(c), then I would hold that only s16(3)(c)(i) is satisfied. I need not repeat my view in relation to s16(3)(a) and (b). They cannot be in dispute.

80.While the Agreement was signed in Shenzhen, there is no evidence as to the negotiation progress and thus no evidence as to where the acts constituting the offer and acceptance took place. The acts could have taken place in Mainland and/or Hong Kong or somewhere else.  In means that the Defendant is unable to say that s16(3)(c)(ii), (iv) or (v) applies.

81.Under the Agreement, goods are to be delivered either in Mainland by Tian Ying or in Hong Kong by the Defendant. Once again, since there is no evidence as to where the acts constituting the offer and acceptance took place, the Defendant fails to show that s16(3)(c)(iii) applies.

82.The Plaintiff engaged Shiyu on 20 November 2008 to collect the Goods and the written authorization is dated 26 Nov 2008. Shiyu collected the Goods on 28 November 2008. The Agreement is dated 27 Nov 2008 and on that day, the Goods “will be carried” from Mainland to Hong Kong. With that, s16(3)(c)(i) is satisfied.

83.Mr. Lai contends that even if s16 applies, the effect is that the Limitation Clause is not subject to ss8 and 9 of the CECO. The Limitation Clause is nevertheless still subject to s7(2) of the CECO which deals with negligence liability. I believe that it cannot be disputed by the Defendant.

Reasonableness Test under the CECO       

84.Section 3(1) of the CECO provides that:-

“In relation to a contract term, the requirement of reasonableness for the purposes of this Ordinance and section 4 of the Misrepresentation Ordinance (Cap 284) is satisfied only if the court or arbitrator determines that the term was a fair and reasonable one to be included having regard to the circumstances which were, or ought reasonably to have been, known to or in the contemplation of the parties when the contract was made.”

85.The first question that has to be resolved is: who are the parties in question? Mr. Lai submitted that they are the Plaintiff and the Defendant.

86.Mr. To submitted that they should be Tian Ying and the Defendant. He relied on Sonicare International Ltd v East Anglia Freight Terminal Ltd[1997] Lloyd’s Rep 48 at 55 which is approved by the English Court of Appeal in Northern Electric Plc v Econofreight Heavy Transport Ltd [2001] EWCA Civ 286.  

87.I accept Mr. To’s submission that it will be illogical to examine how a non-contractual party had dealt with terms which he had never seen. It is my ruling that the parties concerned are Tian Ying and the Defendant.

88.There is no dispute that it is for the Defendant to prove that the Limitation Provision satisfied the reasonableness test (s3(6), CECO).

89.I have considered the submission of and the authorities referred by Counsel, the CECO and the matters referred to in Schedule 2 of CECO. I accept Mr. To’s submission that the Limitation Provision satisfies the reasonable test because:-

(a)  It is open to the Tian Ying to cover itself by insurance. The same applies to the Plaintiff.

(b)According to Ms. Sui, it is Tian Ying which raised the issue of limitation of liability. The Defendant only negotiated with Tian Ying in relation to quantum.

(c)  The entire Limitation Clause applies to Tian Ying and the Defendant. In the absence of evidence to the otherwise, the only reasonable conclusion is that Tian Ying and the Defendant are of similar bargaining power.

(d) According to Ms. Sui, limitation of liability is a common practice in the trade.

(e)  The Defendant has minimal knowledge of the nature of the goods and no knowledge of the value. Mr. Ng said that the Plaintiff would not let the carrier know the value of the goods to be delivered.

(f)   There is no evidence of inducement.

90.It is my ruling that if the Limitation Provision is applicable, it satisfies the reasonableness test under the CECO.

Quantum

91.There is no dispute that the cost of the Goods is US$10,689.40 (US$0.38 x 28,130 pieces).  The sum claimed by the Plaintiff is the selling price of the Goods to Express Luck Industrial Ltd.

92.While the Goods are of inferior quality in the eyes of Express Luck, Mr. Ng said that the Plaintiff is entitled to return the Goods to the supplier for replacement.

93.Mr. Ng also said that the price of the Goods as on 1 Dec 2008 is more or less the same as the original purchase price.

94.There is no evidence from the Defendant contradicting the evidence of Mr. Ng. There is also no suggestion as to what is the value of the Goods on 1 Dec 2008.

95.In the premises, the Plaintiff is entitled to damages in the sum of HK$83,377.32 (US$10,689.40 x 7.8).

96.If the Limitation Clause applies to the present case for whatever reason, the damages that I will award is RMB 1,200.

Conclusion

97.The Defendant owes a duty of care to the Plaintiff under negligence and bailment. The Defendant has breached the duties.  The Plaintiff is bound by or subject to the Limitation Clause. However, the Limitation Provision, as relied on by the Defendant, only covers Tian Ying but not the Plaintiff. Further, the Limitation Clause does not cover negligence.  In any event, there is wilful neglect on the part of the Defendant. The Defendant cannot rely on the Limitation Provision to limit the compensation.

98.I grant judgment in favour of the Plaintiff in the sum of HK$83,377.32 with interest at 8% from date of writ to date of judgment and thereafter at judgment rate until full payment.

99.I also make an order nisi that the Defendant to pay the Plaintiff’s costs of this action together with all costs reserved to be taxed if not agreed with certificate to Counsel. This order shall become absolute unless there is application to the otherwise within 14 days after handing down of this Judgment.

Mr Alex S. W. Lai, instructed by Messrs. Hon & Co., for Plaintiff

Mr Ken To, instructed by M/s. Chiu, Szeto & Cheng, for Defendant