World Asian International Ltd v. Brilliant Top in Logistics Ltd
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HCCL 8/2011 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMMERCIAL ACTION NO 8 OF 2011 _____________
_______________ J U D G M E N T _______________ 1.The Plaintiff in this action is suing the Defendants for the value of a container of animal foodstuffs lost or stolen whilst allegedly in the Defendants’ control or custody. 2.Mr Rosa Mera, a Spanish national, has been, since 2008, the sole effective director and shareholder of the Plaintiff company which imports from Europe, such miscellaneous animal foodstuffs as red deer tails and pizzles, pig, chicken and rabbit parts, which have a market in Hong Kong as everyday and/or eclectic items of culinary culture. 3.The 2nd Defendant operates a cold storage container service more usually on its own premises and, when its own facilities are full to capacity, at other premises of varying types with which it has an account. 4.The 1st Defendant carries out the ancillary services such as transportation, vanning and devanning i.e. loading and unloading. 5.Both Defendants operate from the same premises with their staff being based at the same premises in Kwai Chung. There appear to be two addresses in Kwai Chung. 6.The 2nd Defendant has a clear overlap with the 1st Defendant in the services it provides, because its “mission” is “to establish quality services in logistics”, warehouse and distribution services amongst several others, and with its name, which on the face of it is self-explanatory as to its business, is the catch phrase, “Power in Logistics”. 7.On the basis of the material on Mr Frankie Lai’s business card, there is a distinction without a difference between the two companies. This is confirmed by the documentation provided for charging its customers. The debit notes emanating from the 2nd Defendant itemising the charges for such services as storage are then dispatched to the customer with an invoice headed with the name of the 1st Defendant requiring payment to its account. There is no evidence to indicate whether the 2nd Defendant has a separate bank account. All the indications including the inferences to be drawn from Mr Lai’s evidence and the activities conducted are that the two companies exist side by side perhaps as an accounting exercise, providing complementary services. In his statement, Mr Lai described the relationship of the two companies in the following terms:
Mr Frankie Lai Sai Kit 8.He describes himself as the Logistics Manager employed by the 1st Defendant company. In his statement, prepared and signed for these proceedings, it is stated :
9.His evidence varied the situation somewhat but an air of uncertainty as to his employer remained. He said that the reference to his being employed by the 2nd Defendant for 10 years was incorrect. He said he joined the 2nd Defendant in 2002 and transferred to the 1st Defendant in June 2004. He had been Sales and Marketing Manager with the 2nd Defendant. Now a Ms Lau was the 2nd Defendant’s Assistant Sales Manager. Although he attributed different aspects of business to the two companies, he gave the impression that the two companies were more or less without any distinction in the actual business conducted, and he certainly seemed to ‘wear two hats’. 10.His business card is headed with the name of the 1st Defendant and his title is Logistics Manager. His e-mail address, however, is “[email protected]”. The website is “www.b-logistics.com.hk”. On the reverse of the card is a broad description of “Our Services” which include warehouse service followed at the bottom by : “Brilliant Cold Storage Management Ltd”. He was, throughout these events, the only person with whom the Plaintiff, through Mr Rosa Mera, had contact. E-mail communication was the preferred means; it was frequent and sometimes on several occasions in a day. Mr Lai was the source of information, of advice and the means by which fundamental matters were dealt with. Wong Tsin alias Jim Wong (trading as North Sea International Industrial Co) 11.This “fly-by-night” character is at the root of the chicanery concerning Mr Mera’s lost container. 12.At one stage in the past, he had been a shareholder and director of the Plaintiff company which had been bought off the shelf from one of those agencies specialising in setting up companies in such a market. In October 2008, Wong Tsin transferred his shareholding to Mr Rosa Mera and ceased to have any direct or legitimate role in the Plaintiff’s business. He had his own business, North Sea (for short), and became a customer of the Plaintiff. 13.Mr Rosa Mera did not trust this person readily, and it seemed that he owed Mr Rosa Mera or his company (the Plaintiff) a sum of money for goods supplied to him. He did, however, carry out some function for the Plaintiff, albeit limited, and probably, as a result of the fact that he became a customer of the Plaintiff, and was interested in the goods brought into Hong Kong by it. That role was to obtain Government clearance by certificates through the Food and Environmental Health Department, so that the goods could be sold in Hong Kong. Wong Tsin was referred to as the contact man. 14.Wong Tsin opened his own account with the 2nd Defendant on 7 November 2008. It transpired that he also had accounts at Yee Lim’s Storage and, more significantly, at Sim’s warehouse in Fotan. The Defendants did not have an account at Sim’s warehouse, a matter of great significance as it transpired. Manuel Rosa Mera 15.Mr Mera opened his account with the 2nd Defendant on 2 October 2008. The signature card contains only his name, Passport number and signature as the person “authorised to sign documents for delivery of cargo”. The spaces for additional signatures are struck through. The contact numbers are a Spanish telephone number, a mobile number and a Spanish fax number. 16.The 2nd Defendant sent the Plaintiff by fax on 2nd October 2008, its terms and charges for the services to be provided to the Plaintiff. Both documents are headed in its name only. 17.At that time, Wong Tsin had ceased to have any direct involvement in the Plaintiff’s business. Mr Rosa Mera made it clear that he did not trust Wong Tsin and used him only for mutual convenience viz. the arrangements for inspection of the goods imported for the obtaining of a licence from the F.E.H.D. 18.Initially, the Defendants contended that the 1st Defendant also faxed its own terms and conditions to the Plaintiff. Mr Rosa Mera denies having received these. In any event they ceased to be of significance when Mr Nicholas Cooney S. C. on behalf of the Defendants, abandoned their reliance upon the exclusion clauses. The business practice between the parties 19.Once a container of goods imported by Mr Rosa Mera arrived at the port of entry, they could only be collected by the 1st or 2nd Defendant upon production of a Release Order. The Release Order was obtained by Mr Mera upon production of the Bill of Lading to the forwarding agents. This Release Order was then forwarded to the Defendants to enable them to collect the goods from the shipping agents at the port of entry. 20.The Defendants, either or both of them were responsible for transporting the containers of goods, and entering them into their cold storage warehouse. The next phase was to obtain a certificate or licence from the F.E.H.D. after which the goods could be sold within Hong Kong. Once that had been obtained and a purchaser was ready, the goods would be released only upon the receipt by Mr Frankie Lai of a Delivery Note from Mr Rosa Mera. Such Delivery Note from Mr Rosa Mera would only be forwarded once he had received payment for the goods from the purchaser. This was the invariable practice and Mr Frankie Lai well knew this. 21.The nature of the Delivery Note documentation is illustrated at pages 336-349 of Bundle C2 recording sales to North Sea International, (Wong Tsin’s business) between November 2008 and 6 January 2011. They are signed by Mr Rosa Mera. 22.In Bundle C1 at pages 139-154 are another series of Delivery Orders dated between 1 December 2010 and 15 March 2011. They are in identical form, most of them relating to Fook Sang Tai, one to Shingsky International Trading, and the other three are simply copies (duplicated) of three Delivery Notes relating to North Sea International. The last two of these are dated the 4th and 6th of January 2011. They are particularly significant because they show at those dates Delivery Orders were required for the release of any goods to Wong Tsin, trading as North Sea International, even though Wong Tsin had arranged for F.E.H.D. clearance and certificates before the goods could be sold, and released to him in accordance with a Delivery Order. The 4th January 2011 was, coincidentally, the date on which the Defendants delivered the container in question to Sim’s warehouse where it became under Wong Tsin’s control. 23.The e-mail contact between Mr Frankie Lai and Mr Rosa Mera illustrates the importance of the Delivery Orders with Mr Lai regularly asking for a Delivery Order so that he could release the goods to a customer, and Mr Rosa Mera sending the Delivery Orders. The only instance of Wong Tsin receiving anything other than by way of a delivery order comes in the form of an express instruction that he be allowed sample cartons which have no value. But even that required Mr Rosa Mera’s express approval. 24.It is quite clear in my view that the practice involving the Defendants through Mr Frankie Lai, and Mr Rosa Mera, was intended to ensure that goods were released to no customer ― not even Wong Tsin ― without the essential formality of a Delivery Order which had been preceded by payment. The missing container 25.The contents of one of the two containers which occupied the attention of all from November 2010 to January 2011 were the more expensive products being red deer parts which needed to be sold before Chinese New Year, 2011. 26.They were despatched from Hamburg, Germany on 21 November 2010 via Transworld Shipping Company in container no. LTIU 9004731 and were due in Hong Kong within 20 to 30 days. 27.On 23 November 2010, Mr Rosa Mera e-mailed to Mr Frankie Lai :
Frankie Lai replied :
Mr Rosa Mera answered that they were already on their way and he could do nothing now. They were due to arrive on 15 December. He was in contact by e-mail again on 26 November:
A reply from Frankie Lai the same day showed that he was alert to the possible problem:
28.The Defendants (or the 1st or the 2nd Defendant) had an account at Kerry Cold Storage and this facility seems to have stayed in Mr Rosa Mera’s mind throughout his period. He made it clear that the contents of the two containers were valuable and they had to be sold before the Chinese New Year. A few days later, he repeated that he hoped that space could be found for the two containers and that he was trying to sell the “goods” quickly to “have some space”. 29.One of his clients, Michael Wong of Fook Sang Tai, was being a bit too demanding for Mr Frankie Lai’s convenience, and e-mail exchange was taken up with this problem for a while. 30.On 6th and 10th December 2010, Mr Rosa Mera was inquiring again about space for the two containers due to arrive on 15 December. He obtained the Release Document from Transworld, and gave this to Frankie Lai. He was in Hong Kong by 19 December when the containers were released from Transworld’s Port premises. What then happened is in some respects complicated. Mr Rosa Mera accepted the suggestion that the goods be transferred from the two shipping containers into rental containers. This was a cheaper option than continuing to use the original containers. 31.At a tea-time meeting with Frankie Lai and Wong Tsin on 19 December at the Panda Hotel, Mr Mera’s understanding was that, although he preferred that his containers should stay at the Defendants’ premises, he was agreeable to one of his containers, which was already at the Defendants storage, being transferred to Brilliant Rise, a storage facility which he thought was part of the Defendants’ business, but which, in fact, was unconnected though the Defendants had an account there. Mr Mera’s belief as to the link between the Defendants and Brilliant Rise was, in my view, reasonable enough. He knew from past experience that the Defendants used other facilities on occasions which were under their accounts, and charges for these were settled with the Defendants with the latter imposing a surcharge which Mr Rosa Mera accepted. 32.The ambit of this tea-time conversation varies according to the two principal persons present. Frankie Lai says that Wong Tsin acting as the interpreter explained all the risks of security and spoilage in relation to other storage facilities. Mr Rosa Mera said that no such problems were explained but he was told of the surcharge by the Defendants if other premises were used, and the difficulties with other storage facilities which preferred to keep space for their own clients. Wong Tsin did not act as an interpreter, although certainly, there was conversation between Frankie Lai and Wong Tsin in Chinese. With Frankie Lai he, Rosa Mera, was able to explain and understand essential matters in English. I am satisfied that quite apart from his evidence, which I accept, the content of e-mails passing between the two men shows that they had a clear understanding of each other in English and communicated intelligibly. 33.He said he made it clear that he wanted Mr Lai to arrange cold-storage preferably at the Defendants’ premises or at those with which the Defendants had an account. He wanted no risk to be taken with his containers’ contents. Although, he agreed that he also left the matter with Wong Tsin to come up with ideas or information it was upon Frankie Lai that he relied. He would not allow his containers to go to coldstore premises that were under the control of Wong Tsin. I am satisfied that nothing in that discussion gave Frankie Lai any reasonable basis for thinking that Wong Tsin was given any authority to arrange storage for Rosa Mera’s goods. 34.Frankie Lai knew that Mr Rosa Mera did not trust Wong Tsin. He said so in his evidence although he appeared to try and dilute this a little later. He agreed that apart from the fact that Wong Tsin arranged for the inspection of goods by the F.E.H.D. there was nothing else that gave him any impression that he had a wider authority from Mr Rosa Mera. He knew that the Plaintiff’s goods were only ever released to Wong Tsin after payment on the strength of which the Delivery Order was sent. Even allowing Wong Tsin to have or inspect samples was preceded by a specific instruction. As Frankie Lai tellingly stated ― “Rosa only trusted me.” 35.I am satisfied that Frankie Lai’s unreliable description of Wong Tsin’s role or participation at that lunch-time meeting is a distortion of the truth designed to relieve himself of responsibility for what subsequently happened. 36.The red deer items in the original container were transferred to UESU 4551226 (The rental container). The cheaper items were transferred from EMCU 5255826 into CBHU 8398401 at the 2nd Defendants premises. Something clearly went wrong as far as Frankie Lai’s original suggestion was concerned. Instead of a space being made available at the 2nd Defendant’s premises for the container with the more valuable goods (now UESU 4551226) it was delivered to Brilliant Rise. How that came about is not clear, but it is one of the suspicious factors giving rise to the inference of Frankie Lai’s collusion with Wong Tsin which I will consider a little later. 37.From Brilliant Rise, the container in question was transferred by the Defendants to Sim’s Storage at Fotan. The Defendants did not have an account there. Wong Tsin did. Frankie Lai knew that with the container at Sim’s, Wong Tsin could effect the release of its contents but he said that it did not occur to him that the container would be safer for Mr Rosa Mera if at a store on the Defendants’ account at, for example, Kerry Cold Store. His comments are inconsistent. 38.The contents of the e-mails between Mr Rosa Mera and Mr Frankie Lai are also revealing, mainly in the sense of what Frankie Lai does not tell Rosa Mera. On 28 December 2010, Mr Rosa Mera e-mailed Frankie Lai asking :
39.In his statement, Frankie Lai said he was surprised to receive a call from Wong Tsin on 29 December to the effect that he (Wong) had found a space for one container at Yee Lim Storage, the latter having told Lai (or a colleague) that there was no space. When Lai told one of his colleagues to check with Yee Lim quoting North Sea (Wong Tsin’s business) it was confirmed that a space for the container had indeed been booked under the name of the North Sea business. Frankie Lai never revealed this to Mr Rosa Mera. Worse was to come. 40.He did inform Rosa Mera that the container may go to Yee Lim Storage on 4 January 2011. It is clear that Mr Rosa Mera did not know where the second container, the valuable goods container, was, and Mr Lai was notably uninformative. Inspection and clearance at the earliest opportunity was essential so that the goods could be sold. On 3 January 2011, Frankie Lai confirmed that this container would be at another public warehouse in “the Fotan area tomorrow”, i.e. 4 January 2011. He still did not disclose that Wong Tsin had an account at Sim’s and that therefore the container would be under his control. He suggested in evidence that he believed that Wong Tsin would have told Mr Rosa Mera. This is in my judgment a facile explanation. It was clear Rosa Mera was relying on Frankie Lai for information and, as Frankie Lai said on two occasions, Mr Rosa Mera trusted him. 41.In the e-mail of 5 January 2011, Frankie Lai was telling Mr Rosa Mera that “We (he may have meant his staff) [were] devanning the second container from 2 pm to 6 pm.” There was still no mention of Sim’s and on 14 January Mr Rosa Mera was asking him: “Did you put the container at Kerry Cold Store?” and on 15 January he was asking for the address of Kerry Cold Store. 42.Frankie Lai sends the address on 17 January. On 26 January Mr Rosa Mera asks Frankie Lai to let Michael Wong inspect some goods from the container in question at Kerry Cold Store. Then, on 27 January, Frankie Lai finally reveals that the container is at Sim’s warehouse, not at Kerry Cold Store, but still does not give the address or reveal that it is under Wong Tsin’s account. 43.It is quite clear that Frankie Lai knew well before then that Mr Rosa Mera had no information from Wong Tsin as to the whereabouts of the container, despite what he said in evidence. 44.On 8 February, one month after the container had entered Sim’s warehouse under Wong Tsin’s control, Rosa Mera was inquiring if the F.E.H.D. had inspected the goods. Frankie Lai replied that he had contacted Wong Tsin and ascertained that the release letter had not yet arrived. A week later, Lai was telling Rosa Mera that he could not contact Wong Tsin and revealed for the first time that the container was under Wong’s account in Sim’s warehouse ― “So we must find Jim!” his e-mail ended. The punctuation suggests a degree of alarm, feigned or real. Within a few minutes he e-mailed again with an apparent sense of urgency :
And then a few minutes later :
He reported it to the Police promptly, telling Rosa Mera that he would have to come to Hong Kong to pursue the matter directly. 45.Mr Rosa Mera’s reaction was predictable. In e-mails he said :
46.The following day Frankie Lai informed Rosa Mera that solicitors were now instructed for Brilliant Cold Storage / Brilliant Top in Logistics. Ostensible / apparent authority as an agent 47.There is no substance in Mr Frankie Lai’s contention. He knew that Wong Tsin arranged inspections by F.E.H.D., but he knew, more importantly, that Rosa Mera did not trust Wong Tsin and that the invariable practice was that no goods, other than samples without value, were released to Wong Tsin without a Delivery Order after Wong Tsin had paid for the goods. He said that he thought that Jim Wong was going to deal with the sale of the goods at Sim’s warehouse. This was, of course, obvious in the circumstances but he gave no other example of Jim Wong having sold Rosa Mera’s goods. He had earlier confirmed that the only factor on which he relied had been Wong Tsin’s actions in securing the F.E.H.D. licence. 48.Frankie Lai’s attempts to endow Wong Tsin with authority which allowed him access to containers of goods and storing them under his own account are not convincing. 49.I am satisfied he has not told the truth about Wong Tsin’s handling of the container that went to Sim’s warehouse. It is patently clear from the e-mail contact between himself and Rosa Mera, that he himself was the source of all important information, that Rosa Mera was in the dark about the movements of the container, and especially that he had failed, deliberately or otherwise, to inform him that in effect Wong Tsin had taken over the “logistics” in relation to the container, even though the 1st Defendant was providing the transportation, vanning and devanning services. 50.The suggestion that Wong Tsin was keeping in contact with Rosa Mera in relation to the whereabouts and progress of the container is simply not credible. It flies in the face of any reasonable understanding of his knowledge of Wong Tsin and the e-mail contact. It is a contrived explanation for the difficulties Mr Frankie Lai found himself in. He knew that Rosa Mera relied upon him, and the Defendants for the care of his imported goods. When Rosa Mera pointed out to him that his action in allowing Wong Tsin access to and control of his goods defied belief, and was contrary to instructions, Frankie Lai did not even attempt to answer those two e-mails. I infer that at that stage he knew he had no answer, but he knew well beforehand that he had allowed Wong Tsin access and control to the goods without any justification or authority. 51.The content of his two e-mails to Rosa Mera revealing that Wong Tsin had control over the container at Sim’s warehouse, and that he and the goods had disappeared, revealed that he knew that the risk had materialised. There was no suggestion then that he understood that Wong Tsin had kept Rosa Mera fully in the picture. Collusion or negligence? 52.I strongly suspect that Mr Frankie Lai colluded with Wong Tsin so as to allow him to gain control and ultimately possession of these goods. There are a number of pointers to this :
53.There were other matters on which Mr Lai might have been cross-examined more vigorously but on the aspects which were more difficult for him, he seemed to seek refuge in repetition of a belief in Wong Tsin’s loyalty to Mr Rosa Mera. 54.He made a statement to the Police in September 2011 (six months later) in which he surveyed matters in a superficial manner leaving unanswered a number of questions which ought to have been put to him. By then, of course, solicitors had been instructed on the Defendants’ behalf, and they would have been anxious to protect his position. 55.The indications are that there probably was collusion on the part of Mr Frankie Lai but, setting that aside, there was undoubted negligence, in my judgment, on his part, as servant or agent of the Defendants. Having set out all the features earlier there is no need for me to repeat them. The Liability of the Defendants 56.It is clear that Mr Frankie Lai wore “two hats”. He acted on behalf of and represented both companies. Both played a part in movements of the two containers and the “lost” container in particular. Mr Rosa Mera always understood that he was dealing with Brilliant Cold Storage. The contractual documents sent to him made this clear. In his evidence, Mr Frankie Lai said :
57.In relation to liability on the part of the Defendants, any difference between the two companies is a distinction without a difference. They are both liable in negligence. 58.From the outset the lines distinguishing between these two companies were blurred and continued to be so. Frankie Lai never drew a distinction between them in their handling of the matter from the time that the two containers arrived. That is why Mr Rosa Mera remained of the view that his account and contract was with ‘Brilliant’, and that meant Brilliant Cold storage. He understood that ‘Brilliant’ had an account at Brilliant Rise. There was no question of his being told that a different corporate entity was involved and therefore different considerations might apply. If, and, when storage space became available at Brilliant Cold Storage then that was where the containers would go. As an alternative, all that mattered to him was that the facility would be one at which ‘Brilliant’, either or both companies, would have an account. 59.When Frankie Lai took over the transportation, vanning and devanning, he did so subject to the original contract or as bailee. He remained in control of the containers until he effectively handed over the lost container to Wong Tsin at Sim’s warehouse. At all times, he was acting on behalf of one or both companies in providing a service to Rosa Mera. Both companies were involved in providing container services for the Plaintiff, and saw this situation as an extension of their services given the lack of storage space at their own premises. The work involved was carried out under the supervision and control of one or other or both companies, and it was charged for. It is immaterial that the invoices for these charges went out under Brilliant Top In Logistics Ltd. It is wholly artificial to contend that because both are separate legal entities that each must necessarily be viewed in isolation in relation to their parts in the saga. Frankie Lai and other employees were part of an undertaking and rendering of services by two companies, related to each other, and indistinguishable in their roles, and which at no time ceased to have any responsibility to the Plaintiff, either in contract or under a bailment. 60.They thereby owed a duty of care to the Plaintiff to exercise safe custody of his goods by reason of the contract to provide storage and ancillary services, and to comply with instructions and the acknowledged and proven practice with regard to the release of goods or as bailees. Jointly and severally they failed to fulfil that duty by knowingly allowing an untrustworthy party without any express or implied authority to exercise exclusive control and possession of them. 61.There will, therefore, be judgment for the Plaintiff against the Defendants jointly and severally, for the sum of Euros 230,257[1] together with interest thereon for the appropriate period at the prevailing rate. The Plaintiff is also entitled to an order for the costs of this action to be paid by the Defendants, to be taxed if not agreed.
Mr Patrick Chong, instructed by Stephen Mok & Co, Solicitors, for the Plaintiff Mr Nicholas Cooney S. C., instructed by Ho & Partners, Solicitors, for the 1st and 2nd Defendants [1] This is the amount claimed in the Points of Claim. The lower figure referred to in submissions (Euros 191,626.02) is the amount paid by the Plaintiff to Josef Maier, the supplier of the goods, to him. I have assumed that the larger figure reflects the costs of transport etc., and of loss of profit (although no dispute or argument has been addressed to me regarding the figure) leading me to the conclusion that the pleaded figure has been agreed. | ||||||||||||||||||||||||||||||||||||