Commercial Action1994

NANTONG ANGANG GARMENTS CO LTD v. HELLMANN INTERNATIONAL FORWARDERS LTD

Related cases with same parties

CACV106/2011NANTONG ANGANG GARMENTS CO LTD v. HELLMANN INTERNATIONAL FORWARDERS LTD
CACV64/2005NANTONG ANGANG GARMENTS CO LTD v. HELLMANN INTERNATIONAL FORWARDERS LTD
FAMV15/2006NANTONG ANGANG GARMENTS CO LTD v. HELLMANN INTERNATIONAL FORWARDERS LTD

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76648-EN-2011-05-27

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HCCL 117/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 117 OF 1994

_____________

BETWEEN

	NANTONG ANGANG GARMENTS CO LTD	Plaintiff
and
	HELLMANN INTERNATIONAL FORWARDERS LTD	Defendant
and
	SILKING DEVELOPMENT LTD	1st Third Party
	LERNER STORES INC	2nd Third Party

_____________

Before: Hon Reyes J in Court

Date of Hearing: 17 and 19 May 2011

Date of Judgment: 27 May 2011

______________

J U D G M E N T

______________

I. INTRODUCTION

1. This is the re-trial of Hellmann’s third party action against Silking and Lerner.

2. Lerner was the ultimate purchaser of goods which Nantong manufactured. Lerner had placed a purchase order for the goods with Drake. Drake in turn sub-contracted the manufacture of the goods with Nantong. Silking was Lerner’s Hong Kong-based sourcing agent. Hellmann is a freight forwarder. Lerner and Silking were long-time VIP customers of Hellmann.

3. The issue is whether Hellmann is entitled to be indemnified by Silking and Lerner against damages and costs paid by Hellmann to Nantong in respect of the misdelivery by Hellmann of 903 cartons of the goods.

II. BACKGROUND

4. By a Letter of Instruction (LOI) dated 23 February 1994 Nantong consigned 903 cartons of silk garment with Hellmann for carriage by air from Shanghai to Columbus (Ohio). The LOI specified Citibank Hong Kong as consignee of the goods. But eventually Nantong agreed for the goods to be consigned to Lerner in Columbus.

5. Hellmann issued 2 sets of House Air Waybills (the Lerner HAWBs) in relation to the goods. One set (Lerner 1) covered 355 cartons, while the other set (Lerner 2) covered 548 cartons. Lerner 1 and 2 consigned the goods from Shanghai to Lerner in Columbus.

6. On Lerner’s instruction (given around 1 March 1994), Hellmann also issued 2 parallel sets of House Air Waybills (the Silking HAWBs) in relation to the goods. One parallel set (Silking 1) concerned the 355 cartons covered by Lerner 1 and consigned those same 355 cartons from Nantong in Shanghai to Silking in Hong Kong. The other parallel set (Silking 2) concerned the 548 cartons covered by Lerner 2 and consigned those same 548 cartons from Nantong in Shanghai to Silking in Hong Kong.

7. Lerner had told Hellmann to carry the goods to Hong Kong, rather than Columbus, because it was Lerner's intention that the goods should be delivered to Silking. Silking would then carry out a complete inspection of the goods in Hong Kong.

8. Lerner had cancelled whatever plans it had originally had to sell the goods in Columbus. Lerner believed that the goods were defective, at least in part. But, for whatever reason, Lerner did not want to cancel its purchase of the 903 cartons entirely.

9. Lerner wished Silking in the course of its further inspection to sort out which goods were defective and which were not. Silking could then sell off any sound goods on Lerner’s behalf.

10. Neither Lerner nor Silking wished Nantong to know that the goods were to be delivered in Hong Kong to be subjected to a full inspection.

11. Nantong was unaware (and never approved) of the issue by Hellmann of Silking 1 or 2.

12. Hellmann caused the goods to be carried by China Eastern Airlines to Hong Kong. Because of the limited capacity of the aircraft involved, the cartons arrived in Hong Kong in 3 lots: 270 cartons on 3 March 1994 at 1100 hours; 627 cartons on 3 March 1994 at 1700 hours; and 5 cartons on 5 March 1994 at 0900 hours. One carton went missing. It was never delivered.

13. On 3 March 1994 Nantong instructed Hellmann by phone and fax not to release the goods to Lerner until Nantong told Hellmann otherwise.

14. On 4 March 1994, in consideration of Hellmann’s acting upon Lerner's instruction to carry the goods from Shanghai to Hong Kong (rather than Columbus), Silking provided Hellmann with a letter of indemnity. The letter (signed by Mr Allen Law for Silking) stated:-

“As an agent act for Lerner, we were instructed that the ... shipment [of 903 cartons] should be routed via HKG and not direct fly to Columbus.
Due to the above said route changed. We hereby confirm to you that we will undertake and agree to bear full responsibilities/ liabilities whatsoever directly or indirectly arising from or relating to the said route change.”

15. The wording of the second paragraph quoted above was suggested to Mr Law by Mr William Chiu of Hellmann. Mr Chiu had written to Mr Law on 1 March 1994 stating that:-

“you will be much appreciated if you can sign a letter of indemnity to our company, indicate precisely that you will undertake and agree to bear full responsibilities/liabilities whatsoever directly or indirectly arising from or relating to the said route change”.

16. Despite the 3 March 1994 instruction from Nantong, Hellmann did not prevent Silking from taking delivery of the goods on 5 March 1994 at 0900 hours (in respect of the first and second lots of cartons) and on 7 March 1994 at 0900 hours (in respect of the third lot of 5 cartons).

17. Nantong sued Hellmann for breach of contract and bailment and for conversion of the 903 cartons of goods. Hellmann joined Silking and Lerner as third parties and sought an indemnity from them. The matter (including the third party action) went to trial before Stone J in November 2002.

18. During the trial, Hellmann admitted liability and consented to judgment being entered against it for the sum of US$370,000. The sum was all-inclusive in the sense that it covered the invoice value of the 903 cartons (US$284,840), interest on such amount, and Nantong’s legal costs.

19. Stone J dealt with the third party proceedings in the absence of Silking and Lerner (both of which had previously ceased to be legally represented and neither of which had applied to be represented by a director). Having heard Hellmann’s then counsel, Stone J gave judgment against Silking and Lerner. The latter companies were ordered to reimburse Hellmann on the basis of Silking’s 4 March 1994 letter of indemnity.

20. Two years after the trial, Silking and Lerner applied to set aside Stone J’s judgment against them. Their application failed before Stone J.

21. But in September 2005 the Court of Appeal set aside Stone J’s judgment in the third party proceedings. In the Court of Appeal’s view, Silking and Lerner had a reasonable prospect of success and, despite the lapse of 2 years, the overall justice of the case required that Stone J’s judgment in the third party proceedings be set aside.

III. DISCUSSION

22. Whether Silking and Lerner are liable to indemnify Hellmann depends on whether Silking and Lerner had the right to obtain the goods consigned under the Silking HAWBs. If Silking and Lerner had such a right, they should not in the ordinary course of events be liable to indemnify Hellmann. That would be regardless of whether Hellmann itself became liable to Nantong for releasing the goods to Silking contrary to Nantong’s instruction.

23. I say “in the ordinary course of events” since in this case there is the additional element of Silking’s 4 March 1994 letter of indemnity. Having determined whether or not Silking and Lerner were entitled to receive the goods, I must also deal with the separate question of the effect of the letter.

24. Silking provided the letter in consideration of Hellmann releasing the goods. On a true construction of the letter, did Silking and Lerner (as Silking’s principal) undertake to indemnify Hellmann against liability to Nantong, regardless of whether Silking and Lerner were entitled to delivery of the goods in Hong Kong?

25. There is no dispute among the parties that the Warsaw Convention, either in its Original or Amended forms, applied to the air carriage of the goods.

26. If the operative air waybills were the Lerner HAWBs, the latter concerned a carriage from Shanghai to Columbus. The Mainland was (and remains) a party to the Amended Warsaw Convention (AWC). On the other hand, although the United States has signed the AWC, the AWC has yet to be ratified there. Accordingly, a contract for the carriage of goods by air between the Mainland and the United States would have been subject to the Warsaw Convention.

27. If the operative air waybills were the Silking HAWBs, the latter concerned a carriage from Shanghai to Hong Kong. In 1994 Hong Kong was subject to the AWC as extended to it by the United Kingdom (then exercising sovereign power here). Accordingly, a carriage of goods by air between Shanghai and Hong Kong would have been subject to the AWC.

28. Arts. 12 and 13 of the Warsaw Convention and AWC are in similar terms. They provide:-

“Article 12
(1) Subject to his liability to carry out all his obligations under the contract of carriage, the consignor has the right to dispose of the cargo by withdrawing it at the aerodrome of departure or destination, or by stopping it in the course of any journey on any landing, or by calling for it to be delivered at the place of destination or in the course of the journey to a person other than the consignee named in the air waybill, or by requiring it to be returned to the aerodrome of departure. He must not exercise this right of disposition in such a way as to prejudice the carrier or other consignors and he must repay any expenses occasioned by the exercise of this right.
(2) If it is impossible to carry out the orders of the consignee, the carrier must so inform him forthwith.
(3) If the carrier obeys the orders of the consignor for the disposition of the cargo without requiring the production of the part of the air waybill delivered to the latter, he will be liable, without prejudice to his right of recovery from the consignor, for any damage which may be caused thereby to any person who is lawfully in possession of the air waybill.
(4) The right conferred on the consignor ceases at the moment when that of the consignee begins in accordance with Article 13. Nevertheless, if the consignee declines to accept the air waybill or the cargo, or if he cannot be communicated with, the consignor resumes his right of disposition.
Article 13
(1) Except in the circumstances set out in the preceding Article, the consignee is entitled, on arrival of the cargo at the place of destination, to require the carrier to hand over to him the air waybill and to deliver the cargo to him on payment of the charges due and on complying with the conditions of carriage set out in the air waybill.
(2) Unless it is otherwise agreed, it is the duty of the carrier to give notice to the consignee as soon as the cargo arrives.
(3) ....”

29. In the remainder of this Judgment, I shall simply refer to the Warsaw Convention and the AWC interchangeably as “the Warsaw Convention”.

30. Mr Thomas Lai (appearing for Silking and Lerner) submits that the operative HAWBs were the Silking HAWBs.

31. The Silking HAWBs would thus evidence an agreement between Nantong as consignor and Hellmann as carrier to deliver the goods to Silking as consignee in Hong Kong. The goods having arrived in Hong Kong, Mr Lai suggests that Silking became entitled to have the goods delivered to it pursuant to Warsaw Convention Art. 13(1).

32. It follows (Mr Lai concludes) that, whether or not Hellmann became liable to Nantong for ignoring the instruction to hold on to the goods, Silking and (as Silking’s principal) Lerner cannot be faulted for having taken delivery of the goods in Hong Kong.

33. Soon after the goods arrived in Hong Kong and a few days prior to obtaining physical delivery of the goods, Silking obtained a pouch from Hellmann containing the Silking HAWBs. Armed with those Silking HAWBs, Silking obtained the goods. Even if Nantong’s instruction to Hellmann preceded Silking obtaining actual physical delivery of some or all of the goods, Nantong’s instructions to Hellmann (Mr Lai says) for the disposition of the goods came too late. Nantong’s rights as consignee (Mr Lai stresses) ceased when those of Silking and Lerner began, at the very latest when the Silking and Lerner received the pouch with the Silking HAWBs.

34. Mr Lai’s analysis would be the correct one, if the Silking HAWBs constituted the operative contract between Nantong and Hellmann. But in my view the operative contract was contained in or evidenced by the Lerner HAWBs.

35. Mr Jenkin Suen (appearing for Hellmann) points out that Nantong was wholly unaware of the Silking HAWBs. In fact, that the goods were going to be routed through Hong Kong and delivered to Silking here for full inspection was deliberately kept secret from Nantong by Hellmann, Silking and Lerner. As far as Nantong was concerned, the goods were being consigned to Lerner in Columbus.

36. In those circumstances, it could not have been that Hellmann was contractually obliged to Nantong to deliver the goods to Silking in Hong Kong. Instead, Hellmann had contracted with Nantong to carry the goods from Shanghai to Lerner in Columbus. The fact that, for convenience or adminstrative purposes, largely to enable the goods to be delivered in Hong Kong, Hellmann secretly and unilaterally prepared the Silking HAWBs cannot transform the latter HAWBs into the operative contract. The evidence is that Hellmann issued the Silking HAWBs solely to accommodate Silking and Lerner as Hellmann’s VIP customers.

37. Thus, the goods never having reached Columbus (the airport of destination under the operative Lerner HAWBs), Lerner’s rights as consignee (much less those of Silking as Lerner’s agent) never arose. The requirements of Warsaw Convention Art. 13 for the consignee to become entitled to delivery of the goods were not met. Nantong remained in control of the goods as consignor and, as long as the goods had not reached Columbus, could divert the goods from delivery to Lerner or Silking (as Lerner’s agent).

38. In short, neither Silking or Lerner ever became entitled to receive the goods.

39. The corollary is that Hellmann as carrier was bound to follow Nantong’s orders regarding the disposition of the cargo. To the extent that it was still possible because the goods had not yet reached Columbus, Hellmann ought to have withheld delivery from Lerner and Silking (as Lerner’s agent).

40. But, by secretly undertaking to deliver (and actually delivering) the cargo to Silking in Hong Kong (as opposed to Lerner in Columbus), Hellman rendered itself unable to comply with Nantong’s directions. Hellmann acted contrary to Nantong’s right under Warsaw Convention Art. 12(1) and thereby became liable to Nantong.

41. Hellmann was fully aware of the risks it was running by delivering the cargo to Silking in Hong Kong, instead of to Lerner in Columbus. It knew that it was not complying with Nantong’s instructions as consignor. For that reason, Hellmann (through Mr William Chiu and Mr Benjamin Hui) pressed Silking for the letter of indemnity.

42. On its terms the letter of indemnity undertook “full responsibilities/liabilities whatsoever directly or indirectly arising from or relating to the said route change [from Shanghai-Columbus to Shanghai-Hong Kong]”. Plainly, the terms are wide enough to encompass liability incurred by Hellmann for delivering the goods in Hong Kong pursuant to the terms of the Silking HAWBs, rather than in Columbus pursuant to the Lerner HAWBs.

43. Consequently, in my judgment, Silking and Lerner (as Silking’s principal) are liable to indemnify Hellmann against liability to Nantong.

44. Silking has argued that, as Lerner’s agent, it should drop out of the picture and not be held liable. But, on the wording of the letter of indemnity, Silking was accepting liability on its own behalf as well as on behalf of its principal Lerner. Note, for instance, the use of the plural pronoun “we” and the signature by Mr Allen Law “for Silking” on the face of the letter.

45. It is true that the second paragraph of the letter refers to Silking being “an agent act for Lerner”. But this is stated simply as background. Silking came to know that the shipment would be routed through Hong Kong because it was so informed by Lerner as principal. Given that background, Silking was confirming that “we will undertake and agree to bear full responsibilities/ liabilities”. The undertaking by Silking is unqualified. Lerner, on the other hand, would also be liable on the indemnity as disclosed principal under ordinary principles of the law of agency.

46. There are 3 further points.

47. First, Silking and Lerner submit that, if liable on the indemnity, their liability should exclude compensation for the 1 missing carton which they never received. That seems to me to be correct. The loss of that carton is an unrelated event which cannot be attributed to the route change. It is unknown how the carton came to be missing. Taking a rough proportionality, I would estimate the amount (including interest and cost) to be attributed to the missing carton to be 1/903 or about 0.001 of US$370,000 (US$370).

48. Second, it is suggested that the US$370,000 paid by Hellmann to Nantong is unreasonable. I disagree. The invoice value of the goods is about US$285,000. Adding interest for the period from misdelivery of the goods in 1994 up to the trial in 2002 and adding legal costs on top, one could easily end up with a significantly greater amount than US$370,000. In this light, the settlement sum paid by Hellmann to Nantong seems conservative and reasonable.

49. The Warsaw Convention limits the damages payable by a carrier to a consignor for misdelivery of cargo. The Warsaw Convention also strikes down any limit stipulated in a contract of carriage which is lower than the Convention limitation. But the Convention limitation is not available where a carrier causes damage by “wilful misconduct” (under Art. 18 of the Original Convention) or “with intent to cause damage or recklessly and with knowledge that damage would probably result” (under Art. 18 of the Amended Convention).

50. Here, on the evidence, Hellmann was fully cognisant of the risks it was running by delivering to Silking in Hong Kong. That was why Hellmann pressed for the letter of indemnity. Hellmann acted wilfully or knowingly. Accordingly, on the wording of Art. 18 in either the Original or Amended Conventions, Hellmann would be liable to compensate Nantong without recourse to the limitation.

51. Third, it is suggested that, because Nantong may not have been the owner of the goods at the time of misdelivery, there must be doubt as to Hellmann’s liability to Nantong. There is nothing in this argument.

52. Under the Warsaw Convention, the carrier is liable to compensate a consignor for loss or damage to cargo. Whether or not Nantong owned the goods which it had manufactured, Nantong had bailed the same to Hellmann. As bailor or consignor, Nantong had the right under Warsaw Convention Art. 12(1) to direct how the goods were to be handled before their arrival in Columbus. That right included the right to instruct Hellmann not to release the goods to Lerner or anyone else pending Lerner’s full payment of the price of the goods to whomever might have been the owner of the same. The value of that right to hold on to the goods as security for payment must be equivalent to the invoice value of the goods.

IV. CONCLUSION

53. Hellmann is entitled to be indemnified by Silking and Lerner.

54. There will be judgment against Silking and Lerner for US$369,700 (that is US$370,000 less US$300 (the notional cost of the missing carton)).

55. Interest will run on the amount of US$369,700 at 1% over HSBC US$ prime from 27 January 2003 (when Hellmann paid the last installment of its settlement with Nantong) until date of judgment. Thereafter, interest will run at the judgment rate.

56. There will be an Order Nisi that Hellmann have its costs of the third party proceedings against Silking and Lerner. Costs are to be taxed, if not agreed.

(A. T. Reyes)
Judge of the Court of First Instance
High Court

Mr Jenkin Suen, instructed by Messrs Luk & Co., for the Defendant

Mr Thomas Lai, instructed by Messrs Lo, Chan & Leung, for the 1^st & 2^ndThird Parties

Please refer to CACV106/2011 for the relevant appeal(s) to the Court of Appeal.

44563-EN-2005-01-28

NANTONG ANGANG GARMENTS CO LTD v. HELLMANN INTERNATIONAL FORWARDERS LTD

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HCCL 117/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.117 OF 1994

-------------------------

BETWEEN

	NANTONG ANGANG GARMENTS CO. LTD.	Plaintiff
	and
	HELLMANN INTERNATIONAL	Defendant
	FORWARDERS LIMITED
	and
	SILKING DEVELOPMENT LTD.	1^st Third Party
	LERNER STORES INC.	2^nd Third Party

----------------------

Before : Hon Stone J in Chambers

Date of Hearing : 13 December 2004

Date of Judgment : 28 January 2005

-------------------------

J U D G M E N T

-------------------------

The application

1. This is an application by the defendant, by summons dated 23 November 2004 pursuant to the provisions of Order 35, rule 2, RHC, for an order that :

(i) the time for application under Order 35, rule 2 be extended;

(ii) the Order of Stone J dated 20 November 2002, whereby Judgment in the sum of US$370,000, together with interest and costs, was entered in favour of the defendant against the 1^st and 2^nd 3^rd parties, be set aside; and

(iii) that the defendant do pay the costs of this application.

2. The provisions of Order 35, rul3 2 read as follows :

“ (1) Any judgment, order or verdict obtained where one party does not appear at the trial may be set aside by the Court, on the application of that party, on such terms as it thinks just.

(2) An application under this rule must be made within 7 days after trial.”

The facts

3. The facts are in short compass.

4. On 19 and 20 November 2002 the trial of HCCL No.117 of 1994 took place before this court.

5. Judgment was rendered on 20 November 2002, and the document entitled ‘Reasons for Judgment’ was subsequently handed down on 28 November 2002.

6. These Reasons speak for themselves, and describe that which took place at the trial.

7. In short, the head action between the plaintiff and the defendant was compromised, and the defendant thereafter was left to prove its case against the absent 1^st and 2^nd third parties. The third parties were unrepresented, and did not appear at the hearing of the action.

8. Paragraph 13 of these Reasons states thus :

“Whilst the non –appearance of the third parties and the absence of adversarial argument remains a less than satisfactory feature of this case, nevertheless I was satisfied on the evidence that the defendant had established its case as pleaded in the Amended Statement of Claim (leave to amend having been granted to the defendant) against each of the 1^st and 2^nd third parties, and accordingly that the defendant was entitled to the indemnity sought, together with consequential orders for the defendant’s costs of the third party proceedings and for the costs incurred in the defence of the plaintiff’s action. I so ordered.”

9. It is the Judgment thus entered that now is sought to be set aside in the present application by the 1^st and 2^nd third parties.

The evidence

10. The application is led by an affirmation of Mr Au Ho Fung sworn on 25 October 2004. Mr Au is a director of the 1^st third party, Silking Development Ltd, and deposes on behalf of that entity and of Lerner Stores Inc., the 2^nd third party.

11. This affirmation addresses the history of events. It canvasses a number of issues under subheads entitled ‘Explanation for default’, ‘Poor service of Messrs Simmons and Simmons’ and ‘Merits of third party defence’.

12. The thrust of the affidavit is that there has been no proper trial of the third party action. It is said that the judgment was irregular and wholly wrong in law and ought to be set aside. On the basis of the style and content of critical observations made as to the conduct of this trial by myself as trial judge — “fundamental and serious mistakes”, “disastrous scale of miscarriage of justice” provide an indication of the flavour of the narrative — I assume that this affidavit was drawn by a legal professional in the United States.

13. Evidence filed in this application on behalf of the defendant took the form of an affirmation of Mr William Chiu Hon Kin, an Assistant General Manager at the China Airfreight Division of the defendant.

14. His affirmation recounts the history of the proceedings between the plaintiff and defendant — a claim for misdelivery of 903 cartons of garments , and the consequent third party proceedings for an indemnity brought by the defendant against the 1^st and 2^nd third parties — and thereafter dealt with that which occurred at the hearing, the Order made by the court at the conclusion of that hearing, the compliance by the defendant with the order made in favour of the plaintiff (payment of the Hong Kong dollar equivalent of US$370,000), the failure of the third parties to comply with the order made against them, the taxation of costs that took place on 27 April 2004, together with service of the allocatur on the 2^nd third party, and finally describes the enforcement proceedings taken out in the United States against the 2^nd third party, proceedings which are currently contested.

15. The affirmation of Mr Chiu concludes that the defendant has at all times proceeded on the basis that it had obtained a valid and enforceable judgment against the 1^st and 2^nd third parties, that it had fully complied with its obligations to pay to the plaintiff the amounts ordered, and that to its knowledge the 1^st and 2^nd third parties took no steps to challenge the judgment of this court until about October 2004, when solicitors were instructed to handle the matter, that is, a full two years after this court had handed down its judgment.

Decision

16. As was recognized during argument, and as was canvassed on the face of the summons, this application necessarily consists of two parts, namely the element of extension of time, and thereafter consideration of the merits.

17. I deal with each in turn.

(i) Extension of time

18. The objective observer might think this an ambitious application.

19. The framers of Order 35, rule 2 saw fit to state that an application under this rule must be made within seven days after the trial. Notwithstanding this stricture, this application has been taken out almost two years to the day after the judgment which it is now sought to set aside, and a full decade after the third party action itself was commenced.

20. The issue of delay in applying to set aside the judgment is clearly relevant, as the marginal notes to this rule make clear : see MN 35/2/1, Hong Kong Civil Procedure, 2004, in particular when, as in this instance, the successful party has acted upon the judgment.

21. It follows that, in considering the application for extension of time, the court must have regard to the reason proffered for such delay, so that, for example, ignorance of the judgment complained of may constitute a material factor.

22. No such excuse is proffered here. In fact, the position is quite the opposite. It is not said that the 1^st and 2^nd third parties were unaware of the judgment at the time it was handed down. To the contrary. It was known about, but ignored until the motion for summary judgment against the current incarnation of the 2^nd third party, Lerner New York, was filed on behalf of the defendant on 10 September 2004.

23. In this regard, counsel appearing on this application on behalf of the applicants, Mr Thomas Lai, was disarmingly frank: he noted that since nothing seemed to be happening in terms of the judgment it had been decided to “let sleeping dogs lie”, but that after enforcement proceedings had been commenced in the United States there had been no further delay, and thus the “ball had been set in motion” in terms of the present application to set aside.

24. Mr Lai further commented that the delay had not been “calculated”, and since no third party rights had intervened, it would be appropriate for the case to be retried.

25. For his part Mr Haynes, counsel on behalf of the defendant, emphasised that the timing of this application and that of the enforcement proceedings was co-extensive.

26. He drew attention to the reasons proffered for the delay by the deponent, Mr Au, who stated that shortly after the hearing he was “surprised” to receive notice of the judgment from the court, and that separate copies of the judgment were sent by the court to the address of the 1^st third party in Hong Kong and also to the address of the 2^nd third party in the United States. Mr Au observed that since the 1^st third party was basically playing an agency role in Hong Kong for the 2^nd third party, he awaited instructions from the US principal on the next step, and that he had been informed that legal advice thereafter was sought from US attorneys. This took some time, and that “meanwhile nothing much seems to happen in Hong Kong about the judgment”, and thus he continued to await instructions.

27. Ultimately, said Mr Au, in September 2004 he had received news from America that the defendant was trying to enforce the judgment in the United States against the 2^nd third party, and he was informed that on US attorney’s advice the matter “had to be sorted out with the original court in Hong Kong.”

28. Hence the instruction of local solicitors in the matter, and the mounting of the present application.

29. Against this background, wherein there is no factual dispute about that which occurred to account for the delay, I have no hesitation in declining to exercise the court’s discretion to grant the extension of time as sought by the applicants.

30. In my judgment the delay which occurred was both calculated and self-serving. It is tolerably clear that had there been no attempt to enforce in the United States, nothing whatever would have been done about a judgment that belatedly now is characterised by the draftsman of the affirmation as a miscarriage of justice.

31. In reaching my conclusion upon the issue of extension of time I have borne in mind not only the conduct of the applicants subsequent to the judgment, but also the position of the defendant, who over the intervening two years has acted on the basis of the judgment in its favour, and last, but not least, the public interest in there being an end to litigation. The present case, it seems to me, provides a paradigm example of the policy underpinning this latter principle.

32. Accordingly, the application for extension of time, as reflected in subparagraph (1) of the summons dated 23 November 2004, is dismissed.

(ii) Merits

33. The foregoing decision effectively decides this application. However, in case I be wrong in this conclusion I turn briefly to consider the underlying merits, in particular the reasons given for the absence of the third party at trial.

34. I note that in the affirmation leading the application Mr Au sees fit to state that “the learned judge was factually wrong in thinking that both third parties were absent whereas in truth and in fact they were both present and represented by me.”

35. I do not think that Mr Au can be asserting that he was actually present in court at the time that Mr Kat, then counsel for the defendant, proceeded to argue the third party case. The fact of the matter is that at this time there was no-one present in court to represent the third parties.

36. That to which Mr Au appears to be referring when making this statement is that on the case papers there was evidence of third party participation in this case. He further makes reference to the issue of a subpoena, which I understand had been issued to Mr Au on behalf of the defendant when apparently it was anticipated that viva voce evidence would be required in the head action.

37. At the time of the compromise, and of the hearing of the third party action, the court was not aware, nor was it informed by counsel that there was any purported representation on behalf of the third party, and certainly none was evident in court. Had the situation been otherwise, it is safe to assume that the proceedings would not have taken the course that they did.

38. The issue of representation of the 1^st and 2^nd third parties in this case is a matter that looms large in the affirmation of Mr Au. This is dealt with under the heading “Poor service of Simmons and Simmons”, and recounts “the very disappointing nature of the service we received.”

39. A short factual history of the case, and of the engagement, in February 1994, of Simmons & Simmons is profferred, and of the instruction to represent the 1^st and 2^nd third parties upon receipt of the Third Party Notice. Thereafter it is said that there was a “constant change” of handling solicitor, as to which Mr Au opines that he felt “rather uneasy”.

40. There is then recounted that consideration was given to a possible strike out by the defendant of the plaintiff’s claim, an application which ultimately was not mounted, and complaint is made of the bills of costs for the advice then tendered. Mr Au states that “having lost all faith” in Simmons & Simmons he had decided that “we could act in person for the trial”, so much so that he did not respond to letters from the handling solicitor, Mr Ng, requesting instructions as the date of trial approached.

41. No date is given by Mr Au for the aforesaid decision to act in person, but this must have been in the months prior to October 2002 given that the solicitors had notified him, by letters dated 2 and 11 October 2002 of the court appointment for the hearing of their application to cease acting in this case.

42. In any event Mr Au sees fit to conclude that in discharging themselves from acting, his former solicitors simply “walked off” and did nothing by way of guidance as to future conduct, so that “we were left completely on our own.”

43. In light of the decision which he says by then had been taken, this latter conclusion seems neither fair not accurate; it is abundantly clear on the evidence that the decision had been made by Mr Au, for good reason or bad, I know not, not to retain solicitors or counsel for the trial, and to proceed in person. There is what has been described by Mr Haynes as a “stream of correspondence” from Messrs Simmons & Simmons wherein the necessity to be placed in funds in order to instruct counsel is stressed, and it is clear that the decision had been taken, either by Mr Au or his superiors, not to expend any further funds on this case.

44. Against this background, therefore, on the face of Mr Au’s affirmation no reason is advanced as to why he was not present in court to represent his client after the compromise of the head action. In this connection Mr Haynes points out that the order of this court that the head action and the third party action be heard at the same time had been made as far back as March 2002, and that until Messrs Simmons & Simmons came off the record on 29 October 2002 the third parties must have been aware of the position.

45. There was a suggestion by Mr Lai in argument that the 1^st third party, in the form of Mr Au, had been “sent away” by a lady from the defendant’s then solicitors, who had called him and told him that the action was settled, and that that was the reason for his non-attendance. However, this information was vouchsafed from the bar, and does not find its way into the sworn evidence; in any event, as Mr Haynes observed, the suggestion that the defendant’s solicitor should be advising the third party in adversarial litigation is, on the face of it, extraordinary.

46. This court thus is presented with the stark position whereby the representative of the third parties, who had decided not to use lawyers and to seek to act in person (as to which no application for leave so to do appears to have been made) did not appear in court at the time of the trial, the case having been duly called, and wherein the court was not advised by the defendant’s then counsel, Mr Kat, that there had been any advice given by those instructing him that there was no necessity to attend.

47. Having compromised the plaintiff’s claim, the defendant thereafter was required by this court to prove its case against the third parties; in the judgment of this court, it succeeded in doing after having been granted leave to amend its pleading upon that which, if I recall correctly, related specifically to the issue of implied indemnity.

48. The reasons for judgment reflect the reasons of this court in acting as it did. Having reread those Reasons, and further having considered the apparent merits of the case of the third parties in what was a chain action arising from the misdelivery of a quantity of garments manufactured by the plaintiff and wrongly released by the defendant to the 1^st third party, I see no reason to change the views expressed therein. As a matter of completeness I note that the reference to ‘defendants’ (at paragraph 4 of the ‘Reasons for Judgment’) clearly is a reference to the third parties, as the context makes entirely clear.

49. It follows from the foregoing, therefore, that in so far as it may be necessary further to have considered this application in light of the refusal of this court to extend time, the application pursuant to paragraphs (2) and (3) of the summons dated 23 November 2004 also would stand dismissed.

50. I have been able to perceive no procedural or substantive merit in this application.

Order

51. For the foregoing reasons, the order of the court consequent upon this application is as follows :

(i) The application of the 1^st and 2^nd third parties, by summons dated 23 November 2004, is dismissed.

(ii) There is to be an order nisi that the costs of and occasioned by this application be paid by the 1^st and 2^nd third parties to the defendant upon a common fund basis, to be taxed if not agreed, such order to become absolute save in so far as application be made to vary the same within 14 days of the date hereof.

(William Stone)
Judge of the Court of First Instance
High Court

Mr Thomas Lai, instructed by Messrs Lo, Chan & Leung, for the 1^st and 2^nd third parties/applicant

Mr Timothy Haynes, instructed by Messrs Coudert Brothers, for the defendant/respondent

(I) Appeal to Court of Appeal by the 1st and 2nd Third Parties. Retrial of Third Party action before a different judge. Please refer to the appeal judgment of CACV64/2005 (II) Please refer to CACV106/2011 for the relevant appeal(s) to the Court of Appeal.

25527-EN-2002-11-20

NANTONG ANGANG GARMENTS CO. LTD. v. HELLMANN INTERNATIONAL FORWRADERS LTD.

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HCCL000117/1994

HCCL 117/1994

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.117 OF 1994

-------------------------

BETWEEN
	NANTONG ANGANG GARMENTS CO. LTD.	Plaintiff

	AND

	HELLMANN INTERNATIONAL FORWRADERS LTD.	Defendant

	SILKING DEVELOPMENT LTD.	1st Third Party
	LERNER STORES INC.	2nd Third Party

-------------------------

Coram: Hon Stone J in Court

Dates of Hearing: 19 and 20 November 2002

Date of Judgment: 20 November 2002

Date of Reasons for Judgment: 28 November 2002

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REASONS FOR JUDGMENT

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Introduction

1. This case is a misdelivery claim. The action was brought by the plaintiff, a silk garment manufacturer in the mainland, against the defendant, an international freight forwarder, for damages resulting from the misdelivery of 903 cartons of ladies silk woven garments.

2. The goods were manufactured by the plaintiff and were delivered to the defendant's Shanghai office for onward carriage by air from Shanghai to Columbus, USA.

3. This designated state of affairs did not occur. Notwithstanding the specified position under the contract of carriage, the goods were re-routed to Hong Kong without reference to the plaintiff and were released by the defendant to the 1st third party herein, Silking Development Ltd, which appears to have been acting in conjunction with the 2nd third party, Lerner Stores Inc, an American corporation and, I understand, the intended buyer of these silk garments.

4. Neither third party was present at the trial of this action, the firm of solicitors hitherto representing both, Messrs Simmons and Simmons, having successfully applied, by Order dated 29 October 2002, to come off the record on the basis that despite repeated attempts no instructions could be obtained from the defendants for the forthcoming trial.

Compromise of the Head Action

5. The defendant forwarder, Hellmann International, submitted to judgment in the afternoon of the first day of the trial, at a stage prior to the completion of the evidence of the plaintiff's first witness, Mr Daniel Ng Ho Ngor.

6. The substance of this judgment was that there was to be judgment for the plaintiff in the sum of US$370,000.00, such sum to be inclusive of interest and costs. Provision was further made for the payment by of this sum by instalments (the final instalment of US$120,000 to be payable on 27 January 2003), in addition to payment out of sums earlier deposited in court pursuant to orders requiring payment of security for costs.

Third Party Action

7. Settlement of the head action left Mr Kat, appearing on behalf of the defendant, to prove his case against the absent 1st and 2nd third parties in the third party action.

8. In my view he succeeded in so doing. One witness was called on behalf of the defendant, Mr William Chiu Hon Kin, who gave evidence in terms of his witness statement, in addition to identifying and verifying the documentary evidence supporting the plea that the defendant had received direct instructions from each of the 1st and 2nd third parties respectively as to the variation in carriage of the goods, specific instructions with which the defendant forwarder had complied.

9. Mr Chiu referred in particular, also, to the fact that consequent upon the instructions received, the 1st 3rd party, an Hong Kong company, had given the defendant a letter of indemnity dated 4 March 1994 confirming to the defendant, inter alia, that "we will undertake and agree to bear full responsibilities/liabilities whatsoever directly or indirectly arising from or relating to the said route change".

10. I accept without reservation the uncontradicted evidence of Mr Chiu.

11. Mr Kat submitted, in my view with some justification in the circumstances, that the express indemnity as received by the defendant was couched in sufficiently wide terms to encompass an obligation binding upon both third parties, so that the indemnity as given by Silking may be construed as being tendered both on its own behalf and on behalf of Lerner.

12. If there be any residual doubt on the point, in any event I further accept Mr Kat's submissions concerning the general principles relating to the implication of an indemnity in favour of a party acting at the request of another when such act turns out to be injurious to third party rights: see, for example, The "Nogar Marin" [1988] 1 Lloyd's Rep 412 (CA) and Stanley Yeung Kai Yeung v. Hong Kong and Shanghai Banking Corporation [1981] AC 787 (PC). So that in this instance, as he pointed out, such indemnity necessarily arises by reason of the specific and direct instructions given to the defendant forwarder by the 1st and 2nd third parties, Silking and Lerner.

13. Whilst the non-appearance of the third parties and the absence of adversarial argument remains a less than satisfactory feature of this case, nevertheless I was satisfied on the evidence that the defendant had established its case as pleaded in the Amended Statement of Claim (leave to amend having been granted to the defendant) against each of the 1st and 2nd third parties, and accordingly that the defendant was entitled to the indemnity sought, together with consequential orders for the defendant's costs of the third party proceedings and for the costs incurred in the defence of the plaintiff's action. I so ordered.

14. As to the element of post-judgment interest, given that judgment in the head action against which an indemnity now has been ordered is payable by instalments, such interest is to run, until payment, at the judgment rate from time to time prevailing and is to be calculated upon each of the three instalments as from their respective payment dates. The Order to be engrossed will be amended accordingly.

	(William Stone)
	Judge of the Court of First Instance
	High Court

Representation:

Miss Flora Cheng, instructed by Messrs Deacons, for the Plaintiff

Mr Nigel Kat, instructed by Messrs Koo & Partners, for the Defendant

The 1st and 2nd third parties were unrepresented and did not appear at the hearing of the action

Please refer to CACV106/2011 for the relevant appeal(s) to the Court of Appeal.

(i)	the time for application under Order 35, rule 2 be extended;

(ii)	the Order of Stone J dated 20 November 2002, whereby Judgment in the sum of US$370,000, together with interest and costs, was entered in favour of the defendant against the 1^st and 2^nd 3^rd parties, be set aside; and

(iii)	that the defendant do pay the costs of this application.

“	(1)	Any judgment, order or verdict obtained where one party does not appear at the trial may be set aside by the Court, on the application of that party, on such terms as it thinks just.

	(2)	An application under this rule must be made within 7 days after trial.”

(i)	The application of the 1^st and 2^nd third parties, by summons dated 23 November 2004, is dismissed.

(ii)	There is to be an order nisi that the costs of and occasioned by this application be paid by the 1^st and 2^nd third parties to the defendant upon a common fund basis, to be taxed if not agreed, such order to become absolute save in so far as application be made to vary the same within 14 days of the date hereof.