Maintek Computer v ECT Delta Terminal

DMC/SandT/10/13

Hong Kong Special Administrative Region

Maintek Computer (Suzhou) Co Ltd and others v Blue Anchor Line and others

Hong Kong SAR Court of First Instance: Reyes J in Chambers: HCAJ No. 106/2008: 25 February 2010 [1]

Mr Edward Alder, instructed by Messrs Richards Butler, for the Plaintiffs

Mr Russell Coleman SC and Ms Janet Ho, instructed by Messrs Holman Fenwick Willan, for the ETC Delta Terminal BV, one of the Defendants

CARRIAGE OF GOODS BY SEA: MISDELIVERY BY OCEAN TERMINAL: SETTING ASIDE DEFAULT JUDGMENT: REAL PROSPECT OF SUCCESS: LIMITATION CLAUSE: MEANING OF ‘DELIVERY’: STAY IN FAVOUR OF ARBITRATION: APPLICABILITY OF TERMINAL CONTRACT

This case note has been contributed by Ken Lee To-ching, LLB(Hons), PCLL (University of Hong Kong), BCL Student at Oxford University.

Summary

The Court of First Instance refused to set aside a default judgment entered into against ETC Delta Terminal (‘ETC’) on the grounds that it had no real prospect of success in defending the claim, as the limitation period in the bill of lading did not apply on the facts. Application for a stay in favour of arbitration was also refused.

This note has been contributed by Ken Lee To-ching, LLB(Hons), PCLL (University of Hong Kong), BCL Student at Oxford University.

Background

In August 2007, the Plaintiffs consigned 11 containers to Transpac for carriage from Shanghai to Tilburg via Rotterdam. These included the container in question (“Container X”), which was stuffed with Sony Play Stations.

The contract of carriage was evidenced by an Express Cargo Bill of Lading (ECB). Clause 3 provided that:

“The Carrier shall be discharged of all liability under this Document unless suit is brought within 9 months after:- (i) the delivery of the Goods or, (ii) the date when the Goods should have been delivered, unless international Conventions or statutory regulations compulsorily applicable in the individual case are stipulating a longer term of prescription.”

The containers were carried by sea from Shanghai to Rotterdam by Hapag-Lloyd, Transpac’s sub-contractor. They arrived at Rotterdam on 5 September 2007. Hapag-Lloyd arranged them to be stored at the ECT Delta Terminal. This was done pursuant to a pre-existing Terminal Contract between Hapag-Lloyd and ECT (“the Terminal Contract”). Clause 7.4.3 provided for disputes between the parties to be referred to ADR and, if not settled by these means, to arbitration.

Transpac’s agents at Rotterdam cleared the consignment through customs, and obtained the requisite customs clearance document (known as “the Sagitta”). Arrangements were then made for the containers to be carried to Tilburg by barge, and they were registered in ECT’s barge system.

Gierros, a trucking company, obtained the copy of the Sattiga from unknown criminals claiming to act for a non-existing company, and was instructed to collect the Container from ECT. On 5 September 2007, a truck driver of Gierros went to ECT’s terminal to ask for Container X to be released for on-carriage by truck.

The ECT employee handling the request noticed that Container X was registered for delivery via ECT’s barge system, not its trucking system. However, he did not follow internal procedures to check whether Container X had in fact been re-routed to the trucking system. He re-routed it himself, and released it to Gierros.

The truck driver delivered Container X to the person who had instructed Gierros. The latter took Container X, which was later found abandoned and emptied of its contents.

The Plaintiffs originally initiated a claim against five Defendants for the value of the lost goods in Container X. They later obtained leave to amend the Writ and include ECT as a party to the action.

ECT failed to serve a notice to defend, and in November 2009, the Plaintiffs obtained a default judgment for liability against ECT.

ECT applied to set aside the default judgment. One of the grounds was that it had, in reliance on clause 3 of the ECB, a real prospect of success on the question of liability. It also applied for a stay in favour of arbitration of all outstanding issues (whether as to liability or quantum) between itself and the Plaintiffs.

Judgment

Reyes J dismissed all applications made by ECT.

As regards whether there was a real prospect of success, the Court held that even if ECT could rely on the limitation period in Clause 3 of the ECB, Clause 3 did not apply on the facts. “Delivery” in limb (i) of Clause 3 should be interpreted as “delivery in accordance with the terms of the ECB”. This did not cover (mis-)delivery of Container X and its contents to persons not entitled to them, as happened here. Thus, limb (i) did not apply.

Applying the Hong Kong Court of Appeal decision in Cheong Yuk Fai v China Interlational Freight Forwarders [2005] 4 HKLRD 544, limb (ii) of Clause 3 meant the time “when the Goods should have been delivered in accordance with the terms of the ECB”. This referred to either a reasonable time after the Plaintiffs demanded delivery of Container X (and its contents) in Tilburg, or a reasonable time after Transpac informed the Plaintiffs that Container X was available for collection in Tilburg.

However, Container X never reached Tilburg. Neither did Transpac notify the Plaintiffs that it was available for collection, nor did the Plaintiffs demand delivery. Thus, limb (ii) did not apply.

Therefore, ECT had no real prospect of success. It was strictly liable for the Plaintiff’s claim in conversion, and it was, in addition, negligent in handling Container X by not following its internal procedures before re-routing it.

In relation to the application for a stay in favour of arbitration, the Court held that even if there had been a sub-bailment of Container X by Hapag-Lloyd to ECT on the terms set out in the Terminal Contract, Clause 7.4.3 did not apply. The clause was restricted in its application to “the Parties”, which were defined in Clause 2.1 as “the signatory Lines to this Terminal Contract, which are the constituent members of the Grand Alliance and the Terminal Operator”.

None of the Plaintiffs fell within this definition of “the Parties”. There was nothing in the Terminal Contract to suggest that “the Parties” should be read to include all those to whom the terms of the Terminal Contract might apply under the “sub-bailment on terms” doctrine. This reading was also not necessary for the commercial efficacy of the Terminal Contract. The stay was, therefore, refused.