Antwerp Diamond Bank-v-Brink's Inc
DMC/SandT/15/03
Hong Kong
Antwerp Diamond Bank NV v Brink’s Inc
Hong Kong Court of First Instance: Lam and Lunn VPP and Barman JA: CACV No.282 of 2012: [2014] 4 HKLRD 158: 17 July 2014
Mr Charles Sussex SC and Mr Patrick Chong, instructed by Messrs Wong, Fung & Co, for the Plaintiff/Appellant
Mr Andrew Sheppard, instructed by Messrs Tanner De Witt,for the third Defendant/Respondent
OF GOODS BY AIR: MISDELIVERY: GOODS RELEASED TO BUYER WITHOUT CONSENT OF PLEDGEE BANK AND WITHOUT PAYMENT: LOCUS OF PLEDGEE BANK TO SUE FOR CONVERSION: AGREEMENT BY SELLER TO PLEDGE FINISHED GOODS TO BANK: DELIVERY OF GOODS TO FREIGHT FORWARDER COMPLETED PLEDGE: CONSTRUCTIVE DELIVERY OF GOODS TO BANK
Summary
This was a case involving carriage of goods by air where the goods were mis-delivered to the buyer without payment or the consent of the plaintiff bank. The Court of Appeal overturned the decision of the trial judge and held that the bank was entitled to sue the carrier for conversion as the seller had pledged the goods in its favour. The pledge was completed when the goods were delivered to the freight forwarder for carriage under an air waybill showing the Bank's agent and receiving bank in Hong Kong as the consignee.
This note has been contributed by Ken T.C. Lee, LLB(Hons), PCLL (University of Hong Kong), BCL(Oxon) and barrister-at-law in Hong Kong.
Background
Under a working capital consortium agreement (the Agreement) and a joint deed of hypothecation, the plaintiff, Antwerp Diamond Bank NV (the Bank), provided banking facilities to an Indian company (the Company) for the acquisition of diamonds and other raw materials for the manufacture of finished diamonds for export.
Articles II.1 and II.5 of the Agreement provided that:
“1. The Borrower agrees that the said Facilities together with interest… and other moneys payable in respect thereof will be secured in favour of the said Banks by a first charge by way of hypothecation and/or pledge of the Borrower’s Current Assets, namely, Stock of Raw Materials, Semi Finished and Finished Goods, Stores and Spares … Bills Receivable and Book Debts and all other movables of the Borrower …
5. In respect of the said Facilities granted to the Borrower against pledge of goods, movables and all other assets all such goods, movables and other assets shall be placed in the possession of the said Banks under their control and in such manner that such possession and control may be apparent and indisputable …”
With the Bank’s consent, the Company sold three batches of diamonds (the Diamonds) to a buyer in Hong Kong (the Buyer) and arranged for the Diamonds to be shipped to Hong Kong by air. The freight forwarder issued to the Company three House Air Waybills respectively dated 28 July, 6 November and 12 November 2012 (the Air Waybills), which were then handed over to the Bank. The Air Waybills stated the Company to be the shipper, the Bank’s agent and receiving bank in Hong Kong as the consignee, and the Buyer as the notifying party. The third defendant, Brink’s Hong Kong Limited (Brink’s HK), was the contracting party in respect of the contract for carriage of goods.
After being carried to Hong Kong by air, the Diamonds were collected by Brink’s HK, who then released them to the Buyer without obtaining the consent of the plaintiff and without the Buyer having accepted the drafts drawn on it.
The Bank sued Brink’s HK for conversion, claiming that it was the pledgee of the Diamonds, or alternatively that it was entitled to sue for mis-delivery under the Warsaw Convention or the Amended Warsaw Convention.
At first instance, Deputy High Court Judge Lok rejected the Bank’s claim and held that delivery of the Air Waybills to the Bank did not amount to constructive delivery of the Diamonds to the Bank, as the Air Waybills were not negotiable documents of title. Further, it was doubtful whether the Warsaw Conventions applied because the mis-delivery took place after the completion of the carriage by air.
The Bank appealed to the Court of Appeal.
Judgment
Barma JA (with whom Lam and Lunn VPP agreed) gave the leading judgment of the Court of Appeal. The Court held that the Bank was the pledgee of the Diamonds and was entitled to bring a claim in conversion against Brink’s HK. Articles II.1 and II.5 of the Agreement amounted to an agreement on the part of the Company to pledge its finished goods (i.e. the Diamonds) to the Bank. The pledge was complete when the Diamonds were delivered to the freight forwarder for carriage to Hong Kong under the Air Waybills. This constituted constructive delivery of the Diamonds to the Bank and placed them in its possession. The present case was indistinguishable from the decision of the Privy Council in Kum v Wah Tat Bank Ltd [1971] 1 Lloyd’s Rep 439. The trial judge erred by focusing on the irrelevant question of whether the Air Waybill was a negotiable document of title.
