Hirdaramani v. OCS
Hirdaramani Industries Limited and another v. Orient
Consolidation Services (HK) Limited
DMC Category Rating: Confirmed
This case note is based upon a note prepared by the website’s former International Contributors from Hong Kong, Koo and Partners/Paul Hastings
For many years, Malu’s business with H was conducted on terms that letters of credit would be used as a means of payment and it had been H’s practice to designate Malu’s bank as the consignee of the shipment. The practice was to ensure that the bills of lading would not be endorsed in favour of Malu in the absence of payment.
As from September 1994, the parties were using a liner container operator, NYK Line, to perform shipping services for the goods and the defendant, Orient Consolidation Services (HK) Ltd ("OCS"), a Hong Kong freight consolidator substantially owned by NYK, to consolidate H’s goods. Since OCS was not physically situated in Sri Lanka, where the goods were manufactured, the process of consolidation was handled by its agent there, Maritime Agencies Ltd ("MAL"). As the Malu Malu business was substantial, OCS developed an "Operation Manual" for MAL to follow, containing examples of the standard documentation to be used. One of the key documents was a receipt known as the "Forwarder’s Cargo Receipt", issued by MAL to H. This stated that the ‘buyer/consignee’ was Malu Malu’s bank, and not Malu Malu itself. Unfortunately, the bills of lading issued by NYK for each consignment showed as consignee not "to order [Malu Malu’s] bank", but Malu Malu itself. Relying on the bills of lading, Malu Malu were able to obtain delivery of the goods on their arrival in the US, without first paying for them. This occurred in respect of 10 consignments over the period January/April 1995 and, later in 1995, Malu Malu filed for bankruptcy protection. As there was now no prospect of recouping funds from Malu Malu, H claimed the amounts outstanding from Malu Malu, some US$344,000, from OCS, in contract, bailment and conversion.
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