Heung-A v. New Rank

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Heung-A Shipping Co. Ltd. v. New Rank (Holdings) Ltd, Excel World Container Line Ltd. and Best Trend Enterprises Ltd.

Hong Kong High Court: Stone J: [2001] HKEC 144: 12 February 2001

Counsel for Heung-A: Mr. James Thomson, instructed by Messrs. Koo & Partners
Counsel for Best Trend: Mr. John Kerr, instructed by Messrs. W.K.To & Co.

In this case, the claimants, a container liner operator, were unsuccessful in a claim for detinue (the unlawful detention of a chattel that belongs to another person) in respect of 37 of their containers. The claim was brought against another carrier and the operator of a container depot in which the containers were stored under lien by that carrier for unpaid freight and other charges relating to the cargo in the containers. The court held that the facts did not support the tort of detinue. Further, the court held that the claimants had impliedly consented to the containers being handled in accordance with the terms of the second carrier’s bills of lading (which included the lien clause), when their Hong Kong agents delivered the containers to it. Thirdly, the court held that the claimants had failed to prove that they had suffered any damages from the loss of use of the containers, there being no evidence that the claimants had had to lease-in replacement containers.

DMC's Category Rating: Developed

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The Claimants Heung-A, a Korean container liner operator, carried a consignment of newsprint from Indonesia to Hong Kong. The consignment was carried in 40’ containers supplied by the claimants and arrived in Hong Kong early in April 1997. Heung-A’s Hong Kong agents issued a delivery order for the consignment to the first defendants, New Rank (Holdings). The delivery order contained on its reverse a guarantee signed by New Rank undertaking to return the containers within 10 days and, if the containers were not returned within that period, then a container detention charge of HK$200 per container per day would become payable. Pursuant to the delivery order, Heung-A’s Hong Kong agents delivered part of the consignment to the second defendant, Excel World Container Line, for onward carriage to Nanhai in the Pearl River Delta. However, the consignment was apparently unable to clear Customs in Nanhai. In consequence, Excel returned it to Hong Kong and, as from 17 April 1997 placed the consignment in the care of the third defendants, Best Trend Enterprises, who ran a container storage depot. Eight of the containers were released by Best Trend in early May 1997 but the remainder of the containers, 37 in all, remained in the custody of Best Trend until March 1998.

During the period from April 1997 to March 1998, Excel claimed to be exercising its right – under the Bill of Lading it had issued for the abortive carriage to Nanhai - to lien the cargo (and the containers) for freight and other charges which remained unpaid. In September 1997 solicitors for Heung-A wrote to Excel World, demanding the immediate return of the containers. In December 1997, the solicitors sent a letter in similar terms to Best Trend. Best Trend then engaged in negotiations with Excel World, as a consequence of which the cargo was unloaded from the containers on 21 March 1998. Best Trend then re-delivered the empty containers to Excel World. But it was only on 15 May 1998, that Excel World re-delivered the containers to Heung-A, pursuant to a tripartite agreement entered into the day before, between Heung-A, Excel World and Best Trend.

Heung-A claimed against both Excel World and Best Trend in detinue (the unlawful detention of a chattel that belongs to another person) for damages based either on the daily sum of HK$200 per container under the delivery order or, alternatively, at the rate of US$3.00 per container per day, being the then market rates for container rental. By the time of the trial, both New Rank and Excel World had ceased operations. A default judgment had been given against New Rank in February 1998, with damages to be assessed. As for Excel World, it took no part in the present proceedings. The action therefore concentrated on the claim against Best Trend, where Heung- A claimed damages for the period from 15 December 1997 until 20 March 1998.

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The judge held that the claim failed on three grounds.

Firstly, the facts did not support a claim in detinue. The demand letter sent by Heung-A’s solicitors in December 1997 to Best Trend involved the obligation to incur expense and to de-stuff the containers. That demand was not, in the judge’s view, sufficient to trigger a claim in detinue. He found also that at the date of the writ, there had been no ‘unconditional refusal’ on the part of Best Trend to comply with the demand – such a refusal being, in the judge’s view a necessary ingredient, on the authorities, for the establishment of the tort of detinue. Even if the demand were valid, the steps taken by Best Trend to resolve the matter with Excel World were, in the judge’s opinion reasonable, given Best Trend’s position as a sub-bailee of the containers and their contents. It was unlikely that interpleader proceedings (in which Best Trend would have applied to the court for directions) would have produced a quicker result.

Secondly, the judge found that the principle of ‘bailment on terms’, based on the 1994 decision in The Pioneer Container case of the English House of Lords, applied. Under that principle, Heung-A were bound by the actions of their Hong Kong agent in handing possession of the containers to Excel World, in the knowledge that Excel World would then deal with them on the basis of its bill of lading terms. These gave Excel World the right to assert a lien over the containers and their cargo. The ‘Himalaya’* clause in that bill of lading entitled Best Trend also to the benefit of that lien clause. As a result, Heung-A were bound by the terms of the bailment of Excel World and of the sub-bailment of Best Trend.

*Note: a ‘Himalaya Clause’ in a bill of lading gives the servants, agents and sub-contractors of the carrier the right to rely on the carrier’s defences and limitations under the bill of lading, in the event that they are sued themselves.

Thirdly, the judge found that Heung-A had failed to prove that they had suffered any damages as a result of the detention of the containers. There was no ground on which the contractual rate of HK$200 per container per day could apply to claims against Excel World or Best Trend. They were not parties to the guarantee under the delivery note and this figure could not be characterised as a genuine pre-estimate of loss. The alternative claim, based on a daily hire rate of US$3.00 per container failed also; there was insufficient evidence to show that Heung-A had needed to hire-in containers to replace the 37 detained; nor was there evidence as whether there was a surplus or shortage of containers in the market at the material time – an important point given that that Heung-A had then about 20,000 containers in their fleet.

Although Excel World did not participate in the proceedings, the Judge held that Heung-A’s claim against them failed on the same grounds as the claim against Best Trend – at least up to 21 March 1998. The judge would, however, have allowed a limited claim against Excel World for the period between 22 March and 16 May 1998 (the date on which the containers were finally returned to Heung-A), had the claimants been able to prove that they had suffered any loss.

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