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Bank Negara Indonesia v The Hong Kong And Kowloon Wharf And Godown Co Ltd

Judgment Cited authorities 6 Cited in Precedent Map Related
Vincent
Judgment Date17 October 1979
Year1979
Judgement NumberCACV55/1978
Subject MatterCivil Appeal
CourtCourt of Appeal (Hong Kong)
CACV000055/1978 BANK NEGARA INDONESIA v. THE HONG KONG AND KOWLOON WHARF AND GODOWN CO LTD

CACV000055/1978

Contract - warehouseman - goods delivered into storage - terms of business requiring declaration if goods exceeding $500 per package in value - no such declaration - in breach of contract defendant released goods without comparing signature on delivery order with authorised signature - signature a forgery - whether sufficiently proved that goods were of nature alleged - goods found to exceed $500 per package in value - defendants in breach of fundamental term - "fair and reasonable interpretation" of contract - terms excluding and limiting liability not applicable - defendant liable for full value of goods.

IN THE COURT OF APPEAL 1978 No. 55
(Civil)

BETWEEN
Bank Negara Indonesia Plaintiffs
(Respondents)
AND
The Hong Kong and Kowloon Wharf and Godown Co. Ltd. Defendants
(Appellants)

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Coram: Huggins & McMullin, JJ.A. and Cons, J.

Date of Judgment: 17 October 1979

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JUDGMENT

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McMullin, J.A.:

1. Messrs. Nam Hoi Ltd. was a Hong Kong company dealing in merchandise of various descriptions. It commenced trading in 1967 and in October of that year it opened an account with the plaintiff bank. During the next twelve months Nam Hoi employed the resources of the bank to complete a number of deals concerning goods imported by it from outside Hong Kong by means of letters of credit. In this way the bank financed the importation of a variety of goods including steel bars, blankets, and cement. As to these transactions no question is now made, and it has not been suggested that Nam Hoi failed to discharge its obligations to the bank in respect thereof. In August 1968 at the request of Nam Hoi the plaintiff bank opened an irrevocable letter of credit in favour of a company known as Central Asia Investment Co., the address of which was Cross Street, Singapore, for the importation of some 7 tons of nutmeg oil, and on September the 5th, again at the request of the company, the plaintiff bank opened a similar letter of credit in favour of the same company in the sum of $1,056,000 Singapore dollars in respect of a purported shipment of 32 tons of nutmeg oil packed in 200 kilogram steel drums. It is from the latter transaction that the present cause of action springs. It is common ground that 160 steel drums containing a liquid purporting to be nutmeg oil, and so described in the relevant contract and shipping documents, were carried from Singapore in a vessel of the Messageries Maritimes line, the vessel being known as the S.S. Var. These drums were off-loaded in Hong Kong on the 8th of October 1968. Pursuant to the agreement between Nam Hoi and the plaintiff bank the bill of lading showed upon its face that these goods were delivered to the order of the bank; the bill itself and the other necessary shipping documents such as the invoices, packing list, weight note etc. were delivered into the custody of the bank. The bank thus acquired a special property in these goods to secure its loan. A letter of credit was subsequently drawn upon by the Singapore company and was honoured by the bank's agent in Singapore to the full amount of the credit. The bank has never been repaid.

2. Upon arrival in Hong Kong the steel drums and their contents were accepted for storage in the defendant company's transit store under a contract the terms of which constitute one of the principal issues between the parties. These goods were held in storage by the defendant company between the 8th of October 1968 and the 19th of October and on the latter date they were delivered into the custody of one CHAN Kung-wo, the permanent managing director of Messrs. Nam Hoi Ltd. The goods were thus delivered to Mr. Chan upon presentation by him of a delivery order purporting to be signed by the bank's authorised signatory. The goods were then taken to another place for storage by Mr. Chan and another person who accompanied him and they have since totally disappeared. It is common ground that the signature on the delivery order was a clumsy forgery which would readily have been detected by the counter clerk who delivered the goods to Mr. Chan, had the former compared that signature with the specimen signature given by the plaintiff bank to the defendant company at the inception of their relations. It is conceded that the counter clerk was under a contractual duty to compare the signatures and that the defendant company is affected by his negligence in failing to do so.

3. The author of this forgery has never been discovered. As may be imagined, Mr. Chan himself was immediately under suspicion and after police investigation he was actually charged with uttering a forged document and obtaining goods by means of a forged instrument. Eventually, however, a nolle prosequi was entered, the Crown apparently being satisfied, upon certain statements taken from him by the police, that he was innocent of the fraud.

4. That there was a fraudulent conversion of these goods is evident. Moreover the defendants have sought throughout to rely upon items of evidence tending to show misconduct in two of the higher officials of the plaintiff bank whose acts, although not pleaded as fraudulent, are said to have contributed to the negligence of the defendants in releasing the goods. Thus, on the strength of certain statements allegedly made by CHAN Kung-wo, the defendant company maintains that the bill of lading was given into the latter's custody by Mr. Soekarno Soedirman, an assistant manager of the plaintiff bank, which enabled Chan to procure the delivery order from the shipping company which later was used to effect the release of the goods. That much is conceded by the plaintiff bank but it is denied that Soekarno had anything to do with the delivery order itself notwithstanding Chan's statement that he had given that order to Soekarno and had it returned to him for the purpose of effecting the release of the goods.

5. There was also the matter of the invoice, packing list and quantity list which, according to Chan, were delivered into his possession by another official of the bank, Mr. Yiu, these documents having been required by an inspector of the Department of Commerce and Industry whose inspection of the goods was a necessary prerequisite to their release. Although the trial judge did not find these bank officials to have participated in a conspiracy to make away with the bank's security their conduct was regarded by him as dubious and dishonest and he did consider it in relation to the contention that it had at least facilitated a conspiracy to defraud the bank which, it was said, necessarily involved the importation, under the letters of credit, of valueless goods described wrongfully as nutmeg oil which, it is conceded, is a very valuable substance.

6. Neither Mr. Chan nor any other person from the Nam Hoi Company gave evidence at the trial. Nor did Mr. Soekarno Soedirman; nor did Mr. Yiu; nor was any witness called from the Central Asia Investment Co. in Singapore. The only person who actually saw the contents of the drums, the inspector of the Commerce and Industry Department, did not give oral evidence but a letter concerning the result of his inspection was put in together with several other items of a documentary nature which were tendered and received under the provisions of the Evidence Ordinance relating to the admission of hearsay evidence in civil actions. Thus there was no direct evidence at the court of trial concerning the nature of the contents of these drums. On the balance of such evidence as was before him, however, the learned trial judge found that the contents consisted of nutmeg oil. This finding constitutes the first contentious issue before the court on the hearing of this appeal.

7. Originally the trial judge considered that he had three issues to deal with. The second of those concerned certain estoppels said to operate against the plaintiff bank by reason of its having permitted CHAN Kung-wo to take possession of the delivery order upon which the goods were released. The learned trial judge, confronted by contradictory hearsay statements on this matter from Soekarno and CHAN Kung-wo, and taking into account the fact that the counter clerk of the defendant company had neglected to compare the signature on the delivery order with the specimen signature, concluded that it had not been proved that any representation had been made by the bank or its servants to the defendant company sufficient to support any of the estoppels pleaded in paragraphs 10 to 13 inclusive of the defence.

8. However, the estoppel plea was not pursued in this court and we are left therefore with two main issues. The first is that which has already been referred to viz.: whether it was proved that the substance in the drums was genuine nutmeg oil. The second is whether, assuming it to have been genuine oil, the defendants are exempted from liability for the loss of these goods either (a) totally or (b) partially by virtue of certain provisions in the contract between the parties upon which the goods were taken for storage by the defendant company. As to the latter of these issues the learned trial judge held that the defendant company was not protected by any of the exemptions or exceptions clauses upon which reliance was placed and accordingly he found for the plaintiff in the full sum claimed.

9. On the first of these issues Mr. Oswald Cheung for the appellant company seeks to show that the trial judge was in error in finding that the evidence before him was sufficient to discharge the onus, which it is conceded lay upon the respondent company, of showing on the balance of probability that the substance in the drums was...

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