Smart Modular Technologies Sdn Bhd and Another v Federal Express Services (M) Sdn Bhd and Another

• Judgment Date: 20 April 2006
• Date: 20 April 2006
• Docket Number: Suit No 259 of 2002
• Court: High Court (Singapore)

Smart Modular Technologies Sdn Bhd and another

Plaintiff

and

Federal Express Services (M) Sdn Bhd and another

Defendant

[2006] SGHC 66

Judith Prakash J

Suit No 259 of 2002

High Court

Bailment–Bailees–Duties–Goods in bailment hijacked en route to destination–Whether bailee's negligence contributing to loss of goods–Carriage of Goods by Air and Land–Carriage of goods by road–Contracts of carriage–Contract containing clause excluding liability of carrier for loss caused beyond carrier's control–Goods hijacked en route to destination–Whether hijacking beyond carrier's control

Pursuant to a contract of carriage between the second plaintiff (“Sun Tech”) and the first defendant (“FedEx M”), FedEx M was to transport 1,000 memory chips that Sun Tech had ordered from the first plaintiff (“Smart”) from its premises in Penang, Malaysia to Singapore. On 28 August 2000, a courier (“Mr Turairaj”) from FedEx M's Penang office (“the Penang station”) collected the goods from Smart's premises in a FedEx M vehicle. The vehicle was subsequently hijacked and the goods were stolen and have not been recovered.

Sun Tech brought an action against FedEx M for breach of duty as carrier and/or as bailees to recover the US$860,000 that it had paid for the goods, alleging that FedEx M was negligent and did not apply proper security methods for the care of the goods which led to their loss. Sun Tech submitted that FedEx M had committed multiple breaches of the International Air Transport Association Airport Handling Manual (“AHM”) which Sun Tech's expert witness (“Mr Phipps”) testified was applicable to the circumstances. Sun Tech further alleged that FedEx M had failed to show that Mr Turairaj was not involved in causing the loss and that FedEx M had not discharged its onus of proving that the hijack had in fact taken place as the evidence supporting the allegation of hijack was fraught with inconsistencies. FedEx M's position was that it was not responsible for the loss as the same was due to circumstances beyond its control, relying on a clause on the back of the airway bill issued by Mr Turairaj when he picked up the goods.

Held, dismissing the claim:

(1) By virtue of the contractual provision on the back of the airway bill, FedEx M would not be responsible if it could show that the loss was caused solely by an event beyond its control. However, if negligence on the part of FedEx M contributed to the loss, then the cause of the loss would not fall within the clause. It was for FedEx M to show that the hijacking was an external event over which it had no control and which it could not have prevented by the exercise of reasonable care. An event would only be beyond the control of a party if reasonable steps taken by that party could not have prevented that event from occurring: at [11].

(2) Mr Phipps had more than adequate qualifications as an expert on security measures, generally, in relation to the transport of goods. However, his reliance on the AHMs was, in the circumstances of this case where the loss took place while the goods were on a public highway en route to the airport, misplaced. The AHMs were aimed at indicating the appropriate security measures to be taken to protect goods that were within the airport premises. They did not deal with the measures required to protect goods travelling on a public highway and were not the right standard against which the security measures adopted by FedEx M were to be measured: at [21] and [80].

(3) As FedEx M had pleaded that the hijack was the cause of the loss, it had to prove that the hijack had in fact taken place. Further, since FedEx M had to show that the hijack was an event that was beyond its control, it had also to establish that none of its employees were involved in the hijack. If Mr Turairaj or any other member of its staff had participated in the robbery, then FedEx M would be liable for their actions. It was therefore not necessary for Sun Tech to plead that Mr Turairaj was involved - it was for FedEx M to show, on the balance of probabilities, that he was not: at [59] and [67].

(4) The loss of the goods was caused by an event beyond the control of FedEx M, to wit, the hijacking of its van by persons unknown. There was no negligence on the part of FedEx M or its employees that was causative in relation to the loss: at [79].

(5) The security procedures practised by FedEx M were suitable for the type of business that it undertook and the crime situation that existed in Penang at the material time. FedEx M was a general courier and not a specialist company providing high security transport services for valuable goods. Customers like Smart were aware of the type of services offered by FedEx M and it was clear from the minutes of a meeting between Smart and FedEx M on 24 September 1999 that FedEx M would not offer armed escorts and it was up to its customers to provide these should they think that the security situation required them. Second, the local situation in Penang at the time was such that whilst the Penang station should have been and was aware that hijacking of vehicles on the road could occur, there was no reason to think that there was an imminent danger of such an incident happening in Penang to the extent that enhanced security measures had to be adopted or FedEx M should have refused to carry valuable cargo. In addition, it was not a standard of the industry to require the use of armoured vehicles or those outfitted in the way suggested by Sun Tech: at [80].

(6) FedEx M had implemented a reasonable security system in relation to the goods that it carried and to the level of risk that it could reasonably anticipate it was facing. One of the governing rules of the security procedures adopted was that the courier's safety was paramount. That was a wholly reasonable rule. There was no rule or standard in the industry that required courier companies to only employ trained security personnel as their drivers: at [81].

Port Swettenham Authority v T W Wu and Co (M) Sdn Bhd [1979] AC 580 (folld)

Goh Kok Leong, Anna Quah and Gho Sze Kee (Ang & Partners) for the second plaintiff

Lok Vi Ming SC, Ajinderpal Singh and Mark Seah (Rodyk & Davidson) for the first defendant.

Judgment reserved.

Judith Prakash J

Introduction

1 There are two plaintiffs and two defendants named in the title of this action but by the time the hearing started, it was clear that the fight was between the second plaintiff, Sun Technosystems Pte Ltd (“Sun Tech”) and the first defendant, Federal Express Services (M) Sdn Bhd (“FedEx M”). The second defendant, Federal Express Corporation, was not served with the writ and played no part in the suit at all. The first plaintiff, Smart Modular Technologies Sdn Bhd (“Smart”), discontinued its action at a relatively early stage since it had no real interest in the claim.

2 Sun Tech is a company incorporated in Singapore which manufactures and supplies computer hardware systems. It purchases memory modules, essential components of such systems, from Smart, a Malaysian company, which manufactures the modules in its factory in Penang. These purchases are made on free on board (FOB) terms. Once a shipment is ready, Smart, at the request of Sun Tech, will contact FedEx M and ask it to transport the shipment to Singapore. FedEx M is a member of the Federal Express group of companies that carry on business worldwide as carriers of goods by land and sea. It has offices in Kuala Lumpur and Penang. Its Penang office, usually referred to as the Penang station, had a relationship with Smart in relation to the carriage of Smart's goods.

3 In July 2000, Sun Tech ordered 1,000 memory chips from Smart. The goods cost US$860,000. They were ready for shipment on 28 August 2000. That morning, Smart contacted FedEx M and a few hours later, a courier from the Penang station, one Mr Turairaj a/l Thigarajan, picked up the goods from Smart's premises. He then transported them in a FedEx M vehicle intending to deliver them to a colleague at a shuttle exchange point (“the shuttle point”) from where they would be taken to the Penang station's air cargo terminal for storage prior to being transported by air to Singapore. Whilst Mr Turairaj was en route to the shuttle point, he was forced by robbers to stop his van. Subsequently, the van was hijacked and the goods were stolen. They have not been recovered.

4 This is an action for breach of duty as carrier and/or as bailees. Sun Tech seeks to recover the US$860,000 that it had paid Smart for the goods. FedEx M takes the position that it is not responsible for the loss as the same was due to circumstances beyond its control. Sun Tech's riposte is that FedEx M was negligent and did not apply proper security methods for the care of the goods and that was what led to their loss.

5 This suit is not the only action that arose out of the loss of the goods. In Suit No 260 of 2002 (“Suit 260/2002”), Sun Tech, taking the position that the contract of carriage was between it and Federal Express (S) Pte Ltd (“FedEx S”), sued that company to recover its loss. On 29 June 2004, I dismissed Sun Tech's claim in Suit 260/2002 on the ground that Sun Tech did not have a contract of carriage with FedEx S. I found in that action that FedEx M had been acting as principal and as carrier when it accepted the goods and agreed to transport them from Smart's premises to Sun Tech. I further found that FedEx S's role would have been to act as FedEx M's agent in Singapore to clear and deliver the goods on their arrival here. I then found that Smart had been acting as agent for Sun Tech when it asked FedEx M to transport the goods and, therefore, that the contract of carriage was between Sun Tech and FedEx M.

6 From the closing submissions in this case, it is clear that FedEx M accepts that the contract of carriage was between itself as carrier and Sun Tech as the owner of the goods. It is common ground that this...