Tee Yip Kun and Others v. The Chiyus Manuf Cturing Co Ltd
Read the full judgment text of CACV 60/1975 on BabelCite. This Court of Appeal judgment.
2. The learned trial judge found for the plaintiffs on the question of liability and, as to quantum, the reference to January 1974 was abandoned. Instead, different fixed sums of damage were agreed between the parties according to whether the learned judge found that the defendants' breach of the obligation to deliver occurred in September 1973, October 1973 or in November of that year. The state of the market in gloves was such that the damages were to be lowest if the breach occurred in Septem
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CACV000060/1975 IN THE SUPREME COURT OF HONG KONG (APPELLATE JURISDICTION) CIVIL APPEAL NO. 60 OF 1975 (On appeal from C.J. 278/74) -----------------
----------------- Coram: Higgins & Pickering, JJ.A. & McMullin, J. Date of Judgment: 4th March 1976. ----------------- JUDGMENT ----------------- Pickering, J.A.: In the court below the plaintiff company sued the defendants for the difference between the market value of a quantity of gloves as at January 1974 and the total value of that quantity as under contracts for the sale by the defendants to the plaintiffs thereof. 2. The learned trial judge found for the plaintiffs on the question of liability and, as to quantum, the reference to January 1974 was abandoned. Instead, different fixed sums of damage were agreed between the parties according to whether the learned judge found that the defendants' breach of the obligation to deliver occurred in September 1973, October 1973 or in November of that year. The state of the market in gloves was such that the damages were to be lowest if the breach occurred in September, higher if in October and highest if in November. The learned trial judge found that the breach occurred in November with the result that the plaintiffs were awarded the highest of the three figures agreed between the parties as the possible figure of damages. 3. The appeal was originally directed both to liability and to damages but at the opening of the hearing in this court Mr. Jackson-Lipkin, who did not appear in the court below, very properly conceded that he could not argue the issue of liability and that aspect of the appeal was abandoned. 4. On the issue of quantum it is Mr. Jackson-Lipkin's contention that the breach of contract by the defendants occurred not in November 1973 but in September of that year so that damages should have been awarded not in the sum of $170,000 but in the amount of $110,000 these being the figures agreed between the parties as the appropriate damages for breach in these respective months. It was the further contention of counsel for the defendants that this figure of $110,000 fell to be reduced by virtue of the plaintiff company's failure to mitigate its loss. 5. The gloves in question totalled 17,640 dozen pairs and were the subject of some twenty sale and purchase contracts dated between 7th August 1972 and 10th May 1973. In the result the defendants delivered only some 400 dozen pairs of gloves and this not until November 1973. The final contract, that is that dated 10th May 1973, whilst specifying delivery for shipment by the plaintiff company to its overseas buyers in September 1973, also incorporated a clause to the effect that delivery under the 19 previous contracts should be effected before delivery under that contract of 10th May. On the face of it therefore it would appear that the breach of contract in the form of failure to deliver took place when, on 30th September 1973 no deliveries had been effected. In deciding that the breach of contract did not occur until November 1973, however, the learned trial judge relied upon a habit and practice between the parties, as exemplified in other contracts between them, that delivery was normally some three, four or even five months later than the specified delivery date. It will be recalled that the parties had by agreement tied themselves to damages based upon a failure of delivery either in September, in October or in November 1973 which was why the learned judge confined his finding to one of breach of contract in November instead of December 1973 or January or February 1974 which months would at first sight appear to be more plausible upon the basis of a habit and practice of delivery varying from three to five months in arrear. 6. It is the contention of the plaintiffs that since the final contract between the parties specified delivery in September with prior delivery of all outstanding orders before that delivery under that final contract, all question of practice and habit between the parties had come to an end and that therefore the breach of contract occurred when no deliveries had been effected by the end of September. In this view we must concur and we are unable to accept the contention of Mr. Zimmern for the plaintiffs that the acceptance of 400 dozen gloves in November was evidence of an agreement between the parties to vary the terms of contract in regard to delivery. Quite apart from the fact that there was no evidence whatever of any such agreement, Clause 5 of the Terms and Conditions endorsed upon the back of the final contract of 10th May provided that acceptance of the goods or part thereof by the buyers after the contractual dates was not to be deemed a waiver in any sense by the buyers of any rights arising from such late delivery. Moreover, on the authority of Goss v. Nugent(1), it would not have been open to the parties to vary their agreement after breach of it. And there was no waiver of the breach. 7. In the light of our opinion that there was simply no evidence of any agreement to vary the contract in regard to delivery dates, it is unnecessary for us to consider the construction of Item 14 of the Terms and Conditions which related to the manner in which the effect of the binding English text of the contract might be varied or affected. 8. In our view there was no room for taking into account any previous habit and practice between the parties in regard to late delivery as it had operated under other contracts and the breach must be held to have taken place in September 1973; so that, upon the basis of the damages agreed between the parties for breach in the respective months of September, October and November 1973, the award of $170,000 based upon breach in November cannot stand and must be substituted by the figure appropriate to breach in September 1973, that is $110,000. 9. The question remains whether this reduced figure should be subject to further reduction by reason of the plaintiff company's alleged failure to mitigate its damages. It was Mr. Zimmern's contention for the plaintiff company that the measure of damages was that laid down in s.53 of the Sale of Goods Ordinance and that no question of mitigation arose. With this contention we are unable to agree. There is nothing in the section which confers upon a buyer immunity from the ordinary obligation to mitigate damages and a buyer suing under the Sale of Goods Ordinance for wrongful neglect or failure to deliver goods to him is in no better position in this respect than any other plaintiff in an action for damages for breach of contract. The principle was stated by Viscount Haldane L.C. in British Westinghouse Electric and Manufacturing Company, Limited v. Underground Electric Railways Company of London, Limited(2) in these terms:-
and had earlier been stated by James L.J. in Dunkirk Colliery Company v. Lever(3):-
10. The real issue in regard to mitigation of damages was upon whom lay the obligation to establish the amount of mitigation allegedly open to the plaintiff company. It was Mr. Jackson-Lipkin's contention for the defendants that since the evidence showed that comparable goods from comparable firms could have been obtained in May 1973 at a price lower than the contract price obtaining between the plaintiff company and the defendants, the defendants had demonstrated the possibility of mitigation, that is they had shown the fact of avoidable loss on the part of the plaintiff company. At this stage, counsel contended, the burden of proving the amount of such avoidable loss shifted to the plaintiffs since the defendants had no idea of the plaintiff company's margin of profit upon resale to its overseas buyers, and so could not quantify the mitigation open to the plaintiff company. We find this approach untenable. In the first place whilst a plaintiff might well plead or give evidence on the lines that if anybody was about to talk about mitigation, he could demonstrate that by virtue of a rising market mitigation would have been impossible, it would be an unusual plaintiff who would spontaneously plead or attest to the fact that he could have mitigated the damages but failed to do so. Nor can we accept the proposition that if the burden of proving the amount of mitigation possible is not shifted to the plaintiffs once the defendants had shown avoidable loss, no defendant could ever succeed upon the doctrine of mitigation of damages. There exist such matters as discovery, interrogatories and above all cross-examination and it is perfectly open to the defendants by one or more of these means to ascertain the plaintiff's resale price to their overseas buyers thus supplying the court with a yardstick with which to measure the actual amount of mitigation open to the plaintiff in any particular case. In the present case no at empt was made to do this. As we see it the onus of proving the amount of mitigation reasonably open to the plaintiff lay upon the defendants and, even upon the assumption that mitigation would in fact have been possible in the case of a market which was shown to be rising in the second half of 1973, was not discharged. 11. Although no cases were cited to us, our view on this matter is not without authority, in Roper v. Johnson(4) the defendants agreed to sell to the plaintiffs 3,000 tons of coal, at 8s.6d. per ton "to be taken during the months of May, June, July and August". No coal having been taken by the plaintiffs in May, the defendants wrote on the 31st of that month asking the plaintiffs to consider the contract cancelled. The plaintiffs did not assent to this but on the 11th June the defendants positively refused to deliver any coal. In the action brought by the plaintiffs no evidence was given to show whether they could have gone to the market and obtained a new contract for coal. It was held that in the absence of evidence on the part of the defendant that the plaintiffs could have obtained a new contract on such terms as to mitigate their loss, the true measure of damages was the sum of the differences between the contract price and the market price at the several periods for delivery. In that case Keating, J. said:
and later:
Brett, J. in the same case said:
Grove, J. added:
and later:
12. It will be observed that in these judgments the emphasis is upon the necessity for the defendant to give evidence to show not only how but to what extent mitigation upon the part of the plaintiff was possible. The case was followed in James Finlay & Co. Ltd. v. N.V. Kwik Hoo Tong Handel Maatschappij(5). 13. Thus upon both principle and authority, we conclude that it was for the defendants to demonstrate the likely amount of mitigation of damages (if any) open to the plaintiff company. Since they have failed to do this they are not entitled to any mitigation of the sum of $110,000 agreed between the parties as the figure appropriate for damages based upon breach of the contracts in the month of September 1973. 14. The appeal as to quantum is allowed and the award of damages in the sum of $170,000 set aside and substituted by an award of $110,000. We will hear counsel as to costs. Representation: Jackson-Lipkin, Q.C., and M. Tam (W.K. Poon & Co.) for appellants. A. Zimmern, Q.C., and Patrick Fung (Chan & Ho) for respondent. (1) 1833 5 B & Ad. 58 (2) 1912 A.C. 673 at p.689 (3) 1878 9 Ch. D.20 at p.25. (4) 1873 C.P.P. 167 (5) 1928 2 K.B. 604
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----------------- Coram: Huggins & Pickering, JJ. A. & McMullin, J. Date of Judgment: 4th March, 1976. ----------------- JUDGMENT ----------------- Huggins, J.A.: I agree that the appeal should be allowed on the issue of quantum, but out of courtesy to the learned judge I will state my reasons shortly. 2. Although the total quantity of gloves agreed to be sold was 17,640 dozen pairs, the last of the twenty contracts concerned only 2,050 dozen pairs. However, the date for delivery was stated in this last contract to be:
It seems to have been common ground in the court below that that had the effect of extending the dates for shipment under all the previous contracts, although the delivery date under some of them had already passed when the last contract was signed. Indeed, the judge found that it was "a habit and practice between the parties that the delivery from the defendant is three or four months or up to five months behind time". In the event the only delivery under any of the twenty contracts was of 400 dozen pairs on 27th October 1973 under Contract No. 2599, the proper date for delivery having been "April or May". That delivery was made at the request of the Plaintiff. The claim is in respect of the balance of 17,240 dozen pairs. 3. It being common ground that the damages should be assessed at the difference between the contract price and the current or market price at the date of the breach of contract, the main issue to be decided is as to the date on which the breach occurred. The trial judge found that it occurred in November 1973, he having first come to the conclusion that there had been an agreement to extend the date for shipment beyond the date specified in the last contract. The basis for that conclusion was the habit and practice to which I have already referred, but with respect to him I think that overlooks the express terms of the contracts. All the contracts were set out on printed forms and included a large number of "Terms and Conditions", among which were the following:
It was argued that Clause 14 excluded the possibility of any variation of the written contract by subsequent parole agreement or by implication from habit and practice. Although at first I was inclined to think that the clause was concerned only with the interpretation of the original written contracts, both sides have been content to assume that that is too restricted a reading as it was "the effect" of the English text which was not to be varied unless the alterations were authenticated by the initials of both parties. Be that as it may, there was no evidence of an express agreement to vary the date of shipment and Clause 5 is explicit that acceptance of late shipment of part of the goods was not to be deemed a waiver of any rights arising from such late shipment or from non-shipment of the rest. One of the rights arising from late shipment was the right to claim damages for non-delivery at the agreed time. Equally there is no evidence of an express agreement to vary Clause 14 and nothing from which such an agreement could be implied. Until Clause 14 was varied it remained binding on the parties. Acceptance of late delivery of part of the goods could not in any event amount to a variation of the contract, because the breach had already occurred: Goss v. Nugent (1833) 5 B. & A. 58. 4. Mr. Zimmern has submitted that it is not open to the Defendants to rely on the printed terms and conditions, because they were not relied upon in the court below. By implication the Plaintiff alleged that the breach of contract was in January 1974, that being the date by which the damages claimed were assessed in the Statement of Claim. On the other hand, para.3 of the Statement of Claim said that the Plaintiff would refer to the contracts "for their full terms and effects" at the trial. The Defence denied that damages were assessable by reference to January 1974, because that was "long past the time of the alleged breaches of contract". In his closing address counsel for the Defendants appears to have argued that the latest time for shipment under the contracts was September. It does seem that he said that in the context of the "note" on the last contract concerning delivery under the previous pending contracts, but it must be borne in mind that the Statement of Claim had not expressly alleged an agreement to vary the date of shipment stated in the last contract. In my view it would not be just to hold that this Court must ignore some of the express terms of the contracts. 5. I am satisfied that the breach of contract occurred in September and that, subject to the only other point which now falls for our decision, the damages must be reduced to $110,000. The Defendants further contend that the Plaintiff failed to mitigate its damage and that it is not entitled even to the $110,000. It is said that the Plaintiff ought to have proved an attempt to buy equivalent goods elsewhere and that, having failed so to do, it cannot recover more than nominal damages. Mr. Jackson-Lipkin emphasises that there was evidence that the Plaintiff had made purchases of similar goods from time to time from other manufacturers and that the onus was therefore on the Plaintiff to lead evidence to rebut the inference that the contract goods could have been replaced by purchases from those other manufacturers at a price which was not higher than the contract price. 6. There is, of course, no duty to mitigate until a breach has occurred (in this case in September), but a duty to mitigate does then arise whether the damages fall to be assessed at Common Law or in a manner laid down by statute. I agree with Pickering, J.A. that on the authorities the burden is always on the defendant to show that the plaintiff has failed to take reasonable steps to mitigate his loss and that that requires him in a case of this kind to adduce evidence that goods are obtainable elsewhere at a price which would result in mitigation. 7. I would therefore allow the appeal to the extent of entering judgment for the Plaintiff in the reduced sum of $110,000. 4th March, 1976. Representation: |