Kaiser Garments Ltd v. Lai Shum Co

CACV000060/1979

Pleading - action for damages for failure to deliver goods corresponding to description - Statement of Claim alleging breach of condition implied by s. 15 of Sale of Goods Ordinance - no allegation of breach of warranty - goods accepted - all material facts having been pleaded, it was open to judge to award damages for breach of warranty.

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

Date of Judgment: 28 March 1980

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JUDGMENT

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Huggins, J.A.:

1. The purchaser of goods appeals against the dismissal of its claim to damages for failure by the sellers to deliver goods corresponding with the description in the contract.

2. The Sellers, who were not the manufacturers, agreed to sell cotton twill at $5.80 a yard. In so far as is material to this appeal it was found by the judge that this was a sale by sample and description, that 10,317.5 yards of twill were delivered and a sum of $59,841.50 paid therefor, that the goods did not correspond to the contract description but that it had not been established that the goods failed to correspond to the sample, that 10,244 yards were either used or resold and that the value of that twill was $1.95 a yard, the resale price. The judge said that, if the Sellers had been liable, he would have entered judgment for $41,502.80, being the purchase price of $59,841.50 less $14,991.60, the price received for the 7,688 yards actually sold at $1.95 a yard. I shall return to these figures, which appear to contain a mathematical error. The reason for the dismissal of the claim was that, although the Purchaser had pleaded breach of the condition implied by s. 15 of the Sale of Goods Ordinance, the goods had been accepted and there was no alternative claim for breach of the warranty upon which the Purchaser could have sued by reason of s. 13.

3. Mr. K.H. Woo contends, first, that it was unnecessary to plead the warranty: the facts constituting the breach of condition and the breach of warranty had been pleaded and the Purchaser had prayed for damages. In the alternative he sought leave to amend the Statement of Claim by alleging a breach of the warranty.

4. Mr. Woo relies upon two passages in the dissenting judgment of Fletcher Moulton, L.J. in Wallis, Son & Wells v Pratt & Haynes 1910 2 K.B. 1003, a judgment which was endorsed by the House of Lords on appeal at 1911 A.C. 394. At p. 1013 the Lord Justice said:

"It will be seen, therefore, that a condition and a warranty are alike obligations under a contract a breach of which entitles the other contracting party to damages."

Then at p. 1015 he said:

"The ingenious argument of the counsel for the defendants in this case was, in my opinion, based upon a fallacy. He was compelled to admit that the vendors undertook the obligation of delivering common English sainfoin and that this was an obligation having the higher status of a condition. It was thus outside the language and the scope of the clause in the contract relating to warranties. But he sought to say that, although this clause as to warranties did not affect the existence of the obligation, it took away the right to damages for a breach of it. His argument was that under s. 11 a condition becomes a warranty if any portion of the goods is accepted. The answer to this argument is, in my opinion, two-fold. In the first place s. 11, sub-s. 1, does not state that a condition becomes a warranty if the goods are accepted, but only that the legal remedies for the breach of a condition become, in that event, limited to the single remedy which exists in the case of a warranty, namely, suing for damages. Whether an obligation is a condition or a warranty is decided (as s. 11, sub-s. 1(b), and the definition clause shew) by the contract itself and not by matters subsequent to the contract. Such matters (whether they consist of express election or election statutably implied from acts) may amount to a renouncement of, or may take away, the superior legal advantages of a condition as compared with a warranty, but they do not make it a warranty, and if the language of s. 11 be carefully examined it will be seen that it nowhere states that a condition ceases to be a condition, but merely that the breach of the condition can only be treated as a breach of warranty, that is, as a ground for damages and not for repudiation. By s. 11, sub-s. 1(a), this is one of the remedies which is always open to the contracting party who is entitled to claim for a breach of a condition of the contract."

(Section 11 of the English Act appears as s. 13 in our Ordinance). Thus, it is submitted, it was enough to plead the breach of condition without mentioning the warranty. Furthermore, the Statement of Claim alleged the facts which constituted both the breach of condition and the breach of warranty and it was sufficient to plead the material facts without alleging either the condition or the warranty. Thus in Shaw v Shaw 1954 2 Q.B. 429, 441 Denning, L.J. observed:

"It is said that an implied warranty is not alleged in the pleadings, but all the material facts are alleged, and in these days, so long as those facts are alleged, that is sufficient for the court to proceed to judgment without putting any particular legal label upon the cause of action."

5. I think these arguments are correct. If they were not, I would unhesitatingly have granted leave to amend even at this stage, for on the findings of the judge there can be no meritorious defence to the action. In Curran v William Neill & Son (St. Helens) Ltd. 1961 1 W.L.R. 1069 the omission was to plead a regulation, and Holroyd Pearce, L.J. said at p. 1078:

"An amendment would have a very strong claim on our discretion, even at this late stage, if it could be shown that on the evidence the plaintiff was clearly entitled to succeed under a regulation on which he had omitted to rely."

The other judges were of a like mind. In that case an amendment would have served no purpose, but in the case before us it would enable justice to be done.

6. I would allow the appeal and enter judgment for the Purchaser. There is no cross appeal on the question of damages, but the Purchaser has very fairly agreed that the figure should be $36,743.00. This is arrived at by making allowance for the goods used by the Purchaser as well as those which they were able to resell and by taking as the value the price at which the sub-purchaser resold shortly afterwards.

McMullin, J.A. (Judgment annexed).

Cons, J.:

7. For the reasons given by my brothers I would also allow the appeal and enter judgment for the Appellant in the sum agreed.

28th March 1980.

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

Date of Judgment: 28 March 1980

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JUDGMENT

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McMullin, J.A. :

8. For all that one must sympathize with the unrepresented respondent, whose principal executive Madam CHENG Tak-ling has fought for over two years to avoid the liability brought upon her by the financial failure of her firm, I am satisfied that the appellant's claim cannot be resisted.

9. The learned trial judge found for the defendant (respondent) upon the narrow issue of what he believed to be a failure on the part of the plaintiff (appellant) to plead (alternatively to the principal plea of total failure of contract which he found had been defeated by waiver) breach of warranty, on the basis that the plaintiff had either elected to treat or had been compelled to treat the breach of condition as a breach of warranty. The judge found that she could not rely on the provisions of s. 13 and s. 55 of the Sale of Goods Ordinance. He found that the only breach of warranty which had been pleaded had not been proved and no exception was taken on appeal to that finding of fact. But then he held that because the plaintiff had waived the right to repudiate the contract and had accepted the goods despite their not conforming with the contract specifications the right to claim for consequential damage had also gone.

10. I do not find it necessary to look further than Wallis v. Pratt⁽¹⁾ on which Mr. Woo relies. That case in my view fully sustains his contention that a fundamental breach of this kind gives a plaintiff the right either to repudiate or to seek damages and that the latter remedy persists notwithstanding the loss of the former through waiver or otherwise. While it might have been better to plead specifically, I do not think the failure to do so can have misled the defendant or that it is fatal to the plaintiff's claim. The facts disclosing breach of condition are pleaded and damages for breach are claimed. The plaintiff was entitled to rely on the legal consequences flowing from the facts as pleaded. (Annual Practice p. 267 - 18/7/2)

11. I would allow the appeal and I concur on the consequential order announced by the learned President.

Representation:

K.H. Woo (Johnny T.K. Cheng & Tong) for appellant

Respondent by Madam CHENG Tak-ling, a partner

(1) (1910) 2 K.B. 1003.