U. & I. Co Ltd v. The Santo Trading Co (A Firm)

CACV000007/1976

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Coram: Hon. Briggs, C.J., Pickering, J.A. and Cons, J.

Date of Judgment: 14 July 1976

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JUDGMENT

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Cons, J.:

1. On the 9th of July 1973 the plaintiff purchased from the defendant 200 tons of P.V.C. resin to be shipped from West Germany in August of the same year. The purchase price was US$635 per ton, to which must be added another US$35 freight charges. The defendant has at no time delivered those goods and is therefore in breach of contract. Matters could have been put simply in that way. The market price in October, when the goods should have been assessed at the difference between that and the contract price in accordance with Sec.53(3) of the Sale of Goods Ordinance, that is a total of US$46,000. In fact the learned trial judge did award damages in this figure although he arrived at it by a slightly more complicated route. It is against this award that the defendant now appeals.

2. In order to understand the ground of his appeal it is first necessary to look at the way in which matters were in fact pleaded. The material points of the Statement of Claim may be paraphrased as follows:-

Then follows a claim for the difference between the two prices; there is no direct allegation in so many words of failure to deliver under the original contract.

3. It is, with respect, a little difficult now to understand why counsel chose to plead in this way. Item (2) would only be necessary if the plaintiff had wished to claim loss of profit or expenses incurred by reason of his resale, which he did not. Items (3) and (4) are matters of evidence going only to establish the market price of the goods at the time when they should have been delivered. They were so accepted by the learned trial judge.

4. Secondly it is necessary to realise that when the plaintiff gave evidence in support of his claim his story was to some extent different from the one pleaded. When pressed he did make some mention of resale in Taiwan but basically he said that the object of the purchase had been to resell 100 tons in Hong Kong and retain the balance in stock against continued rises in price. This is what the learned judge accepted as the true facts. It also appeared that the second contract ((4) above) extended to only 100 tons.

5. I think we are asked to reverse the judge's finding to some extent. We were taken through various documents and portions of the plaintiff's evidence in order to show that he was telling lies in court. It was suggested that this was done in order to increase the damages payable to him. I do not think this necessarily follows but for the purpose of the argument I am prepared to accept that the goods under the original contract were at all times intended by the plaintiff for resale in Taiwan.

6. The ground of the appeal is "that the learned trial judge erred in law in his assessment of damages and failed to take note that the plaintiff had mitigated his loss". It is based on the plaintiff's evidence that he settled the claim that his Taiwan purchaser may have made against him for $100,000, from which incidentally he deducted some $50,000 by way of "commission". The argument is that by so doing he limited his loss under the contract to $100,000 and that is all that the defendant should be required to pay.

7. At first sight this is an attractive argument. If the defendant should now pay $100,000 the plaintiff is left with an overall gain of $50,000, which one presumes is the profit or "commission" that he expected to make on the resale. He is in the position in which he would have been if the contract had been carried out. That is if the contract for resale had been carried out. But that is not the contract on which the action was brought. The action was for breach of the original contract of sale. The argument put forward treats the two contracts as one transaction. In one sense perhaps they are; I am assuming the plaintiff bought in order to resell. But in so doing the plaintiff entered into two separate transactions with two separate parties and each transaction created its own distinct rights and liabilities. As far as the original contract for sale is concerned the contract for resale is a circumstance peculiar to the plaintiff. It cannot affect the right he has against the defendant to have delivered to him the goods that he has ordered. The defendant failed to honour that right. He is therefore in breach of contract. The natural consequence of that breach is that the plaintiff failed to obtain possession of the goods which he had bought. He was entitled, if he wished, to replace them elsewhere at the defendant's expense. Had he done so he would have had the benefit of their increased value since the date of the contract. That is the natural order of things upon which Sec.53 of the Sale of Goods Ordinance is based. There is no authority that I know of which says that he should be deprived of that benefit simply because he did not in fact repurchase and resell or because of some other arrangement he made with his own buyer. The passages to which we were referred do not assist the defendant. Para. 1230 of Benjamin on Sale of Goods relates to breach by the purchaser, not the seller. And the passage quoted there from British Westing House v. Underground Electric Railway⁽¹⁾ refers to occasions where the plaintiff "in the course of his business has taken action arising out the transaction". In the present instance the plaintiff's relationship with his buyer in Taiwan does not arise out of his transaction with the defendant. It arises out of his own independent transaction and should not be taken into account.

8. The defendant originally brought this appeal on the question of liability as well as damages but abandoned it as to liability at the beginning of the hearing. For these reasons both appeals are dismissed with costs.

Representation:

A. Zimmern, Q.C. & A.M. Niamatullah (Kwong, Lam & Chan) for Appellant

R. Mills-Owens & Ronny Tong (Johnson, Stokes & Master) for Respondent

(1) (1912) App. Cas. 673 @ 689.