Hang Tung Trading Co v. China Build Development Ltd and Another
Read the full judgment text of HCA 8415/1987 on BabelCite. This High Court CFI judgment.
1. This case concerns 25,000 lbs of acrylic popcorn yarn. By a contract dated December 10, 1986, the Plaintiff agreed to buy and the Defendant agreed to sell 80,000 lbs of such yarn of a count of 1/2.2 nm. Three deliveries were made. I am concerned with the second. It was made on February l6, 1987. On that occasion the Plaintiff took delivery of 40,000 lbs of yarn from the Defendant at the Hunghom Railway Station, and there and then loaded the same on to a train for delivery to its sub-buyer in
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HCA008415/1987 1987, No. A8415 ---------------------- H E A D N O T E ----------------------- Observations on :-
1987, No. A8415 IN THE SUPREME COURT OF HONG KONG HIGH COURT _____________ BETWEEN
______________ Coram: Bokhary, J. in Court Date of hearing: June 26-30 and July 3, 1989 Date of delivery of judygment: July 6, 1989 ----------------------- J U D G M E N T ------------------------ 1. This case concerns 25,000 lbs of acrylic popcorn yarn. By a contract dated December 10, 1986, the Plaintiff agreed to buy and the Defendant agreed to sell 80,000 lbs of such yarn of a count of 1/2.2 nm. Three deliveries were made. I am concerned with the second. It was made on February l6, 1987. On that occasion the Plaintiff took delivery of 40,000 lbs of yarn from the Defendant at the Hunghom Railway Station, and there and then loaded the same on to a train for delivery to its sub-buyer in Shanghai. 2. Some 6 weeks later, at the beginning of April, the Plaintiff received a complaint from its Shanghainese sub-buyer. The complaint was that 25,000 lbs of the yarn the subject-matter of the second delivery were of a count of 1/1.9 nm rather than of 1/2.2 nm. A count of 1/1.9 nm is heavier than one of 1/2.2 nm. Plainly, a count of 1/2.2 nm is part of the description of the yarn as sold and as sub-sold. 3. There were communications, both verbal and written, between the Plaintiff and Defendant over this turn of events. It is common ground that they reached an understanding in regard to the return of the 25,000 lbs and a refund of the price thereof - just as it is common ground that the Plaintiff has no right of rejection save pursuant to such understanding. This is because the Plaintiff concedes that, by accepting the second delivery, it had lost the right to reject any of the yarn thereunder. 4. Although there is now an issue as to whether the 25,000 lbs were of a count of 1/1.9 nm rather than one of 1/2.2 nm, at that stage the Defendant was prepared to assume that the Shanghainese sub-buyer had made an accurate complaint as to count. 5. According to the Plaintiff, the Defendant wanted it to do what it could to persuade the Shanghainese sub-buyer to accept the 25,000 lbs, but was failing that - willing to accept the return of the same without any condition as to the time by which such return had to be effected. 6. The Defendant's case is this : it was an express term of the understanding that its willingness to accept the return of the 25,000 lbs was conditional upon the same being returned within 2 weeks of April 3, 1987. Alternatively, says the Defendant, such willingness on its part was conditional upon the return of the 25,000 lbs within a reasonable time; and that means, it says, within one month of April 3, 1987. 7. It is not in dispute that the 25,000 lbs did not get back to Hong Kong until June 21, 1987: 8. In reaching the understanding in question, the Plaintiff acted through a director of its named Sze while the Defendant acted through a director of its named Lee. They gave conflicting evidence - Mr Sze in support of the plaintiff's case as to the understanding, Mr Lee as to the Defendant's. My task was faciliated by the fact that the solicitors for the parties agreed to take a full note of the evidence. This enhanced my ability to observe the demeanour of the witnesses in the box, which, accordingly, was not in any way inhibited by a need to keep a record (as opposed to merely taking a note for my own use). 9. In the result, despite the defendant's failure to mention the 2 week limit in correspondence in which some such mention might have been expected, I accept Mr Lee's evidence that the market for this sort of yarn is much better in the earlier half of the year since it is to be made up into autumn or winter garments, that the Defendant was anxious to have the 25,000 lbs back as soon as possible if it was to take the same back and that, accordingly, it stipulated that its willingness to accept the return of the same was conditional upon such return being effected within 2 weeks of April 3, 1989. I so find. 10. That finding puts an end to the first basis upon which the Plaintiff advances its claim, namely, a revived right of rejection. That basis goes even if the 25,000 lbs supplied by the Defendant are of a count of 1/1.9 nm - as the Plaintiff alleges and the Defendant denies. It remains important, however, to decide whether or not that is the position. For if it is, then the Plaintiff can fall back on the alternative basis on which it claims, which is for damages for breach of a term in the contract - treated as of necessity as a warranty rather than a condition - that the yarn supplied would be of a count of 1/2.2 nm. 11. Is the count of the 25,000 lbs in fact one of 1/1 9 nm? I do not think that anyone would suggest for one moment that the way in which the Plaintiff has gone about proving, or trying to prove, that it is can be held up as model of how these should be done. Be that as it may, I have to decide whether, on the whole of the evidence, it is at least more likely than not that it is. A great number of factors go to make up the circumstances which have to be considered in deciding this question. They include these: There are now 156 bales lying in a godown in Chaiwan. These, says the plaintiff, are the 25,000 lbs which were delivered by the Defendant to it under the second delivery, delivered by it to its Shanghainese sub-buyer, and returned by that sub-buyer to Hong Kong on June 21, 1987. It is common ground that the second delivery consisted of 156 bales, that they came to Hong Kong from Taiwan and that they went from here up to Shanghai. The Plaintiff alleges - and the Defendant denies - that they then came back down here from Shanghai and are now lying in the godown in Chaiwan. If the 156 bales lying in the godown are the ones the subject-matter of the second delivery, they would in the normal course of their sojourn Kaohsiung - Hong Kong/Hong Kong - Shanghai/Shanghai - Hong Kong have picked up 3 shipping marks. 12. The first is the shipping mark for the sea voyage from Kaohsiung to Hong Kong. It ought to read
and be followed one number per bale, such numbers to run from 1 to 156. 13. The second shipping mark is the one applied by the Plaintiff itself for the train journey from Hong Kong to Shanghai. It ought to read thus:
14. The third shipping mark is the one applied by the Shanghainese sub-buyer for the return of the goods by train from Shanghai to Hong Kong. It ought to read thus :-
15. On June 27, 1989, the Solicitors for the Plaintiff, the Defendant and the Third Party respectively conducted a joint examination of the bales lying in the godown in Chaiwan. 9 bales were examined. 16. Each of them bore the first 3 lines of the first shipping mark, namely, those which read thus :-
But only one of the 9 bales bore a number within the range l to 156. The other 8 each bore a number higher than 156. 17. Only 2 of the bales examined bore the Hong Kong - Shanghai shipping mark. 18. The Shanghai - Hong Kong shipping mark was found on each of the 9 bales. 19. The question which I have to decide is one which has given me considerable anxiety. On the one hand, the Plaintiff is able to point out that neither the Defendant nor the Third Party has been able to suggest what goods, if not those supplied by the Defendant under the contract here in question, would bear the first 3 lines of the Kaohsiung - Hong Kong shipping mark. Moreover, Mr Lee did concede that there could be some error in the application of numbers to the bales when the Kaohsiung - Hong Kong shipping mark was being applied thereto, although he thought it unlikely that there would be any error let alone error on a large scale. 20. On the other hand, however, the absence of the Hong Kong - Shanghai shipping mark on 7 out of the 9 bales examined is not explained by any evidence even though such absence was discovered before the Plaintiff closed its case. 21. Nor, I am afraid, does the difficulty end there. 22. On April 2, 1987, the Plaintiff passed on to the Defendant a fax of that date from the Shanghainese sub-buyer in which it is stated that a count of 1/1.9 nm was marked at both ends of the outer packing of the 156 bales complained of and indicated in tags inside the packing. No evidence has been led to suggest that any of the 156 bales lying in the godown bore any such marking or contained any such tag. 23. Still further cause for concern over the identity of the bales arises in this way: The Plaintiff has led evidence that samples drawn by surveyors engaged by it were found, when tested at a laboratory approached by those surveyors, to be acrylic pop corn yarn of a count of 1/1.9 nm. The laboratory results are not challenged. However, difficulties arise in connection with the drawing of the samples tested. The survey report indicates that the 156 bales from which samples were drawn are those making up Lot No. D-16164R under Godown Warrant t No. 007739. That godown warrant, which is dated July 7, 1987, does refer to that lot. However, the lot referred to in the demand notes issued by the godown to the plaintiff in respect of storage charges is different, albeit only slightly so. Those demand notes, which run from June 25, 1987, to May 25, 1989, all refer to 'Lot No. D-16164' rather 'Lot No. D-16164R'. The shipping mark referred to in the godown warrant and the survey report is also different from the one found on the bales in the course of the examination thereof by the parties' Solicitors on June 27, 1989. Instead of the
found upon such examination, the godown warrant and the survey report speak of a shipping mark which reads
True the discrepancy is slight. But again it is one which is unexplained when an explanation is to be expected. 24. There of course are factors which tend to suggest that the bales lying in the godown in Chaiwan are the ones supplied by the Third party to the Defendant, by the Defendant to the Plaintiff and by the Plaintiff to the shanghainese sub-buyer. Those factors were put forward with considerable skill in the able submission of Mr Fok, who appears for the Plaintiff. What I have to decide is whether the plaintiffhas proved on a balance of probabilities that the yarn lying in the godown is the yarn thus supplied. 25. Having given the matter the most careful and anxious consideration, I have come to the conclusion that the Plaintiff has not proved that. There are gaps in the evidence by which the Plaintiff has attempted to prove its case on this issue. The Plaintiff was well aware before it came to court that tie issue existed. By the time it came to court and before it had closed its case, the Plaintiff could have been in no doubt as to how vigorously the Defendant and tie Third Party were contesting that issue. The goods were lying in the godown available for further survey; the godown people are no doubt amenable to subpoena. In those and other ways the Plaintiff may have attempted to close the gaps in its case. It has not done so. If I could close the gaps for it by the exercise of robust commonsense - or whatever else you may care to call it - I certainly would. But on the material before me, there is nothing for me to pour into those gaps except speculation. That would not do. As Lord Reid pointed put in Dorman Long (Steel) v. Bell [1964] I All ER 617 at p. 619C, it "... has been said that after all the evidence has been led the initial onus of proof is rarely of importance." But sometimes it is. This is one such time. 26. The Plaintiff's case having broken down on the facts in the way I have indicated, that is an end to its claim against the Defendant; and with it goes the Defendant's claim against the Third Party. 27. Nevertheless, I should indicate what I would have awarded the plaintiff if it had succeeded on liability, on either of the bases on which it claimed. And I should indicate what I would then done as between the Defendant and the Third party. 28. Had the Plaintiff succeeded on the basis of a revived right of rejection, I would have awarded it : (i) US$51,250.00 by way of a refund of the price of the 25,000 lbs rejected; (ii) US$1,250.00 as the difference between the price at which it bought the 25,000 lbs from the Defendant and the price at which it bought replacement yarn for the Shanghainese sub-buyer; (iii) HK$6,500.00 by way of freight charges from Shanghai to Hong Kong; (iv) HK$2,129.70 by way of transportation charges from the railway station in, I think, Hunghom to the godown in Chaiwan; (v) storage charges at the godown from June 22, 1987, to the date of judgment at the rates claimed; (vi) such interest Is I would have fixed after hearing argument thereon; and (vii) subject to argument thereon, costs. 29. Had the Plaintiff succeeded on the alternative basis of breach of warranty, my award would have been the same in regard to replacement goods, freight charges and transportation charges. My approach as to interest and costs would have been the same. I would have had some difficulty over storage charges; but doing the best I could, I would have awarded 2 months' storage charges. I would - again doing my best with what I had - have awarded US10 cents per Ib as the difference in price between yarn of a count of 1/2.2 and yarn of a count of 1/1.9, which comes to US$2,500.00 30. Turning to the third party proceedings, I would have rejected the Third Party's contention that it had not contracted as a principal with the Defendant. I accept that it acted as an agent for the Taiwanese supplier. But vis-a-vis tit Defendant, I am satisfied that - on the objective teat to be applied - it must be to have assumed the responsibilities of principal. The factor most heavily relied upon by Mr Yuen, who appears for the Third party, to suggest otherwise is the fact that payment by the Defendant was by a letter of credit established in favour of the Taiwanese supplier, who was named. While this is more common when an overseas supplier is the only one with the responsibilities of a seller qua principal, such arrangements do exist in situations in which someone coming in between the overseas supplier and the local buyer is acting an a principal. The Third Part's sole witness, a director of its by the name of Lo, conceded as much. Mr Lo also concedes that he never told the Defendant's Mr Fung, with whom he negotiated, that he was acting purely as an agent. He thought that Mr Fung understood that. Mr Fung says that he did not. I believe him. There is nothing else pointing to agency pure and simple; and everything else points the other way. 31. I should mention at this stage that I reject the Defendant's contention that the contract between it and the Third Party was oral even though a written agreement was entered into. This contention was introduced during the hearing with a view to circumventing certain exemption clauses contained in the written contract. But it is relevant to the agency defence also in this way: Once you hold - as I do - that the contract is written, the agency defence begins to wilt. The contract says in terms that the Third party has 'sold' the goods. Nowhere is agency mentioned. 32. The contention that the contract is oral is advanced on this line of reasoning: First, it is said that an oral understanding had been reached before any document appeared on the scene. The answer to that is quite simply: of course it had; an oral understanding must precede its reduction into writing. Secondly, it is said that the words in the contract "We confirm having sold the undermentioned goods ..." shows a prior completed oral contract. But the sentence continues: "... subject to the TERMS and CONDITIONS stated on the face and back hereof". Even if - which I doubt - an oral understanding could normally avoid being subsumed by a later written contract repeating its terms, I do not see how it could avoid that result in the teeth of words incorporating further terns and conditions. 33. In the present case, the Defendant's contention is further devastated by the fact that the oral understanding was, as the Third Party believed, reached not with the Defendant but another company under Mr Fung's control. Before it was signed by the Defendant, the written contract required two amendments. One was to insert the Defendant's name in the place of that of the other company to which I have just made mention. The other was to alter the delivery date. Even if it survived everything else, the oral understanding would have to give way to the written contract once it had undergone the bargaining inherent in such amendments. 34. Mr Chung, who appears for the Defendant, accepts that the exemption clauses would be part of the contract into which his client entered if that contract is the written one, since it signed the same. 35. Two exemption clauses are relied upon by the Third Party. The first is clause 9, which reads:-
One look at the clause shows that there has been a printer's muddle in the course of its reproduction. Precisely what it would provide in the absence of such muddle is a matter of speculation, and cannot be determined. I find it quite impossible to ascribe to the parties any consensus to rely on any part of such a clause. Nor would I strive to do so in the way judges have frequently done in order to rescue bargains from oblivion. Here, I am faced with an exemption clause in a standard form of contract. The contract can live without the clause. The clause does not merit rescue by severing the incoherent from the otherwise coherent. 36. As it stands, the clause, if not nonsense, is at least ambiguous. Even if it were neither, I would not regard reliance on the requirement as to a written claim within 30 days (of which mention is made in the clause) as fair or reasonable in all the circumstances. The requirement would, therefore, be unenforcable by reason of section 57 of the Sale of Goods Ordinance, Cap. 26. 37. The other exemption clause relied upon by the Third Party is clause 11, which reads :-
It is really the exemption from liability for consequential damages that the Third Party relies on. That exemption is free from ambiguity. And I consider reliance thereon as fair and reasonable in all the circumstances. 38. In my judgment, the proper meaning to give to the word "consequential" in clauses such as these is one along the lines of the meaning given to that word by Mr Justice Parker - and by the Court of Appeal affirming his decision - as it appeared in the exemption clause which had to be considered in Croudace Construction v. Cawoods Concrete Products [1978]2 Lloyd's Rep. 55. It does not cover any loss which results directly and naturally in the ordinary course of breach by late delivery (as in that case) or wrong delivery (as in this one). 39. Had the Plaintiff succeeded against the Defendant, I would have given the Defendant relief against the Third Party co-extensive with the relief which I would have given the Plaintiff against the Defendant if the Plaintiff had succeeded on the breach of warranty basis. I would have done so even if the Plaintiff had succeeded against the Defendant on the revived right to reject basis. Here, my reasoning is as follows : To begin with, the revival, by the Defendant, of the Plaintiff's lost right of rejection would not be a direct or natural result of the Third Party's breach. That would mean that clause 11 would bar the Defendant from recovering from the Third Party any refund payable be its i.e. the Defendant to the Plaintiff as a result of the revival of such lost right of rejection. Equally, the recovery of storage charges beyond the 2 months' within which breach of warranty alone would permit recovery would be barred. Even ignoring clause 11, the Defendant would not be able to saddle the Third Party with storage charges incurred as a result of what would be its i.e. the Defendant's wrongful refusal to accept the return of goods it had agreed to take back. Storage charges beyond 2 months' worth would, in my view, fall within that category. 40. In the result, the Plaintiff's claim against the Defendant is dismissed. And the Defendant being left with no need of any relief against the Third Party, its claim against the Third Party is likewise dismissed. 41. Tie Plaintiff's Counsel and Solicitors will, I trust, permit me to say that nothing I have said in the course of this judgment is intended as any criticism of them. I am grateful to the legal advisors for all the parties for the assistance which they have given me in this case. 42. I will now hear Counsel on the question of costs.
43. The Plaintiff shall pay the Defendant's costs to be taxed on a party and party basis if not agreed. The Plaintiff shall pay 75%, and the Defendant shall pay 25%, of the Third Party's costs to be taxed on a party and party basis if not agreed. I made such an order as to costs by consent.
44. I order that the HK$12,000.00 paid into court by the Defendant on Mar. 14, 1989, be paid out to the Defendant's Solicitors forthwith.
Representation: Mr J. Fok (Victor Chu & Co.) for Plaintiff Mr T. Chung (Fairbairn Catley Low & Wong) for Defendant Mr R. Yuen (So & Karbhari) for the Third party |