Man Foong Paper Products Ltd v. Great China Match Co Ltd

DCCJ003471/1975

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

ACTION NO. 3471 OF 1975

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Coram: Judge Mayo, D.J. in Court.

Date of Judgment:

Mr. John Chan (Chan Ho) for plff

Mr. Charles Young (J.S. & M) for Def'd.

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JUDGMENT

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At the commencement of the hearing the Defendant admitted the Plaintiff's claim and issues were confined to those raised on the defence and counterclaim.

The dispute between the parties related to the printing of advertisements on matchboxes to be used by Air Siam and Hong Kong and Shanghai Hotels. The Plaintiff is a printer and the Defendant produces matchboxes. The terms of the contracts between the parties are governed by 2 contracts the first dated 8.1.75 and the second dated the 13.1.75. Under both contracts the Plaintiff was required to produce samples of his printing work to the Defendants for their approval.

witnesses gave evidence for the Defendants, Mr. Lieu a Director and Manager and Mr. Law the Factory Manager. The evidence of both these gentlemen was similar and to a large extent they corroborated each other. Their evidence was that the Plaintiffs produced samples of their work on 3 occasions the last being on the 29.1.75. Both witnesses gave evidence of the necessity for a very high standard of workmanship in printing for prestige advertising and of the failure of the Plaintiffs to meet these standards with the samples produced. Mr. Lieu justified these high standards by stating that the price for the work was very much higher than the price of normal printing work. They each described in some detail the nature of the deficiencies which they alleged existed in respect of each sample. Mr. Lieu also gave evidence of Mr. Sun of the Plaintiff's company telephoning him at the end of February and advising him that his company could not meet the terms of the contracts. Mr. Lieu then described the action taken by him to mitigate damages for the breach of the contracts by way of entering into contracts with Hing Yip Co. to undertake the printing albeit at a higher price. Particulars of these contracts were deduced in evidence to substantiate the Defendants' claim for damages in the counterclaim.

Mr. L.K. Sun was the only witness to give evidence for the Plaintiffs. He referred to the samples which had been produced in evidence and claimed that the quality of the samples was of a sufficiently high standard and that the Defendants were unreasonable in not approving the samples. He gave evidence of utilising an offset printing technique which utilised a camera and the application of a printing process which ensured that none of the colours would become intermixed. He went on to give evidence that short of bank notes being printed it was not feasible to ensure that the colouring of any printing adhered exactly to the colouring of any sample produced. He said that such factors as the prevailing temperature and humidity or the oxidisation of lead paints would all be critical factors which would mean that no 2 samples would correspond exactly to each other. He also said that to keep matters in a proper context it was necessary to bear in mind the fact that he was simply producing working proofs as samples and that the finished product would have an enhanced appearance. He denied repudiating the contract. Neither party saw fit to call expert witnesses in support of their case. Certainly it is no simple task for a Judge to adjudicate on such a question particularly bearing in mind the rather technical nature of the printing requirements and his lack of expertise on a practical matter of this nature. From a layman's point of view the samples certainly appeared to be of a reasonable quality and to conform to the standards of printing which normally appear on matchboxes which bear the names and trade marks or other insignia of airlines, hotels, clubs, restaurants etc. I realise however that a simple opinion of this nature is entirely inadequate to determine a dispute of this nature. I am satisfied that the only way by which I can reach a just resolution of this case is to have regard to the background information available and in particular to the conduct of the parties.

What emerges clearly from the evidence is that subsequent to the signing of the contracts the initiative for taking the matter further rested with the Plaintiff. They produced 3 sets of samples all of which were rejected by the Defendants. At the hearing Mr. Sun sought to establish that such rejection was unreasonable. However there is no evidence that he attempted to communicate this view to the Defendants at the relevant time. After the 29th January the Plaintiff appears to have taken very little action in the matter. There is no evidence either that a concerted and continuing effort was made to rectify the deficiencies referred to or that the Defendants were put on notice that the Plaintiff considered the Defendants' rejection was unreasonable. All of the correspondence which was submitted was consistent with Mr. Lieu's evidence that Mr. Sun unilaterally repudiated the contract. In addition to this Mr. Sun was unable to give any plausible explanation as to why the Defendants should give alternative instructions to Hing Yip to print the matchboxes at a higher price. I am satisfied on the evidence that the Plaintiff has been in breach of both of the contracts and that such breaches have been occasioned as a result of their incapacity to meet the exacting standards required.

I must now consider the damages which should flow from the said breaches of contract. Mr. Chan cited to me paragraph 603 of the 23rd Edition of Chitty on the General Principals of Contract in support of his submission that clause 2 of the contracts which related to the requirement of the Plaintiff to obtain approval of samples amounted to a condition precedent. I do not think that there is much merit in this submission. If the contracts are read as a whole it is clear that clause 2 cannot be artificially severed from the contracts nor can a valid argument be sustained that the requirements contained in the clause constitute a separate issue which amounts to a condition precedent. The obligation contained in that clause forms an integral part of all of the duties to be performed by the parties and the non fulfilment by either party of the terms of the clause amounts to a breach of the contract as a whole. Damages are therefore payable. I am in agreement with Mr. Yeung's submission that the amount of the damages which should be assessed is the difference between the contract price agreed between the parties for all of the printing to be undertaken and the price payable to Hing Yip under the new contracts entered into by the Defendants. There was no evidence deduced to the effect that the new contract prices were unreasonable nor on the other hand was there any evidence to indicate losses otherwise arising as a result of the delay which occurred. I will hear the parties on the actual figures to be assessed.

I understand that it is the wish of the parties to address me on the question of costs and I will hear them for this purpose.

Representation:

Mr. John Chan (Chan & Ho) for Plaintiff.

Mr. Charles Young (J.S. & M) for Defendant.