Luen Fat Commercial Corporation Ltd v. Shun Fung Piecegoods Co

HCA001970/1974

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 1970 OF 1974

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Coram: Trainor, J.

Date of Judgment: 24th October, 1975.

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JUDGMENT

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1. The plaintiff's claim is for the sum of $80,000 being the price of goods sold and delivered to the defendant by the plaintiff. The sales contract was in respect of a quantity of yarn. The plaintiff also sued in the alternative on a cheque for that amount which when presented was dishonoured, of which dishonour the defendant was duly informed.

2. The proceedings have their origin in a sales contract dated the 21st of December, 1973 in respect of certain yarn which was described in contract as Monsanto Polyester Yarn, Semi-dull, 150 Denier/34 filament. The goods arrived in Hong Kong some time towards the end of February, 1974, and it is the contention of the defendant that after receipt of a Shipping Order and inspection of the goods they were found not to be of the quality expected.

3. Mr. Chow Hung Hing, a member of the defendant firm, told me that on receipt of the Shipping Order on the 28th February, 1974 two cheques dated the 1st March were issued by his firm for $80,000 and $60,000 respectively, and another for $12,339.12 postdated to the 15th March. He said the goods were received into the firm's godown on the 1st March where, after 4 p.m. , he and his father inspected them and discovered that the goods "were not right". He said about 12,000 1bs. of the yarn was on spools which weighed between 8-10 1bs. each, and about 13,000 1bs. on spools which weighed 1-6 1bs. each. He said the yarn had not been texturised and accordingly could not be made into cloth. His greatest complaint seemed to be that the goods were not texturised. He told his Counsel that there are two types of Monsanto yarn; texturised and non-texturised. When asked if there was anything to show he ordered texturised yarn he replied "All I can say is we needed texturised goods to be manufactured into piece goods right away to be put in our shop front for us to sell as wholesalers".

4. After the inspection, the witness said he, told a Mr. Fan, a representative of the defendant company, of the position and that he would stop the cheques. This was done on the 2nd March.

5. Mr. Chow said that on the 4th March he went to the godown with Mr. Fan who having seen the goods admitted they were of B quality and not texturised. He said it was then agreed between them that Mr. Fan would introduce a firm to whom the 12,000 1bs. of the yarn on spools weighing 8-10 1bs. might be sent to be texturised at the plaintiff's expense, and that the plaintiff would take back the remainder which would remain in the defendant's godown for which the defendant would pay charges until they were removed. It was also agreed, he said, that when the 13,000 1bs. were removed the cheque for $80,000 would be returned to the plaintiff. In pursuance of that agreement, he said the cheques for $60,000 and $12,339.12 were presented and honoured.

6. Mr. Chow said that Mr. Fan also agreed that any profit made by the plaintiff out of the 13,000 1bs. would be paid to the defendant. No part of this agreement was fulfilled by the plaintiff.

7. Mr. Chow said his firm tried without success to have the yarn texturised. He said that at this time he also discovered that the tensile strength was less than he expected.

8. It is of interest to note here that Mr. chow was adamant that he instructed his banks(the cheques stopped were drawn on two banks) in writing on the morning of the 2nd March to stop the cheques from the plaintiff's banks dated. It is not without significance that on the 1lst March there was some $,000 1ess than $80,000 in the bank on which a cheque for that amount was drawn (although there was slightly more than $80,000 on the 2nd March) and there was about $29,000 less in the other bank on which the cheque for $60,000 was drawn.

9. It was Mr. Chow's contention that when the contract of the 21st December was entered into he told a Mr. Fan that he wanted the Monsanto Polyester Yarn,150 Denier/34 Filament for weaving or knitting piece goods. He said that Mr. Fan was thoroughly aware of the business the defendants carried on, and knew the type of yarn that was necessary to make piece goods of the type the defendants sold or dealt in. He told me that the type of piece goods he dealt in, and he produced samples of them, were such as were produced from texturised yarn and he said that Mr. Fan was aware of that. Mr. Fan on the other hand has told me that although he knew the defendants dealt in wholesale and retail piece goods he was not aware that they specialised in any particular sort. He told me that at no time was it ever mentioned that the yarn should be texturised. It is of intereste to note that in his evidence, and when he was addressing me at the close of the case Mr. Chow repeatedly said he "intended to purchase" texturised yarn, and I think perhaps that this case turns on the use of "intended to purchase".

10. I am satisfied that what I have heard in evidence from both sides with regard to this has been what they believed to be the truth. I believe that Mr. Fan offered to sell to the defendant Monsanto Polyester Yarn, Semi-dull, 150 Denier/34 Filament as the yarn is described in the contract. I believe that Mr. Chow told Mr. Fan that he wanted yarn of that description for the purpose of making cloth of piece goods. I do not think, and in this I accept Mr. Fan, that "texturised" was ever mentioned between them. I have had the evidence of the very highly qualified Dr. David K.T. Chan who has informed me that the yarn supplied to the defendant answers in every way to what is set out in the contract. It is not of the highest quality but it fully answers the description and is capable of being woven or knitted into piece goods. He has told me that cloth can be knitted or woven with the yarn and the only difference between piece goods woven by texturised yarn and non-texturised yarn is a matter of elasticity.

11. I am satisfied that the defendant received what he asked for.

12. At the commencement of this case, Mr. Tang who appeared for the plaintiff told me he was not proceeding on the basis of goods sold and delivered but merely on the cheque which on presentation was not met. Prima facie there is no answer to a claim based on a dishonoured cheque as consideration is presumed. For a defendant to succeed he would have to establish that there was no consideration for the giving of a cheque. Rather than there being evidence that there was no consideration I am of the opinion that the evidence establishes that there was full consideration for the cheque, the defendant having received what he ordered.

13. In the circumstances I order that judgment be entered for the plaintiff in the sum of $80,000 with interest at the rate of 8% from the 1st March until the payment of judgment; that the defendant's counterclaim be dismissed, and award costs to the plaintiff on the claim and counterclaim.

14. I have been reminded by Mr. Tang, and I am grateful to him for it, that I have not dealt with the alleged agreement to which I have already referred and is pleaded in paragraph 11 of the defendant's Defence and Counterclaim to the effect that after Mr. Chow and his father had inspected the goods with Mr. Fan it was agreed between them: that the defendant would accept 12,000 1bs. of the yarn supplied to be texturised at a factory to which the plaintiff; and that the balance of the yarn approximately 13,000 1bs. would be taken back by the plaintiff to be stored at the defendant's godown at the cost of the plaintiff; and that when the 13,000 1bs. from the godown were removed by the plaintiff that the plaintiff would return the cheque for $80,000, that is the cheque the subject matter of these proceedings. Further that the plaintiff would pay to the defendant the profit made by them on the sale of the 13,000 1bs. of yarn.

15. Although I said I considered the witnesses told me what they believed to be the true nature of the transaction they entered into I do not believe what Mr. Chow told me with regard to that agreement. I am satisfied that no such agreement was made.

Representation:

Mr. R. Tang (Philip K.H. Wong & Co.) for the Plaintiff.

Defendant in persion.