Harlow & Jones Ltd v. Sigma Shipping Co Ltd

Case No.HCA 1901/1970

Court

High Court CFI

Date—

Judge—

Case Document

100%Judiciary

HCA001901/1970

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 1901 OF 1970

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BETWEEN
	HARLOW & JONES LIMITED	Plaintiff
	and
	SIGMA SHIPPING COMPANY LIMITED	Defendant

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Coram: Li, J.

Date of Judgment: 22nd May 1973.

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JUDGMENT

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1. This is an action for breach of contract of sales. The plaintiff is a company incorporated in the United Kingdom trading or dealing in mild steels and scrap metals through an agent in Hong Kong entitled Burwill Trading Limited. The defendant is a company incorporated in Hong Kong and part of the defendant's business in the year 1970 was to operate a rerolling mill. I shall refer to these various parties as follows: the plaintiff, Harlow & Jones Limited, as the plaintiff, Burwill Trading Limited as the agent and the defendant, Sigma Shipping Company Limited, as the defendant.

2. On the 28th of May 1970, a contract was entered into between the agent on behalf of the plaintiff with the defendant to supply the defendant with 100 tons of mild steel rerollables now lying on Kwun Tong bank. The terms of the contract are as follows: the price is at ?1 5s. per long ton ex Kwun Tong Bank at the exchange rate of $14.614 per pound. Delivery is to be prompt with buyers undertaking to remove all the material from Kwun Tong bank latest by the 31st of May, 1970. Payment is to be made by Documents Against Acceptance of draft(s) drawn either by the agent or the plaintiff or by themselves at 90 days sight, acceptance upon first presentation, interest to be calculated at the rate of 9 per cent per annum. There is a special condition endorsed to the effect as the buyers have already inspected this material and found it acceptable, there will be no claim for sub-specification material. In pursuance of this contract, the defendant took delivery of 48.44 long tons and, for the purposes of this action, paid for them. However, the defendant failed and refused to take delivery of approximately 52 tons supplied by the plaintiff. For this reason, the plaintiff sued for the purchase price of the 52 tons of mild steel.

3. In their statement of defence, the defendant admits the signature of the contract and that they have taken only 48.44 tons. However, the defendant refused to accept the other 52 tons for the reasons that the plaintiff failed to deliver such 52 tons at the bank of Kwun Tong Bay, and the goods were not offered at the date named in the contract and that the goods were of inferior quality and not merchantable as described in the contract. Thus, the issue in this action is entirely a matter of fact: namely whether there is any substance in the defence allegations that the plaintiff failed to deliver the goods at the place specified in the contract, at a time specified in the contract and, what is most important, whether such goods were, in fact, of unmerchantable quality.

4. The plaintiff's evidence is given by one witness only, namely Mr. Taylor, the Managing Director of the agent. His evidence is that prior to the execution of the contract on the 28th of May 1970, the defendant's manager, Mr. Tang, had inspected the goods in question, namely 48 tons lying at the sea-front of Kwun Tong Bay and another 52 tons lying further inland, about a few hundred yards inland, near the weigh-bridge in an open yard. He says that the pile that was at the sea-front was of normal and perfectly acceptable good quality rerollable mild steel. Of the 52 tons, they were of thinner quality but it was suitable for use by the defendants because the defendant had machines which could use thinner steel. In cross-examination, he said there might be some scrap iron underneath and that was precisely why the negotiated price was at least 10 per cent lower than the then current market price, which was £34 to £35 per long ton plus lighterage charges. As it was sold on the spot and the goods were of slightly inferior quality, the price was reduced to £31.5s. For this reason, the special clause was endorsed in this contract of sale dated the 28th of May that the buyer would have no claim for any sub-specification material. This contract is in Ex. A1. He said that before the contract was signed, Mr. Tang went to his office to negotiate the terms. Mr. Tang had seen the two piles of steel at the two different spots as described by him. He frankly admitted that he was not the person who took Mr. Tang to inspect these goods. It was one member of his staff by the name of Djing who took Mr. Tang around. Anyway, he saw Mr. Tang in his office before the contract was signed and it was abundantly clear that the materials were in two different spots and two different places and that Mr. Tang was aware that they were of - at least one pile was - of inferior quality. Hence this special clause.

5. When the defendant failed to take delivery of the 52 tons, various telephone conversations and letters were exchanged between the agent and the defendant. Mr. Taylor took part in some of these telephone conversations. At a certain point of conversation, in a letter, Ex. A8, which is a letter addressed to the defendant, dated the 11th of August, 1970, the agent offered to pay the cartage from the weigh-bridge to the sea-front so as to accommodate the defendant. That was not accepted. Eventually the plaintiff had to dispose of the 52 tons together with other surplus or rejected stocks they had at a much reduced price. For this reason, although originally the claim was for the whole of the purchase price for the 52 tons, now I am informed that the plaintiff's claim is reduced to the difference between the contract price and the price at which the 52 tons were eventually sold. That difference is $5,072.31. Of course, the plaintiff claims interest on this sum as from the date of the contract or the date that the defendant should take delivery. That is the evidence of the plaintiff - the gist of the plaintiff's evidence.

6. The defence called two witnesses. Mr. Tang, the manager of the Import and Export Department and also in charge of the rolling mill, said that the materials were inspected by him prior to the contract. When he inspected the materials, the whole of the hundred tons were at the sea-front, consisting of perfectly rollable materials. The reduction in price was merely because that some of the materials were of thinner size and that only the defendant could find use for them. He said that prior to the execution of the contract, Ex. A1, he never saw Mr. Taylor. Nor did he negotiate the price with Mr. Taylor. Throughout the transaction, he dealt with Mr. Djing of the agent's staff. When the negotiation was completed, Mr. Djing went to him with a contract already signed by Mr. Taylor. He frankly admitted that he agreed to the no claim for sub-specification material clause but he said that as he had inspected the pile at the sea-front which were suitable for use, he saw no harm in signing this on the understanding that he was going to receive delivery from that pile. Then when delivery was ultimately taken on the 5th of June 1970, he was informed by his supervisor, Mr. Mak, that only 48.44 tons of the material were available. His rolling mill was then in need of raw material, so he hastened to ask Mr. Djing to supply the rest and he protested that the balance of the 52 tons were missing from the sea-front. Both Mr. Taylor and Mr. Djing at one time or another assured him that the agent would look after him and make up for the 52 tons.

7. By the 15th of June, he was invited by Mr. Djing to go and inspect a pile of material at an open yard near the weigh-bridge, a few hundred yards or a thousand yards away from the sea-front. He saw these materials and he found that there was so much scrap iron intermingled in this pile - about a hundred tons of metal - that he found it unacceptable. He was not to trust himself. He contacted his supervisor in the rolling mill to come to the spot to inspect the material. The supervisor was of the same opinion that such a pile was unacceptable, unrollable and unusable for their mill. Hence they refused to take delivery.

8. Mr. Mak, the supervisor of the defendant, also gave evidence. He said that before he took delivery on the 5th of June, he had been supplied with a copy of the contract, Ex. A1. He went to the Kwun Tong Bay to view the material per contract and he found that the pile of material consisted of a lot of thin railings which were of less value. But the majority of the pile consisted of angle iron and steel plates. By angle iron, he meant steel. These were of much high value. Because of the mixture he found that £31.5s. was about the fair price. Had the pile been completely of thin rails, he would have found that even £31.5s. would be excessive. That was based on his experience in the trade. When he inspected the pile of material in the contract, he was ready, able and willing to take delivery of the whole lot. However, a Mr. Lee, with whom the agent denied any connection or knowledge, told him that the wall at the sea-front was congested with lighters and it would be impracticable for his lighter to get anywhere near the wall to take delivery. Eventually, they contacted one another and he went again on the 5th of June bringing with him the lighter for the purpose of taking delivery of the hundred tons. There was a delivery order enabling him to take delivery of a hundred tons. On his arrival, he only found approximately, after weighing, 48 tons or thereabout of thin rails. The steel plates and the angle iron had already gone. Nevertheless, he took the 48 tons away. In the evening or late in the afternoon, he telephoned Mr. Tang about the shortage of deliverable material. In other words, they were short supplied by 52 tons. That is Mr. Mak's evidence.

9. Looking at the gist of this evidence, the first matter to be resolved is to which party is telling the truth. The witness in the plaintiff's case lies in this, where as Mr. Taylor testified that Mr. Tang had viewed the piles of steel at two different spots, he was not the person who took him there. He relied on the information supplied by a member of his staff, Mr. Djing, whom he had dismissed for dishonesty. However, there is evidence that Mr. Tang went to his office to sign a contract and he gave a reason why he should go there - to negotiate the price and to receive a secret commission. I shall not deal with the allegation of receipt of a secret commission. I shall not deal with the allegation of receipt of a secret commission which may or may not be an offence. Anyway it was merely alleged - Mr. Tang denied it - and I propose to say no more in this matter.

10. The point is that there is definitely evidence on the part of Mr. Taylor that Mr. Tang went to his office to sign a contract. This is in direct conflict with Mr. Tang's evidence. When two perfectly respectable citizens come forward to this court to give evidence, it is always difficult to assess who is telling the truth and who, to use blunt words, is lying. However, the party can only be judged by their conduct during or subsequent to the dispute that has arisen. I would not like to use strong words as to who is lying and who is not. However, I have to judge their conduct.

11. When the 52 tons were not delivered or when the 52 tons were not taken by the defendant it is the subject matter of further negotiation between the parties. According to Mr. Taylor, he urged the defendant that he must take delivery. On the part of the defendant, they said they urged Mr. Taylor to deliver them as quickly as possible. That is yet another difference, Let us then look at the correspondence and the conduct of the parties. On the 7th of August, a letter was addressed by Mr. Taylor to the defendant - Ex.A5, page 7. Among other things, Mr. Taylor said:

"We would draw your attention to the clause concerning delivery, whereby you have undertaken to remove all the material from Kwun Tong bank latest by the 31st of May, 1970. Whilst we do not mind you being a few days late in removing the material, it is now over two months since the date that you undertook to take delivery of this material."

Then he went on to say:

"We would now ask you to complete taking delivery of the material which you have bought from us under contract BM-069, latest by the 15th of August, 1970, otherwise we shall have no alternative but to put it in a public godown, the storage charges of which will be for your account."

Now, in this letter, there is no suggestion that there was any alternative material offered to the defendant by the agent or any substitute being offered to them. It is a straightforward request to take delivery. There was no reply from the defendant. On the 11th of August, in Ex. A8, another letter was written to the defendant by Mr. Taylor. From the tone of this letter, it is obvious that there had been some telephone conversations backward and forward. A part of this letter reads:

	"We would once again, draw your attention to the final paragraph of our letter of the 7th of August in which we asked you to take delivery of the balance of this contract latest by the 15th of August. The material is currently lying in the open yard next to the weigh-bridge of Wo Fung Company in Kwun Tong.
	We confirm our conversation with your Mr. Tony Tang when we advised him that we would bear the cartage expenses of the material from the open yard to Kwun Tong bank. These expenses must be agreed with our office before they are ...(illegible) .
	Please let us know by return when you intend to take delivery of this material."

12. Mr. Taylor's explanation of this letter for the offer was that throughout, the defendant was relying on a very technical reason that the goods were not placed for acceptance on the spot in the contract, namely the sea-front. Mr. Taylor said that it was his own understanding, however mistaken, that the whole area should be described as Kwun Tong Bay or Kwun Tong Bank. Just to make quite sure that he was absolutely in the right and to accommodate the defendant, he offered to pay the cartage from the weigh-bridge to the sea-front which would be nominal, anyway not a sizable sum. To this letter, the defendant replied on the 13th:

	"We refer your two letters dated 7/8/70 and 11/3/70 respectively, concerning the captioned Rerollables.
	In this regard, we must inform you the fact that on 5/6/70, we, by your request, went to the Kwun Tong Bank to take delivery of the captioned materials. However, we found out there was only a quantity of 48.446 L/T available for our delivery and not any more in Kwun Tong Bank. We therefore bound to take delivery of the above said quantity only. So, in this matter, you can see it is not our responsibility for the rest quantity. As you know, we did prepare to take delivery all of the materials but you could not supply us punctually. We therefore regret to inform you that we at present rather decline the acceptance of the balance materials."

Pausing at this stage, I would observe that had the agent offered the defendant substitutes, I would have expected the defendant to raise this matter there and then. As it was, reading from this paragraph in the defendant's letter, they were only complaining that first of all, the materials were not on the spot and secondly, the materials were not there in time. The defendant have never said that on the 15th of June, the Agent offered them materials or substitutes which were far inferior in quality and quite unsuitable for their purpose and therefore in breach of contract. No allegation of the sort.

13. Then further correspondence ensued and the agent wrote another letter on the 22nd of September, Ex.A9, which reads as follows:

	"Under the terms of the above contract, you purchased from us approximately 100 tons of mild steel scrap. This material was inspected by your Mr. Tony Tang and accepted by him on your behalf.
	You took delivery of T.48.4464, and agreed to pay for the material on 5th of June, 1970. So far, despite our repeated requests for settlement of our invoice, we have received no payment from yourselves.
	Unless we receive payment in full by the 25th of September, 1970, we shall have no alternative other than to ask our solicitors to help us to collect the money which became due and which you are deliberately withholding.
	We would also remind you that there is a further quantity of approximately 52 tons of material which you have purchased and which is ready for delivery, but which you have so far not taken delivery of.
	Despite our various requests for you to remove the material, you have declined to do so. Unless you are able to give us some reasonable compromise with in a very short time from today's date, we will have no alternative other than to sell this material on the open market, and debit you not only with the difference between the price at which you have contracted to buy the material and the eventual selling price, but also with the storage charges that we have had to pay in view of the fact that you have not taken delivery.
	We await your comments, and we remain,
	Yours faithfully,"

14. There were further correspondence. Ultimately there was a reply from a letter from the defendant's solicitor Lau, Chan & Ko. Before I refer to the letter of Lau, Chan & Ko, perhaps, I would observe that the agent's letter at no time suggested they had offered any substitutes. Let us then have a look at this letter from the defendant's solicitor:

"We are obliged to you for your letter of the 7th instant."

They were referring to another letter in October,

"	and confirm that we act for The Sigma Shipping Co., Ltd.
	On our clients' instructions, we send you herewith their cheque in your favour for $22,866.80 in payment of the cost of 48.4464 long tons already delivered to them as per statement of account attached herewith.
	Our clients have placed before us all the papers relevant to the above contract. According to their instructions to us, your clients failed to perform their part of the Contract because they were not in a position to deliver to our clients approximately 51.56 tons of mild steel rerollables "ex Kwun Tong bank" as stipulated in the Contract.
	Although the contract was entered into on the 28th May 1970, it is clear from your clients' letter of the 11th August 1970 that on that date the goods were still lying in the open yard in or near Wo Fung Company of Kwun Tong. It is true that your clients offered to pay for the cartage expenses from the open yard to the Kwun Tong bank, but this offer was rejected by our clients by their letter to you of the 13th August 1970.
	Our clients consider that they had the right to reject delivery of the goods and they reserve their right to claim against your clients for all damages which they may have suffered.
	They are not concerned with what your clients wish to do regarding the balance of the goods in their hands."

15. Pausing at this letter, one cannot help feeling that if the defendant's allegation of unsuitability were true, one would have expected the solicitor to choose the best weapon to fight the battle and would have mentioned it straightaway in that letter. As the letter stands, it appears to me that either the defendant had never given their solicitor the full instructions or that their solicitor have entirely missed the point in a Contract of Sale of Goods. As it is, having regarded the evidence, the goods being at the weigh-bridge - whether they were at the weigh-bridge or at the sea-front - is of no defence whatever particularly having regard to the evidence that even the goods at the sea-front had to be carted to the weigh-bridge to be weighed and then carted back to the sea-front, and also having regarded the fact that the agent offered to pay for the cartage, I cannot see what sort of defence has been raised in this letter dated the 21st of October, 1970. In Ex.A15, there is a bit more to that. Mr. MAK said that when he went to collect the material on the 5th of June, he found that all he could get was less than half the quantity to be collected. He did not act as a prudent man would act - to contact his office first. He did not inform his office that only half of the inferior quality was available. According to his evidence, the thin rails were worth far less than £31.5s. per ton. The higher value material made up of steel plates and angle irons had gone. Having regard to this, I would have thought that as a prudent man, he should have contacted his superior and asked whether he should be authorized to accept half of the inferior quality goods which were of much less value and only half the total quantity. Well, he explained and he trusted the agent. He had had deals with the agent before and his firm was in urgent need of material. Even so, as a supervisor of the factory, I would have expected him to contact his office before he accepted half of such inferior material. Furthermore, if no material was available until the 15th of June and the agent had to offer the defendant substitutes in the open yard, I would have expected the defendant to raise this question - the question of unsuitability. Anyone who is experienced not necessarily in law but only experienced in business and have some commonsense would have known that the fact that the goods were not on the spot to be delivered would not defeat a contract of sale. That is only a question in compensation. Again a difference of ten days of delivery between the 5th of June and the 15th June will not enable the defendant to rescind the contract unless time is made essence of the contract. Although there is an obligation on the part of the defendant to take delivery on or before the 31st of May, there is no clause expressing urgency in this matter. There is no evidence that time is of essence in the contract. There is no evidence that the defendant had to buy from other suppliers of raw material to make up the shortage. The only defence would be that, if that is true, of the unsuitability of the material. The defendant should know that they have signed a contract that they will not claim for anything that is of sub-specification material. They knew it and Mr. MAK, when he took delivery, had sight of this contract. When he went to take delivery on the 5th of June and found that more than half of the acceptable material he saw a few days ago had gone, the only way to protect himself was first of all to contact his office. If he was authorized by his office to accept this material, he should ask for an acknowledgement that those material that had been inspected and accepted by the defendant were only available by less than half and that the agent would be under an obligation to supply further suitable material subject to approval. That would be what a prudent businessman be advised to do. Unfortunately that was not done by the defendant. Throughout the exchange of correspondence, there was no one word mentioned of substitute material or unsuitable material until practically the last minute when the amended defence was filed on the 16th of May this year.

16. Looking at the evidence as a whole, then having regard to the reason why, I am compelled that on the balance of probability to the conclusion that the plaintiff's evidence is to be accepted and that the defence of unsuitability does not ring true. On the facts, I find that before the execution of the contract, the defendant's staff Mr. TANG must have inspected the goods on the two respective spots, namely the sea-front and the open yard, that the plaintiff was at all times ready, able and willing to supply the material contracted for by the defendant at these two different spots, and that if there was any mistake as to the difference between the sea-front and the open-yard, the plaintiff had made up the offer for paying cartage at an early enough time and lastly, I find as a fact that whether suitable or unsuitable, the defendant had inspected the material - the 52 tons of material in question at the open yard and entered into the contract for the price that they were willing not to claim any compensation for sub-specification material. Under the circumstances, I find for the plaintiff in the sum of $5,072.31 plus interest from the 30th of May 1970 plus interest on a figure of $23,747.75 which represented the whole of the purchase price for the 52 tons from the 30th of May 1970 to the 23rd of September 1971, the date when the 52 tons were disposed of, and then interest on the figure $5,072.31 from the 23rd of September until the date of payment and interest is at the rate of 9 per cent per annum. As I understand, in the course of the proceedings, that the defendant has abandoned his counterclaim and therefore the counterclaim would be dismissed and cost would follow the events to the plaintiff in this action.

17. Well, I understand Mr. Eddis that Mr. Mills-Owens was mentioning about the difference in the costs in this court and the District Court. Are you going to say anything about the scales of charges?

MR. EDDIS:	The state of affairs is unamended. In the alternative, they seem to be claiming for the full amount and despite what may have been said on their application, I would submit that no penalty be issued against the defendant.
COURT:	Well, not any penalty against the defendant. I think in that case, the scale must still be in the Supreme Court scale.
MR. MILLS-OWENS:	Well, I do ask for costs in the Supreme Court scale. If necessary, I can call my solicitor to give evidence.
COURT:	No, no. I was going to ask whether Mr. Eddis might suggest it could be in the District Court scale but that he is not saying anything over this, I think I would just say that it is on the Supreme Court scale.
MR. MILLS-OWENS:	I will be grateful if you would note it or otherwise difficulties might possibly arise from the taxing-master.
COURT:	Yes.

	( Simon F.S. Li )
	Puisne Judge

Representation:

R. Mills-Owens (Deacons) for the Plaintiff.

F. Eddis (Lau, Chan & Ko) for the Defendant.

Oral judgment reduced into writing.