Hang Lung Bank Ltd v. Hip Fung Trading Co

HCA002032/1971

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

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Coram: Mr. Registrar Silke in Chambers.

Date of Judgment: 25th October, 1973.

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DECISION

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1. This is an assessment of damages pursuant to the Order of Mr. Justice Leonard dated 6th May 1973 - Judgment being entered on the 9th May 1973 - for Judgment for the plaintiff with costs and damages to be assessed by the Registrar.

2. At the assessment the plaintiffs were represented by Robert Wei, Esq. of Counsel instructed by Clayton Wong & Co. and the defendant firm by three partners who appeared in person Ang Tian Sieh, Choi Leung Pang and Hui Shu Mui.

3. The plaintiff's claim is based on two shipments of goods under Letter of Credit - the eighth and ninth shipment - the previous shipments having gone through in the ordinary way.

4. The defendant firm sent an Application and Agreement for commercial letter of credit to the plaintiff whereupon the plaintiff issued and opened a confirmed, revolving and irrevocable without recourse Letter of Credit No. 610/70 dated the 1st April 1970. These documents were produced as exhibits A and B respectively.

5. It was an express term that the defendant firm would, on presentation of draft or drafts drawn under the Letter of Credit, provide the plaintiff with funds to meet all such draft or drafts together with disbursements, commission and other expenses.

6. There was an application to amend the Letter on the 29th May 1970 in respect of the goods to be shipped to read" 100% union carbide Chemical fibre, dynel 50 denier, dyed in original packing" or the same fabric undyed, semi-dull 150 or 250.

7. There was a further application to amend the Letter dated 20th August 1970 which in effect brought the terms back to those of the original application on 1st April 1970.

8. These applications emanated from the defendant firm. The second amendment was refused by the beneficiary which refusal was communicated to defendant firm by an Advice Note dated 8th September 1970.

9. Three successful shipments had taken place before the 8th September and after that date, despite the refusal, four shipments were made and accepted without dispute. Drafts drawn were paid by the defendant firm in respect of these seven shipments.

10. By an Advice Note dated 16th November 1970 (Exhibit G) the plaintiff advised the defendant firm of the eighth shipment of goods under the Letter and that bills in respect of these goods had been received and accepted. The defendant firm refused to accept these bills and failed to pay drafts dated 28th October 1970 on presentation.

11. The amount of this draft was US$8,325.00 or HK$50,761.69 at a rate of exchange of US$1.00 to HK$6.0975.

12. In relation to the ninth shipment the defendant firm again refused to accept the bills and failed to pay the plaintiff the draft dated 30th October 1970 on presentation.

13. The amount of this draft was US$16,718.60 or HK$101,837.17 at the same rate of exchange.

14. In each case there was a margin lodged in the defendant firm's favour of: 8th shipment HK$7,614.00: 9th shipment $9,070.35, which falls to be deducted from the amount of the respective drafts.

15. In each case there is interest at 1.2% per month and an amount for stamp duty.

16. In respect of the 9th shipment there is a further sum for freight storage and transportation charges of HK$22,092.25 claimed.

17. The defendant firm through its partners, who either cross examined the witnesses for the plaintiff or gave evidence, disputed certain matters.

18. They claimed that under another Letter of Credit 611/70 there was a balance remaining in their favour of deposits on margin. It is the plaintiff's evidence, which I accept, that this sum had been used to reduce an overdraft the defendant had with the plaintiff Bank. In any event, even if I were to reject the plaintiff's evidence on this, this assessment is concerned wholly with Letter of Credit 610/70 and what went on under a separate letter which does not impinge on these proceedings has, in my view, no relevance.

19. The defendant firm also disputed the market price of the particular fiber at the relevant date. It is common case that the plaintiff bank holds and continues to hold certain portions of the goods shipped and this raises the question of mitigation of damages.

20. As to the actual market price the plaintiff called a Mr. Chung Kai Yung who had been engaged in the import and export business as manager of Victory Trading Company and who gave evidence of the market price which he put at $7 to $8 per 1b in 1970. He examined the 8th shipment, that is the dyed fibre, and stated it was not packed in original packing, that is on one skein or a single long piece, but was intertwined. He further stated the market value of the semi dull to be about the same and this also was not in "original packing".

21. In cross examination he stated the price of the fibre did vary and it depended on whether or not documentation was available but maintained his market price as $7 to $8.

22. The defendant firm called a Mr. Hui Kin Fong, an adjournment from the 24th September to the 9th October being given time for this purpose, who at first blush appeared an independent witness. It was later put to him that he was in fact a partner of the defendant firm which he denied. He said he was unaware that he had been referred to as a "partner" in the struck out defence but agreed that he did sign an application for Credit as being a partner and further a specimen signature card as one of the authorised signatures of the defendant firm - a partnership. I view his evidence in the light of his interest.

23. Mr. Hui referred himself to a note book - not produced in evidence - as to current market price at the relevant date but it transpired that most of his evidence as to price came out of his head and he produced no documents of sale or purchase to justify the prices he mentioned of about $24 per lb or in one case $28 per lb. In the latter he pointed out an entry in the note book.

24. On balance I accept the evidence of the plaintiff's witness on this matter of the market price for the fibre not in original packing. Mr. Wei had approached the matter of mitigation on the basis that his clients were obliged to do so. On further consideration he took the view that, though he left this as a matter for me, this duty may well not apply to a pledgee or mortgagee. He referred me in general to McGregor on Damages, Paget on Banking 8th Edition and specifically to the passages contained in Coote 7th Edition Volume 2 p. 1494 and Fisher and Lightwood Law of Mortgage 8th Edition at page 224.

25. I was also referred to Daniels v. Nixon English and Empire Digest Volume 37 at page 15. This is a Canadian case summarised in Canadian Abridgment Volume 8 p. 1175.

26. In my view the overriding principle where damages are being claimed is that they are compensatory and not penal and that the one who suffers loss by reason of the breach should take reasonable steps, if they are available to him, to mitigate that loss.

27. Can it be said that the term of contract here - effectually providing payment facilities in another place which payments were to be reimbursed to the grantor by the grantee on presentation of the "bills" - takes it outside the general rule? Though I agree no specific authority appears to exist to say a person in the plaintiff's position must mitigate I do not feel that this is a ground for saying that he has no such duty. Were he assessed here to be entitled to "unmitigated" damages would that give him the right to liquidate the goods he holds and keep the proceeds for himself? I think the answer would be in the negative.

28. I would therefore assess damages here as:-

29. The full assessment is therefore $172,336.30. On this sum there will be interest at the rate of 8% p.a. from the date of assessment to the date of payment and the plaintiff is entitled to the costs of this assessment.

30. Certificate for counsel.

31. Dated this the 25th day of October, 1973.

Representation: