Alcoa International (Asia) Ltd v. Sun Wah Ornament Manufactory Ltd

HCA002257/1974

IN THE HIGH COURT OF JUSTICE

ORIGINAL JURISDICTION

ACTION NO. 2257 OF 1974

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CORAM: LI, J.

Date of Judgment: 5th March 1976 at 3.30 p.m.

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JUDGMENT

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1. In January 1974 the plaintiff company sold 60 tons of aluminium to the defendant company by agreement which is evidenced in a letter addressed to the Managing Director of the defendant company in document 7 of the agreed bundle. The price was US$0.44 per pound, which I work out at the rate of $5.08 per U.S. Dollar to the sum of $4,926.38 per ton. In this document the goods were to be delivered ex-mill, that is from the factory, as from April 1974 and June 1974. No definite time was put for the goods to reach the defendant. Payment terms was cash on delivery.

2. Some time in March, in accordance with their usual practice, the plaintiff sent the defendant a sales order in accordance with this agreement but at the back of the page of the sales order certain terms and conditions were set out as to the obligations of both parties. One of these terms, to put it shortly, is that the seller would not be responsible for late delivery in certain events beyond their control, one of which is that the seller would not be responsible if the delay is caused by difficulty in transportation. That is putting it very widely and generally.

3. In July 1974, as evidenced in document 10 of the agreed bundle, the plaintiff advised the defendant that the estimated time of arrival of the goods in Hong Kong would be some time on the 8th of August. There was some delay in transportation because the ship on to which the goods were to be loaded had some trouble and had to go in repair. As a result the goods or the ship carrying the goods did not arrive in Hong Kong until the 13th of September 1974, upon which date the defendant's company refused to accept delivery and refused to pay for the goods. For this reason the plaintiff sued the defendant for breach of contract. The gist of the case is as simple as that.

4. The plaintiff's case is that they are protected by the clause contained in the sales order - in document No.8 of the sales order which exempts the seller from liability if the delay was due to delay in transportation or lack of transportation and in any event that according to the contract, time is not of essence of the contract. The defence is this: that the defendant was justified in refusing to accept delivery because of the late delivery of the goods and in any event the plaintiff and the defendant, prior to the arrival of the goods, had agreed on the cancellation of the contract. It was on such basis that the defendant also cancelled their contract with their suppliers and therefore the contract between the plaintiff's company and the defendant company was cancelled by mutual consent. Thus the plaintiff is not entitled to any claim against the defendant.

5. I shall not go through the evidence touching upon the issue which are two-fold: one is whether the defendant is bound by the contract to accept delivery and the other, as to the quantum of damages. They are simple and short enough. It is sufficient for me to say that having considered the evidence as a whole, I come to the conclusion that the defendant must be bound by this contract. I say this for the reason that if document No.7 of the agreed bundle is the one and only document touching upon the terms of the contract, then the time of delivery is not of essence of the contract. No time had been put for the delivery of the aluminium ingots. Furthermore, this is strengthened by the fact that according to their conduct of previous dealings, a delivery of more than three months late was accepted by the defendant without any complaint. It is also a fact that despite the information covered by the plaintiff that the ship would arrive on the 8th of August, the defendant did not raise any complaint until well after the 31st of August when Mr. TANG of the defendant company said that he was pressed by his suppliers of the defendant company. Even when the defendant company was pressed by the suppliers, all the defendant did in the first approach to the plaintiff company was to ask for a reduction in price. Thus the only consideration in the mind of the defendant company at the time when they talked about this contract and talked about the late delivery was predominantly one of reduction in price. There is evidence about the conversation between Mr. TANG of the defendant company and Mr. Negris of the plaintiff company concerning the cancellation. Taking the evidence of their conversation as a whole, I hold, on the balance of probabilities, that Mr. Negris had not consented to a unilateral repudiation of the contract. For this reason I hold that on the issue of liability the defendant must be bound.

6. I now come to the quantum of damages. It is true that under the Sales of Goods Ordinance Chapter 26:

"Where there is a breach of contract, the measure of damages is the estimated loss directly and naturally resulting in an ordinary course of events from the buyers for breach of contract."

The contractual price in the contract, as I said, was US$0.44 per pound, working out at the rate of $5.08 per U.S. Dollar, the figure is $4,926.30 per ton in Hong Kong Dollars. There is a total of 60 tons. According to the plaintiff's company's evidence in the person of Mr. Goodwin, the market price was US$0.33 per pound in September 1974. According to the evidence of Mr. TANG of the defendant company, the price for aluminium today, that is in 1976, is about US$0.38 to US$0.39 per pound. That is a substantial difference from the contract price. However, the defence evidence as produced by Mr. CHONG is that on the 10th of September 1974 he was able to buy 60 tons of aluminium at the price of $4,900 a ton. The plaintiff's case insofar as quantum of damages is concerned is that the plaintiff is a subsidiary of a United States company which manufacture aluminium ingots. They are one of the established factories of this commodity in the world and the leading manufacturer of such commodity in the world. As such they are not prepared to sell at grossly under value of their products. They would like to maintain a balanced price so that they would not injure their own reputation. He said that whatever price other people might ask for aluminium ingots, their company is not prepared to ruin their reputation in selling at grossly under value of such product. That may well be so. The fact remains that in September 1974 the company of Asia Development was able to acquire 60 tons of aluminium ingots of similar quality at the price of $4,900 per ton so that the price range is not too big between the contract price and the actual market price of the day. I do not see any reason to disbelieve Mr. Charles CHONG. Mr. Goodwin, on the other hand, maintained that the price at the time was probably US$0.33 per pound which is substantially lower than the contractual price of US$0.44 per pound. However, Mr. Goodwin frankly conceded that at the time there was such surplus of aluminium stock in various countries that he had difficulty in disposing of that 60 tons. One potential purchaser at the time who might well be unknown to Mr. Goodwin was the company of Asia Development Company who had to acquire the 60 tons they originally contracted for and they were prepared to pay as much as $4,900 per ton.

7. The case of James Finlay and Company v. N.V, Kwik Hoo Tong H.M.⁽¹⁾ - has been cited in support of the plaintiff's claim. Having considered that case I find that the circumstances of that case are not on all fours with the present case. The broad principle of that case is that a plaintiff or a party who is the victim of a breach of contract is not obliged at all times to mitigate the damage by a process which will injure its own reputation in a trade. However, in the present circumstances, there is an open market as far as the aluminium ingots are concerned. Such commodity, according to the evidence, was readily available and not necessarily available from the plaintiff's company. It shows that while the plaintiff company might well be a leader in the manufacturing and sales of such commodity in the world and presumably even in Hong Kong, but as far as the Hong Kong market is concerned, the plaintiff's company was not in a position to monopolize the market as such or to influence the market as such. In short, I hold that in September 1974 there was an open market and from that time up-to-date, there is still an open market. It is not for the plaintiff to say that they are entitled to hold the 60 tons of aluminium ingots from 1974 up-to-date in order to maintain a price level of such commodity because they feel that they are a leader of the industry. It seems that for one and a half years, they have held the property without selling them. They have changed their policy in not taking any further order for aluminium since July 1974. Whatever they have done, they have not influenced the market in any way. There has been a gradual fluctuation, although not a sharp fluctuation, of the price up and down. I will be justified, in my opinion, to treat the contract as any other ordinary contracts and that it was within the plaintiff's power to mitigate the damages when the breach of contract occurred. If I were to hold otherwise, it would amount to enforcing specific performance of the contract. This is not entirely out of order. But in the circumstances of the case I do not feel that I am justified in ordering specific performance and, therefore, I can only award damages for the breach of contract.

8. Taking the evidence as a whole, and having accepted that the contractual price of the aluminium product in Document 7 of the Agreed Bundle as being $4,926.38 per ton, I have to assess what would be the market price of such products in the month of September/October. Having regard to the fact that the Asia Development was able to acquire 60 tons of aluminium ingots at the price of $4,923.38 per ton I would be inclined to award the difference between the contract price and the price of $4,900 per ton as the actual measure of damages which, according to my calculation again, come to $1,578. It may well be that on the sudden repudiation of the contract that the plaintiff was not able to dispose of the commodity at once. That price of $4,900 per ton was the price obtained on the 10th of September 1974. The goods did not arrive until the 13th of September 1974. But there is no evidence as to the market price of the commodity to date since 10/9/74. However, I take into consideration that in the market price of this commodity does not drop or rise very sharply. There is a gradual fluctuation from time to time. I think it is fair to say that the plaintiff might, if he had done so, required one or two months to dispose of the commodity which was repudiated by the defendant company.

9. In the circumstances, I would award the damages to the plaintiff in a sum of $2,000 to make it a round sum. Admittedly, this is really a rule of the thumb. The landing charges which should be the responsibility of the defendant as are the storage charges for two months at the rate of $531,00 per month. Such sums would have to be added together and I shall not usurp the function of the parties to work out the total figure, but such sums are to carry interest as from the date it is payable at the rate of 8 per cent interest per annum. The plaintiff is to have costs of this action.

10. I must confess that this is the type of case which is quite different from cases of tort when only general damages are asked for and there is no assessment as to how much the general damages could be. That is why this case can be distinguished from the cases of trespass and the cases of injury to a person. The plaintiff in this particular case could have worked out an estimate if the plaintiff is not too ambitious as to the measure of damages which should be well within the District Court scale. As such, I would award the costs to be at District Court scale but with certificate for counsel. It should be on the upper scale.

Representation:

(1) (1929) 1 K.B. 400.