Scientific Dyeing & Finishing Works Ltd v. Wing Fung Fibre Industrial Co Ltd

HCA002184/1973

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 2184 OF 1973

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Coram: Briggs, C.J.

Date of Judgment: 7th October, 1974.

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JUDGMENT

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1. The plaintiffs are dyers, setters and finishers of cloth including polyester material. The defendants are manufacturers of cloth including polyester material. The plaintiffs claim is for work done for the defendants under a written contract dated 14th November, 1972 and for further work done under a certain oral contract, or oral contracts.

2. The defendants in their defence state the work done by the plaintiffs resulted in certain defects in their cloth, and they counterclaim for damages in respect of each of the two claims.

3. I will deal with the claim under the written contract first. That contract provided for three separate transactions. It was, in effect, three contracts in one for it provided that the defendants should supply fabric to the plaintiff in three separate, specified quantities and that the plaintiffs should dye and finish each separate quantity of material by a specified date. We are not concerned with the first quantity, we are only concerned with the second and third quantities, which are referred to in the contract as Quantity B and Quantity C. Quantity B was 100,000 yards of polyester which the plaintiffs agreed to dye and set by the 20th February, 1973; Quantity C was 80,000 yards of polyester which was to be dyed and set before April 20th, 1973.

4. The defendants had a customer, a company referred to as "General Garments" during the trial. The contract stipulated that the plaintiffs should deliver the finished goods to this customer. The plaintiffs would then look to the defendants for payment for the work done to the defendants' raw material. The plaintiffs sent a sample of the dyed and set polyester to General Garments and it was approved by them. Accordingly, the plaintiffs completed Quantity B under the contract, and delivered the goods to the customer, General Garments. There was no complaint as to the quantity of the goods made by General Garments to the plaintiffs. So the plaintiffs started to complete Quantity C under the contract. The subject matter of Quantity C was cloth similar in weight and measurement to that in Quantity B so the plaintiffs did not send a further sample to General Garments.

5. By May 7th, 1973 a dispute had arisen between the plaintiffs and the defendants. However, deliveries continued to be made under the contract until May 12th. On May 22nd the defendants asked the plaintiffs to stop further deliveries. In the event the plaintiffs have a considerable amount of finished material which belongs to the defendants lying in their factory. And there is a quantity of some 2,000 1bs. odd of the defendants' raw material which has not been processed.

6. The plaintiffs have been paid the sum of $20,000 only. This was on May 31st. In court there was a minor dispute as to the reason why this sum was paid. The plaintiffs' manager said that it was part payment for work done under the written contract. A witness for the defendants seemed to suggest that it was a sum of money supplied to the plaintiffs so they could pay their workmen's wages. I do not accept this witness' evidence on this point. And I find as a fact that the sum of $20,000 was part payment for work done under the written contract. In the event, therefore, the plaintiffs claim is for over $149,000 under the contract.

7. The defendants allege that their customer, General Garments, rejected the finished goods but they have never said why this was done. I have not seen a copy of the contract between the defendants and their customer, General Garments, so I was unable to say whether, if they did reject the goods, that they were entitled in law so to reject them. However, it is fairly certain from the correspondence and the evidence that General Garments did refuse to accept the goods or rather having accepted delivery of the goods they returned them to the defendants from Taiwan where they had been shipped by General Garments themselves.

8. No witness was called to state in so many words that General Garments returned the goods because there were defects in the cloth, or that this was done because the goods did not comply with the terms of the contract made between them and the defendants. I was not even told what price General Garments had contracted to pay to the defendants for the material though the Manager of the plaintiffs said he was told by an employee of the defendants that nothing had been paid to the defendants by General Garments. There was, of course, no contractual relationship between General Garments and the plaintiffs.

9. The case for the defendants is that the goods are defective. Complaint is made as to barres, curves and what is known in this trade as "orange peeling".

10. Much time was expended at the trial over these three defects alleged to be found in the cloth, i.e. barring, curves and orange peeling.

11. As to barring, very little heed be said. It was agreed by the expert witnesses that the fabric in question almost always has barres. Indeed, it is very rare to see polyester material of this type without them. In the samples shown as exhibits in court barres were clearly seen in all the pieces of material produced.

12. It is also agreed that barres are usually caused by using thread of different grades of thickness when knitting the raw material. In this case the knitting was done by the defendants and at the end of the case I think it was conceded that not only was this so but barres were not of themselves objectionable. In any event, the plaintiffs would be covered, so far as this is concerned, by clause 8 of the agreement which reads as follows:-

"Upon each lot of unbleached fabric sent to (the plaintiffs) by (the defendants) the specifications of (the Defendants') client shall be complied with, that the organization (structure) must be uniform and the original yarn and quality the same, i.e. that it shall be clean and tidy, otherwise (the plaintiffs) shall not be held responsible for any question arising from the above-mentioned items of dyeing and setting."

13. What was complained of, however, was that the dyeing and setting process as carried out by the plaintiffs was not of such a nature as to minimize the barring effect. The main complaint was that too high a temperature was used in the dyeing process and the plaintiffs' manager admitted they had used a high temperature.

14. Having heard the expert witnesses on each side there is no doubt in my view that curves are caused during the process of the setting of the cloth and that orange peeling is caused by that process also. Curves are caused when the cloth is not passed through the setting machine evenly. One can see them because of the barres. It was admitted that the plaintiffs had not used resin as part of the process of setting. And that the use of resin was mandatory to achieve a cloth which, when stretched, recovered its original form, namely did not suffer from orange peeling. It was also stated that these three defects - too prominent barres, curves and orange peeling - were not all that serious. In my view, so far as regards this part of the claim it has been proved that the defects in the material such as they are were caused during the dyeing and setting process.

15. Presuming, for the sake of argument that so far as this part of the claim of the plaintiffs is concerned, the evidence shows that the cloth had these specific defects and that these defects were the result of the methods used by the plaintiffs to dye and set the cloth am I justified in holding that the defendants have suffered a loss? Is the evidence sufficient for me to hold that General Garments had a legal right under their contract with the defendants to return the goods to the defendants when I have no copy of that contract before me and no evidence of why General Garments returned the goods? The goods could have been returned for a large number of reasons, some of which might have been legally correct, some of which not.

16. I do not think that I should make such a presumption in favour of the defendants especially when it would have been so easy for them to have put this matter beyond doubt. And it is for comment, as I have already said, that at least two of the expert witnesses, Mr. Li, a witness for the plaintiffs, and Mr. Wong, who was called for the defendants, testified that the finished cloth was not unusable. The cloth would be tailored into garments and there was somewhat of a conflict in the evidence of the expert witnesses how serious the defects were with this in mind.

17. In my view, therefore, the plaintiffs are entitled to succeed under this part of their claim, that is under the claim brought in respect of the written contract of November 14th, 1972.

18. I now come to the second part of the plaintiffs' claim. This is a claim for work done under an oral contract or oral contracts. Mr. Chiang, the Manager of the plaintiffs' factory said that there was one contract but several different deliveries of material by the defendants to their factory. From his evidence it would appear that there was more than one contract. When a delivery was made special terms were arranged for that lot or those lots of material. A large proportion of the material was to be washed and set only - the rest was to be dyed and finished as before. The defendants would tell the plaintiffs where to deliver the finished goods. Mr. Chiang said that some 8,000 yards of material was returned to him from customers of the defendants to whom he had delivered cloth at the defendants' request.

19. The particulars of this part of the claim of the plaintiffs are clearly set out in paragraph 2 of the Statement of Claim. The cloth which was to be washed and set only has been delivered to the defendants and so has some of the other dyed cloth. However, the plaintiffs still have in their possession more than 13,000 1bs. of material belonging to the defendants.

20. The defence to this part of the plaintiffs claim is that the plaintiffs have refused or failed to deliver all the goods under the contract. The defendants have counterclaimed for damages for non-delivery. The defendants have not paid the plaintiffs anything under this part of the claim of the plaintiffs.

21. It is no part of the case for the defendants that the cloth forming the subject matter of this part of the claim of the plaintiffs was defective. This is clear from the pleadings. The sole objection is non-delivery.

22. The Manager of the plaintiff company admitted that his company still had more than 13,000 1bs. of the cloth of the defendants in his factory, but he said he has always been willing to deliver it to the defendants. However, he had received no instructions from the defendants and so he had had to store it in his factory. He said that on one occasion he had tried to deliver it or some of it to the defendants who would not accept it.

23. During the trial the court went to the factory premises of the plaintiffs and saw the cloth of the defendants which is still there. It is obviously taking up a great deal of space in what is not a large factory and must be a great nuisance. I accept the evidence of the Manager of the plaintiffs as to this part of the case. The denials of the defendants were neither direct nor convincing being solely made by inference during the cross-examination of the plaintiffs' witnesses. I find that the plaintiffs were and still are willing to deliver the goods to the defendants but that the defendants have not made any attempt to arrange for their delivery either to themselves or to a customer. I therefore find for the plaintiffs on this part of the case.

24. There will be judgment for the plaintiffs for a total of $191,867.99.

25. The question of the mitigation of damages so far as the amount of the defendants cloth still in the plaintiffs' factory was raised. This is now of academic interest. The cloth was and is the property of the defendants and the plaintiffs could not sell without the permission of the defendants. That this permission was withheld is clear from the correspondence between the parties' solicitors which was exhibited to the court. It is right for me to record that I consider the defendants to have been in default in not allowing the plaintiffs to go ahead and to accept the offer which had been made to them.

26. There will be interest on the sum of $149,969.61 at 8% per annum as from 16th July, 1973 until the date of payment and interest on the sum of $41,898.39 at 8% per annum as from 16th July, 1973 until the date of payment.

27. The plaintiffs are to have their costs and the counterclaim is dismissed with costs.

Representation: