D.E. Davies & Son (Textiles) Ltd v. Using Garment Manufacturing Co (A Firm)
Read the full judgment text of HCA 722/1968 on BabelCite. This High Court CFI judgment was delivered on 15 November 1969.
1. The plaintiff is a company registered in England which as part of its business imports textiles and made up articles of clothing into England. The defendant is a firm, the sole proprietor of which is one Ma Shu Ming. They are manufacturers of garments for export from Hong Kong. The plaintiff and the defendant have been doing business together for some ten years. The plaintiff company operating through their agents Messrs. David & Co. (London) Ltd.
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HCA000722/1968 IN THE SUPREME COURT OF HONG KONG ORIGINAL JURISDICTION ACTION NO. 722 OF 1968 -----------------
----------------- Coram: Briggs, J. in Court. Date of Judgment: 15 November 1969 ----------------- JUDGMENT ----------------- 1. The plaintiff is a company registered in England which as part of its business imports textiles and made up articles of clothing into England. The defendant is a firm, the sole proprietor of which is one Ma Shu Ming. They are manufacturers of garments for export from Hong Kong. The plaintiff and the defendant have been doing business together for some ten years. The plaintiff company operating through their agents Messrs. David & Co. (London) Ltd. 2. In the year 1967 the parties entered into seven contracts under which the defendant agreed to sell to the plaintiff considerable quantities of men's cotton satin drill trousers. The seven contracts each bears an individual number ranging from UGM 009 to UGM 015 and are in very similar terms. They state the quantity of pairs of trousers required, the contract price and the date on which the trousers are to be delivered to the plaintiff in the U.K. This is expressed to be within a period of one or two months. 3. All the contracts were made between July 29th 1967 and October 25th 1967: that is to say, the first contract was made on July 29th, the following four contracts were made on August 25th, the sixth contract on September 19th and the final contract was made on October 25th 1967. There were negotiations for another contract which was called UGM 016 which were abortive but a further contract, of a similar nature, UGM 017 was entered into on February 8th 1968. I will deal with that contract later in this judgment. 4. As I have said above, each contract stated the date of shipment. Thus contract UGM 009, which is the first contract in time, provided that 2,000 dozen pairs of trousers were to be shipped in equal amounts of 500 dozen in the months of January to April 1968. Similarly UGM 010 and 011 provided that shipment would be in January 1968. It is unnecessary to particularise each contract: it is enough to say that shipments under the whole seven contracts were to be made from the months of December 1967 to April 1968. In each case the contract price of a dozen pair of trousers ranged between 92/ - and 96/ -. The contracts were all expressed to be C.I.F. 5. In all, the plaintiff agreed to purchase 4,175 dozen pairs of trousers under these seven contracts. I am not here concerned with contract UGM 017. I was told that cotton satin drill trousers are summer goods, namely that in Europe they are only sold to be worn in the summer months. Mr. Davies, the managing director of the plaintiff company, who gave evidence told me that it is necessary for such articles to be in the plaintiff's hands early enough for them to be distributed to their customers in time to be in the shops in England for the summer buying season. 6. This was not challenged by Mr. Ma who gave evidence for the defendant. He has, of course, been engaged in this trade long enough to know that that is the position. 7. The plaintiff received two deliveries of 175 dozen and 150 dozen pairs of trousers on February 26th and March 21st 1968 respectively under contract UGM 014, which provided for delivery of 1,000 dozen pairs between December 1967 and February 1968. No other deliveries were received before April 1st under any of the seven contracts. 8. The first question I have to decide is whether time was of the essence of the contract. In my view it is obvious from the subject matter of the contracts themselves and their wording that this was so. 9. Both parties, and I find this as a fact, knew that cotton satin drill trousers are summer goods in Europe: and each contract gives a definite period of time during which the goods were to be shipped. In my view had a shipment arrived one day after the time stipulated in the contract concerned the plaintiff would have been within his rights in refusing to accept it. 10. In November 1967 the pound sterling was devalued. In Hong Kong the dollar was devalued and then revalued but the result was a devaluation. At this time there had been no shipment under the contracts, and indeed none was due until December 1967. 11. The defendant cabled the plaintiff on November 29th 1967 informing him that because of devaluation, the price contained in any order placed with him before devaluation must be increased by 10%. On December 4th he followed this up with a letter repeating this. In this he states that he is holding the orders of the plaintiff until he receives the acceptance of the plaintiff to this course. 12. I am at a loss to understand this. Each of the seven contracts contained a specific clause in the following terms:-
13. The defendant therefore could have adjusted the price without more ado. Be that as it may the plaintiff replied to the defendant's cable of November 29th on the following day suggesting an increase of 5% only. This was answered by the defendant on December 9th still insisting on a 10% increase but not of course mentioning the express term in the contract which is given above. 14. However the plaintiff accepted the 10% increase on December 12th by cable. I mention all these dates because later it was contended by the defendant that the delay of the plaintiff in replying to the defendant's cable of November 29th was responsible, at any rate in part, for the delay in the shipments under the seven contracts. The defendant cabled the plaintiff to this effect on February 6th, and this allegation forms part of the defence to this action. 15. There is no substance in this. As I have already said it was not necessary for the defendant to ask the plaintiff if he would agree to a price change in view of the devaluation of the pound, and there is no evidence that the period of time of thirteen days which the correspondence took caused any delay to shipments. 16. The truth of the matter is that the devaluation upset the business of the defendant completely. Mr. Ma described conditions as chaotic at that time. I will deal with this in more detail later. It is enough to say here that in my view the delay in the shipment was caused by the defendant's inability to fulfil his part of the bargain. Not it must be said, due to any dishonesty or malpractice on his part. 17. The plaintiff had pre-sold most of the goods, the subject matter of the contracts. As early as November 15th he had been complaining that he had received no shipping samples. These were necessary so he could show his customers in the U.K. that the quality of goods they had purchased were up to the quality of the sales samples which they had already approved of. Complaints continued throughout December and January: complaints that no shipping samples had been received and that no shipments had been received either. Indeed on December 11th the plaintiff begged the defendant to send the shipping samples to him by air-freight. 18. In my view the cable sent by the defendant on February 6th was less than frank. The defendant had not been replying to the various complaints of the plaintiff much less satisfying them, and on February 2nd the plaintiff hinted that they might have to put the matter in the hands of their Hong Kong solicitors. It may be that the defendant sent the cable of February 6th when at his wits end to find some or any excuse for the delay. 19. However business between the two parties seems to have been on two levels. For despite the lack of information as to the position under the seven contracts and the complaints of the plaintiff as to the delays,the parties entered into another contract UGM 017 on February 8th 1967. I have already mentioned this contract. 20. This contract was in the same form as the previous seven contracts. It provided for the purchase of 2,000 dozen pairs of cotton satin drill trousers, the same articles which were the subject matter of the other contracts. The whole amount was to be shipped, and I quote - "April/May (or earlier if possible) The price for the trousers under this contract was considerably higher than that under the other contracts being 110/ - per dozen as opposed to 92/ - and 96/ - per dozen. This contract was entered into as a result of an offer made by the defendant. When it was accepted by the plaintiff he stressed that the other contracts must be fulfilled since his customers in the U.K. were causing trouble. It is clear from the agreed correspondence that the defendant was aware that the plaintiff had pre-sold all or a great quantity of the goods the subject matter of the contracts. 21. The plaintiff cabled his acceptance of contract UGM 017 on February 8th which as I have said was an order for a further 2,000 dozen pairs of trousers. On February 17th the defendant asked the plaintiff for permission to ship - and I quote - "your new order for 2,000 dozen,ahead of all existing contracts". The letter continues:-
22. On February 22nd the plaintiff replied with a counter suggestion that 1,000 dozen of the new order be shipped first, then all of the existing or old orders, finally the second 1,000 dozen of the new order. This letter stressed that shipments were overdue and eagerly awaited. This did not commend itself to the defendant and he wrote again. By some mischance, the responsibility of the defendant , his letter dated March 12th did not reach the plaintiff until March 19th. He immediately cabled the defendant as follows:-
23. This was followed by a letter repeating the cable in which it is made abundantly clear that all the remaining orders must be fulfilled. The plaintiff stated that if he had not received shipment by April 1st he would have to take legal action. This was dated March 19th. This did not allow of much time. But Mr. Davies told me in the witness box and it is apparent from the correspondence, that he, Mr. Davies, was of the impression that the greater part of the goods had already been manufactured. And of course by this date that should have been the case. Indeed they should have been delivered. 24. Though the parties had now agreed that the trousers mentioned in UGM 017 were to be shipped first this was not done. The defendant shipped 500 dozen pairs of trousers under contract UGM 017 and the whole of the trousers under contracts UGM 010 and UGM 011 i.e. 125 dozen pairs on two dates in April. The plaintiff refused to accept delivery of them. 25. The plaintiff's claim is for loss of profits for non-delivery under the first seven contracts. He makes no claim under the eighth contract UGM 017. The defendant admits that there were breaches but his case is that the plaintiff waived these breaches. Or he puts it in another way: that the parties came to a variation of the agreement between them. 26. He relies on the agreement that the whole of the goods mentioned in contract UGM 017 should be shipped before the goods mentioned in the other contracts. He asks me to spell out from this arrangement a variation to the effect that UGM 017 must be fulfilled first and then the other contracts must be satisfied. This would mean that the defendant would not be in breach if he supplied the plaintiff with 2,000 dozen at the new price under UGM 017 before June 1st after which he would have to supply the 3,850 dozen, remaining to be delivered under the other contracts. 27. I do not think that it is possible to spell out such a variation. The parties were not in my view saying that the contract UGM 017 with all its terms was first of all to be completed and after that, the other contracts were to be satisfied. The arrangement was simply an arrangement to assist the defendant in his then financial difficulties. The plaintiff was very reluctant to agree but felt bound to do so because it was very late in the season, he had sold all the goods he expected to receive (indeed, to have received) and he knew he would be unable to procure any similar goods elsewhere. This was made abundantly clear in the evidence and the correspondence bears it out. Time was of the greatest importance. There was evidence of how short a time it takes to manufacture garments of this description provided of course the manufacturer has the materials. The reference to the "2,000 dozen UGM 017" in the plaintiff's cable of acceptance of the offer is merely a reference to the trousers which bore the higher price. In one of his letters dated March 12th 1967 the defendant said himself that it did not matter whether they were new or old orders: all the orders dealt with cotton satin drill trousers. The difference was as to price only. 28. In addition, the cable of the plaintiff of March 19th and the letter following clearly show that the plaintiff had not waived the breaches of the contracts. The cable expressly states that the plaintiff holds the defendant to the contracts and further demands the names of the ship on which shipment is to be made. The plaintiff made this most clear in his evidence. He denied that he had agreed to suspend deliveries under the contracts and thought and hoped that they would be made in March or at the latest in April. Also, if the defendant was to ship the whole of the 2,000 dozen expensive pairs he wanted the names of the ships on which the shipments of goods under the other contracts were being delivered. 29. In his evidence Mr. Ma said that the reason he had been unable to make deliveries under the contracts was the local conditions obtaining at the time. 30. He explained that he ordered material from the weaving factories in respect of each order as it was signed. The practice was that the factory would make the material available to him at a date close to the shipping date of the made up goods. 31. Devaluation occurred between the dates he made the contracts with the weaving factories and the dates on which they were to deliver the material to him. He agreed that such a change in local circumstances was his risk under the contracts made with the plaintiff. But he said that conditions were chaotic. However he did not ask the plaintiff to cancel the contracts. 32. He was perfectly aware that the goods were summer goods and he knew that they must be in Europe for the summer markets. 33. He hoped that the arrangement to ship all the more expensive goods under contract UGM 017 would assist him over the difficult period through which he was going. He agreed that such an arrangement was for his benefit and for his benefit alone. He never suggested in evidence that the whole of the terms of the contract UGM 017 should be fulfilled and then and only then should deliveries be made under the previous contracts. It was not a question therefore of there being one delivery of 2,000 dozen pairs of trousers at 110/- per dozen before June 1st - after which there would be other deliveries under the other contracts. It was merely a financial arrangement to assist him whereby for the first 2,000 dozen pairs of trousers the price would be 110/- per dozen which would be appropriated to the contract UGM 017. The other deliveries would be late but not too late for the plaintiff's purposes. 34. It is always easy to be wise after the event and it might have been better had Mr. Ma told the plaintiff frankly of the difficulties he was suffering from locally. Be that as it may, there is no doubt in my view that both parties were most anxious to fulfil the contracts in their entirety. 35. In my view therefore there was no waiver of the breaches of contract and the only variation was in the order in which batches of the same goods of different prices were to be delivered. 36. I now come to the counterclaim. The defendant claims that the plaintiff is in breach of contract UGM 017. He refused to accept a shipment of 500 dozen pairs of trousers under this contract. These were sold by the defendant to others in London and he incurred certain expenses as a result. There were storage charges, insurance had to be effected, etc.: the rest of the 2,000 dozen pairs of trousers under UGM 017 were never shipped. The defendant manufactured these and says he was ready to supply them to the plaintiff some three weeks after the delivery of the first 500 dozen. This may have been too late under the terms of the contract but since they were never shipped the point need not detain us. In order to minimise his loss the defendant sold them locally or at any rate he sold some of them. He claims "about $4,000" for the expenses incurred in connexion with the sale in London and 20% of the contract price of the 1,500 pairs which were not shipped, which he said was "about $20,000". 37. The time for delivery under contract UGM 017 was between April 1st and June 1st and the shipment of 500 dozen arrived in late April. As I have said it was refused by the plaintiff. The position, as was pointed out to me by counsel for the plaintiff, is governed by section 33(1) of the Sale of Goods Ordinance (Cap.26). This states:-
38. Contract UGM 017 is not a contract for delivery by instalments and so the plaintiff was not bound to accept the 500 dozen. 39. The counterclaim must therefore fail. I must add that there was an insufficiency of evidence as to the damage suffered by the defendant. Certain figures were mentioned in the defence but the evidence given in support was very limited indeed. It is essential when a claim is made that it shall be properly proved. Phrases such as "about 20%" which was used in this case cannot be of assistance. Perhaps particulars should have been requested. However the matter is now academic. 40. For completeness I should mention that contract UGM 009 provided for instalmental deliveries, the last to be made in April 1968. In fact no deliveries were made. The plaintiff's claim is for breach of contract as at April 1st at which date it would have been possible for the defendant to have shipped an instalment under contract UGM 009 to cover the April delivery. In my view the fact that the defendant had made no deliveries at all under that contract entitled the plaintiff to consider that the whole contract had been repudiated as at April 1st 1968 (see section 33(2) of the Sale of Goods Ordinance). 41. As I have said the plaintiff succeeds in his claim. The plaintiff was unable to buy goods of a similar nature. And he therefore claims for his loss of profits on resale. He had previously sold all the goods under the contracts less 150 dozen pairs. 42. Taking into consideration a sum to represent an insurance premium, transport charges and certain other expenses the loss of profit comes to $41,647.30. In addition there is a claim for loss of profit on the 150 dozen pairs which though he did not sell the plaintiff says he could have sold had they been delivered to him. This comes to $1,522.60. 43. There will be judgment for the plaintiff for $43,169.60 with costs. The counterclaim is dismissed with costs.
Representation: ...(illegible) for Plaintiff. Benjaminin Liu (W.I. Cheung & Co.) for Defendant. Judgment read in Court. |