San Hall and Co (A Firm) v. Sun Wah Marine Products Co

DCCJ004195/1968

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT VICTORIA

CIVIL JURISDICTION

ACTION NO. 4195 OF 1968.

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Coram: D. Cons, D.J. in Court.

Date of Judgment: 29 October 1968

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JUDGMENT

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1. The defendant in this action is a firm whose business apparently includes the sale of frozen shrimps. To this end shrimps are purchased by them in large quantities from various shrimp laans and shrimp boats, prepared and frozen and then retained in cold storage against possible purchasers.

2. The business of the plaintiff apparently includes the purchase of frozen shrimps in Hong Kong for delivery to customers in Canada. In furtherance thereof on the 8th of March this year the plaintiff purchased from the defendant some 3,000 pounds of frozen and prepared shrimps at an express price of HK$6.10 per pound to be delivered f.o.b. Hong Kong. The contract (Exh. 1) provided for a particular ship on the 14th of March, but the shrimps were, by agreement between the parties, actually shipped one week later on the s.s. "Roseville". On the 18th of April, i.e. two days after their arrival in Vancouver, some 1,200 pounds of the shrimps, being all those of the size "26/30 counts", were inspected by the Vancouver Department of Fisheries, and as a result, ordered to be destroyed or removed from the Country within a certain time. This portion of the purchased goods was in fact shortly afterwards returned by sea to the defendant.

3. So much is agreed. The first area of dispute lies in the possibility that the shrimps had at sometime become defrosted. A decision as to this is essential for two reasons. Firstly, because if the defrosting occurred after the shrimps were placed on board the "Roseville", e.g. due to a failure in the refrigeration plant of that ship, it is a risk to be shouldered by the plaintiff; secondly, because it is nowadays common knowledge that vegetable matter, such as shrimps, immersed completely in ice will not deteriorate appreciably unless and until the ice is thawed. From this it follows that if the state of the shrimps can be established at any time during a continuously frozen period, which includes the time of delivery to the plaintiff, whether it be actually before or after that delivery, then that state must necessarily be the state in which the shrimps were in fact delivered. The last part of paragraph 2 of the Defence does not accept this proposition, but no evidence at all was called by the defendant to support his pleading, and such evidence as there was, namely that of the defendant's own sales manager, was against it.

4. As to whether it is possible, as it were in retrospect, to tell whether frozen shrimps have sometime been defrosted and then refrozen, the evidence was poor. At first the defendant's sales manager told me it was impossible to do so. Then in cross-examination he thought that in such circumstances the cartons in which the shrimps were finally packed would become wet and damaged, only to retract this in re-examination. Miss Leung, the defendant's cold storage manageress, told me that on the return of the disputed shrimps to Hong Kong there was less ice surrounding them than before, the upper part of the blocks of ice having at sometime thawed. But no explanation as to where the resultant water disappeared, or as to the state of the cartons, was given.

5. On the other hand, annexed to the affidavit of the 7th of August sworn in Vancouver by Mr. Hager, the customer of the plaintiff, is a letter purporting to be from the Inspection Supervisor of the Southern District of the Vancouver Department of Fisheries. This letter sets out the results of a laboratory examination of the shrimps by that Department and includes the sentence "There was no evidence of defrosting found on the samples that were examined." I appreciate that the defendants were at a disadvantage in having no opportunity to cross-examine the maker of this statement, but I assume that he would be a government official having no particular axe to grind, and I cannot conceive that he would have included such a categorical statement in his report if in the common run of things defrosting did not leave tell-tale evidence behind. I am therefore satisfied that the shrimps had not been defrosted between the time of their being frozen in the defendant's factory and their being inspected by the Fisheries Department in Vancouver.

6. The second area of dispute is whether the shrimps were bad or not. The defence maintains that at all stages, even up to the date of the defence, the shrimps were good. It instances the satisfactory quality of the remainder of the shipment, all of which the evidence shows to have come from the same original purchase by the defendant, and the quality of which purchase was said by Miss Leung to be "All right". Mr. Chan points to the lack of complaint by the plaintiff after inspecting the cargo before it was put on board ship. I am told also that the General Chamber of Commerce has issued a Certificate of Processing, but I am not quite sure of what this is evidence. But if the shrimps were good on their return to Hong Kong, one wonders what has happened to them since. Were they sold to another customer at the full current market price? This would be good evidence of quality. Or if they are still in the possession of the defendant, why were not they produced, or bearing in mind the difficulties attendant upon their ice-bound state, at least a report from a reputable surveyor? Is it perhaps significant that Miss Leung was not asked directly about their actual condition?

7. For the plaintiff it is advanced that the shrimps were rejected by the authorities. Naturally this is not by itself conclusive, nor a sufficient ground to warrant rejection, but the Certificate annexed to the affidavit sworn by Mr. Hager on the 27th of August refers to decomposition of the fish, and the letter, to which I have already referred, sets out slightly greater details. It was suggested that the number of samples taken by the authorities was too small for a proper survey. But in the absence of evidence as to the practice of inspectors or surveyors in this field, I would accept that in circumstances where any amount inspected is probably also wasted, 5% of the bulk is a reasonable sample on which to base an opinion.

8. I appreciate as well that the defence has had no opportunity to cross-examine the persons who were responsible for the Canadian report, but again, I assume them to be independent officials concerned only with the quality of the goods. And there is some evidence that their standards as to fitness would have been no higher than those prevailing in Hong Kong. On that evidence, together with the complete lack of the evidence which I would have expected in relation to the shrimps on their return, I am satisfied that on arrival in Canada they were in a decomposed state. In view of my finding already that they had been continuously frozen since leaving the defendant's factory, it follows that they were in the same decomposed state when inspected by the plaintiff and when delivered on board the "Roseville", that is to say they were not, at either of these times, of merchantable quality.

9. By the proviso to section 16 paragraph (b) of the Sale of Goods Ordinance, a seller is relieved of his liability to provide goods of this quality where the purchaser has examined the goods and where such examination as has in fact been made, should have revealed the defects complained of. There is here further dispute as to how the inspection by the plaintiff was carried out, but having to decide between Mr. Yiu on the one hand and Miss Leung on the other, I prefer the evidence of the former. That of Miss Leung as to the exact numbers of the various sizes offered, coupled with her demeanour, seem to me too glib for credibility. Unfortunately, the matter was taken no further, and no question asked or evidence adduced to show whether rubbing of the "little bit of shrimp meat" between his fingers by Mr. Yiu ought to have revealed to him that that piece or that size of shrimp generally was not in good condition. Nor was there anything to show that the defendants ever offered to have some of the fish melted down for a test like that carried out in Canada. I conceive that the burden of establishing the proviso is upon the defendant, and I am satisfied that he has not discharged it. If I am wrong in this, it will be of little consolation to the defendant by reason of clause 6 of the Contract, the immediate effect of which appears to be to delete the proviso from the Ordinance insofar as it relates to this transaction. And in any event, it appears from the uncontradicted evidence of Mr. Yiu that the defendant agreed to the rejection by the plaintiff and certainly accepted the shrimps on their return. It is pleaded in paragraph 7 of the Defence that this was by mistake but it never became clear to me during the trial what this mistake really was.

10. For the reasons set out above I am satisfied that the plaintiffs were entitled to reject the delivery of the shrimps of that particular size, and that they did do so. The only question that remains is the assessment of damages. This was a matter not so easy to decide. Mr. Chan, the sales manager of the defendant, told me that shrimps command various prices per 1b. according to their size, those in question being at the cheaper end of the scale. This was not accepted by Mr. Yiu for the plaintiff but his evidence was not very convincing on this aspect. I think it probable that there is a variation in price when sizes of shrimps are considered separately. But in the present contract this was not the case; a general price for the whole cargo was struck. Where parties adopt such a system of pricing, I think it must be taken to continue throughout the whole life of the contract, including those stages when something goes wrong. This is clearly the basis upon which the Canadian party made his claim against the plaintiff who acted reasonably and properly in settling it. No question was raised as to the other matters included in the claim, and I therefore give judgment in favour of the plaintiff in the sum claimed and costs.

Representation:

Mr. G.S. Ford (Ford, Kwan & Co.) for Plaintiff.

Mr. Y.T. Chan (Philip K.H. Wong & Co.) for Defendant.