Cear's International Co Ltd v. Panter Electronics Industrial Co Ltd

HCA011672/1982

Action No. 11672 of 1982

IN THE HIGH COURT OF JUSTICE

BETWEEN

Coram: Hon. Liu J.

Date: 28th July, 1983.

__________

JUDGMENT

__________

1. This is a claim by the plaintiff against the defendant for failure to perform a contract in respect to 30,000 pieces of LCD pen watches. The historical background is far from being complicated.

2. The plaintiff and the defendant had been dealing with each other for a year or thereabout. In September 1982, for ordering the 40,000 pieces of pen watches, the plaintiff sent to the defendant their own contract form for confirmation which is exhibit "P1" bearing a date, the 11th September 1982. Instead of signing the plaintiff's contract form "P1" sent over, the defendant returned their own signed contract to the plaintiff which is exhibit "D2" bearing a date of the 8th September 1982. On the back of each form, both "P1" signed by the plaintiff but unsigned by the defendant and "D2" signed by the defendant but not signed by the plaintiff but, however, accepted by the plaintiff to evidence the transaction, there were terms. The plaintiff raised no objection to the manner in which the transaction was evidenced and accepted without objection the terms on the defendant's contract exhibit "D2". Two of the terms on the back of the defendant's contract "D2" are of particular significance in the dispute between the parties to this action, and they were clauses 20 and 21. According to the marginal reference, clause 20 governs "Price" and clause 21 governs "Event of Difficulties". Clause 20 reads as follows:-

Clause 21 is in the following terms:-

3. 10,000 pieces were delivered under the transaction evidenced by exhibits "P1" and "D2". After the delivery of 10,000 pieces, the defendant requested an increase from the unit price of, I believe, $8.80 per piece to $9.30. The conversation in which the request was made was held between Mr. Cheung of the defendant and the manager of the plaintiff, Mr. Dadlani. Mr. Dadlani readily agreed to the request. On cross-examination, he conceded that he "agreed because Mr. Rupani told (him) he had agreed with Mr. Cheung, the contract was subject to increase in price". In this regard, Mr. Rupani, the Managing Director of the plaintiff gave us a startling version, but I will come to that in a moment or two.

4. The upshot of the conversation and the agreement was that the original transaction as evidenced by exhibits "P1" and "D2" was to be replaced by a new agreement for the agreed increase in price. I should also mention that for the increase from $8.80 to $9.30, according to Mr. Dadlani, the manager of the plaintiff, Mr. Cheung explained that "the price had to be increased because the costing of components had gone up". The new agreement was implemented by the signing of as well exhibit "Dill as exhibit "P2" both bearing the date of the 9th October 1982. Exhibit "P2" was a document from the plaintiff and exhibit "D1" was a document from the defendant.

5. One of the documents evidencing the original contract was duly cancelled front and back but the document for the original contract signed by the defendant exhibit "D2" was left, in fact, not defaced but very little turns on that, and I need not go into it. What is more significant is that the back. conditions of one of the documents from the plaintiff evidencing the new agreement i.e. exhibit "P2" were wholly deleted. Therefore, the new agreement as evidenced by exhibit "D1" and exhibit "P2" each signed by both the plaintiff and the defendant was governed by only the conditions on the back of the document from the defendant "D1". There is an insignificant difference on the face of the documents evidencing the new contract "D1" and "P2", but again that is not a matter of any importance.

6. The new contract was concerned with the 30,000 pieces at $9.30 per unit totalling $279,000. The conditions on the back of the defendant's document evidencing the new agreement "D1" contain the same clauses as those in the defendant's document for the original  transaction exhibit "D2", in particular, we have the identical clauses 20 and 21. Clause 20 which is concerned with price, stipulated that all the price unless otherwise specifically stated was subject to increase or decrease in the price ruling at time of shipment, not date of shipment but time of shipment. If "the price ruling at the time of shipment" were to be construed as the market price reflecting the increase in cost for raw materials or other items of costing for the defendant, clause 20 could well be redundant because cost increase was amply provided for in clause 21. It could, of course, be argued that whilst clause 21 dealt specifically with cancellation for difficulties caused by an increase in costing, clause 20 permitted an increase on account of increase in cost. The provision for a decrease in clause 20 was obviously unconnected with any costing increase. In my view, clause 20 expressly provided for variation of the price in accordance with the price from time to time listed by the defendant at the time of each actual order for shipment. That construction has the blessings of the past conduct of the parties as reflected in the concessions made in the evidence of the manager, Mr. Dadlani.

7. In November, when the plaintiff asked for delivery, according to Mr. Cheung, through Miss Au on the 1st of November, the defendant intimated that there would be a price increase further from $9.30 to $10.50. The proposed increase was found unagreeable by the plaintiff. The plaintiff purported to hold the defendant to the contract as evidenced by "P2" and "D1" for the delivery of the 30,000 pieces at $9.30. As far as the defendant was concerned, failing an agreement to the proposed increase from $9.30 to $10.50, they were to treat the contract as cancelled. In fact, that was precisely what was said by the defendant in their letter dated the 12th November 1982 to the solicitors for the plaintiff.

8. After the cancellation of the contract by the defendant, this action was instituted. Mr. Dadlani, manager of the plaintiff, explained to the court the futile attempt made on behalf of the plaintiff to seek alternative supply and the sub-sale as evidenced by "P3". I have no reason to doubt the evidence of Mr. Dadlani on these aspects, and I accept it.

9. Let me turn to the evidence of Mr. Dadlani, the manager of the plaintiff. He conceded that upon now seeing clauses 20 and 21 he would agree as a businessman that the defendant could, in November, vary the price up to $10.50. However, Mr. Dadlani testified that he did not notice these, back conditions and was unaware of them. He explained that, in general, the plaintiff would issue a contract to a seller sometimes even without receiving any confirmation in return and more rarely, would the plaintiff be given the seller's own contract. Mr. Dadlani claimed to have sight of these back conditions only recently, 2 or 3 weeks before the trial of this action, in the offices of the solicitors for the plaintiff. He further told the court that as between the plaintiff and the defendant, business had always been conducted on the basis of good faith and good understanding and that it never occurred to him to seek confirmation of a statement of increase in costing made on the part of the defendant. Mr. Dadlani further stated that even if he had made such a request, he would not have expected the defendant to show him any document. As far as Mr. Dadlani is concerned, it is inconceivable for a man of his calibre, having been in this line of business for 4 years having had previous transactions with the plaintiff and having had, not very long ago before the new agreement, the old agreement for the 40,000 pieces on an identical document containing the identical back conditions, to have truly been ignorant, until 2 or 3 weeks ago, of the back conditions on "D1", one of the documents evidencing the new contract. Mr. Dadlani did not impress me as a witness Apart from the evidence from him which I accept, I would be Uncomfortable to have to rely on his evidence.

10. I turn next to the evidence of Mr. Rupani, the Managing Director. According to him, he had no idea of clauses 20 and 21. He told the court that these clauses only came to light, as far as he was concerned, when sometime at the late stage of the transaction in October or November the defendant was repeatedly hard-pressed to make delivery and that only at that late stage were these stipulations as to price increase drawn to his attention. If his version were to be believed, then the concession made by the manager, Mr. Dadlani in his cross-examination by Mr. Fok that he, Mr. Dadlani agreed to the first increase from $8.80 to $9.30 for the balance of 30,000 out of 40,000 pieces in the original contract would be, to say the least, very incongruous. Running the risk of repeating myself, Mr. Dadlani testified that he agreed to the proposed increase because Mr. Rupani told him that he, Mr. Rupani, had agreed with Mr. Cheung that he contract was subject to increase in price. There has been no allegation that there was any other or collateral agreement for permitting an increase than that in the original contract. Therefore, the only agreement referred to in the cross-examination of Mr. Dadlani, of the Managing Director of the plaintiff, must be with reference to the back conditions on exhibit "D2", in particular, clauses 20 and 21 which are identically repeated in exhibit "D1", one of the documents evidencing the new contract.

11. Mr. Rupani further told the court that he explicitly agreed with Mr. Cheung that there was not going to be any further increase. These allegations arose quite peculiarly in cross-examination when Mr. Rupani was taxed by counsel for the defendant. that he never mentioned to Mr. Cheung that there should be no further increase. In reply to that, he said "I did mention to him". He further said that after agreeing to the second contract, there was no question of any price increase. He repeated the allegation in re-examination. His allegation is vague, at least in the sense that he did not give evidence as to what precisely Mr. Cheung said or, indeed, whether Mr. Cheung did agree to the subject-matter he allegedly mentioned.

12. His version of being unaware of the back conditions until the defendant had repeatedly been pressed for delivery is telling as given in his cross-examination. I am reading, of course, from page 19 of the Judge's notes:

These are very strange answers. Like in the case of the manager, Mr. Dadlani, I can also place no reliance on the evidence of Mr. Rupani insofar as it conflicts with the contention and evidence of the defendant.

13. On behalf of the defendant, Mr. Cheung gave evidence. Mr. Cheung readily made concessions on matters net wholly favourable to his company. Mr. Cheung explained that, as was well known in the electronics trade, due to fluctuation of the price for components including crystals, the unit price on a contract was merely provisional subject to fluctuation in accordance with the seller's listed price at the time of shipment required and also subject to the buyer's acceptance of such revised price. Mr. Cheung testified that in addition Mr. Rupani was fully informed and had accepted the arrangement on the signing of the original contract that the plaintiff was to contact the defendant for a confirmed delivery date and the finalised price. Moreover, the original contract and the new contract were both expressly made subject to a revision of the unit price. He told the court that he was a sales representative, his responsibility was to sell and not to order ram materials. Every time, when orders for shipment were placed, he would consult Mr. Maxwell, the manager who would then give him the up-to-date information as to the price proposed to be charged by the defendant. On this particular occasion, so explained Mr. Cheung, it was no exception. On the telephone contact from Miss Au, he communicated to the plaintiff, the new price listed for the clients or customers of the defendant. He told the court that price for crystal had gone up. He further told the court that there might well involve also other components, but that he had no personal knowledge as he was only briefed by Mr. Maxwell on whose instruction or information, he relied and acted.

14. A document "P5" was produced by Mr. Wong on behalf of the plaintiff and not objected to by Mr. Fok on behalf of the defendant. Mr. Cheung told the court that this was one of the documents shown to him well after the event by Mr. Maxwell with the intent to explaining to him, presumably by way of confirmation that price of certain components had, at the material time, gone up. I can hardly derive any assistance from this document.

15. Mr. Cheung further told the court that there had been in the past dealings between the plaintiff. and the defendant with either increases or decreases in the price. Mr. Cheung denied having agreed to or confirmed a fixed final price at $9.30 per unit upon his company entering into the new contract with the plaintiff. I can find little materials in the references to the Production Schedules for justifying the criticisms, levelled at the defendant or capital sought to be made on behalf of the plaintiff I have no hesitation in accepting the evidence of Mr. Cheung in toto. Were it necessary to make a finding that the defendant's cost had increased, I would be prepared to draw that inference from the usual practice of Mr. Cheung in seeking instructions from Mr. Maxwell and the concession made by Mr. Dadlani to the effect that the parties had throughout been acting in good faith and on good understanding and that no increase would be proposed without an increase in the defendant's costing. In fact, Mr. Dadlani did not seem to have questioned the accuracy of Mr. Cheung's explanation for the proposed increase.

16. However, the defence does not seem to have to rely on clause 21. What the defendant, in fact, has said in answer to the claim of the plaintiff is that by the time when delivery was desired, the listed price of the defendant or the Price ruling at the time of shipment had been increased from $9.30 to $10.50 per unit. The plaintiff was not prepared to agree to such proposed increase as they had on the previous occasion, and hence, the defendant was perfectly entitled to treat the contract as at an end within 3 days from the date of their letter dated the 12th November 1982 to the plaintiff's solicitors. There was it is common ground, no acceptance forthcoming from the plaintiff of the proposed increase. The contract was accordingly cancelled and terminated. The defendant's action was not unlawful.

17. In conclusion, the defendant was not in breach of the contract which was no longer in existence at the institution of this action, for not malting delivery of the 30,000 pieces or any of them to the plaintiff and the plaintiff is not entitled to proceed against the defendant for failure to deliver thereunder. In the circumstances, it remains for me to dismiss the plaintiff's action against the defendant with costs.

Representation:

Mr. Derry Wong instructed by Messrs. King & Co. for the Plaintiff.

Mr. Paul Fok instructed by Messrs. S.C. Mok & Co. for the Defendant.