Sun's Enterprise Ltd v. Parker International Consultants Ltd
Read the full judgment text of HCA 4435/1980 on BabelCite. This High Court CFI judgment was delivered on 12 November 1981.
1. This is a claim by the plaintiff for damages for breach of contract.
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HCA004435/1980
Coram: Hon. Liu, J. in Court Date of Judgment: 12 November 1981 ----------------- JUDGMENT ----------------- 1. This is a claim by the plaintiff for damages for breach of contract. 2. By a contract in writing bearing the date the 13th March, 1980, the plaintiff agreed to sell to the defendant 540,000 yards 100% cotton grey cloth of 61 inches width at U.S.$0.715 C.I.F. Hong Kong. The total contract price was therefore U.S.$386,100. There was no dispute that the contract was in fact signed in Hong Kong within the week after its date when Mr. Sun, the President/Director of the plaintiff company visited the office of the defendant's company in Hong Kong. 3. After a further discussion, the contract then in typed form brought along by Mr. Sun was by agreement amended to include, inter alia, the additional term to the Remarks Section, Clause 9, which reads as follows:
4. Mr. Sun was quite adamant that an oral agreement was reached in Taiwan on or about the 13th March 1980 when the selling price was fixed and that the parties were henceforth bound thereby. Mr. Sun reverted to his avowed belief in such an oral agreement in his attempt to justify immediate balk production. He also claimed to have been instructed to commence production by Mr. Liebhart, Miss Connie Lee and Mr. Johnson Yang. I do not accept these of his allegations. No such oral contract was pleaded or relied upon by the plaintiff. It seemed to be common ground that Clause 9 added to the Remarks Section of the written contract constituted a condition precedent the fulfilment of which went to the very root of the contract. 5. The plaintiff's case was that the samples envisaged by Clause 9 were approved by the exchange of letters dated the 24th March 1980 with an authenticated swatch attached to each. These letters are "P1" and "P1(2)". 6. The bone of contention was whether there was any approval of samples under Clause 9 of the contract. The defendant's case was that the swatches attached to "P1" and "P1(2)" were swatches given to the defendant by its German buyer, Mr. Bedi, some time on the 13th of March either in Hong Kong according to Mr. Liebhart or at the time of departure from Taipei according to Miss Connie Lee. It was claimed that the swatches attached to these two exhibits were intended to serve as a request for confirmation of quality and of the plaintiff's capability of matching the same. Thus these swatches were described by Mr. Liebhart as reference sample for quality, and Mr. Liebhart maintained that the plaintiff had to give "proof or evidence in supplying us (the defendant) with the requested yardage". Mr. Liebhart relied heavily on the contract as being not one merely for buying grey cloth but one ultimately for producing bed-sets for the end-user in Germany, and he understood the use of the word "samples" in plural in Clause 9 as being deliberate so as to include not only the plaintiff's production sample but one from the processed finished products. This strained interpretation put Counsel for the defendant in difficulty. Miss Chua was content to rest her case on the requirement of a singular approval of grey cloth quality by the defendant who, it was submitted, naturally would consider itself well-advised to be guided by the view expressed on the cloth quality by its German buyer. 7. Credibility played a significant role in these proceedings, particularly in relation to certain telephonic conversations between Miss Connie Lee and Mr. Sun on about the 1st of April 1980 and on or about the 22nd or the 23rd of April 1980 and the alleged requests and reminders for the 40 yards of 61" width grey cloth which were not committed into writing. However, there was no lack of corroborative documentary evidence relevant to the issue as to whether or not the condition precedent in Clause 9 had been duly fulfilled. 8. Mr. Sun has been shown to be an evasive witness whose credibility was open to grave doubt. He denied that at the inception he was ever told of the defendant's German buyer. He must have known that the defendant's ultimate interest was in bed-sets as he made contact with a Hong Kong manufacturer, Pollux, for the defendant. Later in his evidence, he was less emphatic saying that he was not quite clear about the matter. I find that he was fully briefed of the German buyer as explained by Mr. Liebhart and Miss Connie Lee. He contended that his contract was solely for the sale of grey cloth and that the defendant's German buyer for bed-sets was not his concern. He maintained that once the price was agreed for the grey cloth, the bargain was struck. He would have four months from March to July to manufacture 540,000 yards. On account of his alleged understanding of an oral agreement having been reached in Taipei and the short period for completion, he claimed to have been left with no alternative but to dive into full production forthwith. It is inconceivable that any businessman would gain the impression of a concluded agreement in Taipei when he, Mr. Sun, had to come to Hong Kong subsequently for the contract to be finalized and signed. Then, Mr. Sun claimed that Mr. Liebhart, Miss Connie Lee and Mr. Johnson Yang (or. Yaug) all instructed him to embark on immediate bulk production. It would not be commercially viable for the defendant to encourage instant manufacturing at a time when making charges for bed-sets were unknown and when approval of the processed finished bed-sets had yet to be received from Germany. Mr. Sun was fully aware of the defendant's end-user and his required bed-sets. The excuse was advanced in the hope of justifying his uninvited full operation which was undertaken merely to meet the deadline if and when approval of samples was forthcoming. 9. Mr. Sun stressed that for the sale of grey cloth, two to four yards of sample would be ample, even one yard would be sufficient. He denied any contractual obligation to supply 40 yards of 61" width of grey cloth. He conceded that it would require at least 15 yards for producing a sample of bed-sets, similar to "D1" and "D2", which had to go through four processes. Subsequently he vaguely mentioned a hundred yards in confusion. He told the Court that the defendant's then Taipei agent, Mr. Johnson Yang, approached him some time in March for four yards of grey cloth sample. According to Mr. Sun, Mr. Yang came personally to his factory and cut four yards of 61" width. He gave no less than four different dates for this occasion: 20th of March, changed to 20th of April at one time; 24th of March as originally given in his affirmation, Exhibit "B", was amended to 28th of March. Mr. Sun described how he was asked to and did sign and chop two small pieces cut out from these four yards selected by Mr. Johnson Yang in his factory in March. He never then made reference to any other occasion of signing and chopping. Then he told the Court that on the 28th/29th March Johnson Yang personally delivered the two letters from the defendant both dated the 24th of March 1980, "P1" and "P1(2)". Later, he readily agreed that these letters could have been posted by the defendant in Hong Kong to him in Taipei direct. He was somewhat at a loss to explain the chops half on the swatches and half on these letters "P1" and "P1(2)". In his attempt to piece together unrelated facts to prop up his version, he fell understandably into utter confusion. 10. On the 1st of April, 1980 the plaintiff telexed the defendant urging the defendant to open a Letter of Credit for the contract. About the same time there was, I find, a telephone conversation between Mr. Sun and Miss Connie Lee of the defendant. Much of the contents of that conversation was denied by Mr. Sun who testified to some improper suggestions made by Miss Connie Lee for misleading the German buyer. Mr. Sun's allegations were that Miss Connie Lee implored him to send a telex urging the opening of a Letter of Credit and giving false information to the effect that all bank procedure was settled and work had just commenced. On his own evidence, Mr. Sun could not possibly deny his then knowledge of there being no finalised order from the defendant's end-user in Germany, particularly when he had affirmed categorically in paragraph 9 of his earlier affirmation, Exhibit "B", that the defendant was only hoping to sell to its German buyer. Thereupon, according to Mr. Sun, he telexed the defendant on the 2nd of April in these terms:
11. In his attempt to misrepresent the prior conversation with Miss Connie Lee, Mr. Sun would have the Court believe that the "1" and "5" after "APR" were typing mistakes. He was driven to concede that it was a lie in each of his telex statements that the defendant's bank procedure was all settled and that he had advised his factory to commence bulk production on the 1st of April, the day before. Mr. Sun had claimed in his evidence and another telex of 21st April various dates for full production. There is no necessity for a comprehensive review. This and others adversely affected his credibility, or the lack of it, which was wholly destroyed by his answers given in cross-examination on his telex of the 2nd April at page 6 of the Bundle. 12. I accept the version of Miss Connie Lee on the telephone conversation a day before this telex, in which Mr. Sun was given the explanation that no Letter of Credit would be opened by the defendant before the approval by its buyer of bed-set sample, just dispatched. Mr. Sun was, I accept, reminded that the defendant was waiting for 40 yards of 61" width from the plaintiff. Miss Connie Lee also disclosed that she would be away next day for the Philippines. 13. On or about the 22nd or 23rd of April, 1980, Miss Connie Lee told the Court that there was a conversation in which she informed Mr. Sun that the German buyer rejected the sample and that Pollux graded the grey cloth delivered by Messrs. Textile Alliance at the request of the plaintiff as being inferior and could not guarantee the quality of any bed-sets to be made therefrom. Miss Connie Lee further claimed to have questioned the plaintiff's bulk production up to 110,000 yards by the 21st April without approval of samples. Miss Lee also testified that a take-over by Pollux against the defendant's Letter of Credit was proposed so as to ensure quality control and that in turn Pollux was to issue a Letter of Credit for the plaintiff's grey cloth, if found acceptable. Except for this reference to quality control and a letter of Credit to Pollux, Mr. Sun denied the remainder of this conversation. Mr. Sun denied that he was asking Connie Lee to persuade Pollux to take the 110,000 yards then ready, but almost immediately following he agreed that he did ask Connie to approach Pollux and to confirm to him by telex. Mr. Sun sought to explain these two inconsistent answers by an even more absurd reply that he wished to ascertain if there was a Letter of Credit opened in favour of Pollux. The telex from Connie to the plaintiff of the 24th April, 1980 at page 9 of the Bundle confirmed the discussed problem of quality control and a take-over by Pollux to whom the defendant would open a Letter of Credit. There are passages in this telex which put Miss Connie Lee in difficulties. I will return to them later. On the same day, i.e. the 24th April, even Mr. Sun himself telexed Pollux making enquiry of the proposal mentioning, inter alia, "MEANWHILE U AGREE TO ISSUE L/C TO SUN'S". There was no mention of Pollux's Letter of Credit to the plaintiff in Miss Lee's telex, and thus Mr. Sun unwittingly corroborated that denied aspect in the telephone conversation with Miss Connie Lee. Mr. Sun claimed that he merely assumed that to be the case, but it would be unlikely that the plaintiff's position was not also fully broached in that telephone discussion. 14. On the 9th June, 1980, Grand Majestic, a company of Mr. William Wong's, telexed Pollux with the information that the plaintiff was desirous of selling 540,000 yards of grey cloth at the reduced unit price of 68 cents. There was at this time still no claim raised by the plaintiff who would stand to lose the contract rate of 71½ cents per yard. It was only when Pollux did not show any interest to take the yardage offered at 68 cents per yard that the plaintiff turned on the defendant by its telex of the 3rd July, 1980 seeking to hold the defendant to the contract. (See p.18 of the Bundle). Then finally on the 14th July 1980, by another telex the plaintiff informed the defendant that the matter had been placed in the hands of their solicitor. 15. Miss Connie Lee also did not perform too well in the witness stand. She was at pains to explain the mistake in paragraph 7 of her affirmation, marked A in this action, to the effect that "The plaintiffs did send a small sample." There were also mistakes in her paragraphs 11 and 17 as well as her letter to her German buyer, "D14". She did not promptly respond to Mr. Sun's telex of the 2nd April (p.6 of the Bundle) containing false information and his further telex of the 8th April (p.28 of the Bundle) which was urging the opening of a letter of credit by the end of March, enquiring why two previous telexes had not been replied to and requesting the defendant to instruct its Taipei agent to start shipping inspection. Miss Connie Lee claimed that she had told Mr. Sun that she would be away from the 2nd April and that these telexes were designed to mislead the defendant in her absence. She explained that she had to make a quick exit for Canton after her return and that therefore there was no time to attend to any of these telexes until after yet a further telex from the plaintiff to the defendant on the 21st April, 1980 (page 8 of the Bundle). She maintained that in fact before her reply telex of the 24th April, Mr. Sun contacted her long distance on or about the 22nd or 23rd April. I have earlier set out the gist of the conversation. Miss Connie Lee experienced obvious difficulty in explaining her telex of the 24th April (page 9 of the Bundle), particularly in her attempt to construe "we" as meaning Pollux. It was not suggested by her that "we" was to stand for the joint effort of the defendant and Pollux, to take the plaintiff's grey cloth for processing by Pollux. But then, Miss Lee might encounter an obstacle in the word "definite"; there was yet nothing definite in the proposal. However, the telex did end by stating: "THE QTY YOU HAVE NOW READY THAT THEY WIL TAKE IT". It was not beyond the realm of possibility that the defendant was playing the plaintiff for keeping the quantity of grey cloth available for the making of bed-sets to be negotiated with Pollux. It is pure speculation. Whatever was the true motivation for such her conduct, I have given all her evidence and demeanour the consideration they deserve before deciding on accepting any part of the facts she recounted. 16. Mr. Liebhart of the defendant was unable to suggest any cause for the plaintiff's alleged failure to deliver the sample yardage required despite his and Miss Lee's alleged requests for 40 yards of 61 inches width grey cloth. The plaintiff must have had 80,000 to 90,000 yards by the 24th March 1980. Mr. Liebhart was also unable to satisfactorily explain why the swatches attached to the 24th March, 1980 letters "P1" and "P1(2)" allegedly given by defendant's German buyer in Hong Kong were not submitted for Mr. Sun's inspection and confirmation while he was in Hong Kong between the 15th and 20th of March, 1980 or were sent at all. Miss Lee offered an explanation belatedly at the last stage of her cross-examination that only after she had become aware of the poor quality from Pollux on the 24th April, she recalled the piece of material from Mr. Bedi and posted the same to Mr. Sun in the hope that the plaintiff could manufacture 61" width grey cloth to match the standard of that quality. I accept Mr. Liebhart's account for the discovery of a letter from the defendant's German buyer dated the 17th April 1980, "D10", during this trial from an unrelated file, but I am not entirely with him that he was "not concerned with telexes after the 22nd April 1980" except for subsequent perusal. He preferred to leave certain telexes of Miss Lee to her attempted explanation, but the telex operator did make a passing reference to a final check of telex messages by "the boss". Mr. Liebbart's vague memory of enquiries made of Mr. Johnson Yang's alleged sample yardage was less than impressive. 17. Bearing in mind all these and other matters and the credibility or the lack of it in the material witnesses in this case, I find that in fact Mr. Sun knew all along that the defendant would not take his grey cloth unless it matched the desired quality for all the processes in the manufacture of bed-sets which the defendant hoped to sell to their end-user in Germany and that it was against that desired quality that the approval of samples under Clause 9 was to be given. I further find that in anticipation of an order Mr. Sun had himself chosen to commence bulk production almost immediately after the Taipei negotiation at which a price was quoted without approval of samples so as to ensure meeting the expected short four-month contract period for delivery, if the order was ultimately placed. 18. I also find that the letters dated the 24th of March, 1980 "P1" and "P1(2)" were dispatched with swatches from the German buyer of the defendant. In fact, it is highly improbable that any of these two swatches could have come from the four yards of the defendant's grey cloth which were allegedly cut by the defendant's then representative Johnson Yang in Taipei: By a letter dated the 2nd of April, 1980, "D5", Mr. Johnson Yang returned the defendant's duplicate letter of the 24th of March, 1980 "P1(2)" signed and chopped, and in that very letter it was mentioned a two-yard "production sample cut from machine at factory during my inspection for your examination and approval". There was no suggestion of Mr. Johnson Yang having cut two further yards or having sent earlier the other half of the four yards allegedly cut in Taipei. Thus the swatches attached to the letters dated the 24th March could hardly have come from the plaintiff's factory. I have not lost sight of the fact that both Mr. Liebhart and Miss Lee could give no sensible explanation as to why there had been no written communication with this missing two or four yards as they were unable to give any good reason why no request in writing had been made for the oft-mentioned 40 yards of 61" width. Questions like these and some others were left unanswered, but I accept that the defendant never received any of these four yards allegedly cut in the plaintiff's factory at Taipei before the dispatch of its letters of the 24th March. On the same day of the 24th March, the defendant wrote to its German buyer, "D14" with an intimation that no grey cloth of 61" width was at hand. Again, the four yards allegedly cut by Mr. Johnson Yang in Taipei was on the 28th March, and the swatches with the letters "P1" and "P1(2)" were, I find, sent on the 24th March, some four days earlier. I have dealt with Mr. Sun's evidence of signing and chopping of pieces of cloth at the factory and his initial silence on chopping over these two letters. I turn then to Mr. Johnson Yang's letter to the defendant dated the 25th March 1980, "D6", in which Mr. Yang confirmed knowledge on the part of Mr. Sun of cloth sample being sent by the defendant to the plaintiff for their inspection. Miss Lee testified that she had briefed Mr. Sun on the telephone of the swatches from her German buyer in those two letters as being for matching quality about the time when these letters were dispatched. Mr. Sun denied this call, but the communication of the defendant's then agent on the 25th March is consistent with the version of Miss Lee which I accept. 19. Furthermore, Mr. Sun well knew that in the circumstances, no yardage of less than 40 of 61" width could serve as sample. Even if the 4 yards allegedly cut by Mr. Yang in Taipei had been the source of the swatches in these two letters of the defendant, they could not have been intended or accepted for approval of samples instead of quality reference. These two letters, "P1" and "P1(2)" did not even purport to refer to any approval. Lastly, it would indeed be unusual for the defendant to approve in advance what was to be confirmed by the plaintiff. 20. Whatever was the maneuvre of the defendant, speculation aside I find that none of the letters "P1" and "P1(2)" was or was intended to serve as an approval of samples under Clause 9 of the contract. Clause 9 is unambiguous, and clearly it made the whole contract subject to approval of samples. There was no such approval. 21. In the circumstances, the plaintiff's claim must be dismissed with costs to the defendant.
Representation: Mr. Eddis instructed by H.H. Lau for Plaintiff. Miss Chua instructed by Hampton, Winter & Glynn for Defendant. |