Infinitron (Hong Kong) Ltd v. Himalaya (Power) Electronics Co Ltd
Read the full judgment text of HCA 2219/1983 on BabelCite. This High Court CFI judgment.
1. On or about the 3rd January 1983 the defendants to these proceedings, Himalaya (Power) Electronics Co. Ltd., agreed to sell a large number of kits for radio cassette recorders to two Hong Kong firms who were buying for re-sale to concerns in the people's Republic of China.
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HCA002219/1983
IN THE SUPREME COURT OF HONG KONG HIGH COURT ____ BETWEEN
____ Coram: Hon. Kempster, J. Date of Hearing: 1st, 2nd and 5th December, 1983 Date of Delivery: 5th December, 1983 ___________ JUDGMENT ___________ 1. On or about the 3rd January 1983 the defendants to these proceedings, Himalaya (Power) Electronics Co. Ltd., agreed to sell a large number of kits for radio cassette recorders to two Hong Kong firms who were buying for re-sale to concerns in the people's Republic of China. 2. On the 7th of the same month two agreements contained in purchase orders numbered 72130 and 72131 were concluded between the defendants and the plaintiffs in this action, Infinitron (H.K.) Ltd., whereby the plaintiffs agreed to sell to the defendants and the defendants agreed to buy from them 20,000 electrical switches designated 032 and the like number of electrical switches designated 014 required as components for the radio cassette recorders just mentioned. The overall cost of the switches was US$30,000 payable by letters of credit at sight. Half of each quantity was to be delivered in the middle of February, pursuant to purchase order no. 72130, and the balance in early March of the same year pursuant to purchase order no. 72131. These being commercial contracts time was prima facie of the essence though I agree with Mr. Warren Chan, who appears on behalf of the defendants, that time was not critical within a matter of days. 3. As was known to both parties the switches were manufactured in Japan and apparently exported to Taiwan whence in turn they were exported to Hong Kong to the order of the plaintiffs by Toho Electronics Ltd. The general course of dealing that had been established between the parties during earlier transactions was that, with exceptions, the plaintiffs would intimate that goods were ready for delivery; the defendants would then furnish a letter of credit; the plaintiffs would deliver; the defendants would furnish a certified cargo receipt and the plaintiffs would then be paid the purchase price by the bank issuing the letter of credit. 4. The only part of either purchase order 72130 or 72131 admittedly delivered into the hands of the defendants and accepted by them, and that not until the 5th March, was half of the 014 switches comprised in purchase order 72130. It is common ground that half of the 032 switches were delivered at the same time. On the previous day the plaintiffs had issued invoice B1784 for the price of such goods. The wording on the invoice read "sold to Himalaya (Power) Electronics Co. Ltd." and also included the price of the half of the 032 switches comprised in purchase order 72130. Such price therefore amounted to US$75,000. Of that sum US$3,250, covering the 014 designated switches, was paid under a letter of credit on or about the 14th May. The relevant letter of credit had been issued by the defendants' bank on the 13th April and included a further sum of US$5,000 due from the defendants to the plaintiffs under a transaction with which this Court is not concerned. The plaintiffs now claim the balance of the total of invoice B1784; damages for non-acceptance of what I night call the second half of the goods comprised in purchase order 72130 and damages for non-acceptance of the goods comprised in purchase order 72131. The defendants, who obtained leave to amend their Defence at the eleventh hour, contend that the plaintiffs failed to tender delivery of the goods comprised in the two contracts in time or in whole and, in the alternative, say that the mutual obligations of the parties under those agreements, apart from the 5,000 014 switches accepted, were discharged by mutual consent. 5. It seems to me that the following issues necessarily fall for the determination of the Court:
6. The first question substantially turns on the answer to question (4) relating to subsequent agreement for discharge concluded between the parties. If there was no waiver or subsequent agreement the defendants were, in my view, entitled to refuse to accept late or partial delivery. 7. As to the third question the answer lies in the terms of section 32(1) of The Sale of Goods Ordinance, Cap. 26 which provides that if buyers accept part then they must pay for that part. 8. I now turn to the evidence to ascertain what, if any, further agreement was concluded between the parties by way of variation or otherwise and how question (5) should be answered. I will start with the documents before me. From the "agreed bundle", which I compiled in the course of the hearing, it appears that, following pressure from Toho Electronics, the plaintiffs finally consulted solicitors who wrote to the defendants on the 28th December 1982 stating that under purchase order 72130 5,000 pieces both of switch 032 and of switch 014 had been sold and delivered. That is an assertion consistent with the invoice. The letter went on to assert that the defendants had refused to take delivery of the balance under purchase order 72130. Then it said that under purchase order 72131 the defendants had refused delivery of any of the goods. The letter does not condescend to indicate when such goods were tendered. The defendants then instructed solicitors who wrote to the plaintiffs' solicitors on the 31st December admitting purchase order 72130 and saying:
The latter was a very inadequate suggestion and really does the defendants' case as disclosed in evidence and on the pleadings scant justice. 9. On the 3rd January 1983 the plaintiffs' solicitors wrote again and said:
The writ in the action was issued on the 23rd February 1983. 10. Five days after the agreements of the 7th January 1982 the plaintiffs ordered 30,000 pieces of each of the two types of electrical switch with which this Court is concerned from Toho for delivery in February. The Court was told that this quantity conformed with the defendants' expected requirements. One would have thought that the terms of the express agreements would have provided a more accurate indication. Be that as it may early in February Toho were writing to the plaintiffs referring to a request apparently made to them by the plaintiffs that only half of the goods ordered from Taiwan should be delivered during that month. 11. Mr. Craig Chong Hing, the plaintiffs' managing director and only witness, said that in a telephone conversation with Mr. Chu, the defendnats' purchasing manager, Mr. Chu had asked that delivery under order 72130 should be deferred until about the 20th March as the defendants' buyers were about to cancel. This, Mr. Chong said, he refused. Therefore he remained, on his side, liable to deliver the goods under that purchase agreement during mid-February. But they were not tendered by the plaintiffs within the time provided by the material contract. 12. On the 28th February 1982 and subsequently, according to Mr. Chong, he had further telephone conversations in which Mr. Chu, for the defendants, declined to accept any goods under either contract. By that time, as a matter of law, the defendants could not have been compelled to accept delivery of any of the goods comprised in order 72130. He did not accept or treat Mr. Chu 's attitude as a repudiation by the defendants of contract 72131 or agree to deferred delivery. However, on the 4th March, the plaintiffs delivered half of the goods comprised in order 72130 to the defendants. Mr. Chong said they were all accepted but as already described the defendants paid only for the 5,000 014 designated switches so it is apparent that at some stage before payment was made agreement was reached between the parties whereby the defendants waived their right to reject these 5,000 014 switches. 13. Mr. Chong was asked in cross-examination about a meeting at the defendants' premises in April at which Mr. Cheng (Toho), Mr. Chu and Madam Wong were present as well as himself. He agreed that there was such a meeting but said it was inconclusive. 14. In November 1982 the balance of the goods comprised in order 72130 and all the goods comprised in order 72131 were delivered to the plaintiffs in Hong Kong. But of course by that time, on any view, the defendants were entitled to refuse delivery as they did. 15. In the course of Mr. Chong's evidence he raised what is a relatively minor issue but may have greater significance. Prima facie the issue was relevant to damages and credit. Mr. Chong said at one stage that the switches had been designed by the defendants' engineer and at another stage said they had been designed by Toho. In any event he asserted that they were custom-designed for the defendants' own purposes. 16. Before leaving Mr. Chong's evidence I should say that on his account of the matter the plaintiffs would prima facie be entitled to the balance of the price of the goods delivered to and said to have been sold to the defendants; that balance amounting to US$4,250. 17. The defendants called 3 witnesses. Mr. Chu, Madam Wong and Mr. Wong. Mr. Chu explained that in early 1981 Mr. Chong had told him that the plaintiffs could secure switches of the designs 032 and 014 for them more cheaply from Taiwan as compared with the price the defendants were then paying the makers in Japan. Following this invitation the defendants placed orders with the plaintiffs for such switches. He said that in early 1982 the defendants began to experience trouble with their Chinese buyers, for political reasons, and obviously at that stage they did not wish to be landed with components which they could not use. It was clearly in the defendants' interest to secure cancellation or, put in another way, to take advantage of any contractual rights that might accrue to them to secure the like result. 18. On the 20th February 1982, Mr. Chu said, "I told Mr. Chong that we would wish to cancel all orders in relation to goods which had not yet reached Hong Kong. Mr. Chu said, however, that the plaintiffs would not agree to cancellation. The contracts were firm. The goods had been manufactured and were ready in Taiwan and Toho granted to deliver". 19. On the 3rd March 1932 Mr. Chu said that Mr. Chong rang him again to say that 5,000 switches of each of the two relevant designs had reached Hong Kong. Mr. Chu said he again intimated that the defendants granted to cancel. Again I observe that at that stage, the 3rd March, the defendants were under no obligation to accept either part delivery or late delivery under order 72130. Mr. Chu went on " Mr. Chong asked if we would store the goods for him as he did not want to incur storage charges and discuss payment for them later." Mr. Chu agreed to this. In law the effect of Mr. Chu's account of this conversation seems to me equivocal. If it does not involve acceptance section 32(1) of The Sale of Goods Ordinance has no application. 20. "The next day" Mr. Chu went on "we received invoice B1784". I have already drawn attention to its wording. "I was not concerned", he said "because payment was to be discussed later. We were helping Mr. Chong to avoid storage charges." A series of questions were put to him and answers given thus:
I had summarised the effect of those questions and answers in my note-book in the terms "we took the goods under concession to allow us to pay later." 22. Then Mr. Chu described the meeting held at the defendants' office between the 7th and 9th of April at which Mr. Chong, Mr. Cheung from Taiwan, he himself and Madam Wong were present; Madam Wong not being initially at the meeting. He said an agreement was then reached between the parties to this effect:
Thereafter, as is common ground, a letter of credit issued, cargo receipt was furnished and the plaintiffs were paid for the 5,000 014 switches. 23. "After this", Mr. Chu said "Mr. Chong made enquiries of us about various matters but ceased to ask for payment or to ask us to take delivery." It is worthy of comment that neither he nor Madam Wong nor, indeed, Mr. Chong for the plaintiffs, thought it necessary to reduce this agreement, if agreement there was, to writing. No more at any stage, in writing or otherwise, did the defendants challenge the terms "sold to" appearing on invoice B1784. Mr. Chu said "the switches were not designed especially for us". 24. Then Madam Wong gave evidence. She said "The plaintiffs delivered the goods late". She was there referring to the partial delivery under contract 72130. "That is why the contracts had to be cancelled. Mr. Chong for the defendants said part of the goods comprised in 72130 had been made and asked us to help dispose of these goods". That was her understanding of the background before she got to the April meeting and is of no greater value because she was not directly concerned. Having been called into the meeting she said that Mr. Chong asked the defendants to issue a letter of credit to pay for his goods. "I told him that because of late delivery I had to cancel the order. I was aware half of the goods comprised in order 72130 had been delivered to us but I did not agree to buy them. Mr. Chong asked me to do so. I told him that because of late delivery I could not buy the whole; only in relation to 5,000 014 switches would I pay. I also told him to take back the 5,000 032 switches but he said he would like us to store them at our premises for the moment as he had nowhere to store them himself. So I agreed to keep them for the time being. The result was that if he delivered any more goods to us I could not promise to issue a letter of credit for the 5,000 014 switches. Later he agreed to have the order cancelled. That is the balance of the switches under order 72130 and all the goods comprised in 72131. Mr. Chong and I agreed to this." And then she summarised the agreement:
25. She went on to say "If Mr. Chong had not so agreed I would not have issued the letter of credit. He had delivered late." During cross-examination she disclosed the identity of one of her direct buyers in Hong Kong having displayed some diffidence, I thought, in this field; being unwilling to reveal, perhaps to competitors, her outlets for radio cassette recorders. 26. Last of all was called, really on what I have called the point of credit or damages, Mr. Wong, Madam Wong's husband. He is the defendants' managing director. Madam Wong is the managress. He told the Court about his technical qualifications, which were considerable, and said "We did not design switches 032 and 014. They were the products of the Japanese ALPS Co. They were Fok Wah's standard components. If I had asked either a Japanese or Taiwanese manufacturer for a special design we would have become liable for tooling charges and high charges having regard to the relatively small quantity we could order" and generally indicated that this was economically out of the question. After quite detail examination and cross-examination I accepted without hesitation that, although there were initial negotiations about these switches particularly in relation to price, they were standard electrical components. So on the issue of credit I have to consider the evidence of Mr. Chong with appropriate reserve where it conflicts of that of Mr. Chu and of Madam Wong. 27. Under order 72130 the plaintiffs, if they are to succeed in this action, must show that the defendants waived the late and partial tender of the goods. Insofar as 5,000 014 switches are concerned it is common ground that they did. The plaintiffs said that they agreed to accept 5,000 032 switches as well. And there is some issue between the parties as to when the agreement to accept and pay even for the 014 switches was concluded. The effect of the defendants' evidence is really that this agreement was reached on or about the 7th April. 28. The invoice in relation to the 5,000 032 switches, which is the first matter in dispute, is consistent with the plaintiffs' account. It was not challenged in any way. Mr. Chu's account of the telephone conversations with Mr. Chong was at best equivocal. In the defendants' solicitors' letter there was no mention at all of a meeting on or about the 7th April. On the other side of the balance lies Mr. Chong's assertion that the goods were custom-designed for the defendants and, I must say, the testimony of Madam Wong which I found confident, clear and credible. Further, there is the consideration that the defendants were in a position to impose terms if they were to make any payment. They made payment for the 5,000 014 switches though under no obligation in law to accept them. I accept as well, in approaching Madam Wong's evidence, that it was in the defendants' interests to secure cancellation. It was in their interest, as I earlier observed, to rely upon the terms of the two contracts if to their advantage; which any contractual party is entitled to do. 29. On the balance of probabilities I find that the defendants allowed the plaintiffs to deliver the 5,000 014 switches and the 5,000 032 switches from order 72130 on what might be described as a without prejudice basis for storage purposes on the 4th March and, by doing so, did not accept those goods or any of them within the meaning of section 37 of The Sale of Goods Ordinance. I find that there was no tender of the balance of 72130, certainly no tender within the time provided by that agreement, and that there was no tender of the goods under 72131 and certainly not within the time limited by that agreement. I also find that on or about the 7th April an agreement was concluded between the parties as described so clearly by Madam Wong and that on or about the 14th May, pursuant to that agreement, the defendants paid the plaintiffs for the 5,000 014 switches. In the premises the plaintiffs' claim fails and there must be judgement for the defendants.
Representation: Warren Chan (P.H. Sin & Co.) for plaintiffs E.C. Mumford (Samuel Soo & Co.) for defendants |