Ting Chung Ho t/a Dar Lee Silk Co v. Tai Nan Textile Ltd

HCA000457/1983

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Hon. Penlington, J. in Court

Datesof hearing: 8th-9th May 1984, 22nd-23rd June 1984

Date: 28th June 1984

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JUDGMENT

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1. This is a claim for $43,833.50 being the balance of the purchase price of silk goods delivered by the plaintiff to the defendant on the 27th September 1982. The defendant in turn counterclaims for the sum of $54,370 being the amount of silk which it says was defective together with the extra costs incurred in using the silk due to the defects that were found in it. There is also a counterclaim in respect of an alleged discount of 1% of the purchase price which the defendant says was an agreed term of a contract.

2. Despite the fact that the amounts involved were relatively small the matter took 4 days before me. The law was very fully and carefully argued by counsel for both sides to whom I am grateful. It does seem to me however a matter for the greatest regret that the parties, who are all Shanghainese businessmen engaged in the silk trade, could not have come to a settlement. It was, I would have thought, a case which could easily have been settled with a little goodwill on each side.

3. Evidence was given by the sole proprietor of the plaintiff, Mr. Ting Chung-ho, who said that he knew the Managing Director of the defendant, Mr. Wong Man-tak, and that Mr. Wong telephoned him in late September and asked for 8,000 yards of 'Sheung Shik silk' which is a traditional description used by Mainland Chinese suppliers for what is commonly known as Crepe de Chine. This material comes in various thicknesses and this order was for the heaviest sort, i.e. 8 1b. An invoice was issued, No. 5782, on the 27th September 1982 for a total sum of $203,833.50. There is no reference to any discount in this invoice and Mr. Ting said that there was, on this occasion, no agreement for any discount. Mr. Ting also denied that there was any request from the defendant to be supplied with Shanghai silk. He denied in fact that there was any such term as Shanghai silk used in the trade. He said that before 1980 all Chinese silk was exported by the Shanghai Office no matter where it was made, but then after that a branch was set up in Chekiang. He said there was also Kiangsu silk. He said there was however no difference in quality and nobody can tell the difference between silk produced in the different cities. The place where the silk was woven was always stated on the carton.

4. Mr. Ting said that there was no possibility that the goods supplied could be defective as each bolt was stamped as having been inspected by the weaving factory. He said that he had never had a complaint of defective silk and that he had been in the trade for some 42 years. If any of the silk had been defective then it would all have been defective. He said that there was no complaint from the defendant about the quality of the silk until he made a complaint himself to the Tsimshatsui Police Station. It was only then that the complaints were made. He said that Mr. Wong did not in fact ring him until one or two weeks after delivery of the goods. He denied that he then went to inspect the goods nor did he say to Mr. Wong that he should go ahead and dye the material and that he would replace whatever material was found to be defective.  He did say however that a Mr. Ngai who is employed by the defendants did tell him that the defendants were withdrawing full payment because of alleged defects of the silk and that the sum of $160,000 was accepted, which Mr. Ting says was under duress and without any waiver of his right to claim the balance. He specifically denied that at any time did he inspect the alleged defective silk in the defendant's factory.

5. Further evidence was given for the plaintiff by Mr. Lam Siu-ming, a salesman, who said that he delivered the silk together with Mr. Ting on the 27th September. He prepared the invoice. He said that at the time he saw Mr.Wang at his premises and asked for payment in full. Wong refused to make payment because he said he wanted Shanghai silk, not Chekiang silk. He said however that he would pay $160,000 and would talk to Mr. Ting about the balance as he feared that there may be defects in the silk.

6. Mr. Lam denied going with Mr. Ting to inspect the silk at the defendant's premises on the 5th October. He said however he did make many phone calls to Mr. Wong asking for payment of the balance of the money but without success. He said that following receipt of a letter from the defendant's solicitors he did go in January to the defendant's premises together with their solicitor, a Mr. Poon. He found the silk had been dyed and that could not therefore be returned.

7. Mr. Wong gave evidence for the defendant and said that he had been in the silk business for some 20 years. He received an order in September 1982 from the United States of America for silk dresses to be made out of pure Crepe de Chine. He required some 8,000 yards of the material and he rang Ting and ordered this at $26 per yard. It was to be Shanghai silk, 12103, 8 lb weight. He said that in the past they had suffered losses due to defects in Chekiang silk, though not supplied by the plaintiff. He said that his schedule for preparation of the finished goods was tight. He was present when the goods were delivered but he did not inspect them. Some time however he received the report from a Mr. Ngai, an employee, regarding the quality of the silk. He then went and inspected it and said he found it to be of poor quality. Some of the threads were uneven and some were thicker than the others and there were some broken threads. The following morning he telephoned Mr. Ting and told him that the silk was Chekiang silk, not Shanghai silk, and that it was of poor quality. He said that Ting asked him to do him a favour and do his best for the silk as he had too much stock on hand. He asked Mr. Ting to come and inspect the silk but he did not do so. He they became anxious and eventually rang Ting again and told him he must come and inspect the goods on the 5th October. This Mr. Ting did, together with Mr. Lam. He said that Mr. Ting saw that there were defects but said they were not serious and to go ahead and dye the silk. If there were any defects after the dying he would replace what was defective. He said that similar silk was readily elsewhere available at a price of about 30 cents a yard more than he had paid to Mr. Ting. However he decided to have the silk dyed as requested and this was done. After the dying he inspected the material and found defects in about 600 yards. He then spoke to Mr. Ting and was asked to make use of the defective material and again Mr. Ting came to inspect. He then agreed with Mr. Ting that he would pay him 80% of the price and that Ting would be responsible for replacing any defective silk and also for the extra costs incurred in cutting the defective silk. He said that in fact of the total amount some 2,250 yards were defective. He said he spoke to both Lam and Ting and they said they did not have any good quality silk in their warehouse and that he should purchase his replacement silk elsewhere. This he did from a firm called Fealty Ltd. at a cost of $29,323.69. The relevant invoice was produced. He said that due to the extra time involved in using the defective material he incurred extra costs amounting to $23,500. He also said that at the time of placing the order it was agreed between himself and Mr. Lam that there should be a discount of 1% of the purchase price.

8. A letter from the defendants solicitors dated the 28th December was shown to him in which it is said that the plaintiff had accepted the sum of $160,000 in full and final payment in respect of the goods. It was suggested to him that this was contrary to the defendant's case now put forward. He said that until he had come to court to give evidence he had not previously seen that letter. Similarly, he said that when his own solicitors wrote back in a letter of the 31st December 1982 and he was sent a copy of that letter he did not read it but simply filed it away.

9. Samples of the alleged defective silk were produced but there was no independent expert evidence as to any defects in it. Mr. Wong estimated that the defective silk which could not be used for dresses but might be used for shirts would be worth perhaps $3 a yard.

10. A Miss Ebe Chang was called and she gave evidence that she had had a dealing herself with silk obtained from the plaintiff. This was not the silk which is involved here but she said that it was defective and as a result of that she had stopped payment of her cheque. This evidence was put forward to contradict Mr. Ting's evidence that he had never known there to be defective silk due to the factory inspection system.

11. Mr. Kong Ho of the See Sun dying works gave evidence of dying the silk, although he did not remember his particular lot, and said that before silk could be dyed the bolts would be sown together and in doing so the inspection chops would be removed. The defective material produced has no such inspection chop.

12. Mr. Ngai Chung-ping, who is employed by the defendant, gave evidence and said that it was his signature on the invoice and he had chopped it when the silk was delivered. He told Mr. Wong that the goods had come but it was Chekiang silk and that previous Chekiang silk had been shown to have defects. They inspected the silk and in one bolt they cut off 3 yards to have it dyed. It was found not to be satisfactory.

13. He said that on the 5th October Mr. Ting together with Mr. Lam came to inspect the goods. Many cartons were opened for inspection and the silk was found not to be satisfactory. Mr. Ting said that the defects were not serious and they should go ahead and have it dyed. He said  that a little over 1,000 yards had to be replaced due to the defects. He said that some defects are normal in this type of silk but that Shanghai silk has less than other makes.

14. There has been a great deal of conflicting evidence in this matter and I regret that I am not satisfied that either Mr. Ting or Mr. Wong have told the Court the entire truth. In particular there is a direct conflict of evidence as to whether the silk was inspected by them at the defendant's factory on the 5th October 1982. Of all the witnesses I regarded Mr. Ngai as being by far the most reliable.

15. I am satisfied that the order placed was not specifically for Shanghai silk and that it was only after defects were found that a request was made for Shanghai silk. I am satisfied that when the defects were found an inspection was made by Mr. Ting and Mr. Lam at the defendant's premises on the 5th October. I am satisfied that the defects were pointed out but that it was agreed then that the defendants should go ahead and have the silk dyed and that the plaintiff would replace any silk which was found to be unusable. I am however, on that finding, satisfied that as the silk once dyed would no doubt be very difficult to resell to anybody else that there had been an acceptance by the defendant on the 5th October and that by doing so they had waived the defects that were found in the silk, only however to the extent that this was a waiver of the defendant's right to reject. It was not, in my view, a waiver of a possible claim for damages due to the defects.

16. The evidence called for the defendant as to its damages due to the defects in the silk is extremely poor. There is no expert evidence as to the extent of the defects, the exact amount of material which was defective, the value of the material which was defective, the extent to which it could be used for some other purpose, the actual extra costs involved in having to cut the defective material and the delay that was thereby incurred. Some of the defective material has been produced in Court but it is certainly not for me to examine silk material and to come to an opinion as to defects in it. Some defects however are clearly obvious and they would no doubt be important when making women's dresses out of this silk.

17. I am satisfied that the plaintiffs are entitled to judgment in respect of the unpaid balance of the invoice 5782 amounting to $43,833.50. I find that there was no agreement for any discount on the amount of that invoice. I find that the silk supplied was defective and that as a result the defendants were required to purchase some extra silk to replace it. The evidence on this is vague but I  accept Mr. Ngai's evidence that it was about 1,000 yards. The defendants therefore succeed in their counterclaim in respect of this replacement silk, an amount of $26,000, together with dying charges of $1.70 per yard, a total of $27,700. I find the evidence given for the cost of special inspection and cutting is so vague that I cannot award the defendants any damages in respect of that category. There will be interest on each amount from the 1st November 1982 to the date of judgment at 14%.

18. Plaintiff to have its costs on the claim and the defendants as to its counterclaim.

Representation:

A. Ismail (Chan, Lau & Wai) for the Plaintiff Benjamin Yu (Yung, Yu, Yuen & Co.) for the Defendant