M.I.S. Trading Co v. Yee Fung Textiles Trading Co Ltd

HCA002253/1983

IN THE HIGH COURT OF JUSTICE

BETWEEN

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Coram: Hon. Liu J.

Dates of Hearing: 24th, 25th, 28th, 29th, 30th, 31st May and 1st, 5th and 6th June, 1984.

Date of Delivery of Judgment: 6th June, 1984.

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JUDGMENT

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1. This is a claim by the plaintiff against the defendant on a breach of contract for damages. The defendant, by its Counterclaim, seeks damages against the plaintiff also on a breach of contract.

2. The history leading to the dispute between the plaintiff and the defendant is not quite involved but is indeed lengthy. One Tuli Casual Wear Limited of Australia entered into a Confirmation of Sale with the plaintiff for the supply of 15,000 metres of cotton corduroy fabric of certain specifications. That Confirmation of Sale is exhibit "P1" dated the 15th August 1982. Another copy of what is described as "Sales Confirmation" was signed and confirmed by Mr. Tuli Bleich and that is "P2", but save for the colour assortments amended in the Sales Confirmation signed by Mr. Tuli Bleich, nothing turns on "P2".

3. A formal contract was signed between the Australian buyer and the plaintiff, which is exhibit "P4" dated the 19th August 1982.

4. There are two matters which seem to be of some relevance in this contract between the plaintiff and the Australian buyer Tuli Casual Wear Limited. The first is the shipment date and the second is the extra price paid for securing prompt delivery. Counsel for the plaintiff led Mr. Bleich into agreeing that the stipulated delivery date in the contract between  the plaintiff and the Australian .buyer being within 90 days, with partial delivery allowed, fell on the 12th November 1982. But in fact, as explained by Mr. Bleich, the parties i.e. the plaintiff and the Australian buyer agreed to count the 90 days from the date of their verbal agreement; that would, according to Mr. Bleich and also Mr. Tse, take the shipment date to the end of October. That was confirmed in the formal contract between the plaintiff and Tuli Casual Wear Limited, exhibit "P4", and substantiated by the shipment date in the letter of credit subsequently opened by the plaintiff in favour of the defendant as at the 30th October 1982.

5. The second matter in this contract between the plaintiff and the Australian buyer was the extra price paid for securing due delivery. According to Mr. Bleich as corroborated by Mr. Tse, instead of the original $15.40 per metre C.I.F. Melbourne as in exhibit "P1" and exhibit "P2", the Australian buyer allowed the plaintiff an extra 90¢ on the metre bringing it up to $16.30 per metre C.I. F. Melbourne to ensure punctual delivery on due shipment date.  Hence, in the formal contract exhibit "P4" between the plaintiff and Tuli Casual Wear Limited of Australia, we have the unit price of $16.30 per metre C.I.F. Melbourne.

6. According to Mr. Bleich, Mr. Michael Tse of the plaintiff approached him approximately at the end of 1982; he put it as approximately November from his recollection. Mr. Tse was said to ask for a postponement of the shipment date for about 3 to 4 weeks and an extension of the letter of dredit.

7. Mr. Bleich explained that the sea trip would take about 5 to 6 weeks from Hong Kong to Melbourne and that the Australian factory had 4 weeks annual vacation, 2 weeks in December and 2 weeks in January. Mr. Bleich elaborated that the materials he ordered from the plaintiff were intended for the making of 10,000 garments and that being caught by the operational time limit, he had and did refuse to accede to the request of Mr. Michael Tse and did not grant any extension of shipment date and L/C facilities.

8. After that rejection by Mr. Bleich, Tuli Casual wear Limited followed .it it up by a letter of cancellation, exhibit "P3" dated the 5th November 1982 in which, having confirmed the cancellation, the Australian buyer threatened legal proceedings against the plaintiff for breach of contract.

9. The Australian buyer maintained the same attitude in this case. Mr. Bleich attended court to testify that the Australian company of his had withheld institution of proceedings against the plaintiff pending the outcome of this action. Mr. Bleich told the court that the profit per garment was expected to be Aus. 90¢ per piece. Hence, for 10,000 pieces of garment, his company had suffered a loss of Aus. $9,000. That was converted into $57,750. The conversion did not appear to be a matter in dispute.

10. Mr. Bleich explained that by the time of the cancellation it was much too late for him to re-order the same fabric from Hong Kong as he was caught by the operational time limit and that the price of the Australian suppliers, manufacturers or otherwise, would hardly leave any margin for profit. Thus, his company was unable to manufacture or cause to be manufactured the 10,000 pieces of garment for sale in that season. He lost the profit. Even for the subsequent years, he turned to another Hong Kong supplier for the same type of cotton corduroy instead of repeating the same order with the plaintiff company.

11. As between the plaintiff and the defendant, having obtained the Australian order, the plaintiff through Mr. Tse was seeking a manufacturer locally to fulfil his company's commitment with Tuli Casual Wear Limited. On the 31st August 1982, the plaintiff signed a contract with the defendant for the same goods as ordered by the plaintiff's Australian buyer. After the contract, the plaintiff caused to be opened a letter of dredit in favour of the defendant dated the 6th September 1982. This contract between the plaintiff and the defendant dated the 31st August 1982 provided for shipment to be within 60 days after receipt of L/C. According to Mr. Tse, 10% deposit was solicited and made to ensure punctual delivery.

12. A dispute arose between the plaintiff and the defendant as to precisely when the defendant was in actual receipt of the letter of credit. Mr. Tse was under the impression that the letter of credit was obtained by a special messenger of the defendant soon after its issuance, but according to Mr. Lo of the defendant, due to certain banking procedure, his company was not able to obtain the letter of credit until the 8th or the 9th of September. 60 days after receipt of L/C, whichever date it was on, would take it beyond the 30th October 1982, but in the letter of credit, shipment date was specified as not later than the 30th October 1982 and the letter of credit itself was to expire on the 4th November 1982. Much relevance has been lost in the disagreement  between the plaintiff and the defendant as to the date of the actual receipt of the letter of credit by the defendant and consequently the properly computed shipment date under their contract, as the defendant had accepted the letter of credit with a 30th October shipment date without the slightest protestation. This shipment. date specified in the letter of credit as being not later than 30th October 1982 has also not been made an issue in the pleading of the defendant.

13. There was another disagreement between Mr. Tse and Mr. Lo as to firstly, whether the defendant had any knowledge of the sub-sale. As to that, according to Mr. Tse, he told the defendant through Mr. Lo that the goods ordered were for an Australian buyer overseas and that shipment would have to be made before the end of October 1982. According to him, Mr. Lo sought a 10% deposit so as to enable the defendant to start manufacturing immediately for ensuring prompt delivery on due date. In the contract between the plaintiff and the defendant, the packing desired by the plaintiff was, inter alia, "in export sea-worthy bales". Furthermore, in the letter of credit, named as one of the requisite documents for negotiation of drafts thereunder was a Mate's Receipt evidencing shipment of 16,000 yards. It was further specified in the letter of credit that  the shipment was to he from Hong Kong to Melbourne, Australia. Despite Mr. Lo's denial, there can be no doubt in my mind that he was aware of the overseas contract. I also find that Mr. Tse did, in fact,relate to him the destination of the goods in question and the plaintiff's own contractual commitment.

14. Secondly, it was hotly contested as to whether the defendant contracted as a trading company simpliciter or whether the defendant was sought out by the plaintiff through Mr. Wong, the introducer, as one of the local manufacturers. Mr. Wong told the court that Mr. Lo informed him that he had a factory of his own, as did Mr. Tse. Mr. Tse maintained that not only did Mr. Lo so inform him but he, Mr. Lo also showed him a pair of sample trousers by way of illustration of factory workmanship. Mr. Lo allegedly told Mr. Tse that "the cloth was produced by him". Mr. Wong elaborated in his evidence to the effect that the plaintiff was seeking a manufacturer and as he was not a manufacturer himself, he merely acted as an introducer in finally locating the defendant and presenting him to Mr. Tse.

15. However,  in cross-examination, Mr. Tse was asked the following question to which he answered in the affirmative. The question was: "Would I be right that it would not make any difference to you if that type of corduroy was produced by another factory not owned by the defendant if that corduroy was in strict compliance with the contract?" That was directed at, in my view, the ultimate fulfilment of the contract at the stage of delivery rather than the plaintiff's motive in selecting a local manufacturer with previous experience and capability of producing the desired corduroy. At the time of delivery, the plaintiff would certainly be prepared to accept contract goods of whatever origin without much ado. But the plaintiff's real concern in picking a manufacturer was to hope for a trouble-free progress in production. During the process of manufacturing, the plaintiff would understandably not tolerate any default except for those of the manufacturer of his own choice, in whom he had placed his trust. These matters will have to be borne in mind when the exemption clause or clauses in the contract between the plaintiff and the defendant are to be examined.

16. The defendant, in fact, sub-contracted the manufacture of the goods to Kim Fung Shing. Grey cloth was ordered from Greenfield for delivery to Kim Fung Shing to be turned from raw materials into corduroy of the required specifications

17. To recap, so far, the relationship: According to Mr. Tse, in July 1982, the plaintiff and Tuli Casual Wear Limited started negotiation which culminated in the signing of the Sales Confirmations of the 15th August 1982 and the formal contract of the 19th August 1982 for shipment on or before the 30th October. On the 31st August 1982, the plaintiff and the defendant entered into a contract for the same goods as ordered by the Australian buyer. Mr. Lo was told of the 30th October shipment date. A 10% deposit was made, and a letter of credit with the same shipment date was accepted. The plaintiff reserved a quantity of grey cloth from Greenfield in early September 1982. Mr. Chung was from Kim Fung Shing, a company, which agreed with  the defendant to manufacture  the contract corduroy from grey cloth. According to Mr.Chung, the Factory manager of Kim Fung Shing, in fact, the order came from the defendant round the end of August, but grey cloth was not delivered to Kim Fung Shing by Greenfield until the 10th or 11th of September 1982. Mr. Chung took his own time, and, so he claimed, his planned schedule would have, but for the break-down of the cutting machine, enabled Kim Fung Shing  to complete the order of the defendant. Much criticisms have been levelled at the various periods of inaction of Mr. Chung, but no challenge was made to his statement that his factory would have been able, but for the break-down of the cutting machine, to keep its part of the bargain with the defendant. I do not propose, therefore, to go into the apparent delay caused by the initial inaction on the part of Mr. Chung who has given the court some explanations which counsel very carefully analysed and attacked.

18. According to Mr. Chung who struck this court as an open and honest witness, the cutting machine unfortunately broke down on the 1st or the 2nd of October. Mr. Lo himself inspected the cutting machine after news of its break-down had been conveyed to him. Mr. Chung explained that around the 4th or the 5th of October, the repair costs were being negotiated and that subsequently, refreshing his memory by the invoice dated the 24th October 1982 at page 16 of the Agreed Bundle, the cutting machine was repaired on the 21st or the 22nd of October. I accept the evidence given by Mr. Chung,and I find that the cutting machine did break down as Mr. Chung related to this court. I also accept the dates given by Mr. Chung for the various stages in relation to the cutting machine in question.

19. Kim Fung Shing owned and ran the weaving factory of which Mr. Chung was, at the material time, the factory manager. The defendant limited company did not own this weaving factory nor was the defendant limited company in any way associated with Kim Fung Shing. Mr. Lo is a member of the defendant limited company, and Mr. Lo had a partnership interest in Kim Fung Shing. Whatever was the interest of Mr. Lo himself in Kim Fung Shing and its weaving factory, it is clear that the defendant limited company did not, at the material time, and does not today own or control the weaving factory of Kim Fung Shing.

20. The cutting machine had broken down. What then did the defendant do? According to Mr. Lo, having inspected the machinery and having been told of the negotiation for the repair costs, he approached Mr. Tse and finally on the 15th October 1982, he obtained from him an extension of shipment up to the end of November 1982. The extension so allegedly granted was denied by Mr. Tse.

21. Mr. Wong was subsequently driven to say that he had little clear recollection of what excuses were advanced but he did remember that at the end of October 1982, there was some mention of an extension of the shipment date by Mr. Lo. As for Mr. Tse, he categorically stated that the defendant requested an extension at the end of October 1982 and gave some sort of an explanation to the effect that machinery had broken down. But he described such explanation from Mr. Lo as being vague.

22. Before I examine more closely the alleged-extension, I should go to the other complaints of the defendant. Having sought and obtained an extension as alleged, the defendant complained that the plaintiff did not approve colour samples. The plaintiff through Mr. Tse maintained  that in mid October, colour samples were duly approved and that he had, on behalf of the plaintiff company, been chasing the defendant for delivery. Mr. Lo of the defendant further testified that having obtained the extension to the end of November 1982 and on being pressed by Mr. Tse, he offered to deliver a portion of the quantity around 6,000 metres or yards in early November. But, in fact, so claimed Mr. Lo, on or about the 29th or the 30th October 1982, some 6,000 metres or yards of undyed corduroy were ready and this undyed quantity was on the 2nd November offered to the plaintiff who allegedly rejected them.

23. Partial, shipment was allowed under the contract between the plaintiff and the defendant. But I cannot accept that a partial shipment if ever made or offered would per se relieve the defendant from meeting the deadline for the contract balance. There was no evidence as to whether the defendant would have been ready to deliver the corduroy ordered in full quantity in time even if the plaintiff had duly given a colour samples approval to the defendant. These matters were not joined issue with in the Defence nor the Counterclaim and, in fact, the alleged failure to supply colour samples by the plaintiff was made no part of the defendant's Defence and Counterclaim.

24. I return then to the alleged extension. Both Mr. Tse and Mr. Wong conceded  that Mr. Lo approached the plaintiff for an extension at the end of October 1982. Was any extension granted as alleged by Mr. Lo on the 15th October 1982? Was any extension ever granted when Mr. Lo approached Mr. Tse around the end of October 1982? The defendant was silent on this extension allegedly granted on the 15th October 1982 in its earlier communication with the plaintiff shortly thereafter i.e. after the 15th October. The defendant's telex of the 30th October 1982, page 9 of the Agreed Bundle, sought to obtain an extension on account of delayed shipment of grey cloth from Pakistan. Mr. Tse told the court that he insisted on local yarns for the production. That insistence being not part of the written contract is certainly neither here or there, but, if true, it would be all the more incredible for Pakistani shipment to be raised. The request for extension and amendment of the letter of credit shipment date to the end of November in this telex of the 30th October 1982 made on a different ground and appearing to be a first request is, indeed, inconsistent with Mr. Lo's allegations in respect to this extension on the 15th October 1982.

25. Next, I come to the telex of the 2nd November 1982, at page 10 of the Agreed Bundle. In that telex, the defendant urged the plaintiff to confirm urgently the proposed amendment of the letter of credit "as requested". It was not a demand made in consequence of a prior arrangement. It further stated that "production will be started upon receipt of amendment"; "telex position immediately". The position as put by the defendant in this telex even as late as the 2nd November 1982 would appear to be quite fluid. On the face of it, it was clearly inconsistent with an agreed concrete extension so allegedly given by Mr. Tse to Mr Lo on the 15th October. This telex of the 2nd November 1982 is tied to the telex of the 30th October 1982 and was, therefore, apparently founded on the same excuse of late shipment of yarn from Pakistan instead of the alleged 15th October extension. Mr Lo's attempt to shift responsibility to his secretarial staff was, to say the least, pathetic.

26. In between the 2nd November and the subsequent telex of the 18th November 1982 of the defendant appearing at page 11 of the Agreed Bundle, the plaintiff sent to the defendant a registered letter of the 10th November 1982, which is exhibit "P7", in which the plaintiff demanded damages from the defendant by reason of breach of contract as a result of non-delivery. According to Mr. Lo, the defendant had by then moved to another building but only in its Portion B and subsequently, on or about the 18th August 1982, the defendant moved to Portion A of those new premises. Mr. Lo told the court that he gave a visiting card to Mr. Tse with his address of the new premises i. e. Golden Hill Commercial Building instead of the Ritz Building, as the address in exhibit "P7". Mr. Lo told the court that as a result of the move, the defendant did not, in fact, receive this letter of the 10th November 1982 exhibit "P7" from the plaintiff. No explanation was offered why this other address of Ritz Building was used in exhibit "P7" when the plaintiff's former solicitors by a later letter in the same month, dated the 25th November 1982, page 1 of the Agreed Bundle, amended the old address to the new address of the defendant. As a matter of fact, even earlier than that, in the letter of credit, the new address of the defendant was inserted.

27. However, be that as it may, the letter exhibit "P7"dated the 10th November 1982 was a registered letter and although Mr. Lo of the defendant claimed to have left no forwarding address with the management of the Ritz Building, that assertion is difficult to accept. Being a registered letter to a commercial firm as a limited company whose address, at least-registered address, could have been readily found by the Post Office from the Companies Registry in case of difficulty. I find as a fact, despite the evidence of Mr. Lo, that this letter of the 10th November 1982, exhibit "P7" did reach the defendant. If that be the case as I have found, it is very strange to have another telex sent by the defendant on the 18th November, subsequent to this registered letter from the plaintiff, raising the allegation for the first time that an extension was granted by reason of a machinery break-down. I should set out the terms of that telex in full:

"RE CONTRACT YF/17300/82 16000YDS 21WALES CORDUROY DUE TO SERIOUS DAMAGE IN CUTTING MACHINE THIS COMPELLED US TO ORDER JAPANESE MACHINERY PARTS N ACCESSORIES TO REPAIR. W IFMD YR MR TSE ON 15/10 TO AMEND L/C SHIPMT DATE TO 10/12/82 WITH PARTIAL DELIVERY ALLOWED MR TSE AGREED WE TLX U ON OCT 30 N NOV 2 FOR IMMD L/C AMENDMT BUT UP TO NOW WE HAVE NOT RECD THE AMEN-IF WITHIN 7 DAYS FROM TODAY WE HAVE NOT RECD THE AMENDMENT WE REGARD THIS AS BREACH OF VERBAL AGREEMENT N WL TERMINATE EXECUTION SAID CONTRACT WITH ALL LOSS BORNE BY YR CO. WE DECIDED NOT TO IFM U ANY FURTHER. RGDS LO MING-MANAGING DIRECTOR YEE FUNG TEXTILES TRADING CO LTD"

For the first time, the alleged extension was put on the correct footing i.e. break down in cutting machine. However, the excuse as given in the telex was embellished to the effect that Japanese machinery parts and accessories had to be ordered. The machine had been repaired by the 21st or 22nd of October, so by the time this telex of the 18th November was despatched by the defendant, the costs of and parts for the repair must have been known to the defendant. At the trial, there was no suggestion that parts had to be ordered and this part of the telex was not sought to be explained. There would appear to be little reason for putting forward this extended explanation in this telex of the 18th November 1932. It is not all that material, but it does illustrate that Mr. Lo of the defendant is a person who has little respect for accuracy.

28. I come then to the letter of the 30th November 1982. It is a letter from the solicitors of the defendant to the former solicitors of the plaintiff, which is page 2 in the Agreed Bundle. This letter is yet another glaring example of Mr. Lo's lack of respect for accuracy. The defendant through its solicitors put the break-down date of the cutting machine as at the 12th October 1982. From my calculation of the allegations made in this letter, the defendant again put a different date for the completion of the repair of the cutting machine as at around the 22nd to the 28th of November instead of the date as testified to by Mr. Chung of 21st, 22nd October. Here again in this letter of the defendant, the defendant sought a further extension of the letter of credit to the 31st December 1982. The date of the 12th October 1982 may perhaps be forgiven because of its resemblance to the 2nd of October. But the alleged date of the repair in this letter is inexplicable. The requested further extension of the shipment date in the letter of credit also demands an explanation, but none was forthcoming. It may very well be, but it is a matter of speculation, that because of the allegation of the defendant that colour samples were not given or approved by the plaintiff, a further extension of the shipment date in the letter of credit had to be sought, but this was not raised in the letter of the defendant through its solicitors, the letter at page 2 of the Agreed Bundle dated the 30th November 1982.

29. Lastly, I should summarise my factual findings. I find that the cutting machine did break down and was repaired as Mr. Chung has testified to. I further find that at the end of October Mr. Lo approached Mr. Tse for an extension but with a vague mention of break down of machinery  without any clear revelation. That, perhaps, was understandable as the machine had already been repaired on the 21st or 22nd October and by the end of October, when Mr. Lo approached Mr. Tse, is could be difficult for Mr. Lo to resort to a cause that had never been disclosed and had been rectified. I also accept the evidence of Mr. Tse that the request was made on a vague excuse with no specific time sought by Mr. Lo and that there was no extension. I disbelieve Mr. Lo's version that an extension was granted by Mr. Tse to him on the 15th October 1982. As between Mr. Tse and Mr. Lo, I have absolutely no hesitation in  accepting Mr. Tse's evidence and rejecting Mr. Lo's in so far as the evidence given by both men conflict in the course of these proceedings. I find further as a fact that Mr. Tse did in mid October approve the colour samples for processing by the defendant company. I do not accept that there was an offer by the defendant company of the 6,000 metres or yards of undyed, unfinished corduroy to the plaintiff in early November.

30. There was then no extension granted for late shipment as alleged or at all, but the cutting machinery broke down and it delayed production of the defendant for at least some 20 days from the 1st or 2nd of October to the 21st or 22nd of October.

31. The defendant relied on the exemption clause, Condition 2 on the back of the contract. The defendant argued that when extension was requested, the break-down of machinery then disclosed at the end of October would entitle the defendant to invoke Condition 2.

32. As far as Condition 2 of the contract at page 12 of the Agreed Bundle is concerned, its ambit is admittedly confined, by reason of the facts in this case, to "late shipment due to break down in machinery or to any circumstance beyond the control of the sellers". The break-down in machinery and circumstance beyond the control of the seller were both founded on the break-down of the cutting machine belonging to and used by a factory not owned by the defendant limited company. For the purpose of this case, the exclusion clause, condition 2 is, as admitted, somewhat limited in operation, and its other aspects need not be gone into.

33. The question to be asked must therefore be: Was a break-down in machinery in any factory at all envisaged by the contract? The answer in my view is obviously "No'' for these reasons: The plaintiff took pains to secure an establishment expected to be in smooth progress in the manufacture of the required type of corduroy. Mr. Tse was shown a pair of trousers for factory workmanship. Mr. Lo categorically claimed to be the manufacturer of the material. Mr. Wong made it perfectly clear to this court that the plaintiff was looking for a manufacturer. Although there was no specific mention of sub-contracting or the prohibition of it in the contract between the plaintiff and the defendant, whether performance could "properly be carried out by the employment of a sub-contractor must", as was well said by Lord Green M.R., "depend on the proper inference to be drawn from the contract itself, the subject-matter of it, and other material surrounding circumstances". ⁽¹⁾  As for material surrounding circumstances, in addition to what I have just referred to, Mr. Lo as a representative of the defendant assured Mr. Lo and Mr. Tse that he, Mr. Lo had his own factory and had the necessary experience. Mr. Wong and Mr. Tse were both throughout left with the impression that the defendant was in the process of manufacturing the contract goods itself. This is essentially a rule of construction to be applied with the guidelines suggested by the learned Master of the Rolls, and guided by this rule of construction, one should examine the provisions in the contract to see if sub-contracting would deprive the plaintiff of the substance of what the plaintiff had bargained for.

34. In this contract between the plaintiff and the defendant, it is clearly stated on the left upper corner, "Factory: 6 - 28 Chai Wan Kok Street".  Not only does it represent that the defendant had a factory at the time of this contract but an address of the factory was also given as printed on the face of it. I must not lose sight of the viva voce evidence relating to the search of a manufacturer by the plaintiff for the fulfilment of their contract with the Australian buyer.

35. The contract was made subject to the General Conditions on the back. Condition 2, I need not repeat again, is confined to late delivery due to break-down in machinery or any circumstance beyond the control of the defendant. Both are based on the same ground, and it is not necessary for the purpose of these proceedings to have them separately considered.

36. Condition 7 is a condition that is worth repeating. It reads:

This is yet another clause limiting the liability of the defendant though it is not relied upon by the defendant in its Defence or Counterclaim.

37. Then, we have Condition 11 which reads as follows:

What is so significant is the clear language in this Condition 11 in respect to manufacture of the goods exclusively by the defendant company. Condition 11 reflects, in my view, beyond doubt the parties' intention to have the defendant as the manufacturer. Any sub-contracting would vastly extend the plaintiff's risk. I need not give reasons for it, which are plain enough without further elaboration. The clear language in Condition 11 is to exclude, in my view, the right on the part of the defendant to have the contract vicariously performed. Exemption in Condition 2, so far as it is relevant, would not, in my judgment, apply to a case of sub-contracting such as the one here under consideration.

38. In the circumstances, the rejection of the request by Mr. Tse of Mr. Lo's at the end of October on a vaguely advanced explanation of some break-down machinery was not unjustified. Condition 2 of the contract would not aid, in my view, the defendant in seeking to escape liability as a result of the break-down of the cutting machine in another's factory in October 1982.

39. The plaintiff explained to the court how damages were arrived at. Mr. Tse explained that the contract price was $238,469 with Tuli. That minus $204,800 being the contract price of the defendant would give $33,669. Mr. Tse calculated freight and insurance for the same quantity of goods as being approximately $6,669. $33,669 minus $6,669 would yield a net claim balance of $27,000. A 10% deposit was admittedly paid by the plaintiff to the defendant in the sum of $20,480. These I also accept as I accept the loss stated by Mr. Bleich and converted into Hong Kong dollars by the plaintiff. All in all, the claim by the plaintiff proved against the defendant stands as $105,230.

40. As for the counterclaim, if in fact an extension was granted to the end of November, the defendant failed to deliver the goods, but the allegation was that the plaintiff had not approved colour samples. Such alleged failure to approve colour samples was not pleaded in the Defence or Counterclaim, and, therefore, if indeed an extension had been granted as alleged, the defendant would be entitled to forfeit the deposit but the defendant has failed to establish any claim against the plaintiff by reason of the fact that the failure to complete the contract as at the alleged extension up to the 30th November 1982 was caused by a ground not raised by the defendant as an issue between the parties to this action. But in view of my finding against the defendant, the Counterclaim must be dismissed.

41. In the circumstances, I give judgment for the plaintiff in the sum of $105,230 with interest thereon at 12% per annum from the 1st November 1982 to the date of judgment. The defendant's Counterclaim be dismissed. Costs of the action and Counterclaim be costs for the plaintiff.

(1)     Davies v. Collins, [1945] 1 A. E. R. (Annotated) 247 at p. 250B.

Representation:

Mr. K. M. Chong, instructed by M/S Fan & Fan for the Plaintiff.

Mr. Derry Wong, instructed by M/S K. C. Yung & Co. for the Defendant.