Lau Chun Yuen t/a Luen Kiu Metal Manufactory v. Yeung Cheuk Yiu Brian t/a Betterway Industrial Co.

HCA005624/1996

1996, No. A5624

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

Coram : Hon Mr Justice Findlay, in Court

Dates of hearing: 23, 24, 25 and 26 March 1998

Date of handing down of judgment: 31 March 1998

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JUDGMENT

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The Background

1. The plaintiff claims payment of the sum of $77,818.19 being the price of button eyelets and button plates sold and delivered to the defendant. The plaintiff commenced this action in the District Court on 4 August 1994. In that court, the defendant filed a defence and counterclaim in which, subject to set-off and counterclaim, he admitted the claim, and in which he claimed delivery of some moulds, or payment of $20,000, and damages arising out of late delivery in the sum of $82,359.36. However, when the matter was due for trial in that court in September 1995, the defendant obtained leave to amend his defence and counterclaim to deny liability for the claim and to raise another counterclaim for $3 million damages for loss of custom, goodwill and repeated orders. The defendant also complained that the plaintiff failed to deliver "270,000 pieces of colour nickel buttons and buckles". Because this counterclaim exceeded the jurisdiction of the District Court, the matter was transferred to this court. In December 1996, the defendant amended his counterclaim again to $100,098.44 in addition to the claim for $3 million.

The Moulds

2. At the end of the trial, the plaintiff conceded that the defendant was entitled to set off the claim for the moulds in the sum of $20,000. There was some dispute remaining about one of the moulds, but the plaintiff concedes the defendant's claim, and I can give him no more than he claims.

3. Accordingly, the plaintiff's claim is reduced to $57,818.19.

The Shortfall in Delivery

4. Miss Lau Yu Sin, the sister of the plaintiff and the plaintiff's only witness, conceded that there was probably some shortfall in delivery of the eyelets. The defendant claims that the shortfall was 270,000. On the evidence, it was probably more than this, but this is all the defendant claims, and I can allow no more. The agreed price for the eyelets was $75 per 10,000. Accordingly, the defendant is entitled to a further reduction in the plaintiff's claim of $2,025, leaving $55,793.19.

The Late Delivery

5. This is the major issue in this action. Broadly, the defendant's case is that, in the middle of July 1993, the parties entered into an agreement in terms of which the plaintiff agreed to deliver the eyelets by 15 August 1993 and the button plates by 20 August 1993. The plaintiff's case is that, although these dates were proposed by the defendant to Miss Lau, she said that this was impossible, and the agreement reached was that the plaintiff would deliver the goods by instalments as soon as possible.

6. It is for the defendant to establish the case on which he relies on a balance of probabilities.

7. It has to be said that the only two material witnesses, Miss Lau for the plaintiff and the defendant himself, were totally unreliable. They were both evasive, hesitant, self-contradictory, implausible and utterly unconvincing as witnesses to the truth. Whether this was because they were being untruthful or because their memories were unreliable in recounting events of nearly five years ago matters not. I find that I cannot rely on the evidence of either of them to establish the truth. In this event, I am thrown back on the probabilities, the contemporaneous documents and the onus in order to come to a determination.

8. The main contemporaneous documents are two written orders issued by the defendant; one on 28 July 1993 in respect of 3 million nickel eyelets and 200,000 antibrass eyelets and the other dated 30 July 1993 in respect of "approximately 2,500 gross" of button plates. The order dated 28 July 1993 specifies delivery on 15 August 1993, says "Please provide prototypes first" but does not mention any price. The order dated 30 July 1993 states a delivery date of 20 August 1993, says that "The colour specifications to be supplied later", asks "Please provide prototypes first" and also does not mention any price. The defendant says that these orders were simply to confirm an agreement reached in the middle of July. His explanation for the omission of the important element of the agreed price - that he thought it should be kept secret - is unbelievable. Miss Lau's evidence that there was no discussion at all before these orders were received; that they arrived unexpectedly out of the blue, is improbable. In my view, it is likely that there was a preliminary discussion before the orders were issued, but that this did not result in a concluded agreement. If there had been an agreement, the price agreed would have been included in the orders.

9. It is probable that, after the orders were received by the plaintiff, there was another discussion during which agreement was reached and the price settled. In my judgment, it is unlikely that Miss Lau agreed at this time to delivery dates on 15 and 20 August 1993. In relation to the button plates, on the defendant's own case, moulds had to be made, and this would take two weeks. In addition, the prototypes had to be submitted and colour specifications supplied by the defendant. The defendant advances a case that Miss Lau and her husband personally contracted with him to work out these colour specifications, but Miss Lau denies this. The defendant concedes that these colour specifications were not supplied to the plaintiff until 9 September 1993. And on 10 September 1993, the defendant sent a fax in which he ordered another 1.5 million nickel eyelets and 30,000 pewter eyelets. The additional 1.5 million nickel eyelets were ordered on 5 August 1993. Miss Lau appeared to concede that these eyelets were to be delivered by 20 August 1993, but, as I have said, I cannot place any reliance on what she says. The defendant's evidence is that Miss Lau said that the plaintiff could produce 100,000 eyelets per day, and this is confirmed by the figures for the actual production. With that capacity, how could the plaintiff possibly produce 1.5 million eyelets in 15 days when the plaintiff was already fully occupied in producing the other 3.4 million ordered? It must have been obvious to both witnesses that the plaintiff could not deliver on 15 and 20 August, and, therefore, it is unlikely that the plaintiff agreed to these dates.

10. The other major factor operating against acceptance of the defendant's case is that there is no evidence at all of any written communication by the defendant to the plaintiff complaining about a failure to comply with the agreed delivery dates. This might be acceptable if it were so that the parties did not communicate in writing, but this is not the case. The defendant wrote to the plaintiff about various matters, including a complaint about short delivery, and the plaintiff wrote to the defendant, including giving him schedules of progress. In this context, it is not probable that, if the defendant thought that he had a right to complain about the plaintiff failing to keep her word, that he did not do so in writing in clear and unequivocal terms.

11. Even if I am wrong in concluding, on the probabilities, that the delivery dates as advanced by the defendant were not agreed, the only other sensible conclusion on the evidence is that no finding can be made on what was agreed. In this event, the defendant also fails.

Causation

12. In any event, the defendant has not shown on the probabilities that any delay in delivery by the plaintiff resulted in the defendant suffering damages. After the defendant had received the eyelets and button plates from the plaintiff, they had to be sent to mainland China to be assembled. When they returned, they had to be packed and shipped to the defendant's customer in Beijing and Shanghai. It appears that, on the evidence produced by the defendant, although the first delivery was received from the plaintiff was on 20 August 1993, the first delivery to the defendant's customer was not until 6 October 1993. It also appears that the first complaint from the defendant's customer "that the accessories to start the production are missing" was not until 16 September 1993. By this time, the plaintiff had delivered nearly 2 million eyelets to the defendant. The defendant has not shown that it is likely that, if these eyelets had been supplied to his customer, there would have been any complaint from the customer.

13. We know that, at the crucial time, the defendant had lost all his staff, and Miss Lau and her husband helped him out. It is likely that the defendant's failure to ship the accessories to his customer as they were received from the plaintiff was due to the deficiencies in his own organisation. If the defendant had sent the accessories to his customer as they were received from the plaintiff, it appears, on the evidence, likely that this would have met the customer's schedule. Or, at least, the defendant has not shown on the probabilities that the deliveries by the plaintiff were such that this resulted in him suffering any damages.

The Result

14. In the result, I find that the plaintiff has made out its case for a claim for $55,793.19. There will be judgment for the plaintiff in this sum. I also find that the defendant has failed to establish his counterclaim. This claim is dismissed.

Costs

15. The defendant has succeeded in reducing the plaintiff's claim by some $22,000. In my preliminary view, a just order as to costs on the plaintiff's claim would be that the plaintiff be entitled to recover three-quarters of her costs of the claim from the defendant and that the defendant be entitled to recover one-quarter of his costs of defending the claim from the plaintiff. I make an order nisi accordingly.

16. There seems no reason why the plaintiff should not have her costs of defending the counterclaim, I make an order nisi in those terms.

Representation:

Mr Simon Leung, instructed by Messrs Tony Kan & Co, for the plaintiff.

Mr MC Chiu, instructed by Messrs Deacons Graham & James, for the defendant.