Kaiser Garments Ltd v. Lai Shum Co
Read the full judgment text of HCA 2705/1976 on BabelCite. This High Court CFI judgment was delivered on 13 July 1979.
1. The plaintiff is Kaiser Garments Limited - a company formed from the Nanyang Garment Factory which was the firm which entered into the contract the subject matter of this action. They were represented by Mr C.Y. Lee on the instruction of T.K. Cheng & Co.
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HCA002705/1976
IN THE SUPREME COURT OF HONG KONG HIGH COURT -----------------
----------------- Coram: Silke, J. in Court Date of Judgment: 13 July 1979 ----------------- JUDGMENT ----------------- 1. The plaintiff is Kaiser Garments Limited - a company formed from the Nanyang Garment Factory which was the firm which entered into the contract the subject matter of this action. They were represented by Mr C.Y. Lee on the instruction of T.K. Cheng & Co. 2. The defendant firm is now in liquidation. They were "in person" being represented by Madam Cheng Tak-ling and Mr Tsui Tai-yan. There is some doubt if the latter were a partner in the defendant firm but I permitted him to be the spokesman, so to speak, as he was well versed in the factual matters relevant to the issues. 3. The writ was issued on the 16th December 1976 with the Statement of Claim endorsed thereon and served the next day. A Defence was filed by consent, out of time 18th January 1977 by the solicitors then representing the defendant firm. A reply thereto was filed, again by consent out of time, on the 5th February 1977. 4. The Statment of Claim was amended pursuant to the Registrars Order of 1st March 1978 and reamended, pursuant to the Order of O'Connor J., on 5th February 1979. 5. I have set out the chronology of the pleadings because no amendment have been made to the defence to take cognisance of the alterations to the Statement of Claim. However Mr Lee has, and quite properly in my view, taken no pleading points in the course of his submissions. 6. In the course of the trial he abandoned paragraph (2) and (3) of the schedule to the reamended Statement of Claim and the claims in the prayer at paragraph (a)(ii) and (iii): the net effect of this is that we are concerned solely with a claim under paragraph 9 or, in the alternative, paragraph 10 of the Statement of Claim : for $42,301.75: on damages for breach of contract and, alternatively, for damages for breach of warranty - interest and costs. 7. On the 5th January 1978 a contract ("the contract") was entered into between the plaintiff, represented by Mr Lee Wah-hon (1PW), and a Mr Lok (3DW), representing the defendant firm, for the sale of 100% Cotton Trinting Dyed Flat Raised and Pre Shrunk 74 x 44: 10S x 10S width 44" (Double pre shrunk 12%) 30,000 yards" material. The colours were to be Beige; 10,000 yards; Rose : 10,000 yards; Green : 10,000 yards all at $5.80 per yard. Delivery at the end of February 1976. To the contract were attached samples of the type of cloth required in the colours referred to. 8. The contract was later varied mutually both as to quantity and colour. 9. It would seem that the defendant firm were not cloth makers but intended to supply the order by purchases from another firm who were. 10. The plaintiff intended to make up the cloth into garments and to sell the made up articles to Metropole Trading Company with whom several contracts were entered into. (EXP2(A) to (E)). Though their pleadings refer to another firm situated in America. 11. The series of plaintiffs contracts started on 24th December 1975 with revised contracts on 23rd February 1976, the latter consisting of contract 3453 in respect of jeans, vests, jumpsuits mens and jumpsuits ladies, contract 3454 ladies hot pants and ladies short leg jumpsuits. 12. It is specifically pleaded by the plaintiffs that, under paragraph 5 of the Statement of Claim the material, described as cotton twill was bought "for making the same into trousers for resale" and that this was made known to the plaintiff. 13. I would accept on the evidence that the sale was a sale by description and by sample - this is not really disputed as I understand the defence evidence. 14. What happened after the signing of the contract, and there had been conversations between the parties before that signing, was according to Mr Lee Wah-hon (1PW) that about two weeks later three bales containing 76 yards each of the materials required were delivered as indicative of the materials which would be supplied under the contract. Mr Lee says that he examined the cloth and found it to be an inferior kind which did not answer the description or the sample - it was not constructed with the required number of threads and thus thinner than that needed. 15. He told Mr Tsui, of the defendant firm, this who replied that "may be they are not very good" - they were samples but that the later manufactured cloth would be up to the required standard. The bales were unused. 16. It is as a result of that which Mr Tsui is alleged to have said that the warranty issue arises. It is Mr Tsui's (2DW) evidence that as a result of the bales having been sent to the plaintiff a change of colour - from rose to white - was agreed. Mr Tsui went on that he told Mr Lee that "As we had already manufactured the beige and green he had to accept them as the construction of the fabric of these two colours had been affected after bleaching and dyeing process". 17. He said he earlier had told Mr Lee that the material, if manufactured as required in the contract, would be very difficult to sell should it be rejected. The process with which Mr Tsui was concerned is that known as "pigment dye". 18. About ten days after the delivery of the samples and the conversation above referred to, approximately 10,000 yards of beige and green were delivered to the plaintiff. There was again a complaint made as to the thinness of the cloth and Mr Lee says he showed it to his buyer Metropole. There was the change made from the rose to white, the quantity to be about 5,000 yards. 19. As I have said the reduction in quantity and the alteration in colour were mutually agreed and there is no complaint in respect of the white colour material which was paid for. 20. About ten days after the delivery of the material in beige and green the plaintiff paid for it. The sum being $59,841.50. There has been an invoice (EXP3) produced, dated 6th March 1976 in which the material paid for is described as "74 x 44 x 10S x 10S pigment dyed cotton drill (Double pre shrunk) 10,317½ yards. Beige and green in colour". 21. There is some dichotomy in both the pleadings and the evidence as to how this payment was in fact made - but nothing turns on this in so far as it was made. 22. Mr Lee says the payment was made because Mr Tsui insisted. 23. In May 1976 Metropole brought its American customer to see the goods being manufactured by the plaintiff from the cloth. He was, according to Mr Lee, dissatisfied. 24. Both Mr Tsui and Mr Lok were informed of this - they came to the factory and met the American and according to Mr Lee told that person that the cloth was of the right kind. 25. He, whatever his misgivings, accepted delivery of the goods which had then been produced and which had been shipped but would not accept future manufactured goods made of the same material. 26. He later, on receipt of the goods, said he could not sell them and claimed damages as against the plaintiff. I have not been told the quantity shipped or how much material was left over at this point. I mention the rejection by the American customer simply in the general context of that which took place. 27. Eventually a total of 2,400 yards was used by the plaintiff and he held left on his hands 7,866 yards. This was sold in March 1979 at $1.95 per yard. 28. The amount claimed in the Statement of Claim is arrived at by taking the total payment made by the plaintiff of $59,841.70, deducting from that the goods valued at $1.70 or $17,593.75. The reasoning behind this escapes me as at least 7,866 yards were sold at $1.95 and promptly resold at $2.25 per yard. I shall consider what should be the proper measure, if necessary, later. 29. In May of 1976 the plaintiff decided to have the material laboratory tested. 30. A sample of the beige was sent and what is accepted as an erroneous report on it was provided by Hong Kong Standard and Testing Centre. 31. At the end of that month a further test was made the result of which is shown in (EXP6(b)). The net effect is a cloth "71 x 40: 12.6's/1: 12.1's/1". 32. I have heard evidence upon the tests and the reports made then and later. 33. The green was sent for testing in November 1977 by the plaintiff and in June 1976 by the defendant the results differed slightly. 34. Allowing for the permitted tolerance and bearing in mind Mr Lee's evidence as to thinness I would accept on balance that the materials supplied by the defendant to the plaintiff were defective. Whether or not they accorded with the sample attached to the contract I know not as these samples were not tested. They did not accord with the description given in the contract as to warp and weft in respect of the threads per inch not the counts of yarn. 35. Mr Lee however is no expert, either in business or in dealing in cloth. 36. The plaintiff relies on two basic points : breach of an implied condition and breach of warranty and prays in aid section 15 in respect of the former and section 13 in respect of the latter of the Sale of Goods Ordinance. 37. Dealing first with the breach of warranty - that of Mr Tsui subsequent to the contract. In evidence Mr Tsui said that "as we had already manufactured the beige and green I told him he had to accept them as the construction of the fabric of these two colours had been affected after the bleaching and dyeing process". He further agreed that there was no mention in the contract of the phrase "pigment dyed" but that it was discussed between the parties prior to the signing of the contract. 38. I would accept his evidence on these points and consequently reject Mr Lee's evidence as to the alleged warranty. They are, in my view, mutually exclusive - that warranty as pleaded in paragraphs 6A-6B. of the Statement of Claim. 39. As I have said this was a sale by description and by sample. S15 of the Sale of Good ordinance implies a condition that "the goods shall correspond with the description". They, on the evidence, did not. 40. Under the provision of Section 17 of that ordinance three conditions are implied in respect of a sale by sample. I do not know if the bulk did or did not correspond with the sample as there is no evidence before me as to the construction of the sample as opposed to the construction of the material supplied. The colours, to the eye at least, appear the same. 41. There was an ample opportunity afforded to the buyer to examine the goods. I am not aware of any defect in the goods other than their failure to live up to the description in the contract. This failure, the thinness, was readily apparent to the buyer though he did not seek its actual reason until very much later. 42. I shall confine myself to the undoubted breach of the implied condition as to the failure of the goods to correspond with the description. 43. The question which immediately arises is: was there waiver and if so how does this affect the claim by the buyer. 44. On the evidence there was not a complete excusing of the breach - the plaintiff did complain and in so doing did raise objections to the goods as they were. 45. Did he in effect waive his right to reject? For it is specifically pleaded that he did reject the goods. Section 13 of the Ordinance states
46. It was Mr Lee's submission that the plaintiffs case fell within Section 55 of the ordinance. This reads
47. And, while there was delay here on the part of the plaintiff in making up his mind what to do, he is entitled to damages for breach of contract. 48. With respect to Mr Lee that the plaintiff had a right to reject I have no doubt but it is equally clear from his conduct that he waived that right. The letter purporting to reject, and it is expressly pleaded in paragraph 8 of the Statement of Claim that the goods were rejected, came after the goods had been with the plaintiff for two months, after they had been inspected and thought to be defective, after they had been paid for and after some of the materials had been made up and accepted for delivery by a customer. And even that customer thought them to be defective before accepting them. 49. Had it been pleaded that, in the alternative, the plaintiffs had elected or been compelled to treat the breach of condition on the part of the seller as a breach of warranty the position might have been different. 50. But the only breach of warranty pleaded related to the alleged warranty after the delivery of the goods and no other. 51. Paragraph 8A of the Statement of Claim relies on the warranty I have found not to exist. 52. Should I be wrong in finding that the plaintiff is bound by his pleading that he rejected the goods - which pleading fails as I have said - I would assess damages for breach of the impleaded warranty at $41,502.80. The calculation is : price paid $59,841.50 less the sale price of 7688 yards in 1979 at $1.95 per yard. While not exact, as there is no evidence of the value at the time of delivery, this is the best I could have done in the circumstances. 53. As Section 55 of the Ordinance does not avail the plaintiff he having waived his rejection and not pleaded a breach of condition in diminution or extinction of price or maintained an action for damages for breach of that warranty the action herein fails. 54. There will be judgment for the defendant with costs.
Representation: C.Y. Lee, instructed by Johnny T.K. Cheng & Co. for plaintiff Defendant company represented by Madam Cheng Tak-ling (partner) and Tsui Tin-yau (Manager) |