Ng Tai Kee Trading Co Ltd v. Wai Hing & Co (A Firm)

HCCL000007/1980

Sales of Goods: Non-Delivery - claim for consequential loss - extension of delivery date - measure of damage

Date of trial: 28th - 30th April, 1981 & 4th May, 1981

Date of handing down judgment: 15th June, 1981

Coram: Zimmern, J.

Date of Judgment: 15th June 1981

Date of trial: 28th - 30th April, 1981 & 4th May, 1981

Date of handing down judgment: 15th June, 1981

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JUDGMENT

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1. By a contract in writing made on 13th March 1978 between the plaintiff and the defendant, the plaintiff bought and the defendant sold 10,000 metric tons of second choice hot rolled steel plates of Italian Origin 5% more or less at the price of US$124 per metric ton C & F Hong Kong. The defendant delivered 3,975.54 metric tons and failed to ship the balance. The plaintiff now sues the defendant in damages for such non-delivery. By its re-amended Statement of Claim the plaintiff alleges that in November 1978 when the goods ought to have been shipped from Italy under the contract as extended there was no available market in which the plaintiff could have obtained equivalent goods in Hong Kong. There is no dispute about this.

2. The plaintiff claims that the defendant knew or ought to have known that the plaintiff might convert the contract goods into round bars and supplied particulars that if the goods had in fact at that time been delivered and converted into round bars it would have made a profit of US$453,458.51. Alternatively it claims damages to be assessed. The defendant admits liability and the sole question before me is the assessment of damages.

3. It is common ground between the parties that these are scrap metal fit for conversion into certain end products. It is the plaintiff's case that such goods can be rolled into high tensile steel bars. The defendant through its sole proprietor Mr. CHANG Liang-hou disputes this. He says that the goods are scrap and although part of them under the contract description could be converted into high tensile bars in accordance with British Standard Specification it is impossible to say that the whole quantity could be converted in bars of such specifications and hence could not be sold as such bars. The plaintiff further submits that if the goods cannot be converted as high tensile bars then it can certainly be produced into mild steel bars. The defendant again disputes this and says that mild steel bars are soft bars used for binding and by reason of its mechanical composition the contract plates were hard. Mr. Chang further says that although such plates can be converted into bars they can neither be termed high tensile nor mild steel bars and if sold in the market would fetch a price of below that of mild steel bars. I have heard with interest the evidence called by the plaintiff and the evidence of Mr. Chang the defendant on the conversion of these plates into bars and I far prefer the evidence of Mr. Chang to the evidence of those witnesses called by the plaintiff.

4. I reject the plaintiff's first claim for two different reasons. First under Sec. 53(2) of the Sales of Goods Ordinance the measure of the damage is the estimated loss directly and naturally resulting in the ordinary course of events, from the seller's breach of contract by non-delivery.

5. The plaintiff carries on business as dealers in metals. It bought and sold metal products. This was known to the defendant at all material times. For the plaintiff to succeed on a claim based on a lost opportunity of converting the plates into bars it must plead and prove

All the plaintiff could allege was that it might, if they had received the plates, have converted them into bars. The evidence shows that in its long existence as a dealer in metals it has not once converted anything on its own account or for others, and this claim for US$453,458.51 is too remote and cannot be sustained. It would not be out of place to add here that that it is the duty of the plaintiff to mitigate damages and not to inflate them with imaginary consequential losses.

6. Secondly the figure of US$453,458.51 was calculated in a manner which I can only describe as hopeful but quite unbusinesslike. I am not going to go over them. All I need to say is that no consideration was taken that it would take quite a few months for the conversion, no evidence was led as to the selling prices of bars on dates after conversion, no regard was given for the substantial outlay of money required for the conversion and the interest on the price of the plates tied up for so many months.

7. I now turn to the alternative claim for damages to be assessed. The parties are agreed that the plaintiff could not have entered the market to buy equivalent goods when the defendant failed to deliver as none was available. On the evidence it is clear that a substitute was available i.e. used ship plates for rolling into mild steel bars.

8. I accept the evidence of Mr. Chang the defendant that the plates he sold would be priced in the market 5% to 10% below that of used ship plates. The plaintiff had not resold the goods nor did it buy any substitute for re-sale but that does not matter. Its damage if any other than nominal can be assessed on the difference between the market price of the substitute after adjustment and the purchase price.

9. The contract between the parties dated 13th March 1978 was for 10,000 tons 5% more or less for prompt shipment from Italian main port within 60 days after receipt of letter of credit. The plaintiff opened his letter of credit promptly but in respect of the balance the defendant was in breach as to shipment date but the plaintiff waived the breach and amended its letter of credit two or three times to allow for late shipment. On the 6th November 1978 the plaintiff served notice on the defendant that they must ship no later than 20th November 1978 and the defendant failed to do so. The damages are to be assessed on the date of breach and in this case the extended time of delivery i.e. 20th November 1978 (Ogle v. Vane (1868) L.R. 3 QB 272). It is the plaintiff's evidence and not challenged by the defendant that the market price in November of used steel plate was US$167 per metric ton. This is a higher price substitute to the extent of 5% for which allowance has to be made. The loss suffered per metric ton is US$167 less 5% less cost of US$124 i.e. US$34.65. The contract was for 10,000 metric tons 5% more or less and the defendant was therefore bound to ship 9,500 metric tons only. The defendant shipped 3,975.54 metric tons leaving a balance of 5,524.46 metric tons which at US$34.65 per metric ton comes to US$191,422.53. A counterclaim of US$21,927.52 was admitted by the plaintiff leaving US$169,495.01. The agreed exchange rate was $4.80 per US$1 making $813,576.04. On the 4th May 1981 I gave judgment in that sum for the plaintiff with costs and interest thereon at 12% per annum from 1st April 1979 (agreed date) to date of judgment and said would give my reasons later which I now do.

Representation:

R. Mayne (Deacons) for Plaintiff

F. Eddis (Stevenson, Low & Co.) for Defendant