Chang Liang Hou t/a Wai Hing and Co v. Italsider S.P.A.
Read the full judgment text of HCCL 25/1981 on BabelCite. This HCCL judgment was delivered on 11 June 1981.
1. By a contract in writing dated 27th May 1977 entered into between the Plaintiff and the Defendant, the Plaintiff agreed to buy and the Defendant agreed to sell 60,000 metric tons (M.T.) 5% more or less of second choice steel plates at US$115.70 per MT for shipment from Italy minimum 10,000 MTS per month from July to December 1977 upon terms that the purchaser would open irrevocable and confirmed documentary credits in favour of the seller valid for an effective period of 50 days for shipment
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HCCL000025/1981 Sales of Goods: sub-purchaser, variation of contract between purchaser and sub-purchaser-consequential losses-measure of damage Date of trial: 4th - 8th May, 1981 Date of delivery of judgment: 11th June, 1981
Coram: Zimmern, J. Date of Judgment: 11 June 1981 ----------------- JUDGMENT ----------------- 1. By a contract in writing dated 27th May 1977 entered into between the Plaintiff and the Defendant, the Plaintiff agreed to buy and the Defendant agreed to sell 60,000 metric tons (M.T.) 5% more or less of second choice steel plates at US$115.70 per MT for shipment from Italy minimum 10,000 MTS per month from July to December 1977 upon terms that the purchaser would open irrevocable and confirmed documentary credits in favour of the seller valid for an effective period of 50 days for shipment and 60 days for negotiation. 2. The Plaintiff an experienced dealer in metals had agreed to buy these scrap for intended re-sale to Taiwan but this business fell through due to Governmental regulations there and he failed to open his documentary credits in terms of the contract. This was a breach on his part which would have entitled the Defendant company to rescind but it did not do so and the contract subsisted. 3. By an exchange of letters between the parties both dated 20th February 1978 it was further agreed between them as follows:
4. It is common ground that the above was intended to cover 30,000 MTS as there was a different agreement on the balance of 30,000 MTS which does not concern this case. 5. At the instance of the Plaintiff the following letters of credit were opened in favour of the Defendant:
6. The Defendant shipped the goods covered by the first two mentioned credits but it only shipped 3,975.54 MTS under the 3rd credit for 10,000 MTS leaving a balance of 6,024.46 MTS. The Plaintiff did not open a credit for the balance of 7000 MTS nor did the Defendant ship. This is an action by the Plaintiff in damages for the non-delivery of the 13,024.46 MTS. 7. By its re-re--re-amended Statement of Claim the Plaintiff claims
Liability 8. At the hearing Mr. Mills-Owens rightly and properly conceded that on liability for non-delivery of 6,024.46 MTS he had no defence. For the 7,000 MTS since the Plaintiff never opened the credit for this lot he said there was no obligation on the Defendant to ship as the credit was a condition precedent to any performance by the Defendant. This has now to be examined. 9. On 19th April 1978 the Defendant's agents here wrote to the Plaintiff in part:
At that date the Plaintiff had not opened a credit for 7,000 MTS which was not due to be opened till 15th May 1978. On the evidence before me there is nothing to suggest that the Defendant indicated it was able or willing to deliver this lot in accordance with the contract date or at all. Indeed, it is clear that the Defendant was either unable or unwilling to ship the balance of 13,000 MTS. Accordingly I cannot accept the Defendant's argument that the opening of a credit for 7,000 MTS was a condition precedent to liability. The parties had expressly agreed on the mode of payment - by letter of credit. Well before the time agreed for the Plaintiff's performance of this obligation the Defendant told him not to do so. Thereafter the Defendant never intimated to the Plaintiff that it was willing or able to deliver against a letter of credit or otherwise. In these circumstances the Defendant cannot be allowed to insist on the condition precedent of a letter of credit as a defence for its failure to deliver the 7,000 MTS and the Defendant is liable in damages. (See Plastic Moda Societa per Azoni v. David Sons (Manchester) Ltd. [1952] 1 L1. L. Rep. 527) Damages 10. The two lots have to be dealt with separately. In respect of the balance of 6,024.46 MTS undelivered under the letter of credit opened by Ng Tai Kee Trading Co. Ltd, for 10,000 MTS the Plaintiff claims (a) an indemnity alternatively (b) loss of profit through sub-sale alternatively (c) damages to be assessed. 11. The claim for an indemnity is based on the Plaintiff's sub-purchaser Ng Tai Kee's claim against him for non-delivery of the balance of 6,024.46 MTS. In my view this claim is misconceived. It is clear that at all material times the Defendant knew that the Plaintiff purchased the used plates for the purpose of re-sale to other dealers or to rolling mills in the East for the end use of rolling into steel bars. It is also clear that the Defendant knew that the Plaintiff had sold what was called the second quantity of 10,000 MTS to Ng Tai Kee Trading Co. Ltd. I express no view as to how the damages would have been assessed including the claim for an indemnity if the Plaintiff had not varied his agreement with Ng Tai Kee. At the request of all the parties Ng Tai Kee's claim against the Plaintiff for non-delivery was heard and adjudged immediately before the present action. There this Court rejected Ng Tai Kee's claim for consequential loss and awarded it damages on difference between estimated market value as of November 1978 and the contract price. The month of November was taken because the parties between themselves had agreed to extend the delivery date to then but the Defendant herein was not a party to the agreement and never at any time indicated that it was willing or able to delivery the balance of 6,000 odd MTS after the contract date. Accordingly I find it impossible to say that the Defendant can in such circumstances be liable for the consequential losses of the Plaintiff and the claim of his sub-purchaser against him. That could not have been in the contemplation of the seller Defendant at the time the contract was entered into. The contract was one thing and the sub-sale though at one time much the same thing was without consent of the Defendant turned into a different thing altogether. 12. What I have said also covers the claim for loss of profit which is a consequential loss though the Plaintiff's sub-sale price may be some evidence of its value (Patrick v. Russo-British Grain Export [1927] 2 KB at 538). 13. On the 3rd claim for damages to be assessed the shipment date was fixed at within 50 days after opening of letter of credit. The credit was opened on 20th March 1978 so the Defendant had up to say 10th May 1978 to ship. Time was of the essence of the contract. Actually on 18th March 1978 the Defendant advised the Plaintiff that it would not be able to ship the whole of the 10,000 MTS. At the end of March the Defendant advised the Plaintiff that it could only ship 4,000 MTS against Ng Tai Kee's credit and requested that it be reduced. This I find to be an anticipatory breach which would have entitled the Plaintiff to sue in damages for the balance of 6,000 MTS forthwith as surely there can be no clearer indication of breach then for a seller to inform the buyer to dispose of his means to payment in hand. The buyer can of course refuse to accept the repudiation but here I am concerned with the buyer's duty to mitigate damages. From the end of March through November 1978 the Plaintiff pressed the Defendant for the balance of 6,000 MTS and indeed, Ng Tai Kee extended its credit two or three times to cover shipment eventually up to 20th November 1978. From the correspondence one may find that the Defendant though not unequivocal never suggested or advised that it would perform its obligation under the contract within contract time or as extended or at all. The Defendant did not call any witness at the trial. Generally in non-delivery cases a buyer will extend time when he wants the goods for a specific purpose or on a rising market. The Plaintiff extended time because of his contract with Ng Tai Kee which company extended the letter of credit because of a rising market. It is a purchaser's right to extend the time fixed for the seller's delivery but save with the seller's agreement to so extend time the law imposes a duty on the buyer to mitigate his damages should the seller fail to deliver. He cannot take advantage of a rising market to inflate damages. "The fundamental basis is thus compensation for pecuniary loss naturally flowing from the breach; but this first principle is qualified by a second which imposes on a plaintiff the duty of taking all reasonable steps to mitigate the loss consequential on the breach and debars him from claiming any part of the damages which is due to his neglect to take such steps" (per Viscount Haldane in British Westinghouse Co. v. Underground Ry. [1912] AC at 689.) 14. I cannot accept the contention of the Plaintiff that the court should take 20th November as the date to establish a market value for the goods. His sub-buyer succeeded in establishing that date against him but that cannot affect the Defendant. I hold that the Plaintiff was unreasonable in not facing the realities of the situation upon the Defendant's breach. The proper date to establish a market value for the goods is the last date for shipment under the contract as extended by agreement and that was 10th May 1978. 15. The parties are agreed that there was no available market for equivalent goods so a market value has to be established. The Plaintiff sold the goods to Ng Tai Kee at the price of US$124/MT on or about 14th March 1978. There is evidence that one of the Plaintiff's sub-purchasers sold its shipment at the end of April at the price of US$137.50. Both are indications of the market values of the goods in March and April but I accept that the April figure gives a more accurate picture as it was a sale of shipping documents the cargo then enroute whereas the March figure was for goods as yet unshipped. In the first case I established a market value of US$158.65/MT for November. Adopting the method used by their Lordships in the Privy Case of Tai Hing Mill v. Kamsing Factory(1) of a steady rise in the market from April to November I establish the following values:
The measure of damage per MT is the difference between market value in May and cost i.e. US$140.52 less US$115.70 per MT or US$24.82. 16. The claim is for non-delivery of 6,024.46 MTS. This was for a lot of 10,000 5% more or less under the contract. The Defendant was therefore only bound to deliver 9,500 MTS. It delivered 3,975.54 MTS leaving a balance of 5,524.46 MTS which at US$24.82/MT comes to US$137,117.09. The agreed exchange rate was $4.80/US$1 and this brings it to $658,162.03. 17. As to the 2nd lot for 7,000 MTS much the same might be said and the Plaintiff well after dates fixed for delivery was pressing for shipment. Again the Plaintiff has claimed in the alternatives. I hold that the normal assessment under Section 53 ought to apply and consequential losses be ignored. The date fixed for the credit was 15th May 1978 with shipment 50 days thereafter. The last day for shipment would have been about 5th July. There was no duty on the Plaintiff to accept the anticipatory breach in March and the Plaintiff even on a rising market is entitled to claim the normal measure of damage based on the last day for delivery (Brown v. Muller [1872] LR 7 Ex. 319). The arithmatic is as follows: 18. 9,500 MTS less 3,000 MTS shipped comes to 6,500 MTS. The estimated market value in July is US$146.56 less cost of US$115.70/MT makes US$30.86/MT. For 6,500 MTS at US$30.86/MT the sum comes to US$200,590. At the exchange rate of 4.80 the figure comes to $962,832. 19. There will be judgment with costs in the sum of $658,162.03 and $962,832.00, i.e. $1,620,994.03 and interests on the sum of $658,162.03 at the rate of 12% per annum from 1st July 1978 to to-day's date and on the sum of $962,832.00 at the rate of 12% per annum from 1st September 1978 to to-day's date. Representation: F. Eddis (Stevenson, Low & Co.) for Plaintiff R. Mills-Owens, Q.C. & R. Tong (Johnson, Stokes & Master) for Defendant (1) [1979] AC 91 |