Nic Sang Leather Factory (A Firm) v. A.J.'s International Trade Centre (HK) Ltd

HCA007517/1981

Action No. 7517 of 1981

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Deputy Judge: Mr. Denis Chang, Q.C.

Delivery of Judgment 17th September 1983

Sale of Goods - F.O.B. contracts.

One of the issues in this case is whether a buyer who has not given shipping instructions or nominated a ship is entitled to sue the seller for damages for non-delivery in a F.O.B. contract.

Held: (1) In a F.O.B. contract, where the time of shipment is at the buyer's option, and the buyer fails to give proper shipping instructions the seller is not bound to deliver.

(2) Where the time of shipment is at the seller's option, the buyer is not bound to nominate a ship until he has been notified by the seller, within the contract period, that the goods are ready for shipment.

(3) The above are prima facie rules liable to be displaced by conduct or practice between the parties.

(4) On the facts the rules have not been displaced The seller has failed to give notice of readiness despite the fact that the time of shipment was at his option. He is in principle liable for non-delivery.

Action No. 7517 of 1981

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: Deputy Judge Mr. Denis Chang, Q.C

Date: 17th September 1983

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J U D G M E N T

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1. The Plaintiff claims against the Defendant for the sum of $27,175.00 being the net price payable in respect of goods (P. V. C. Travelling bags) sold and delivered to the Defendant on 7th September 1981 under the Plaintiff's Invoice No. 859181 (P. 2 of Plf's Bdle) and pursuant to a contract dated 22nd. June 1981 (p. 1 of Plf's Bdle). The Defendant does not dispute that the sum is due but in its Defence seeks to set off so much of its counterclaim as will be sufficient to satisfy the Plaintiff's claim.

2. The Counterclaim relates to two contracts, also for the supply of P. V. C. travelling bags. In both cases the Plaintiff was the manufacturer and seller and the Defendant the buyer and exporter. In each case the Defendant was, to the Plaintiff's knowledge, purchasing the goods for re-sale in the Middle East.

Contract No. 1542/80

3. The first contract, in point of time, is Contract No. 1542/80 dated 14th January 1980 (P.3 of Plt's Bdle, P. 3 of Deft's Bdle). It was for the supply of 2, 160 dozen items described as "Art No. SE771 (8085) P. V. C. Bags (Travelling), Top Open zipper and back, two handles, with 5 wheels at the bottom" at a price of HK$217.00 per dozen F.O.B. Hong Kong, sizes 28x24x10" to be shipped on or before 30th April 1980. The contract stipulated that the goods were to be packed two dozen per carton, 1/2 dozen per paper parcel and that the measurement of each carton should not exceed 5.5' cu. ft. The design of the P. V. C. Bags (as well as the colours) were stated to be "as per sample".

4. Issue is joined in the pleadings as to whether there was an oral term, forming part of the contract, to the effect. that the goods would be packed in 6 containers and that each container would contain 360 dozen bags. One of the complaints of the Defendant is that the cartons were too large so that fewer cartons could be packed into one container. As I understand it, 360 dozen was allegedly agreed as the minimum quantity per container.

5. The first container was for M/s Ali Bia Radah Alsobhi ("Alsobhi") in Mecca represented by Al-Shagaa Trading Agencies ("A1-Shagaa"), commission agents, in Jeddah. Alsobhi had purchased from the Defendant 360 dozen of PVC Travelling bags under Ref. SE771 at US$55 per dozen C.I.F. Jedda as per Indent No. 791050 dated 29th December 1979 (P. 4 of Deft's Bdle) issued by Al-Shagaa. This order was placed following a business trip made by the Defendant's Managing Director, Mr. Arjan Dandwani ("Mr. Dandwani"), to Saudi Arabia in November 1979. The L/C opened by the Defendent's said customer called for one shipment (see p. 5 of Deft's Bdle) and the shipping documents required under the L/C were to cover the whole quantity ordered under the Indent. If the container could not take all the 360 dozen the shortfall would have to be separately shipped which would result in such extra expenses as double custom clearance charges and import duty. This was because the original shipment would have been cleared by reference to the shipping documents required by the L/C showing the whole quantity ordered under the Indent.

6. As it turned out the Plaintiff was able to and did ship only 304 dozen by the first container on 9th February 1980 (Invoice No. 537 dated 5th February 1980 at p. 6 of Deft's Bdle). The balance of 56 dozen had to be and were shipped on 15th April 1980 (p. 9 of Deft's Bdle).

7. Mr. Chu Yuk Chan ("Mr. Chu"), the proprietor of the Plaintiff's firm, admitted in evidence that the cartons he used exceeded the contractually stipulated size of 5.5' cu. ft. and that was the reason why he was not able to get 360 dozen into the first container although he had the goods ready. This is, in my judgment, a clear admission of breach of contract. He further admitted, in cross-examination, that it was orally agreed that each container should have 360 dozen and that it was his fault that this was not achieved.

8. Quite clearly, in my view, that Defendant is entitled to damages in respect of this particular breach of contract. Because, however, the additional freight was paid by the Plaintiff, the damages to be awarded for this complaint should not exceed the amount of the so-called double customs charges and import duty incurred in respect of the 56 dozen. Mr. Dandwani in evidence estimated such additional expenses to be in the region of US$300/- and I accept this estimate, albeit a rough one. He said that it was part of the US$500/- settlement figure which he eventually paid his customer through Al-Shagaa. His customer had complained not only of the additional expenses incurred but also of the quality of the goods, in that the material used was alleged to be "too thin". For reasons which I shall come to when dealing with the allegations of defects in the goods shipped in the various containers under the contract, I do not accept that the Defendant has made out any case based on quality or defects or non-compliance with sample. I accept however, that he did reach a settlement with Alsobhi which took into account the double customs charges and import duty. I also accept that the sum of US$500/- was paid by Al-Shagaa on the Defendant's behalf and that the Defendant reimbursed Al-Shagaa as per Statement of Account dated 20th January 1981 (p. 33 of the Deft's Bdle). However, since the double customs charges and import duty were in the region of only US$300, I would award damages in the sum of HK$1,800 for breach of contract in respect of the first container. I would not make a separate award of interest in respect of this claim, firstly because the estimate of US$300/- was a rough one and secondly because the exchange rate prevailing in January 1981 was less than HK$6 = 1.00 so that the sum of HK$1,800 should be sufficient to cover the interest element.

9. I turn now to the next four containers shipped under the contract. The Defendant says, among other things, that the Plaintiff continued to pack fewer than 360 dozen into each container and failed to ship the shortfall.

10. Mr. Chu admitted that despite modifications he had made to the cartons they still exceeded the contractually stipulated size with the result that he was able to cause only 348 dozen to be packed into each of the next four containers shipped to Al-Shagaa. Al-Shagaa this time acted for another customer of the Defendant, one Hussain Abdulla Al-Sulaiman ("A1-Sulaiman") of Jedda. Al-Shagaa had, following the business trip of Mr. Dandwani to Jeddah, placed an Indent dated 5th January 1980 (p. 21 of Deft's Bdle) on behalf of Al-Sulaiman for 1440 doz. travelling bags under Ref. SE771 at the C.I.F. price of US$55.00 per dozen. The Indent expressly stipulated that partshipment was allowed "with the minimum of one con-tainer" and' payment was to be made by L/C. The L/C was opened on 24th January (p. 22 of Deft's Bdle). Mr. Dandwani said that the customer had originally wanted two containers at a time (i.e. 720 dozen) but Mr. Chu could not achieve this, and Quite clearly, had the four containers each contained 360 dozen Al-Sulaiman would have received the full quantity of 1440 dozen ordered under the Indent. As it happened there was a short-fall of 12 dozen per container or 48 dozen in all.

11. This shortfall was never shipped and a sum of $2,022.24 is claimed for loss of profit in respect of the 48 dozen and the sum was apparently arrived at by taking the difference between the C.I.F. price under the Indent (less Al-Shagaa's commission of 3%) and the F.O.B. price under the contract with the Plaintiff. Now this could not be right as it did not take into account such items of costs as freight, insurance, etc.. However, Counsel for the Plaintiff, indicated that as far as this particular sum was concerned, he would be quite content to take the figure claimed as correct. This concession, of course, in no way relieved the Defendant from proof of any other item of.alleged loss. It was made only in the course of Counsel's final submissions. No impression could have been given that the Plaintiff was dispensing with proof in respect of any items of loss. I mention this because of the failure on the part of the Defendant to prove. the loss of profit claimed in respect of another contract which I shall come to shortly.

12. As far as the shortfall of 48 dozen were concerned Mr. Chu said that ever since the first container "it was agreed" that each container would thenceforth hold 348 dozen only. He said that he agreed this with the Defendant's boss (i. e. Mr. Dandwani) and a staff member of the defendant Mr. Tony Thawani as well as the transportation company. Mr. Dandwani was not specifically asked about this. No doubt, given the size of the cartons used by the Plaintiff and the limitation of space, everybody concerned could see that no more could be packed into each container and if this was all what Mr. Chu meant it did not amount to an agreed variation of the contract or release of the Plaintiff from the duty to make up the shortfall. I would reject any suggestion that there was such an agreed variation of the contract or release. The probabilities are, and I find, that Mr. Chu was not willing and could not be bothered to foot the additional freight that would necessarily be incurred if the shortfall was shipped separately. It should also be noted that under the Indent Al-Sulaiman was not obliged to accept anything less than one container per shipment. I find as a fact that the Defendant has lost its profit on the shortfall and would award the sum of HK$2,022.24 in respect of the breach with interest from the date of the writ.

The Claims based on quality; the alleged defects

13. The Defendant, apart from alleging that the material used for the first container was "too thin", also claimed that some of the goods in respect of the next four containers were defective in the following respects: -

14. Mr. Dandwani said that he had received no complaints from his buyers until early June 1980 when he was, again, in Saudi Arabia. He said that the first complaints came from A1 Sulaiman. The goods were shipped from Hong Kong in the four containers on respectively the 27th of April, the 16th of May (two containers) and the 13th June 1980 respectively and the evidence is, and I accept that it took anything from 12 days to one month for a container vessel to reach Jedda and that at the time when Mr. Dandwani was in Jedda in June 1980 the fourth container vessel had not yet set sail.

15. Mr. Dandwani said that Al-Sulaiman had a godown in Jedda that he (Mr. Dandwani) went there and "saw a number of cartons at the godown" and that he had 8-10 cartons selected at random and opened in front of him, that he could recognise from the shipping marks that they were from the Plaintiff, that when the cartons were opened he saw some loose bags, wrapped in paper with no strings and not in parcels of 6; that he took and examined "a few pieces" of those bags and he found that about 30-35% of the bags from those cartons which were opened had nails or rivets not properly fixed and some of them were not in alignment, that the hardboard and the bottom were not properly fixed and that the bags were spoiled, he thought, because of double-folding. He said that after the inspection and after some negotiation he agreed on 9-10th June 1980 to settle the matter in the sum of US$5000/- which was deducted from the price of the 4th container. He produced a settlement memo from Al-Shagaa (p. 24 of Deft's Bdle) and also referred to the chops at the back of the relevant L/C showing the reduction of the price (see Exhibit D5)

16. Incidentally, Mr. Dandwani also said that it was during this trip that Alsobhi complained of the material being too thin and this led to the US$500/-settlement I have referred to earlier.

17. It is a salient feature of this case that Mr. Dandwani did not inform the Plaintiff of the alleged complaints as to quality or defects until more than a year after Mr. Dandwani said he came to know of the complaints. On the evidence I find as a fact that the first time the Plaintiff knew there was anything allegedly wrong with the goods shipped was in September 1981: when Mr. Chu went to the Defendant's office to present his invoice for the payment of goods shipped under a different contract (in fact the contract on which the Plaintiff is now suing upon) he was told by Mr. Dandwani (in the presence of the latter's son) that one of the Defendant's buyers had complained about the goods shipped more than a year previously and that the Defendant had settled for US$5,000/- No mention at that stage was made of the settlement for US$500/-.  I accept Mr. Chu's evidence when he said that Mr. Dandwani on that occasion proposed that if he accepted liability he would place an order for 10 containers of goods and the figure would be deducted by instalments from the price. Mr. Chu was, understandably in my view, surprised and asked why the Defendant should wait until more than a year afterwards to tell him there was something wrong with the goods.

18. I should mention the fact, and it is clear from the evidence, that Mr. Dandwani himself admitted that the first time he informed the Plaintiff that there were these complaints was in September 1981. He referred to a telex which he caused to be sent from Jedda to his own office in Hong Kong on 9th June 1980 (p. 29 of Deft's Bdle) which inter alia said that he was sending a sample from the 3 containers (which had by then arrived in Jedda) to show to the factory. When asked why he did not do it, he said he had later changed his mind. He said he was a busy man. He also suggested he was waiting for an opportune moment

19. I find that the Defendant has failed to establish, as against the Plaintiff, any of the claims based on defects, poor quality or non-compiance with sample.

20. To begin with, I find as a fact that when Mr. Dandwani visited Jedda back in November 1979 and successfully obtained the two Indents he had brought with him and shown to Al-Shagaa some 6 to 7 samples of travelling bags none of which was from the Plaintiff. They were all from other factories. It was after seeing one or other of these samples that A1-Shagaa placed the two Indents. I find as a fact that at no time did the Defendant show the Plaintiff the relevant sample or samples (or cuttings therefrom) which Mr. Dandwani had shown its customers in Jedda.

21. I also find that "SE771" is a reference number of the Defendant not of the Plaintiff. Mr. Dandwani said, and I find, that his company used the same reference number for travelling bags of the same general overall design but on the evidence I find that there were differences between the travelling bags of this general type and design manufactured by different factories in price and quality. In particular there were differences in the thickness of the material used which affected the general appearance. I find that this was one reason why Mr. Dandwani sent telexes to his office asking them to get quotations from factories in Hong Kong before he made offers to and clinched the two orders from Al-Shagaa. Mr. Dandwani admitted there were differences in price and in the material thickness and that, for example, the goods ordered from the Plaintiff were slightly cheaper than goods of similar design from another supplier called Far East Leather Factory Ltd.

22. It is not disputed, and I find, that it was Mr. Dandwani's staff who negotiated with the Plaintiff for the supply of the goods and it was one of them who signed Contract No. 1682/80. None of them was called to give evidence.

23. Indeed, although Mr. Dandwani said that his office had samples of different goods of P.V.C. bags which were identified or otherwise referred to by reference numbers, no such sample corresponding to SE771 was produced in evidence. There was, however, produced to the Court  a travelling bag marked Exh. D3 (beige colour) which he said was a shipment sample from other factories and which he had obtained in October 1980. He asserted that D3 was of the same quality as the samples shown to customers in Jedda and that it was 98-99% the same as the sample he said he showed Mr. Chu. I do not take the reference to "98-99%" as an exact assessment but merely as another way of saying that D3 was nearly identical to the sample he said he showed Mr. Chu. I am unable, however, to accept this assertion and prefer the evidence of Mr. Chu when he said that Exh. D3 was made of a heavier material than the article which he was to supply.

24. Mr. Chu said, and I so find, that the material used in Exhibit D3 was not the same as that used in two samples which he made and delivered to the Defendant under his own reference "Article 8085" in connection with Contract No. 1542/80. He further said, and I so find, that these two samples were made out of the Plaintiff's own material, which was thinner than the sample originally shown to Mr. Chu. The Defendant, however, approved the Plaintiff's samples and it was in accordance with these samples as approved that the goods under contract No. 1542/80 were manufactured.

25. Incidentally, the Defendant is not alleging that all the goods delivered did not correspond to the sample in quality or were otherwise defective so that it could have been very simple indeed for the Defendant to have produced to the court, for example, a travelling bag shipped by the Plaintiff which in the Defendant's eyes did comply with the sample and was not defective and to compare that with a sample or samples drawn from the shipment which was allegedly defective. This was not, however, done. Neither was any pre-shipment sample supplied by the Plaintiff and approved by the Defendant produced to the court by either side.

26. I also find, as a fact, that prior to every shipment, the Defendant carried out an inspection of the goods at the Plaintiff's godown. The goods in respect of the first container, for example, were inspected by the said Mr. Tony Thawani, a member of the Defendant's staff experienced in these matters. This involved a random opening up for inspection of goods already packed and also inspection of goods in the process of being packed. I am of the view that if the material used was not up to standard as alleged it would more likely than not be discovered upon such inspection. Yet, I find, there was no complaint either by Mr. Thawani to his boss or by the Defendant to the Plaintiff (save in relation to the failure to put 360 dozen into each container). Indeed Mr. Dandwani himself said Mr. Thawani did not make of any relevant complaints to him save in relation to the container matter.

27. Mr. Dandwani said that on one occasion around April 1980 he went to the Plaintiff's factory with Mr. Tony Thawani and that he saw some cartons there which appeared to be bigger than the size of the bags and that he opened one or two of them and discovered the bags were not properly tied with strings but only paper wrapped and folded twice. He said he asked Mr. Chu to repack. Mr. Chu, however, was not queried about this incident. I am inclined nevertheless to believe that there was such an incident but that it took place in relation to the problems the Plaintiff was having in trying to pack as many cartons as possible into one container because the cartons were too large. It is not alleged that the goods in question were in respect of any particular consignment to Jedda although the goods could be related to the 56 dozen that were shipped around 25th April 1980. It is to be noted that, once again, there was no complaint as to the P.V.C. material used.

28. Mr. Dandwani said that there were cuttings attached to the Indent placed on behalf of Alsobhi. He said that hat in Jedda he was shown five or six samples which he was told were from the fist container goods and that he could see the difference in the thick-ness of the material comparing the samples with the cuttings, comparing the He did not bring back any of the cuttings but he produced in evidence Exhibit D2 (pink) which he said was from one of the five or six samples he was shown in Jedda. He did not inspect the rest of the goods. Now I am quite prepared to believe - and Mr. Chu admitted - that D2 was a product of the Plaintiff (from which consignment Mr. Chu was not able to tell). I am further prepared to accept that D2 was brought back from Jedda but I am unable to accept that the Defendant has proved on balance of probabilities that it was representative of the goods shipped or that, if it was representative, it showed a breach of contract on the part of the Plaintiff.

29. As regards the goods shipped to Al-Sulaiman, I find as a fact that again they were inspected before shipment and that again there were no complaints received prior to shipment (and, as far as the Plaintiff is concerned, for more than a year afterwards). I do not say that such a pre-shipment inspection in any way relieved the Plaintiff of its contractual obligations or ruled out the possibility that some of the goods shipped were not up to standard or were otherwise defective. Neither do I say that the mere delay in complaining somehow estops the Defendant from putting forward its claims. I am, however, of the view that when the Defendant chose to carry out an inspection without telling the Plaintiff or giving the Plaintiff an opportunity to be represented thereat and when there was no independent survey of the goods, and when the Defendant failed by deliberate decision or neglect to inform the Plaintiff of the results of that inspection until such time had elapsed when the goods had presumably been dispersed, the court is quite entitled to view the allegations with particular circumspection.

30. I am not satisfied that the Defendant has discharged its burden of proof. Whilst I am prepared to accept that the Defendant's ant s buyer Al-Sulaiman was probably expecting goods of a heavier or thicker material (bearing in mind the fact that the samples shown to its customer by the Defendant were from other factories) and that they did make some complaints and sought and obtained a reduction of price from the fourth container I do not accept the results of the inspection at Jedda as told to the court by Mr. Dandwani. I do not accept his bare assertion that 30-35% of the bags from the cartons opened were defective because of improperly fixed nails, improper alignment, or that the hardboard and the bottom were not properly fixed and the bags spoiled. He said that he brought back one bag Exh. D4 (white and blue) and that before it was cut up for laboratory tests he showed it to Mr. Chu in September 1981 when he first brought to his notice the US$5,000/- settlement. Mr. Chu denied this. I prefer Mr. Chu's evidence and I find that Mr. Dandwani did not show him D4. In any event, I do not accept that D4 was representative of the goods shipped to Al-Sulaiman or that it proves a breach of contract.

31. There was no laboratory, survey or any other expert report produced. It seems, however, quite obvious that the thickness of the material affected in some measure such things as the ease with which the bags could be folded (and the corresponding ease with which the bags could develop wrinkles or creases) and even the alignment of the hardboard. This means that if, as I have found, the sample agreed between the Plaintiff and Defendant was of a thinner material than that shown by the Defendant to its customer the customer would have some ground for complaint vis-a-vis the Defendant without there being any breach of contract on the part of the Plaintiff.

32. I should also add that neither the complaint of double-folding nor that of difference in thickness between the white and the coloured P.V.C. were specifically put to Mr. Chu. Mr.Dandwani said that even in a well-made bag one might find a difference in thickness between the white P.V.C. and the coloured P.V.C. but that Exh. D4 exceeded the usual tolerance. I do not know, however, how many bags were alleged to have exceeded that tolerance or were double-folded or whether in course of dealings between the parties over quite a few years double-folding was something that was understood to be prohibited even if the contract did not say so.

33. Even assuming it was something that should not be done I am of the view that evidence is simply unsatisfactory and falls short of establishing a breach of contract.

34. Mr. Dandwani incidentally never inspected the goods from the fourth container. He said the US$5,000/- settlement was reached before the fourth container arrived but it was expressed to be a settlement of all claims, including any that might arise from the fourth container.

35. I should add that it is Mr. Dandwani's evidence that upon discovering the defects he gave instructions to his office to stop the fourth container from being shipped but that this was too late as the goods had already been put on board. All the evidence shows, however, that Mr. Chu was not informed that anything was amiss at all and no one from the Defendant's office has come to explain what happened. Business seemed to have continued more or less as usual between the two companies until September 1981.

36. I would dismiss the claim relating to the US$5,000/ in toto.

The Balance of the Goods

37. The contract quantity was 2160 dozen. The five con-tainers plus the 56 dozen shipped separately totalled 1,752 doz. We know that there was a shortfall of 48 doz. which ought to have been but which were not shipped to Al-Sulaiman. Had that been done there would still/360 dozen outstanding (i.e. 2160-1800). What happened to this balance? I have been informed by Counsel that in fact a total of 2,100 doz. were eventually delivered, inclusive of the quantity shipped to Alsobhi and to Al-Sulaiman. I was told that I need not concern myself with the 6th container or with how it came about that 2,100 dozen were delivered or with any shortfall beyond the 48 doz. for Al-Sulaiman.

Contract No. 1682/80

38. The Defendant is claiming damages for non-delivery. It is common ground that the Defendant never delivered any goods under Contract NO. 1682/80 dated 25th April 1980. Under this contract (p. 25 of Deft's Bdle) the Defendant agreed to purchase and the Plaintiff agreed to sell 320 dozen P.V.C. travelling bags under Article Ref. NO. SE771 (8085) of 3 assorted colours "designs as per sample", sizes 24x28x12 at the price of HK$224.00 per dozen to be shipped "on/before 30.7.80". The printed front part of the contract stipulated that two pieces of shipment samples of each article were required and that "before making the ordered goods, a sample must be submitted for buyer's approval".

39. I should mention in passing that in respect of this contract (as indeed also of the other earlier contract referred on the printed conditions at the back.

40. Mr. Dandwani said that this contract was entered into in order to enable the Defendant to fulfil an order which he had obtained from A1-Oliea Trading Est. who acted on behalf of one Ahmed Sulaiman Al-Hamed, Kuwait. The order (p. 26 of Deft's Bdle) was dated 24th March 1980 and was for 320 dozen items under items under Ref. SE771 and described therein as P.V.C. Travelling Bags, top with zipper, bottom with five wheels, "rest as per sample". The unit price per dozen was expressed to be US$59.25. Terms of delivery were C & FC By Sea Kuwait in transit to Saudi Arabia. The shipment was do be effected by container 90 days from L/C date. The L/C was opened on the 31st March 1980 to expire on 25th June 1980 and the shipment was stipulated as nod later than 25th June 1980 with partial shipments allowed. The L/C stipulated that the Defendant as the beneficiary was do be paid only 97% of the draft amount, the balance being paid to third parties as commission. All banking charges in Hong Kong were for the beneficiary's account.

41. I node that there is a discrepancy between the shipment date stipulated in the L/C and the last date for shipment stipulate in the contract between the Plaintiff and the Defendant. The expiry date of the L/C was also too early. It would therefore be necessary for the L/C do be amended and this was done on 28th June 1980 (p. 28 of Deft's Bdle) do extend the shipment and validity dates do 31st July 1980 and 10th August 1980 respectively. A sum of US$20/- was incurred by way of express. This item of expense was, however, in no way caused by the Plaintiff's failure do ship on due date and would have been incurred in any event because of the discrepancy in dates.

42. However the fact that the customer and the Defendant bothered do extend the expiry date gives some support do the Defendant's case bud only do the extent that ad 25th June 1980 (the date of the amendment) they were still interested enough in keeping their order alive to take the trouble of having the shipment and validity dates extended.

43. Mr. Dandwani said he was "chasing" Mr. Chu to ship the goods but that Mr. Chu gave one excuse after another, including shortage of labour etc., with the result that he lost his customer who however has not made any financial claim against him.

44. When referring to the printed front part of the contract, he explained that the term "before making the ordered goods, a sample must be submitted to buyer's approval" was not one that was always insisted upon and that the Defendant did not insist upon it here. Mr. Chu, in effect, agreed with this evidence when he said that samples were usually required only in respect of those items which he were manufacturing for the first time for the Defendant. He was, however, absolutely adamant that what happened here was that about two weeks after the contract one Miss Mo of the Defendant telephoned him and asked him to give some cuttings for dispatch to the customer, Mr. Chu keeping the other half of the cuttings. He waited for the approval of the cuttings and the O.K. signal to go ahead with the production but it never came. No shipping instructions were ever given in respect of the contract. The contract was not referred to in the September 1981 meeting nor in the Solicitors' correspondence or indeed anywhere else except the pleadings.

45. Mr. Chu sounded genuinely aggrieved that the Defendant should now, without making any prior complaint about it, dip into the dozens of contracts which have been transacted between the parties and single out one in respect of which, he said, the Defendant never came back with the O.K. signal he was waiting for.

46. There were apparently other contracts between the parties one of which Exh. 6 (B) dated 27th June 1980 in respect of 334 dozen of Art. No. SE771 (8085) sizes 28x24x10" which were scheduled for shipment on or before 15th September 1980 and which Mr. Dandwani said were not shipped by the Plaintiff. The contract was switched to Far East Leather Co. Ltd. and no claim is made of the Defendant. Not knowing the circumstances I cannot assume that any of the parties was at fault in that case.

47. It is a fact that in respect of each of the container shipments made under the earlier contract 1542/80 the Defendant sent to the Plaintiff written shipping instructions in standard form, requesting the Plaintiff to make ready for shipment the goods specified therein, giving the approximate date of sailing of the vessel but generally without at that stage naming the vessel. Examples of such shipping instructions are Exhibits D8 and D9 from which may be seen that the shipping marks, the quantity and the description of the goods were clearly given. When the name of the vessel and a more definite sailing date were determined the Plaintiff would again be informed. Exhs. 8 and 9 show that the approximate sailing date given would usually be rather flexible. In Exh. 8 it was simply "about Feb. 1980" and in Exh. 9 it was "about April/May 1980".

48. It is common ground that nothing similar to Exh. 8 or 9 was given by the Defendant to the Plaintiff at any time in respect of the contract in dispute.

49. This is an F.O.B.contract. It is the duty of an F.O.B. seller to put the goods on board a ship nominated or designated by the buyer. Prima facie, where the time of shipment is at the buyer's option, and the buyer fails to give proper shipping instructions the seller is not bound to deliver. Where, however, the time of shipment is at the seller's option, the position in law is not that clear cut. The learned editors of Benjamin's Sale of Goods The Common Law Library 2nd Edition para 1814 in disoussing the case of Forrestt & Son Ltd. v. Aramayo (1900) 83 L.T. 335 think that "it is at least arguable that the buyer is not bound to nominate a ship until he has been notified by the seller, within the contract period, that the goods are ready for shipment". I am respectfully of the view that the proposition stated is correct, that where the time of shipment is at the seller's option, he must first give notice of readiness before the buyer's obligation to nominate a ship arises. These prima facie rules, however, may be displaced or varied by conduct or the practice between the parties.

50. Under the contract in the present case the seller had up to 30th July 1980 to ship the goods and to that extent, therefore, the option as to time of shipment was, in my view, with the seller. I find, as a fact, that at no time did the seller give notice of readiness to the buyer, that is to say, at no time did he either verbally or in writing inform the seller that the goods were ready or when they were likely to be ready. The buyer's obligation to nominate a ship, in my view, had not arisen.

51. I accept, however, Mr. Chu's evidence that the cuttings were not, at  the time of the contract, attached to it and reject Mr. Dandwani's suggestion that they were so attached. Mr. Dandwani was not a person who negotiated with Mr. Chu or who signed the contract. I note, in passing, that none of the other contracts made between the parties and which were produced in evidence involving Article Ref. No. SE771 (8085) had cuttings attached to them.

52. I accept that the cuttings were supplied subsequently but I do not accept any suggestion (and the evidence on this point was in any event vague and unsatisfactory) that it was ever made a condition that unless and until approval was given to these cuttings the Plaintiff was to withhold production of the goods. These cuttings are small little pieces of P.V.C. of different colours and would not show either design or workmanship. Had the Defendant wanted to, it could have insisted on the Plaintiff producing a whole sample for approval first, in accordance with the contract.

53. I also do not accept. Chu made any subsequent queries or showed any particular concern about the fate of this contract: his s factory was; working to full capacity and the clear impression I obtained from his evidence was that he would not have minded in the least if he was given time.

54. On the other hand I think Mr. Dandwani was exaggerating when he said he was chasing Mr. Chu for the goods. I do not think he personally pressed for delivery. The absence of any evidence of any written notices or complaints to or from any of the interested parties before or after the contractual delivery period is, in the light of all the evidence, more consistent with a state of affairs where neither side was particularly bothered about the matter although the defendant did nothing to release the Plaintiff of its obligation in law to give notice of readiness.

55. Mr. Daidwani said he had not "transferred" this particular contract to another factory as he had done in another case referred to above. In fact there is no evidence that anything was done by anybody in an attempt to save the transaction or the profit.

56. I am not told how the claim for loss of net profit is arrived at. Mr. Dandwani gave no evidence as his costings beyond producing the documents referred to. He was not asked about and he did not confirm the figure claimed nor indeed any figure nor did he give his actual or usual profit margin nor did he give any evidence as to the cost of freight, etc. In all the circumstances of the case I am not prepared to award anything beyond nominal damages (say $100) for the breach of contract. The relatively small sum involved would not have justified the question of assessment being referred to the Registrar; no such application has been made and I would not have been inclined to grant it.

57. I will now hear the parties as to the form of the order and the question of costs.

Representation:

Mr. Kumar Ramanathan instructed by (H.M. So & Co.) for Plaintiff Mr. Roderick Murray instructed by (Hampton, Winter & Glynn) for Defendant.

Action No. 7517 of 1981

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Deputy Judge Mr. Denis Chang, Q.C.

Date of delivery of Judgment: 17th September 1983

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Ruling on Costs

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58. The total amount recovered by the Defendant on the Counterclaim is only $3,922.24 as against the Plaintiff's claim for $27,175.00. If this had remained a simple case of set-off I would have given judgment for the Plaintiff for the difference between the two sums. But on the first day of trial I was informed that Counsel for both parties wanted me to record a consent order to the effect that judgment was to be given to the Plaintiff for the full amount of the claim, with a stay of execution on the judgment pending the trial of the counterclaim; the question of interest and costs were stood over at the court's suggestion. Counsel for the Defendant now quite understandably argues that since he has won on the Counterclaim he should be given the costs of the counterclaim.

59. A significant part of the time at the trial was taken up with the question of defects on on which the Defendant has lost and even in respect of part of the Counterclaim where the Defendant has won it cannot be said that it was unreasonable for the Plaintiff, at least in relation to quantum, to have put the Defendant to proof. It will be recalled that Mr. Chu admitted in evidence that he was at fault as far as the container problem was concerned.

60. I have considered whether I should make an order giving judgment for the whole amount claimed by the Plaintiff with costs (on the High Court scale) and give judgment to the Defendant on part of the Counterclaim with costs on the District Court scale and dismissing the rest of the Counterclaim with costs to the Plaintiff. Such an order, however, would be unduly cumbersome and difficult to work out and I am not sure it would be entirely fair. By pleading set-off in the first place the Defendant had effectively held up payment of the Plaintiff's claim, forcing the Plaintiff to proceed to trial. Furthermore the very idea of a stay of execution pending the trial of the Counterclaim is based on what is, as a matter of commercial reality, an eventual set-off.

61. Some time was, however, taken up with the claim based on non-delivery of Contract No. 1682/80 on which the Defendant has won, albeit only nominal damages are recovered.

62. The order that I have decided to make is as follows.

63. There will be judgment on the Plaintiff's claim for the sum of $27,175.00 with interest thereon at 14% from the 7th September 1981 to the date of judgment. There will be judgment to the Defendant under para. (1) of the Relief claimed in the-Counterclaim for the sum of $1,800.00 and under Relief (3) thereof for (a) the sum of $2,022.24 with interest thereon at 14% p.a. from the date of the writ and (b) nominal damages in the sum of $100. The-rest of the Counterclaim is dismissed and there will be costs to the Plaintiff on both the claim and the whole of the counterclaim save and except that the Plaintiff shall be disentitled to half of the last day's costs (i.e. the last day of the hearing, not the day when judgment was taken). Amendment of title of writ. Mr. Chu is the sole proprietor of the Plaintiff and by consent of the parties I give leave to amend the title to Chu Yuk Chan trading as Nic Sang Leather Factory; re-service dispensed with.

Representation:

Mr. Kumar Ramanathan instructed by (H.M. So & Co.) for Plaintiff Mr. Roderick Murray instructed by (Hampton, Winter & Glynn) for Defendant.