Sabah Shipbuilding, Repairing and Engineering Sdn. Bhd. and Another v. Houston Engineering and Equipment Ltd
Read the full judgment text of HCA 1810/1976 on BabelCite. This High Court CFI judgment.
1. The Chung Wah Shipbuilding and Engineering Co. Ltd., the 2nd plaintiffs, carry on their business in Hong Kong. They have an associated company in Sabah, the 1st plaintiffs, for whom they provide managerial and secretarial services. Houston Engineering and Equipment Ltd., the defendants, are, among other things, dealers in heavy equipment.
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HCA001810/1976
----------------- Coram: Cons, J. Date of Judgment: 16th November, 1978 ----------------- JUDGMENT ----------------- 1. The Chung Wah Shipbuilding and Engineering Co. Ltd., the 2nd plaintiffs, carry on their business in Hong Kong. They have an associated company in Sabah, the 1st plaintiffs, for whom they provide managerial and secretarial services. Houston Engineering and Equipment Ltd., the defendants, are, among other things, dealers in heavy equipment. 2. Early in 1975 the Sabah company wanted to buy a floating dock to be operated down there. Chung Wah approached Houston who were able to offer a dock then lying in Japan. It was a secondhand dock built some two years earlier. Eventually agreement was reached and a written contract signed on the 4th April. Chung Wah and the Sabah company were expressed in the contract to be joint purchasers, but in reality Chung Wah were acting solely on behalf of their associate. The price was set at one hundred and sixty-nine million Japanese Yen to be paid in various amounts at various stages of the transaction. The first payment was to be made on the signing of the contract and was to be ten per cent of the total price. It was in fact paid a few days later. Houston's receipt is dated the 18th April. That was for 16.9 million Yen. On the 24th April Houston sent 13.5 million Yen to Japan. 3. The first recital of the agreement for sale says that Houston were owners of the dock. That was wrong. Houston had not by then purchased from the true owners. And unfortunately before they could do so the true owners went bankrupt. The sale between the plaintiffs and Houston was set aside by mutual agreement. The money sent to Japan was kept there for a while as the parties discussed the possible purchase instead of a brand new floating dock. However the discussions came to nothing. The money was brought back to Hong Kong and on the 25th October Houston paid to Chung Wah something over HK$212,000. This did not represent repayment in full. Houston had deducted from the full amount almost HK$70,000. They said it was owing to them by Chung Wah in one way or another. Chung Wah did not agree. And in the course of time the plaintiffs issued their writ. That was on the 1st September 1976. At that time they claimed just over HK$73,000. They reached this figure by subtracting from their initial Yen payment the Yen equivalent of what Houston had repaid and then converting the answer to Hong Kong Dollars. On the first day of the trial I allowed the plaintiffs to amend so as to put their claim in Japanese Yen. The reason they wished to do this is obvious. During 1975 and 1976 the exchange rate between Hong Kong Dollar and Japanese Yen had been relatively stable. On the 1st September 1976, the date the writ was issued, the Yen stood at HK$1.70 per 100. Today it is in the region of HK$2.65. If the plaintiffs are successful their judgment will be worth approximately half as much again. But before I turn to the interesting question of whether it is correct to allow that, it is necessary to see whether the plaintiffs are entitled to judgment at all, and if so for how much. Or to put it the other way round, to see if Houston have substantiated their "deductions". These may be conveniently dealt with under five heads. The Crawler Crane 4. In the summer of 1974 Chung Wah and Houston were negotiating the sale of a machine known as a crawler crane. The crane was in Australia and, like the floating dock, it was not new. Naturally Chung Wah wished to inspect the machine before they agreed to purchase, and they sent their Deputy Managing Director, Mr. Wilson Wong, down to Australia to have a look at it. As an inducement to the sale Houston agreed to pay Mr. Wong's air fare if the negotiations were successful. They were. Chung Wah purchased the crane, and subsequently submitted a bill of HK$6,662.35 for the air fare. Houston refused to pay. They admit liability for some part of the fare but suggest that Mr. Wilson Wong travelled more extensively than he needed. Now it is true that he did travel within Australia to some extent. His evidence is that this was paid for by the original owners of the crane. It is also true that he returned via Indonesia and Singapore, but there is nothing in the evidence to suggest that this added anything to the cost of his ticket. I do not think that Houston are entitled to deduct any part of the figure I have just mentioned. 5. The contract for the sale of the crane between Chung Wah and Houston was for sale "F.O.B. Australia port". Special Clause No. 2 provides: "Freight charges from Australia to Hong Kong is estimated to be Aust. $12,000 -, actual rate to be charged on your account". This was emphasized in a letter from Houston about one week later which confirmed "(b) Freight charges is estimated at Aust. $11,000 - and actual freight charges will be calculated after the equipment is loaded and the difference up and down will be chargeable or refundable to you". However, the bill from the shipping company was much higher than Aust. $11,000. It was Aust. $14,437.16. Most of the difference was made up by a charge for heavy lifts of just over HK$20,000. The crane was a heavy piece of machinery, some 100 tons. Even when broken down for carriage, as it was, into four separate pieces, it was apparently still too heavy for the ship's slings or for the crane that the original owners had provided in Brisbane, the port of loading. The ship owner had to engage and pay for something more powerful. The question now is who should pay for that extra expense. 6. The classic duty of a shipper in English law is "to bring the cargo alongside ..... and to lift that cargo to the rail of the ship": Harrison v. Best (1). This duty has perhaps become a little out of date in view of modern methods of loading, in particular in the present instance. No one in his right mind would contemplate that the crane would be handed over in mid-air as soon as it reached Lord Devlin's notional perpendicular above the rail (see Pyrene Co. Ltd. v. Scindia Navigation Co. Ltd. (2)). There seems to be no authority as to what has taken its place, perhaps because most cases are dealt with by special agreement or by the custom of a particular port. I think therefore that I have to look solely to the contract itself. This says in effect that Houston shall put the crane on board a ship bound for Hong Kong without expense to Chung Wah. I do not take the words "on board" to mean "alongside on the dock". I take them to mean what they say. If, as is possibly often the case, the ship is willing without charge to lift the cargo from the dock direct to its own hold all well and good for the shipper or the seller. But if the ship for some reason makes a particular charge for that service then in my view that charge cannot be laid at the door of the carrier or the buyer. 7. I have been asked to allow some deduction at least on the ground that part of the heavy lift charges would have been expended in placing the crane in the ship's hold once it was already on board. No suggestion was made as to what proportion should be allowed and no evidence was called to show what part if any in the operation might properly be put under this head. For all I know the crane might have been carried as deck cargo. In any event I am not prepared to undertake any quantification on my own account. 8. I have also been asked to find that some of the HK$20,000 was expended in unloading the crane after its arrival here, expenses which are admitted to be the liability of Chung Wah. Defence counsel relies on part of a letter written by the shipping company in answer to complaints made by Houston. With respect to counsel there is nothing in this point. The bill of lading and earlier correspondence make it abundantly clear that the expenses were incurred solely when loading in Brisbane. The defendants are not entitled to make any deduction in this respect. The Trailer 9. In the same summer both Chung Wah and Houston were engaged as sub-contractors on the construction site of the New World Centre. Chung Wah needed trailers. Houston delivered three. They had to come by barge because there was no suitable road access. This much is common ground. The evidence as to the rest of the transaction is contradictory. 10. Mr. Wilson Wong of Chung Wah says that the three trailers were delivered on approval; that Chung Wah decided to keep one, which they modified to suit their particular purpose; that the other two were returned to Houston within a few weeks; and that there was at no time any agreement as to the purchase price or transport costs. Mr. Joseph Luk, the Deputy Managing Director of Houston, says that it was an outright sale of the three trailers at a price of $12,000 each; that he was to arrange for the transport of the trailers on behalf of Chung Wah and to charge them accordingly; that two were subsequently taken back but only because Chung Wah abandoned them on the site when all the work had been completed and the principal contractor asked Houston to remove them. 11. Between the two witnesses I unhesitatingly prefer Mr. Wilson Wong. I do not think his recollection can be completely accurate, for example, his written comment on Houston's letter of the 18th November indicates that the trailers had at that time still not been returned although that was probably several months after the delivery. But in general his evidence is supported by the documents. The wording of that particular letter is quite inconsistent with Mr. Luk's story of an outright sale and the written comment again indicates that no price had been agreed. Houston's failure to issue an invoice for the delivery charges until a year later, despite correspondence about trailers in the mean time, is further evidence that there was no specific agreement. Chung Wah are willing now to pay a reasonable price and transport charges for one trailer. There is no independent evidence as to what this should be. $7,000 is mentioned in the Pleadings. Mr. Wilson Wong accepts $2,000 as reasonable charge for transport. I shall therefore fix a total price of $9,000. The Hose Pipe 12. This matter has happily been agreed between the parties. Houston may accordingly deduct $900. Fork Lift Truck 13. In January 1977, some time after the writ had been issued in this action, Chung Wah took a fork lift truck from Houston. About two weeks later they returned it. Mr. Wong says that the agreement was that Chung Wah would try out the truck; if it was successful and suitable for their needs they would purchase it; however it was not successful; it broke down mechanically and Houston could not or would not repair it. On the other hand Mr. Luk says that this also was an outright sale; that the machine was in good working order and had been inspected by Chung Wah engineers before they took it away; that it was physically returned to Houston but not with their consent. Unfortunately the transaction was not in fact made between these two gentlemen. Each is merely repeating in court what his own staff have since told him. None of the staff gave evidence. I have therefore nothing to go on except the documents. There is a delivery order dated the 7th January. This shows that Chung Wah collected the truck on that day. Someone has signed that it was received in good condition and order. Then there is an invoice three days later. The terms of payment are expressed to be "Cash against delivery". Neither document mentions that the sale is subject to the approval of the buyer or conditional in any way whatsoever. I find therefore that it was an outright sale. The defendants are entitled to $18,500 as the purchase price. Transfer Charges 14. This matter relates to monies paid under the abortive sale of the floating dock that I mentioned in the first instance. Houston claim two amounts: HK$1,237.75 and HK$2,486 In the statement of accounts that they sent to Chung Wah in October 1975 they refer to these accounts respectively as "Bank charges for the remittance to Japan" and "Bank charges for the refund from Japan". In the Further and Better Particulars of their counterclaim they call them "Transfer expenses necessitated by the cancellation of the contract". 15. As I see it the position of Houston is hopeless. In the first place if one studies the document, page 93 of the Agreed Bundle, carefully, one sees that both figures, apart from the small amount of $110 in the first, are exchange losses incurred in converting Hong Kong Dollars to Yen and vice versa. This was done by Houston solely for their own convenience or perhaps that of their bankers. In the second place Houston were not required by the contract to send any money at all to Japan. Again it was something done on their own initiative. There is no reason why Chung Wah should pay for that or for bringing the money back later. It is said by Mr. Joseph Luk that in a telephone conversation he had with Mr. Wilson Wong just before the 25th October it was expressly agreed that Chung Wah would bear these charges and also that they would accept repayment of the monies due in Hong Kong Dollars. I do not believe that evidence. There was not even the hint of any such agreement until Mr. Luk gave his evidence. It is contradicted by Mr. Wong and by the letter that he wrote at the time. Houston may not deduct these charges. The Currency Problem 16. In Miliangos v. George Frank (Textiles) Ltd. (3) the House of Lords granted a limited discretion to give judgment in foreign currency. That was an action to recover a debt payable in Swiss francs under a contract governed by Swiss law. Their Lordships have now approved a general discretion and have laid down some guide lines for its exercise: The Despina R and Services Europe Atlantique Sud (Seas) of Paris v. Stockholms Rederiaktiebolag Svea of Stockholm (4). In tort a plaintiff should usually be compensated in his own currency, that is the currency in which he normally conducts his trading operations and which he would have to spend in order to recover the currency in which the loss was immediately felt. In contractual cases, where the proper law of the contract is the court's own law, it should be in the currency, if any, which the parties have chosen themselves, bearing in mind that the choice of a currency for accounting purposes does not necessarily mean that the parties intend damages for breach to be paid in the same currency. Where no choice has been made damages should be awarded in the currency which most truly expresses the plaintiff's loss. 17. It is suggested by defence counsel - and I think conceded by the other side - that the true nature of the present action is not strictly contractual but is for monies had and received. This is the first time, as far as we are all aware, that an action of this kind has been considered in this context. Counsel for the defence suggests that I should have regard to what he puts forward as the basic principle underlying the discretion in all cases, that is that a court may award a fair compensation for loss actually suffered. It should not give a windfall profit to one side at the expense of the other. Counsel for the plaintiffs argues that the situation is closely akin to debt or the recovery of a specific article, and that I should not look to the question of profit or loss, for this is a normal commercial risk that the parties voluntarily undertook the moment they chose to introduce a foreign currency into their dealings. 18. I have come to the conclusion that as a general principle the argument of plaintiffs' counsel is correct. Where parties to a contract choose a particular currency in which to make payments to each other that choice should continue to govern repayments where the consideration has totally failed, even though technically speaking the contract has by then already been brought to an end. In the present instance the appropriate clause of the contract is Clause 14 (Agreed Bundle p. 86). It provides:
When Houston made the payment on the 25th October they exercised their option to pay in Hong Kong Dollars. They paid HK$212,653.65. They may now add to this figure HK$9,000 for the trailer and HK$900 for the hose pipe. The whole was equal to 13,326,000 Yen. I calculate at the rate of HK$1.67 to 100 Yen which is the rate given for that date in the Far Eastern Economic Review. That left 3,574,000 Yen unpaid. Since then Houston have paid a further HK$10,000 but I do not know when it was paid or what then was the rate of exchange. The general principle would demand that judgment be given on the claim for 3,574,000 Yen less whatever upon enquiry HK$10,000 was found to be worth at the time it was paid. 19. However, there is another aspect to be considered. As I see it this discretion has been conferred on courts to enable them in particular circumstances to provide a more just result than the old rule would have allowed. And I have wondered whether a judgment in Yen in this case would have that effect. I have wondered because it seems to me that in reality the Yen transaction has little to do with the real dispute between the two companies. It is only the setting in which the main action has been fought. The real dispute has been almost exclusively over domestic matters for which the Hong Kong Dollar is the natural and proper currency. These domestic matters have now been settled and the delay suffered by the plaintiffs can be adequately met by an order for interest. To compensate the plaintiffs further by allowing them to benefit from the more recent changes in the exchange rate might well be considered unjust enrichment. On the other hand it was Houston who deliberately chose to incorporate the domestic matters into the Yen transaction. They could easily have kept them separate. This would not have prejudiced them in any way for there has been no suggestion that Chung Wah are or were at any time not good for monies which might eventually be found to be due. 20. I have found this an extremely difficult matter to decide. Eventually I have come to the conclusion that it would be wrong to exercise my discretion to alter what would otherwise be the natural commercial result of the parties' voluntary agreement and their conscious actions. 21. There remains yet one more point. I am asked, also as a matter of discretion, to give judgment in Hong Kong Dollars because the plaintiffs originally brought their claim in that currency. It is said that they have "elected" to proceed in that currency and should be held to it; by framing their claim in this way they have lulled the defendants into a false sense of security; the defendants might otherwise have protected themselves by further payments into court or by the purchase of Yen currency. 22. This point was first raised on the application to amend. In reply I was referred to the case of Federal Commerce and Navigation Co. Ltd. v. Tradax Export SA (5). There a similar amendment was allowed by the English Court of Appeal even though a claim in the foreign currency could not have been included in the original writ. I also allowed the amendment. I took the view that a defendant is not prejudiced for being called upon to pay that which has always been due, even if not specifically asked for in the first instance, and that any other matters could be adequately, if perhaps not completely covered by the appropriate order as to costs. Whether my decision is correct or not may remain to be seen, but I do not, with respect, think that I should, in effect, be asked to review my decision by the use of my currency discretion. That would be an abuse. 23. For these reasons judgment is entered for the plaintiffs on the claim in the sum of 3,574,000 Yen less the Yen equivalent of HK$10,000 at the official rate of exchange which applied when that sum was paid by the defendants to the plaintiffs, that equivalent to be agreed, or in default liberty to apply to have the amount settled by the Registrar; judgment is entered on the counterclaim for the defendants in the sum of HK$18,500 with interest thereon at the rate of 7 per cent per annum from 1st February, 1977, being the date when the defence and counterclaim was filed, to the date hereof. I am willing to hear argument as to costs and as to the rate of interest, if any, which should be awarded upon the judgment in Yen. Representation: Mr. A.J. Corrigan (Johnson, Stokes & Master) for the plaintiffs. Mr. William Waung (Yu, Tsang & Loong) for the defendants. (1) [1892] 68 L.T. 76 at 77 (2) [1954] 2 Q.B. 402 at 419 (3) [1976] A.C. 443 (4) Times Newspaper 19th October 1978 (5) [1977] 2 All E.R. 41 at 51 |
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