Texwear Garments Ltd v. Lai Ngan t/a Laco Garment Co

HCA009799/1982

IN THE HIGH COURT OF JUSTICE

BETWEEN

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Coram: Hon. Mantell J.

Date of Hearing: 11th June, 1984.

Date of Delivery of Judgment: 11th June, 1984.

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JUDGMENT

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1. The plaintiff company and the defendant firm are both garment manufacturers. It rather appears that a certain amount of the defendant's business is sub-contracted work. In early 1982, the plaintiff negotiated two contracts. One with a company known as Michelle of Hong Kong and the other known as Kowling for, in the one case, 310 dozen ladies shirts and the other, 600 dozen of girls shirts. Both Michelle and Kowling were explicit as to the standard of the garments they required under their respective contracts with the plaintiff and they supplied patterns. It was convenient to the plaintiff to sub-contract that work out and consequently on 4th May, the two contracts which are the subject matter of this action were negotiated with the defendant. The contract with Michelle is numbered 009, the one with Kowling, 011. The terms of those contracts reproduced the requirements of the onward buyers in their contracts with the plaintiff and by those contracts, the defendant undertook to make the shirts according to the patterns and specifications attached to the two main contracts. They agreed to do the work at a fixed price in each case. It was also a term of the contracts in each case that the material from which the shirts were to be made would be supplied by the plaintiff. The contracts are termed C.M.T. contracts which stands for cutting, making and trimming and under such contracts it is a custom of the trade which applied in this case, as I find on the evidence, that the "trimmings" so called should be provided by the defendant, though in order to ensure the quality, and to avoid dispute one would imagine, the defendant was obligated under the contract to buy the trimmings from or through the plaintiff.

2. This claim arises because it is said that the defendant fell down on what was a term of the contract to produce those shirts in a workmanlike fashion and to a reasonable standard bearing in mind, of course, the cost at which the work was being done and the area of the market for which the shirts were eventually destined and I hope it will offend no one if I say that it seems apparent to me that these shirts were not intended for the upper end of the market. At the same time, both the plaintiff's buyers and sub-buyers and the plaintiff themselves were entitled to expect the work to be done in accordance with the contract and the specification and to a workmanlike standard.

3. The defendant was originally represented by solicitors but some time in the past gave a notice of intention to act in person and the defendant has not appeared today either in person or through counsel. So the first matter about which I had to be satisfied before agreeing to allow Mr. Chong who appears for the plaintiff to prove his case was that everything had been done which ought to have been done under the rules to make sure that the defendant knew that the hearing was to take place today. That was easier for Mr. Chong here than in cases which come out of the running list because this action has been fixed for some considerable time for hearing and the court had, in the usual way, taken steps to inform the defendant that it was fixed or listed for hearing today, 11th June 1983. But beyond that, I heard from Mr. Yung, a solicitor who has conduct of the case for the plaintiff that he had taken the trouble to telephone the defendant last weekend to inform her that the case was in for hearing today. He did not actually speak to Madam Lai who is named as the defendant in the action but to her son and I am satisfied that the plaintiff has done everything which it might reasonably be required to do to make sure that tile defendant knew that this action is going to be heard today. Therefore, I allowed Mr. Chong to proceed to try to prove his case. That, in my judgment, he has succeeded in doing.

4. The evidence which I heard came, in the first place, from Mr. Yung who told me that at the time when the defendant was still represented by solicitors, there had been an agreement that these goods should be subjected to the scrutiny of some independent expert or surveyor and that it was agreed that a company which does this work, S.G.S. Hong Kong Limited, should carry out an inspection. That agreement is fully supported by the documents. Pursuant to the agreement the goods were inspected by Mr. Yue, who also gave evidence before me and who told me that he saw both sets of garment under the two different contracts and he found that they were defective and he listed in his report those defects were. I shall not go through them all but the important defect which appeared in a considerable number of the garments was that the chest pockets were not properly aligned and, in other cases, that a large number of the seams had not been properly stitched up. He was led to the conclusion that these goods were below "normal commercially acceptable tolerances".  That evidence has been supported by Madam Li, who is a director of the defendant company, and who had been concerned with these contracts both in connection with the sale on to Michelle and Kowling and also with the orders placed with the defendant. Having received complaints from the onward buyers who themselves had carried out inspection and were not satisfied, she herself looked at the goods and is able to confirm in evidence everything that appears from the report of Mr. Yue. So I am satisfied that these goods were below standard so as to put the defendant in breach of the contracts and the only question which remains, therefore, is the question of damages which fall to be assessed on the basis that there is now no available market for the shirts which are, therefore, worthless.

5. The matter is complicated slightly in that the sale-on was to be in United States dollars and the agreement with the defendant was in Hong Kong dollars. In my judgment, the date at which calculations have to be made to take account of the exchange rate is the date at which the breach occurred, that is to say the date by which the contract should have been performed by the defendant which in the one case, that is contract No. 009, was 20th May and in the case of contract No.011 was 10th June. But it seems that between those dates from the evidence I have heard from Madam Li the exchange rate HK/US was $6.1 and it is on that basis that the calculation has been made. The loss is the difference between the manufacturing costs and sale-on prices in each case.  In the one case, contract No.009, the loss of profit calculated on that basis is $56,154.64, and in the second case, that is the 011 contract, the loss of profit is $77,910. There will be judgment in those two sums accordingly. In addition, however, there is a claim for the cost of the trimmings which were supplied by the plaintiff to the defendant. In the first case, it is $1,665 and in the second case, it is $14,057.20 and there will judgment for those sums. With regard to the damages resulting from breach of the first of the two contracts, 009, that is $57,819.64, there will be interest from the date by which the contract should have been performed, 21st May, at 12½% which is intended to represent an average of the commercial rate of interest obtaining from then until now. On the aggregate of the second head of claim which is $91,967.20 interest will run at the same rate to the date of judgment from 11th June 1982. There will be interest on the whole sum recovered by way of judgement which is $149,786.84 at the prevailing court rate from the date of judgment until payment. There will be costs for the plaintiff on the plaintiff's claim, and the counterclaim is dismissed with costs.

Representation:

K.M. Chong (Chan & Yung) for Plaintiff.

Defendant - in person - absent.