Wong Sai Chung t/a Concord International Trading Company v. Farbell Investments Limited
Read the full judgment text of HCA 307/1986 on BabelCite. This High Court CFI judgment.
1. Some time in about the middle of 1985, the date was not fixed to greater precision than that, Casio launched a new watch in Japan which they call the Pera or possibly the Pera Pera. It had three particular characteristics : first it was very thin, being only 5 mm deep; it had a liquid crystal digital display set at.an angle of 45°; and its control buttons were on the face or top of the watch. It was, what the defendant described to me,as a fantastic success in the Japanese market, retailing a
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HCA000307/1986
IN THE HIGH COURT OF JUSTICE HONG KONG ____________ BETWEEN
____________ Coram: Hon. Hunter J. in Court Dates of hearing: 4th - 6th, 9th - 10th of March 1987 Date of delivery of judgment: 11th March 1987 ___________ JUDGMENT ___________ 1. Some time in about the middle of 1985, the date was not fixed to greater precision than that, Casio launched a new watch in Japan which they call the Pera or possibly the Pera Pera. It had three particular characteristics : first it was very thin, being only 5 mm deep; it had a liquid crystal digital display set at.an angle of 45°; and its control buttons were on the face or top of the watch. It was, what the defendant described to me,as a fantastic success in the Japanese market, retailing at ¥2,500 which was then equivalent to just over HK$90. 2. Some time in the summer of 1985, the plaintiffs had had designed for them a very similar watch. The plaintiffs deal in watches in Hong Kong and some, at least, of those watches are manufactured for them in Shenzhen at the Sar Hoe Electric Works. Whether the designer of the plaintiffs' watch had seen the Casio watch, I know not. I suspect he had, But Miss Wong of the plaintiff company seemed to be unaware of its existence. 3. The plaintiff's watch they called the DS 1628 and they described it as a "paper watch". On or about 24th August of that year, the plaintiff sold 100 of these watches to the defendant at a unit price of US$1.80. This was by way of a trial order to test the market. The defendant company, amongst other things, acquires watches in Hong Kong for transmission and resale in Japan. Mr. Fujita, its controller is himself a Japanese citizen and therefore is naturally familiar with that market. Mr. Fujita has an office in Tokyo. The whole object of this trial order was to get the opinion of potential buyers in Japan, on the plaintiff's watch, and in particular how it compared with the Pera watch. As it turns out, a number of people had the same idea of jumping on to the Pera band-wagon, and exploiting or seizing a part of the market which the Pera had shown to exist for a watch of this nature; and particularly to exploit that market before Christmas of 1985. 4. The 100 watches that the defendant bought were passed onto various potential customers in Japan. One of them was the Saito Watch Material Company which is run by a Mr. Tanaka who gave evidence, and the other was a company called Kyosei. 5. The customers apparently reacted favourably to this watch. They obviously thought that it was going to provide a cheap market alternative to Casio's Pera. It was in fact similar in design in the sense that it had digital display set at 45° , with two front buttons. It happened also to be substantially thinner, it was 3½ mm. and not 5mm. The price was very different. The watch was later sold to Saito at ¥405 equivalent to or slightly less than HK$15. So that that price to Saito was 1/6 of the retail price of the Casio watch. No one was prepared to tell me what the plaintiff's watch was intended to retail for in Japan. 6. In the hope of a good market developing, there were telephone conversations between Saito, Mr. Tanaka and Mr. Fujita and I think, possibly, between Mr. Fujita and the gentleman from Kyosei. The result was that on 6th September, Mr. Fujita saw Miss Wong of the plaintiff company and discussed a much larger deal for a total of 12,500 watches. The price for this quantity was to be US$1.50. It was made clear at the outset that this would have to be paid for by letter of credit and that the plaintiff would not start to manufacture watches until the letter of credit was opened. Mr. Fujita was insistent that the watch should have an accuracy tolerance of plus or minus 3 seconds a day and no more. He was concerned about a guarantee and was told that the plaintiff would give their usual replacement guarantee for defective goods. On battery life, he was told that the plaintiff would insert a Renata Battery which was more expensive at US$0.15 than the ordinary Hong Kong equivalent which was HK$0.10 to HK$0.15, but was calculated to provide the watches with a longer life. 7. After that discussion, which did not give rise to any concluded contract, the defendant drafted a contract which is to be found at page 2 of the bundle. Mr. Fujita brought it to Miss Wong on 13th September. The typed part of the contract was prepared by the defendant. The manuscript is in the handwriting of Miss Wong. The watch is described there as the Pera Watch. This was the defendant's description, noted by Miss Wong but not commented on at the time. I think she honestly thought this was a misprint for "paper". It did not signify to her that the name was apparently quite deliberately chosen as being very close, if not identical, to that under which the Casio Watch was being sold in Japan. The contract provided for the purchase of 12,500 pieces at US$1.50 underneath that was: "N.B. Time setting at Japan Time, quality :3 seconds a day maximum" (that is the tolerance). The design of the lense was then written in manuscript with the colours and inscriptions set out. The size of the carton, the weight of the carton and the number of pieces in a carton are then specified. There is reference to the protectors for the lense. Then there are three dates given for delivery, starting on 19th September and concluding on 27th September in three deliveries. That was already typed. Having regard to what had been said about the letter of credit, that became, in fact, impossible because the letter of credit was not opened until 17th September and received by the plaintiff on the 18th. Both parties then realised that those original dates could not be adhered to, in effect from a standing start on 18th September, which is why the letter of credit provides for partial deliveries locally, the latest delivery being 30th September. 8. The letter of credit required the production of two documents; first "cargo receipt issued by the defendant and signed by their authorised signer whose signature must be in conformative with specimen signature held in our file and certifying the goods had been received in good order and condition": and secondly, "beneficiaries' certificate guaranteeing that all defective goods can be returned for replacement or claimed for compensation by applicant." 9. That letter of credit having been received, manufacture then proceeded in earnest at the Sar Hoe Works. An abortive delivery was attempted on 25th September which was rejected because the watches were not set to Japan Time. The two effective deliveries were made on 28th September of 8000 watches, and on 30th September of 4500 watches. These were examined by Mr. Fujita. There is an issue as to the depth of his examination which I will come back to later, but it was sufficient for him to discover that 320 of those watches had not got batteries fitted and they were rejected at once. 10. In the light of that Mr. Fujita provided two cargo receipts, one dated 28th September for 7680 pieces, i.e. 8000 - 320; and the other dated'the 30th September for 4500 pieces. They are in these terms: "Under our L/C No. 110507 dated 17th of September 1985, we certify that goods have been received in good order and condition." At the same time, the plaintiff provided two guarantees of the same dates, said to be given under the same letter of credit headed ''Beneficiary Certificate - We hereby guaranteeing that all defective goods can be returned for replacement or claimed for compensation by applicant." 11. In those circumstances, it might have been thought at first blush that the plaintiff would be able to obtain payment under the letter of credit with the assistance of those documents. That is not in fact what happened. The bank, the Chekiang First Bank Limited, took the view that these documents were non-conforming documents. On 5th October, they write to the defendant, and send a copy of the same letter to the plaintiff bankers:
12. They invited the defendant to consider authorising them to pay under the letter of credit notwithstanding such discrepancies. 13. I am bound to say, I think this is an unfortunate occurrence. The bank of course is not before me to justify its attitude, but on the face of it I find it difficult to justify. The beneficiary's certificate I have already read, plainly showed that it has been given under this letter of credit. The English in this certificate is no better than the English in the letter of credit itself. The wording is identical. I do not, at the moment, see upon what basis that does not conform with the letter of credit. As for the cargo receipts showing incomplete descritpion of goods. At the foot of each receipt, there was the quantity of goods specified which was being acknowledged as against price payable in respect of that quantity. I simply do not understand how the bank could object to those documents. 14. I think it was unfortunate they did so because by the time the defendant received the documents, he knew that he was having difficulties with his sub-buyers in Japan. The bank's attitude gave him the opportunity to bargain which he at once took. He did not authorise the bank to pay; he told the plaintiff that he was only going to pay for the goods that were of good quality. This produced a slightly bitter response from Miss Wong that she sold the goods under the terms of the contract not on consignment. 15. Certainly if one looks at the document, prima facie as it seems to me, the plaintiff were then entitled to receive the purchase price of the 12,180 watches that had been delivered and accepted, and described as having been received in good order and condition in the cargo receipt. 16. I turn from that particular point to the position on quality which has been the principal argument in the case. I have already said that these watches were manufactured at Sar Hoe Electronic Works in Shenzhen. When manufacture was completed, each of the watches was placed in a soft cellophane bag which was packed with a backing board or instruction card at the back. They were then bundled in bundles of ten, by putting elastic bands round the two halves of the watch-strap. That had the effect of stacking the ten watches face upon face in the bundle. When each of those ten bundles were completed, 25 of them were put into a carton, making a total of 250. The effect of the initial bundling plus the weight of the bundles on one another was, I think, quite sufficient to exert, (what I shall call using a neutral term), a nice pressure on the control buttons of the watches. This pressure I am quite satisfied from what I have heard, was sufficient to bring about an alteration of the time. I should explain that you alter the time setting of the watch by pressing one or other of those two control buttons. 17. Having listened to all these evidence, I have got considerable doubts whether the packing used was sensible for a customer who was demanding precise pre-setting of the timings of the watches. But questions as to the suitability of this packing and the responsibility for the chosen packing were never raised from start to finish in the case. So I need say nothing more about it. But so packed, on receipt of the total of 8000 and 4500 of those watches by the defendant in Hong Kong, I have no difficulty in believing that even assuming that they had all been set to Japanese time at the factory, some of them were not showing Japanese time when received by the defendant. I do not believe the problem was as big as the defendant was telling me in evidence, but I am quite prepared to believe that some dozens of watches were then off Japanese time by the time he received them, and that they had to be reset by him. 18. It was a term of contract between plaintiff and defendant that the time setting should be in Japanese time. This was a comparatively simple matter to correct on the part of the recipient by pressing the right button and mraking the right adjustment. I am quite satisfied that the failure to set a watch in Japanese time was no justification for the recipient refusing to accept that watch. It was a matter which would sound only in damages. I do not mind which of the tests that you apply, whether you use the old fashion terminology of "going to the root of the contract" or any of the other tests, they are all conveniently set out in paragraph 1622 of Volume 1 of Chitty on Contracts, 25th edn. There was nothing here which would justify the recipient of a watch which was not set to Japanese Time in rejecting that watch, when it was very easy to correct the mistake. The most it would give rise to is a claim for damages that are based upon the time taken to put the matter right. No such claim has been adumbrated at any stage in any part of this case. Quite obviously the defendant took that view at the time. 19. He made the necessary corrections and accordingly put the watches on board an aircraft to Tokyo on 1st October. When they arrived, 10,000 were received by Saito, one of his customers, and it said, although the evidence about this is very tenuous, the balance were received by Kyosei. 20. Of the 10,000 consigned to Saito, half were sent off direct by Mr. Tanaka to Saito's customers and the rest he kept in the office. The first thing he noticed about these, was that a number of them were not showing Japanese time. As he explained, it is very easy for pressure to be exerted on one of these buttons and for the time setting to change. He said in order to minimise the risk, the watches were packed not in the way that they had been described to me and in fact presented to me, but with an additional polyethylene cushion between each watch. I have not seen any of those cushions but I am not at all surprised to hear that that did not work. Because a number of the watches which were apparently marked as having been reset and corrected by the defendant, were showing the wrong time when they got to Japan. The short answer, it seems to me, is that the only way of making sure that this did not happen when you are packing the watches in this way, was to protect the face of the watch with some stiff plastic cover, or as was suggested later, pack each watch separately in a cardboard box: something to stop any weight being applied to the control button. This did not happen, and I have no doubt that at least some of these watches but again nothing like in my judgment, the 80% about which Mr. Tanaka spoke, were in fact not set to Japanese time. 21. Why I am, shall I say, suspicious of this, is really for two reasons. First it is apparent that a number of people had the same idea of cashing into, what I might describe as the Casio Pera Market. A large number of look alike Casio watches were apparently being made at this time in Hong Kong for between HK$1.30 and HK$1.50 and being shipped to Japan in the hope of cashing in on this market before Christmas. Mr. Fujita told me that before the end of October, there was a dramatic drop in the price of these watches. 22. When one considers the starting price of these watches, a dramatic drop in the price of these watches in effect means no market at all. That, I am satisfied, is what happened, not at the end of October but considerably earlier in October. When Mr. Tanaka was talking about returning 5000 watches for replacement, that was a euphemism for returning 5000 watches. I am equally satisfied that I have not heard the whole of the story of what was going on between Mr. Tanaka and Mr. Fujita at this time. 23. In the course of his evidence, literally almost out of his nip pocket, Mr. Fujita produced a bundle of fats messages sent from his Tokyo office to him in four days up to, I think 1st of October. They read like daily reports from his Tokyo office to him. I simply cannot accept that when trouble started with this consignment of watches, and bearing in mind that the Tokyo office was very close to Mr. Tanaka's office, that further facs messages were not sent explaining what the.situation was in Tokyo. But nothing like that was produced at all. Indeed Mr. Fujita denied that any such documents existed. I regret to say I simply cannot believe that. 24. I believe that at this time that this market for these look alike watches either had collapsed or on the verge of collapse and that Mr. Tanaka recognised that. Otherwise to have sent back 5000 watches upon the basis that they were not set in Japanese time, when the resetting of those watches was a matter of moments, and were the defects certainly in Hong Hong law, did not justify rejection, (I cannot speak as to Japanese law),makes no sense. 25. Mr. Tanaka, it is common ground, then insisted upon returning all 5000 watches. His complaints were related at second hand to Miss Wong. The first of his complaints, and indeed the major complaint was "not set at Japanese time". That this was at once identified as a problem of packing by Mr. Fujita, was made abundantly clear in the evidence. Because when he was asked about a telex which he sent at page 42 on the 23rd of October, when he talked about the problem of "changeable time." What he said was this:
That was reckoned then to be the total solution to this problem; provide boxes for these watches and there will be no such alteration. I am equally satisfied that the bulk of the alteration which had taken place and had been spoken of by Mr. Tanaka were as a result of alterations in transit, and later by further alterations when the watches were corrected at his office and then restacked again in the same carton repeating exactly the same problem. That was the main complaint at that time. When you have got a complaint which simply does not really start to justify sending all these watches back, one looks for other reasons, I am quite satisfied myself, it was the state of the market. 26. The second complaint was that the transparent cover inside had been left on. I must explain what that was. Initially the lenses of the watches had, as I understand it, a double sided cover. The underside was protected by a transparent piece of plastic; the top was protected by a piece of plastic which was coloured a greenish tinge. What was meant to happen in the course of manufacture was that the underside protector was removed, leaving the top green protector which protected the lens from being scratched from the outside, and was something which could very readily be removed on sale by the ultimate vendor. The complaint which was advanced in correspondence and is repeated in the pleadings, is that every one of these watches was defective because the lens inside had been left on and it was impossible to read the time. 27. That is simply nonsense. I have seen examples of the transparent plastic lenses. It is perfectly obvious that it is possible to read the times through that. I have seen many of the returned watches which have still got their green transparency on top, I can read the time without any difficulty in every single one of them. 28. When one finds a complaint advanced in those terms which is, as I say, simply nonsense, one does look with some suspicion. This is increased when in fact not a word of evidence in support of this complaint was advanced either by Mr. Fujita or Mr. Tanaka in the witness box. 29. The third complaint was that there was something wrong with the buttons which was not further specified. When this complaint was made to Miss Wong, she took the view that this was her responsibility as manufacturer. She had to take the goods back and to have a look at them. She said that if they are defective, then I will pay the return air freight. Upon that basis she took back first 5000 which were returned by Saito some time after 15th October, (the relevant invoice is at page 30 and relates to that), together with a much smaller lot which came back on the 25th of October, (the relevant invoice there being at page 44). That smaller lot was 478 watches. 30. The first 5000 were then sent back to the manufacturers at Sar Hoe for examination. Mr. Cheung, the quality controller who was in charge of that examination gave evidence, and produced the record that he signed of the result misdated the 30th of September. It was his own date. But habit dies hard when you have been brought up on lunar months. I have no difficulty in accepting his explanation that he uses the unfortunate combination of one calendar and another, and produces 30/9/85 when he really means 30/10/85. That inspection shows that there were 72 of these 5000 pieces which were described as damaged; in 15 the pressing button was not in working order; 20 had trouble with the screws retaining the backplate; and 37 where the inside transparent cover had not been removed. That showed, and I accept this as correct, that there was no serious fault with this consignment such as had then been adumbrated, I emphasised those words, because what emerged as the main issue between the parties certainly was not made known to the factory at that time at all. 31. In the light of that report on or about the 1st November, the positions of the parties, in my judgment, could be said to be this. The plaintiff through Miss Wong had reckoned that there was simply no substance in these complaints, in that they were not defective goods that she was under no obligation to take back under the guarantee. She had been trying to get payment unsuccessfully from the defendant, who had declined to authorise the bank to pay notwithstanding these so-called discrepancies. Her attempts to obtain money are set out in the letter at page 46, which were not indeed seriously disputed by Mr. Fujita. She took the view there was no point at all in returning the 5000 or replacing them. Because if she could not got paid for what she had sent already and not been returned, there was no point adding to a bad debt. The best thing was simply to take back the ones that she had got, keep them, say no more about it and sue for the balance. That is what had happened in this suit because the claim here is the price of 6702 pieces. 32. The defendant on the other hand, at that stage, I am satisfied, knew that the market had gone in Japan. He was not going to get paid properly or at all by his Japanese buyers and he was most concerned not to pay the plaintiff: to avoid making any payment to the plaintiff and set off a damages claim such as he might be able to adumbrate, against the purchase price. This explains, I think, why he did not start to press for any replacement to the 5000, any use of these boxes or any further deliveries. Because that was a total waste of time. The market in Japan had ceased to exist. It equally explained why when he got further returns from sub-buyers in November, December and January, he made no attempt to reject them, or to return them to the plaintiff and asked for their replacement under that guarantee. 33. That is how the matter rested, without any further light being cast upon the true quality of these watches, until November 1986. Then somewhat surprisingly, it seems to me, a vice president of the company that manufactures Casio watches instructed a senior quality controller, a Mr. Katsumata, to carry out an exmaination of 10 of the watches given to the company by the defendant out of the later rejections. Considering that these watches had been launched to make inroads in to the Casio market under the Pera name, it is a somewhat unusual turn of events. What high policy lay behind that position, I know not. 34. That report shows first that when the time keeping characteristics of the watches was tested, they performed well within the contract quality tolerance, that was 3 seconds a day. The tests showed that none of them exceeded 2 seconds a day and most of them performed rather better than that. It is interesting to note that the contract performance tolerance of 3 seconds a day compares with the Casio tolerance in the ratio of 3:1 Casio demand no more than 1 second tolerance. So there was no criticism of the watches from that point of view. 35. The main criticisms arose out of what was called a function test, and related to the switch mechanism. The test certainly showed that the switch mechanisms were substantially less robust than those fitted to the Casio watches. First the tester measured what he calls the Make-weight; that is the pressure that has to be applied to the button to depress it at all. He takes the view applying the Casio standard that the minimum pressure shall be 100 g. whereas the pressure on the watches he tested varied between 20 g. and 100 g. In fact the average pressure was about 47 g. The other thing he measured was what he calls the Make-stroke which is simply the distance the button had to travel to close the points and to complete the circuit. Again applying the Casio standard, he expressed the opinion that this should be 0.2 mm. whereas the measurements he took of these watches showed that the measurement was 0.02 mm. on average. It should be pointed out that the stroke was likely to be shorter having regard to the fact the watch was substantially thinner than the Casio watch. He also, as it were, tested the watch to destruction and found that after about 2000 pressing of the button which he had equated with something like 10 months' very persistent use, the mechanism ceased to function. 36. He then in his report says this:
37. Really the only serious issue of fact in this trial is whether that is true: Whether it in fact be right that these buttons are so sensitive that they have something like a hair trigger which means that an ordinary user, you do not get a constant time because one's shirt or jacket can, when brushing against the watch, reset the watch to a false time. That is the crucial issue of fact in this case and the question then arises whether these watches were merchantable or not. 38. Those then are the material facts, as they seem to me to be, and in their light I come back to deal with the issues raised in the case. First is this : It has been plainly established that this quantity of 7206 watches has been delivered and accepted. The prima facie position initially of 12,180 has been altered to that extent by the fact that 5478 had been returned. The balance has been, delivered and accepted, and prima facie, the plaintiff is entitled to price. 39. The second question then is. has the defendant effectively rejected or purported to reject any part of those watches. Certainly 5478 have been accepted back. But no question arises as to that because no claim had been made in respect to them. Secondly, on my findings, no attempt had been made to reject the balance which was said to amount to 2653 and equally no attempt had been made to try and have that balance replaced under the guarantee. There was no evidence to satisfy me to that effect. The suggestion was never made in any letter, and it was certainly not made in any of the pleadings. In those circumstances, it is quite necessary to resolve the interesting argument arising under sections 36 and 37 of the Ordinance. 40. The only contentious issue in this case is damages whether as against the prima facie obligation to pay this purchase price, the defendant can effectively set off damages in diminution. The issue there is whether or not these watches are merchantable. All the possibilities had been pleaded under the Ordinance : sale by description, fitness for purpose, merchantability and sample. The only runner is morchantability. That raises the question posed by section 5(2) of the Ordinance which is in these terms :
41. I do not think it is necessary for me to go beyond that definition in this Ordinance. In effect it seems to me to mean this. Are they as fit for use as wrist-watches as it was reasonable to expect them to be having regard to their price? 42. In the light of that definition, I turn to the complaints which are raised in the amended defence. The first complaint is that none of the watches had the time setting in Japan time. That is a very considerable exaggeration. I am certainly not prepared to find that none of watches had time setting in Japan time when they were delivered to this defendant. But I am quite prepared to accept that several dozens were by that time out of setting. But as I have already indicated, this gives no right to reject. It gives no right to damages beyond the sort of damages claimed for the person's time which had not been raised in this case at all. So there is nothing in that point. 43. The second is that 320 pieces delivered on the 28th September did not have any batteries and hence were immediately rejected. That is accepted as true, 320 were rejected there and then as having no batteries, the batteries would have cost US$0.15 each and the US$0.15 would produce a claim of about US$48. The claim which has been advanced, is a claim of something like over 4 times that for loss of profit upon these immediately rejected goods. This claim seems to be really quite unrealistic. I am far from sure that these goods were in fact sold forward to Kyosei as has been alleged. But the reality of this case was that even if they had been, having regard to what happened to the whole of the watches when they got to Japan, there was literally no profit to be made out of them anyhow. This explains why this little lot was entirely forgotten, and no attempt was made even to invite the plaintiffs to put fresh batteries in them. This claim fails, in my judgment, for want of proof and likewise because it was simply overtaken by events at the time. 44. Thirdly, it is said that the whole of the watches were defective in that the colour protective layers were attached to both sides rendering it impossible to tell the time. This is the allegation I have already intemperately described as nonsense. 45. Fourth, this is the serious one. It originally said this : The design of the switching action of the watches was defective. There is no spring action and the thickness of the double-sided tape creates a space of only 0.2 mm. The result of such design to the consumer is that the watches get easily actuated, i.e. they go to set mode with "slight pressure." Put in slightly plainer English, I think, with respect to the pleader, he is saying that you can easily alter the setting of the watch with "slight pressure" on the button. Then by amendment in 6A the pleader goes on :
The second of those amendments were made after the report of the expert was seen. What this issues really raises is this : Were these buttons acutely sensitive so that the slightest pressure would cause a time setting, or not. 46. On this I am satisfied, first of all, that the alterations which certainly took place to the Japanese time setting between Shenzhen and Hong Kong, and between Hong Kong and Japan, and in Japan were certainly not caused necessarily by any extreme sensitivity. They were caused simply by the way in which these watches were packed and could readily have been rectified and prevented by a different form of packing of the watches. So that that does not prove this point at all. 47. Secondly, and I think this is really the most telling point in the whole case, there has not from start to finish been one word of evidence in support of the proposition that this happened in ordinary use. When the pleader says that this could only be discovered when the said watches was subjected to actual use by the customers, I suspect that pleading is well founded in fact. I ask myself where is the evidence that this happened in actual use; and the answer was that there was none at all. Indeed the whole of this super sensitivity simply was not discovered until over 12 months after the event when this expert first produced his measurement. 48. Thirdly, this is plainly a design fault, that is how it is described, if fault it be. There was no suggestion that the design of these watches has altered at any time. If these watches were as sensitive as is now suggested, it is very surprising that this was not found out by any of the users of the first 100 under the original market testing order. One of the main purposes of that order was to have a look at the goods. I cannot believe that if they were really as sensitive as this, no one would have said "No, these are no good". 49. Fourth, the point was put to Mr. Cheung in cross-examination and totally rejected by him. He was confident that if you had something as sensitive as was being suggested to him, this would be discovered in the ordinary quality control tests in his factory, by the person setting the watches and feeling the buttons. This is as much a matter of feel than anything else. 50. Finally, it may be that this is not most realiable of tests, but it is the best one can do in such circumstances. 51. None of the attempts that people have made in this court to bring about alterations to time setting of any of the exhibits that had been produced, by slight pressure or by a very slight pressure on the button have worked. This judicial digit failed to operate the button. I tried to do my best by applying the sort of pressure my shirt sleeve might apply, and absolutely nothing happened. I applied a good deal more pressure than that with a similar result. I would say it is quite obvious by comparing D1 with P1 that you can see that some buttons stand out more than others. 52. One does come back to this. This is plainly not a precision watch. This is a watch which is on the market for HK$11.00 or there abouts, less than £1 Sterling. It is not quite a toy, but it is not very far removed at that sort of price. It is simply not a precision instrument at all. I have got to bear that very much in mind when applying this test of merchantability under section 2(5). On this evidence, I am quite unable and unwilling to find that these watches were unmerchantable when that test is applied. I think that they were serviceable, reasonable, cheap watches. That their control buttons needed protection in transit accept but they were but nothing like so sensitive that you were left with a watch that was constantly changing time when used. 53. In those circumstances, it seems to me that the various defences which are relied upon in diminution of this purchase price fail and accordingly the plaintiff is entitled to judgment in the sum of US$10,053. Since I also think that this sum should have been originally paid under the letter of credit, I think that the plaintiff is entitled to interest on that sum. This being the 11th of March, I have taken the 11th of October 1985 which is a reasonable date for negotiation under the letter of credit. I think that the plaintiff is entitled to interest at a mean rate which represents 1% over Hong Kong lending rate over that period. I think that the simplest way is to work out an average for that but what I am trying to arrive at is 1% over the variable rate during that time.
Representation: Terence Wai inst'd. by M/s Foo & Li for Plaintiff Horace Wong inst'd. by M/S Cheung, Tong & Rosa for Defendant |