Hip Hing Hong Trading Co Ltd v. Ming Fung (HK) Garment Trading Ltd

DCCJ586/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 586 OF 2003

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BETWEEN:

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Coram: Her Honour Judge C.B. Chan in Court

Dates of Trial: 21^st and 22^nd September 2004

Date of Handing down of Judgment: 13^th October 2004

JUDGMENT

1.The Plaintiff’s claim is for damages for rescission arising out of the breach of an agreement for the manufacture and supply of 32,230 wooden beaded belts (“the Agreement”).

2.The Plaintiff’s case is that the Agreement is part written and part oral.  In relation to the Agreement the Plaintiff’s pleaded case states:-

(a)                The Agreement is set out in a Purchase Order (PO#151/02) dated 22 October 2002 issued by the Defendant to the Plaintiff on or around the same date;

(b)                Additional terms in relation to price, date and place of delivery, payment terms and delivery of samples were agreed by the parties in a number of telephone conversations between Miss Choie Leung (Leung Yee Mui) of the Defendant and Ms. Kitty Lam of the Plaintiffs.

(c)                These terms were reduced into handwriting and also set out on the Purchase Order, a copy of which was faxed back to the Defendant for confirmation.

3.The Plaintiff’s position is that the Purchase Order and subsequent agreement on additional terms constituted a complete and binding agreement with the Defendant.  The Defendant says that the parties were still in the process of negotiation at the time they issued the Purchase Order and that no binding agreement had been reached.

Issues

4.The issues of the case are:-

(1)Whether a final and conclusive agreement had been reached between the parties as stated by the Plaintiff’s witnesses.

(2)If so what loss if any is suffered by the Plaintiff?

The Evidence

5.The Plaintiff called two witnesses Lam Yuet Mei Kitty (hereinafter referred to as “Lam”) who was one of the Directors of the Plaintiff and who negotiated with the Defendant’s former staff Leung Yee Mui in relation to the Agreement and Ho Kwong Man Tidy (hereinafter referred to as “Ho”), the other Director of the Plaintiff, the husband of Lam.  The Defendant’s intended witness Leung Yee Mui was not available to give evidence and her witness statement was tendered as a hearsay statement.  However there is no evidence tendered as to how and when the statement was taken from her nor was the signature thereon identified as that of hers.  

The Plaintiff’s Witnesses

6.The Plaintiff’s witnesses appear to me to be credible and reliable.  Despite cross-examination their evidence was not shaken.  

7.Lam and Ho both tendered their witness statement in evidence as their evidence-in-chief and also supplemented their evidence in chief orally.  From their oral evidence it is clear that the sequence of events is that as stated in their witness statements.  Lam and Ho both stated that the Plaintiff had developed a beaded belt design G643 for Too Brands Inc. (“Too Brands”) according to drawings and measurements given by Too brands.  Too Brands is a company incorporated in the USA and is an importer of garments.  The Belt is an accessory of jeans.  Thereafter the Plaintiff started to manufacture the Belt for Too Brands.

8.Ho stated that according to his knowledge, Second Generation is one of the vendors which Too Brands would make orders for the purchase of garments.  It is not disputed that the Defendant entered into an agreement with Second Generation to manufacture jeans with the Belt as an accessory.  Too Brands had named the Plaintiff as the manufacturer of the Belt and as a result Second Generation indicated to the Defendant that the Defendant should contact the Plaintiff for the manufacture of the Belt.  

9.The Belt is made up of wooden beads and tied up by strings.  The length of Belt would be increased by tying up more beads and vice versa.  The measurement of the Belt and number of beads are referred to as belt grading.  The belt grading was provided by Too Brands to Second Generation and then Second Generation sent the same to the Defendant.

10.Lam stated that on 10October 2002, the Plaintiff received a telephone call from the Defendant enquiring about G643 belt.  The Plaintiff subsequently received a fax from the Defendant enquiring about the belt style number G643 – brown colour (“the Belt”) in respect of the sample and price thereof.  This is at page 89 of the Bundle of Documents (“BD”).

11.In reply to the enquiry for a quotation as per the aforesaid fax from the Defendant, Lam sent an email to Ms. Choie Leung Yee Mui (“Ms. Leung”) of the Defendant, giving a quotation of unit price at HK$8.50 per piece FOB Hong Kong.  She also attached a photo of the Belt for the information of the Defendant.  At that time, Ms. Leung told her that she represented the Defendant.  Subsequent to the commencement of the present proceedings, the Defendant disclosed that Ms. Leung is and was at the material time employed by the Defendant as a merchandiser and was responsible for merchandising.

12.Lam stated that on 18 October 2002, Ms. Leung gave her another phone call.   She told her that the number of G643 belts required was about 30,000.  She asked when the batch of goods would be ready.  Lam replied to her and also sent her an e-mail in reply which is at page 92 of the BD.   

13.After this e-mail, on the 22 October 2002, Ms. Leung telephoned Lam in the morning and stated that her client had placed the Order.  She asked Lam whether a cheaper price could be offered to the Defendant and whether the goods could be delivered to Mainland China.  After consulting Ho, who agreed to the lower price at $7.50 per piece, Lam informed Leung over the telephone that the price would be $7.50 per piece with delivery in Mainland China and delivery to be on or before 16 November 2002.  Ms. Leung then faxed to Lam a three page Purchase Order at page 123 a, b, c of the BD.  Ms. Leung asked Lam to write on the Purchase Order the following which had been agreed:-

(1)Goods would be delivered to Po Ling.

(2)Price at $7.50 per piece.

(3)A further discount of 2% if payment is by cash cheque which Ms. Leung asked for.

(4)Delivery date as on or before 16 November 2002.

(5)The Plaintiff would arrange for delivery after receiving the Defendant’s Cheque in payment. 

14.After writing the additional terms, as requested by Ms. Leung, Lam faxed a copy to the Defendant for record.  The Purchase Order pages with manuscript handwriting as aforesaid is at pages 124 – 126 of BD.  Ms. Leung then faxed the size grading chart as at page 93 of BD to Lam.  

15.It was agreed that before delivery of the goods they would deliver two belts per size to the Defendant in Hong Kong.  That was required to be delivered to the Defendant before delivery of the goods, as production sample.  These would be taken out from the production and if approved would become the shipment sample.  Lam stated that in the sample which they developed for Too Brands, Two Brands already had approved the colour of the beads and the strings used for the belt.  The only thing which required further approval by them would be the sizing when the 17 belts were delivered.  

16.Lam stated that she informed Ms. Leung that the samples could be supplied within 1 week.  Materials for the whole lot of belts would be ordered at one go and out of the material ordered the production samples would be made.  The production samples would take one week because the beads and strings took one week to be supplied.  The dyeing of the beads had to be done in the same lot.  Otherwise there would be colour variation.  Hence all the beads were ordered as one lot.  

17.Ho gave evidence that he ordered the beads and strings and he produced an invoice and order at Exh. P1.  He stated that the Supplier is in the Mainland.  The signature next to the “Ordered by” was his and the signature next to “Transacted by” is the name of his supplier “Chan” in Guangzhou.  Ho stated that he paid the amount stated in the Order/Invoice in the sum of $169,410.00 by remittance of this sum about 10^th or 15^th November.  

18.Lam stated that the first batch of beads and strings ordered arrived on or about 26 October 2002.  The second batch arrived about 1 November 2002.  After the first batch of raw material arrived, the Plaintiff produced the samples for the 17 sizes.  They delivered the samples of the 17 sizes to the Defendant on 28 October 2002.  The Delivery Note of that is at page 97 of the BD.  Lam stated that Ms. Leung told her to wait for the approval of the customer related to the sizing before production of the belts as per the Purchase Order.  Lam told Ms. Leung that for these goods, the raw material had been ordered.  While they had to wait for the client for approval, they had to have sufficient time for production.  

19.After about 3-4 days, Lam gave Ms. Leung a telephone call asking whether the client had received the samples and whether they could carry on production.  Ms. Leung told her to wait.  Lam kept calling Ms. Leung every 2-3 days to enquire but Ms. Leung stated the same thing.  Lam reminded Ms. Leung that after approval had been given, they required 14 days for production.  She reminded Ms. Leung that the material for production of the belts had been ordered.  

20.Not having heard from the Defendant by 11 November 2002, Ho sent an e-mail to the Hong Kong office of Too Brands at page 100 of BD enquiring whether the size samples of G643 belt had been approved.  Their reply at page 103 of BD stated that “If you are waiting for an approval, it is approved as per the last belt we received.”  Ho sent an e-mail to the Defendant at page 102 of BD with the e-mail from Too Sourcing at page 104 of the BD.  The Defendant replied at page 104 of BD saying “Up to this Moment; we don’t confirm you this orders are finally confirmed.  We know you are contacting directly to our client but that is your business.  We never concern with this.  If our client place you any orders then you should ask them for payment and proceed if you want.  Sorry for this case; what we can conclude that we are cancellation our PO0151/02”.  

21.Effectively, the last sentence of the e-mail from the Defendant was that they were cancelling the PO0151/02.  

22.Lam stated in evidence that there had been a concluded purchase order as evidenced in page 124-126 of the BD.   She stated that there had been no mention to her by Ms. Leung that it was conditional to approval of the samples by the client of the Defendant.  She stated that the purchase orders clearly state that they were purchase orders.  All the terms were stated therein.  She told Ms. Leung clearly that they had to order the raw materials for the belts before the production of the size samples.  

The Defendant’s Evidence

23.The Defendant had no sworn evidence to contradict the evidence of the Plaintiff witnesses.  In my view, no weight could be given to the statement of Ms. Leung as there is no evidence related to how the statement was taken from her, or that it was signed by her.  She had not come to Court to give evidence.  It is not tested by cross-examination.  

Finding

24.For the following reasons I find that the Purchase Orders at pages 124–126 were firm agreements between the Plaintiff and the Defendant:-

(1)I accept the evidence of the Plaintiffs’ witnesses as true.

(2)The Purchase Orders themselves at pages 124–126 state that they are Purchase Orders.  There is nothing on the face of the documents to contradict that agreements had been reached as evidenced therein.  There is no statement thereon to state that it is conditional to approval by the Defendant’s client of the 17 samples to be produced by the Plaintiff.  

（3）The e-mail of the Defendant dated 12 November 2002 ended with the words “What we can conclude that we are cancellation our PO0151/02.”  If there had been no purchase orders there would be no need to cancel them.  The wording suggests that there had been purchase orders.

25.Hence I find the Defendant liable to bear the loss of the Plaintiff.

Quantum of Damages

26.I accept the evidence of Lam and Ho as credible.  According to Ho and Lam the wooden beads required for the manufacture of the belts had been ordered and delivered to the Plaintiff in two batches.  The Plaintiff ordered 2.5 million large brown beads, 140,000 of the small white beads that are used in between the brown beads and 70,000 larger white beads which are those at the ends of the beading part of the belts from which the strings are tied.  He also ordered the strings at the end of the beading part of the belts.  He did not order the waxed threads which thread the beads because Ho said that they are readily available on the market.  He paid for the order as stated in Exh. P1 in the sum of $169,410.00.

27.I accept the evidence of Ho and Lam that the raw material had to be ordered before the production of the sample belts.  I accept their evidence that the beads could not be used and had not been used.  

28.There has been no plea of mitigation by the Defendant.  Such a plea has to be pleaded if relied on.  Hence the Defendant could not raise the issue of mitigation.  In view of the aforesaid, I find that the Plaintiff’s claim has been proved.

29.Judgment for the Plaintiff against the Defendant in the sum of $169,410.00 together with interest thereon from date of Writ to date of judgment at judgment rate and thereafter until payment at judgment rate.  I grant an order nisi for costs of the Action to be paid by the Defendant to the Plaintiff with Certificate for Counsel. 

Representation:

Ms. Janine Cheung instructed by Messrs. Alvan Liu & Partners for the Plaintiff.

Ms. Teresa Wu instructed by Messrs. David Ravenscroft & Co. for the Defendant.