Kee Shing Industrial Products Ltd v. Wah Lai Metal Artificial Jewellery Factory (A Firm)

DCCJ 2115/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2115 OF 2003

--------------------

BETWEEN

--------------------

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

Dates of Trial: 8^th to 10^th March 2006

Date of Handing down of Judgment:  24^th May 2006

___________________

JUDGMENT

___________________

1.This instant case has been ordered for a retrial by the Court of Appeal in CACV 224/2004 on 28^th April 2005.  This Court treats the case as though it came before this Court for the first time.

2.It is undisputed that:-

(a) The Plaintiff was a metal products trader and the Defendant was a metal artificial jewellery manufacturer.

(b) The Defendant had regularly purchased metal products from the Plaintiff since 2001.

(c) In previous dealings, the cost of transportation was paid by the Defendant.

(d) In or about October 2002, the Defendant had placed an order on the Plaintiff to purchase 3 Metric Tons of Nickel Square (“the Goods”) in the sum of $180,000 (“the Subject Agreement”).  It is not in dispute, that one metric ton had been delivered to the Defendant’s factory in the P.R.C.

(e) $60,000 was paid by the Defendant to the Plaintiff for the one metric ton of the Goods

(f) 聯榮貿易公司 was the carrier at all material times.

3.It is the Plaintiff’s case that on each occasion when a contract for sale of metal goods is made between the Plaintiff and the Defendant which requires the delivery of the said metal goods to the Defendant’s factory by the carrier Luen Wing, the Plaintiff would fax a Letter of Authorization (hereinafter known as “Letter of Authorization”) to the Defendant to be signed by it authorizing Luen Wing to deliver the said metal goods as its agent, on its behalf and stipulating that upon delivery of the metal goods to Luen Wing, the property in the goods would pass to the Defendant.    

4.It is not in dispute that Luen Wing had failed to deliver two metric tons of the Goods to the Defendant at their factory in the PRC.   The Plaintiff in this action claims payment from the Defendant for the price of the two metric tons of the Goods from the Defendant in the sum of $120,000.

The Defendant’s Case

5.The Defendant defends the present claim on the following grounds:-

(1) It was an express condition of the oral agreements between the Plaintiff and the Defendant that the Goods must be delivered to either of the Defendant’s two factories in the PRC failing which the Defendant did not have to pay for them, or alternatively that the price for the goods is to be payable only if the goods are delivered to the Defendant in the PRC (“the oral term”).  The Plaintiff was thus in breach of contract for short delivery of two metric tons of the goods and the Defendant should not be made liable for payment.

(2) If there is no such oral term, the Defendant’s alternative case is that a condition (in the form of the oral term) may be implied arising from the mutual intention and/or previous course of dealings between the Plaintiff and the Defendant.

(3) There were misrepresentations by the Plaintiff to the Defendant to induce Mr Mak Kwok On of the Defendant to execute the Letter of Authorisation.  Hence the Defendant is not bound by its terms.

(4) If the oral term is established then.  The Letter of Authorisation did not absolve the Plaintiff from the performance of its contractual obligations under the oral term, whether by way of waiver or variation of the oral term.

(5) The Letter of Authorisation was not properly brought to the Defendant’s notice and would not be incorporated as a term of the contract between the Plaintiff and the Defendant.

(6) The presumption under s34(1) of the Sale of Goods Ordinance, Cap. 26 is displaced as the carrier was not the Defendant’s agent, or alternatively, is displaced by the oral term.

(7) Even if the presumption in s34(1) is not displaced, the Defendant may decline to treat the delivery to the carrier as delivery to the Defendant or may hold the Plaintiff responsible in damages by reason of the Plaintiff’s failure to make such contract with the carrier on behalf of the Defendant as may be reasonable in breach of s34(2) of the Sale of Goods Ordinance, Cap. 26.

The Plaintiff’s Evidence

6.Mr. Yip Tsz Fai, (“Mr. Yip”) a Senior Sales Representative of the Plaintiff gave evidence on behalf of the Plaintiff. He adduced his witness statements at pages 30 -35 and 36-41 into evidence and confirmed their contents to be true.  

7.He stated that in or about September 2001, Mr. Mak Kwok On (“Mr. Mak”), who he knew was a partner of the Defendant, telephoned him to order certain Nickel Square (“the Goods”).  He further asked him if the Plaintiff could deliver the goods to the Defendant’s address in Mainland China.

8.He told Mr. Mak that the Plaintiff did not deliver to Mainland China.  He mentioned that the Plaintiff’s other customers had used a transportation company called 聯榮貿易公司(“Luen Wing”) to deliver goods to their destinations in Mainland China.  He might use the same company if he so wished.

9.According to the Plaintiff’s record, the Defendant previously ordered 3 metric tons of the goods which were delivered on or about 19 September 2001, 2 metric tons delivered on or about 2 April 2002 and 2 metric tons delivered on or about 8 April 2002.  All these 3 orders were delivered to the Defendant in accordance with the arrangement of using Luen Wing to deliver the goods.

10.In each of these deliveries the Plaintiff was not responsible to pay the transportation charges of 聯榮貿易公司.  Except on the first occasion when the Defendant paid Luen Wing through the Plaintiff the Defendant paid Luen Wing for these charges directly.  

11.Upon the placing of each of these orders, Mr. Yip would fax a copy of the Letter of Authorization to the Defendant for execution by the Defendant.   Mr. Mak would sign the Letter of Authorization as consignor and also place a company chop of the Defendant on it.   The Letter of Authorization dated 18 October 2002 executed by the Defendant in respect of the subject transaction was produced in evidence and marked Exh P3.   A copy of this is at page 41 of the Bundle of Document (“BD”).  In this Letter of Authorization, Mr. Yip completed the followings spaces in the form, namely that for Consignor and Consignee, the description of the subject goods, its quantity, delivery address, recipient client and telephone.  He then faxed it to Mr. Mak for his signature and the placing of the Defendant’s company chop.   Upon the return of this by Mr. Mak duly executed by the Defendant, one of the staff of the Plaintiff wrote the delivery note and the invoice number thereon after the delivery note and invoice were prepared by her.     Mr. Yip stated that unfortunately he mistakenly wrote the Consignor as Luen Wing and the Defendant as the Consignee.   This was an obvious mistake as the Defendant signed in the space as Consignor and placed the Company chop of the Defendant thereon in that space.    However, the Mr. Mak disputes that this Letter of Authorization related to this subject contract.

12.Mr. Yip also produced another Letter of Authorization which related to an earlier transaction namely one dated 8 April 2002 which was duly signed by Mr. Mak with the Company chop of the Defendant affixed.   He adduced this into evidence marked Exh P1 and a copy of this is at page 40 of the BD.   Mr. Mak disputed the authenticity of this Letter of Authorization stating that the signature thereon purporting to be his signature was a forgery and also the chop of his company is not that of his company.   In effect he is alleging that Exh P1 was a forged document.  

13.In examination-in-chief when Mr. Yip was asked in as regards the purpose of the Letter of Authorization, he stated that its purpose was to confirm that the Defendant had ordered the goods.  Mr. Yip in response to the allegation of the Defendant stated that he had represented to Mr. Mak that the execution of the Letter of Authorization was a procedure required by the Plaintiff but he had never stated that it would not impose any responsibility on the Defendant upon its execution.   He stated that he did not explain its contents to Mr. Mak when he asked Mr. Mak to sign it because Mr. Mak is an educated man and could read it himself and understand the words therein. 

14.Mr. Yip stated that in respect of this subject contract, the three metric tons of nickel were delivered to Luen Wing by another transportation company namely Wai Chun Transportation Company employed by the Plaintiff.   At the time of delivery of the Goods to Luen Wing, the Letter of Authorization was also delivered to them and Luen Wing placed their chop thereon in the place for signature by the Consignee.  At the same time a Delivery Note was also delivered to Luen Wing with the Goods and Luen Wing affixed their chop to show their receipt.   The Delivery Note with the chop of Luen Wing is produced into evidence marked Exh P2 and also on the Copy at page 34 of the BD.    Mr. Yip therefore states in evidence that all three metric tons of the Goods had been delivered to Luen Wing.

15.In relation to the oral term, Mr. Yip admitted in examination-in-chief that he had stated that payment of the goods by the Defendant is to be made after the Goods were delivered to the Defendant’s factory in the PRC.  However, he stated that the invoice at page 35 of the BD stated that the transaction was “COD”.   It is not clear whether the Defendant received this invoice as the invoice would be delivered to the Defendant by Luen Wing together with the Goods.   It is not clear whether this invoice for three metric tons was delivered to the Defendant at the time the Defendant received the first metric ton of the Goods.    When cross-examined by the Defendant’s Counsel that he told the Defendant that the Defendant was to pay for the Goods after the goods were delivered to the Defendant’s factory in the PRC, he answered “Yes”, because of the distance between Hong Kong and the PRC and the time taken in delivery.   

16.He did state that in the former transactions between the Plaintiff and the Defendant, he did not seek payment from the Defendant before the goods were delivered to the Defendant.   He also admitted that he did not chase the Defendant for payment after the Defendant had not received the goods until some months later in March 2003 when they issued a solicitor’s letter.   He stated that the Defendant would not pay hence he did not bother to chase him.

17.Mr. Yip denies that there was an incident alleged by the Defendant in 2001 to 2002 after a few contracts between the Plaintiff and the Defendant had been transacted when Mr. Mak telephoned him to ask him whether Luen Wing is reliable and he assured Mr. Mak that Mr. Mak would not have to pay should the goods not reach his factory in the Mainland. 

The Defendant’s Evidence

18.Mr. Mak gave evidence on behalf of the Defendant and he adduced his two witness statements at pages 42 to 44 and 45 to 54 in evidence.  

19.In relation to the oral term Mr. Mak stated that when he first contacted Mr. Yip related to orders to be placed by him on the Plaintiff for nickel squares, he asked Mr. Yip whether he could deliver nickel squares into the PRC.  Mr. Yip stated that so long as the Defendant would be responsible for the delivery charges, he could deliver the nickel squares into the Defendant’s factories in the PRC.   He informed Mr. Yip that the goods must reach his company in the Mainland before he would make payment.  He also informed Mr. Yip that “when the goods arrive in the Mainland, he will make payment.   When the goods are not delivered to the Mainland he will not pay.  Mr. Yip informed him, “of course, you only pay when the goods are received by you.”

20.In about 2001 to 2002, he was informed that Luen Wing may not be a reliable carrier.  He therefore telephoned Mr. Yip to ask him whether he was sure the goods could be delivered to the Defendant in the Mainland.  Mr. Yip said, “Of course, if the goods are not delivered to you, you do not have to pay.”

21.He gave evidence that the Letter of Authorization dated 8 April 2002 was a fabrication and the signature purporting to be his was not his signature but forged and the company chop purporting to be that of the Defendant was not the same as the company chop of the Defendant and compared with the company chop of the Defendant at page 41, the size of the two company chops are not the same one is bigger, the other is smaller.   He stated that the fax machine imprint purporting to be from his company’s fax machine is not that of his company’s fax machine.

22.In relation to the Letter of Authorization at page 41, that is the one dated 18 October 2002, he said that at the time when he was asked to sign it, he asked Mr. Yip why he had to sign.  Mr. Yip said that it was a formality that he had to sign.   So as not to make it difficult for him he signed.  He thought that as they have an oral agreement that he did not have to pay until he received the goods the oral agreement prevailed.   Further he looked at the Letter of Authorization, which said that the Consignor had to pay the Plaintiff and the Consignor was Luen Wing so he signed.  

23.He stated that on each transaction with the Plaintiff, when the goods were delivered by Luen Wing, he would telephone Mr. Yip to tell him that the goods have arrived or Mr. Yip would telephone him and then he would pay the Plaintiff.  

24.He stated that it was impossible for Luen Wing to be his agent for all the control over Luen Wing is in the Plaintiff’s hand.   The Plaintiff could control every move of Luen Wing.  Moreover it was the Plaintiff who drew up the Letter of Authorization.   The Plaintiff gave every order to Luen Wing. 

25.In relation to the Letter of Authorization dated 18 October 2002 at page 41 of the BD, he stated in examination-in-chief that he signed the Letter of Authorization even though he did not know what was the time he signed it.  He said that he only signed one such document.  He said that when he was asked to sign it he asked why he had to sign it.  Mr. Yip said that he had to sign it as a formality.  He signed it so as not to make things difficult for Mr. Yip.  He thought that he had the oral term with Mr. Yip.  He read the words in the Remark and knew the contents of the Letter of Authorization.  As it stated that the liability would be borne by Luen Wing who will have to pay, he signed the Letter of Authorization.   Subsequently he said under cross-examination that when it was faxed to him the words in the Remark were blurred and were not clear.   However he confirmed that Exh P3 was the Letter of Authorization that he faxed to the Plaintiff after he signed it.  It seems to me that as regards whether the words in the Remark in the Letter of Authorization faxed to him were clear, the copy he received could not be less clear than Exh P3 which was the copy received and faxed back to the Plaintiff by the Defendant.  It is an objective fact as regards whether the words in the Remark in Exh P3 are clear.  This could be seen from Exh P3.   When he was asked whether he could read the words in the Remark, at page 41 of the BD, and was asked to read them, he then said that he could only read with his glasses on.    He then added some new evidence and said that when he received the Letter of Authorization dated 18 October 2002 from Mr. Yip, he telephoned Mr. Yip and asked him why is it worded like that.  Mr. Yip said that since there is an oral agreement that payment is only due when the goods are delivered, and if he did not receive the goods, Mr. Yip will chase Luen Wing and will not chase him.  Then Mr. Yip told him to sign and in response he signed.        

26.When asked why he did not ask Mr. Yip to amend the Letter of Authorization since it did not accord with the oral term, he said that there was no point in his asking Mr. Yip to amend.   Mr. Yip could do that himself.  He stated that perhaps Mr. Yip’s meaning was that Luen Wing was the Consignor and in the Remark it is said he would chase Luen Wing.  He said, “Maybe Luen Wing had to pay”.   Further he did not want to change the Letter of Authorization because Mr. Yip had agreed the oral term with him.  

Credibility of Witnesses

27.In my view, Mr. Mak’s evidence that his signature in the Letter of Authorization dated 8 April 2002 was forged and that the chop purported to be that of his company affixed thereon was not his company’s chop is a lie.  He stated that the company chop of the Defendant in the Letter of Authorization dated 8 April 2002 was not the same size as the company chop of his company shown the Letter of Authorization dated 13^th October 2002 marked Exh P3, (photocopy at page 41 of BD).  This is obviously an untruth.   The company chop purported to be that of the Defendant’s company on the Letter of Authorization dated 8 April 2002 appears in all respects the same size and appear similar in all respects as that of the company chop purporting to be that of the Defendant in the Letter of Authorization dated 18 October 2002.   It is entirely improbable that the Plaintiff would forge Mr. Mak’s signature and forge the chop of the Defendant’s company in a Letter of Authorization, which was then dated 8 April 2002.   I came to the strong conviction that Mr. Mak was blatantly lying.  I found that part of his evidence to be wholly unbelievable.       

28.The fact that Mr. Mak was untruthful is particularly obvious in his answers under cross-examination in relation to the Letter of Authorization dated 18 October 2002 when asked whether he read it.   He stated that the words in the Remark were blurred.  When he was asked to turn to page 41 of the BD, and asked whether he could read the words in the Remark, in the Letter of Authorization, he then stated that he could read the words if he had his glasses on.   Again he said words that were obviously untruthful when asked why he did not ask Mr. Yip to amend the Letter of Authorization.  In answer he said that perhaps Mr. Yip deliberately wrote that Luen Wing would pay the price for the Goods, should the goods be lost, because of the oral agreement.   He further said that Mr. Yip explained to him that the reason why the Letter of Authority is worded like that is because there is an oral agreement that payment is only due when the goods are delivered.  If the goods are not delivered Mr. Yip would chase Luen Wing and not the Defendant.  In my view this piece of evidence by Mr. Mak is wholly unbelievable and is a blatant lie.

29.Mr. Mak’s manner when giving evidence was poor.    He did not give a good impression.   I came to the view that he was not a credible witness.  That being the case, his evidence is not reliable and I cannot accept Mr. Mak’s evidence as reliable.

30.Mr. Yip displays a more forthright manner and admitted facts that are against his interest such as the fact that he did not explain the Letter of Authorization to Mr. Mak before he asked him to sign it.   He also said that he did tell Mr. Mak that the Defendant was to pay the price of the goods after it has reached his factory in the PRC.  However, there were parts in his evidence where he changed his evidence in the course of evidence.   For instance, at one point he admitted that he had told Mr. Mak that signing the Letter of Authorization was a matter of formality but after a break in his evidence, he stated that he did not say that.   However, I find that it is obvious that he did say that.   Mr. Yip did show inconsistency in some of his evidence and was careless in his treatment of his client’s rights such as not letting him have the documents that showed delivery by the Plaintiff to Luen Wing of the two metric tons of nickel squares even when the Defendant indicated that Luen Wing failed to make delivery.  

31.As Mr. Mak’s evidence is not reliable I do not accept such facts asserted by him, which is denied by Mr. Yip.   On the other hand, Mr. Yip is not entirely unreliable and I accept those parts of the evidence admitted by him which are against his interests. 

The Issues

32.The issues outlined by the Defendant’s Counsel in his Closing submission are as follows:

(1) Whether it was an express condition of the oral agreements between the Plaintiff and the Defendant that the Goods must be delivered to the PRC failing which the Defendant did not have to pay or, alternatively, that the Defendant was to pay for the goods after they were delivered to the Defendant in the PRC (“the oral term”). 

(2) Alternatively, whether such condition could be implied by reason of the past course of dealings between the Plaintiff and the Defendant.

(3) Whether the Letter of Authorisation was unenforceable against the Defendant as a result of misrepresentations by Mr. Yip to Mr. Mak.

(4) Whether the Letter of Authorisation would absolve the Plaintiff from the performance of its contractual obligations, whether by way of waiver or variation of the oral term.

(5) Whether the Letter of Authorisation was incorporated as a term of the contract between the Plaintiff and the Defendant.

(6) Whether the carrier was the Plaintiff’s agent, such that the presumption under s34(1) of the Sale of Goods Ordinance, Cap. 26 (i.e. the presumption that delivery to the carrier is deemed to be delivery to the buyer) would be displaced/rebutted.

(7) If not, whether the Defendant may nonetheless decline to treat the delivery to the carrier as delivery to the Defendant or may hold the Plaintiff responsible in damages by reason of the Plaintiff’s failure to make such contract with the carrier on behalf of the Defendant as may be reasonable pursuant to s34(2) of the Sale of Goods Ordinance, Cap. 26.

Issue (1)

33.As I find Mr. Mak to be an unreliable witness, those parts of his evidence that are not accepted by Mr. Yip, is not accepted by me.  The Defendant has not been able to establish that there was an express condition of the oral agreement between the Plaintiff and the Defendant that the goods must be delivered to the Defendant’s factory in the PRC failing which the Defendant did not did not have to pay the Plaintiff as this was denied by Mr. Yip and in the face of such denial, Mr. Mak’s evidence on this could not be believed.  

34.However, Mr. Yip stated that he did inform the Defendant that the Defendant was to pay for the Goods after they had been delivered to the Defendant in the Defendant’s factory in the PRC.   It is also the case that in past transactions, the Defendant paid the Plaintiff after the goods had been delivered to the Defendant’s factory in the PRC.  This would suggest that the Plaintiff did not chase the Defendant for payment before the goods are delivered.  Further in this transaction, the Plaintiff did not chase the Defendant for payment in respect of the two metric tons of goods until the Plaintiff’s solicitors’ letter to the Defendant in March 2003 several months later.   Mr. Yip’s explanation for this was very exceptional, for he said that he did not chase the Defendant because even if he chased him, the Defendant did not have money.  

35.From the aforesaid, on the balance of probability it is highly likely that Mr. Yip stated to Mr. Mak that the Defendant was to pay for the Goods after they had been delivered to one of the Defendant’s factory in the PRC.      

Issue (2)

36.As I have found that there was an oral agreement between the Plaintiff and the Defendant that the Defendant was to pay for the Goods when the goods have been  delivered to one of the Defendant’s factory in the PRC, namely that there is an express oral term to this effect, this issue is not relevant.   However it is to be noted that in the previous course of dealing there has not been a situation where the Defendant failed to receive the Goods ordered from the Plaintiff.  There is no previous course of dealing as regards what the Defendant would do in a situation of non-delivery by Luen Wing. 

Issue (3)

37.I found the evidence of Mr. Mak unreliable so that I could not accept his evidence related to the alleged misrepresentation.   I accept Mr. Yip’s evidence when he stated that he did inform Mr. Mak that Mr. Mak had to sign the Letter of Authorization as a matter of procedure or a matter of formality required by the Plaintiff Company.   Mr. Yip stated that he did not say that Mr. Mak did not need to take any responsibility as regards the contents of the Letter of Authorization despite signing it.  I accept Mr. Yip’s evidence in respect of this.  Mr. Mak himself stated that he read the Letter of Authorization dated 18 October 2002 before he signed it.  

38.I find Mr. Mak signed the Letter of Authorization dated 8 April 2002 and this Letter of Authorization is authentic and I reject Mr. Mak’s evidence that it was forged.   I also accept the evidence of Mr. Yip that on each occasion when nickel squares were sold to the Defendant, he had asked Mr. Mak to sign a similar Letter of Authorization even though he has lost the other two Letters of Authorization signed by Mr. Mak.

39.Mr. Mak admitted that he read the Letter of Authorization dated 18 October 2002 before he signed it.  There is a mistake in the Letter of Authorization dated 18 October 2002 in that the Defendant is stated as the Consignee whilst Luen Wing is stated as the Consignor.   However in the place of signature, Mr. Mak signed in the place for Consignor and he placed his company chop there.   He also stated that at the time when he signed, the chop of Luen Wing was not there.   Hence Mr. Mak chose to sign in the space for   Consignor.   It must have been the case that Mr. Mak was not misled by the mistake of writing the name of Luen Wing as Consignor at item 1) at the top of the Letter of Authorization and the Defendant’s name as Consignee in item 2) of the Letter of Authorization.  

40.Although he was told that as a matter of formality he should sign it, he read it before he signed it and knew its contents.   It is not clear as to how the words spoken by Mr. Yip operated on this mind so as to affect his consideration of the importance of this document.   However it did not stop him from reading through its contents as a prudent businessman and he was well aware that he signed it in the capacity of a Consignor.    

Issue (4)

41.The Defendant’s Counsel relies on Great Bright Limited v Triangle Motors Limited HCA 7781 of 1999 delivered on 4 February 2002 in support of his contention that unless the Letter of Authorization dated 18 October 2002 could be taken as a waiver or variation of the contract between the Plaintiff and the Defendant, the Plaintiff was obliged to perform its original contractual duties towards the Defendant as per the oral term that is the Defendant did not have to pay for the Goods until the Goods are delivered to the Defendant’s factory in the PRC.   The Judgment of Deputy Judge Johnson Lam as he then was concerns two Orders for motor vehicles placed by the Plaintiff on the Defendant partly evidenced by written Customers Orders but orally, the Plaintiff had stipulated that the motor vehicles had to be delivered to the border of China by 30 September 1994.  It was found by the learned Judge that the Defendant agreed the oral terms as to date and place of delivery stipulated by the Plaintiff.  Prior to delivery, the Defendant caused the Plaintiff to sign documents headed, “Confirmation of Export Delivery of Vehicle” (“Confirmations”) wherein the Purchaser acknowledged inter alia, delivery of the vehicles, and the purchaser authorized the Defendant to engage a transportation company to deliver the vehicles to the border at Man Kam To contrary to the oral terms related to delivery at the border in China on 30 September 1994.  One of the issues before the learned Judge was whether the Confirmations could absolve the Defendant from the performance of the oral obligations related to date and place of delivery. 

42.At paragraph 25 of the Judgment, it states,

“Could the Confirmations absolve the Defendant from the performance of such obligations?    In my judgment unless the Confirmations could be taken as a waiver or variation of the contract, the Defendant was still obliged to perform its original contractual duties towards the Plaintiff.”

43.In paragraph 27 of the Judgment, the learned Judge stated,

“In my judgment, the mere act of asking Wong to sign the Confirmations were not sufficient to dispel the impression created by Lin (for the Defendant) in the mind of Wong (for the Plaintiff) that this transportation company would be acting as agent of the Defendant in the delivery.

I therefore hold that the Confirmations did not have the legal effect of absolving the Defendant from its contractual obligations towards the Plaintiff.”

44.I have to find whether in this case the signing of the Letter of Authorization dated 18 October 2002 by Mr. Mak had the effect of a waiver or caused the variation of the oral term.   In all probability, Mr. Mak had made it clear to Mr. Yip that he required the Goods to be delivered to his factory in the PRC and he had made his concerns known that the Goods must be delivered there safely.   Mr. Yip told him that the Defendant was to pay for the goods after they were delivered to the Defendant’s factory in the PRC.  His concerns about the safe delivery by the carrier must have been clear to Mr. Yip.   In my view since the Letter of Authorization carried a term which stated that the Defendant would have to bear the consequences of the loss in transit, Mr. Yip had the responsibility to draw the attention of Mr. Mak to the terms stated in the Remark.  The Remark stated that upon delivery by the Plaintiff to Luen Wing, the property in the goods would have been passed to the Defendant and even if the goods were lost, the Defendant still had the responsibility to pay the Plaintiff.   Mr. Yip clearly stated that he did not explain this to Mr. Mak.  I find that the Letter of Authorization dated 18 October 2002 did not release the Plaintiff from the oral term that the Defendant was to make payment after the said Goods have been delivered to the factory of the Defendant in the PRC.  

Issue (5)

45.In view of the aforesaid I find that the Letter of Authorization was not incorporated as a term of the contract between the Plaintiff and the Defendant.

Issue (6)

46.The onus for establishing that Luen Wing was the agent of the Plaintiff is on the Defendant.  The Defendant’s Counsel in his final submission stated the fact that the Plaintiff had all along worked with Luen Wing Trading Co. as their carrier and the fact that they invariably recommended Luen Wing to their customers is a factor in support of the Defendant’s contention.  The other factor relied on is that the Plaintiff was in control of Luen Wing as carrier.  The Plaintiff not only introduced Luen Wing to the Defendant but also followed up with Luen Wing when Luen Wing failed to deliver the two metric tons at the request of Mr. Mak in the attempt to find out what was happening.  

47.On the other hand these other factors have to be considered:    

(1) The Defendant paid the delivery charges of Luen Wing.

(2) The Defendant negotiated with Luen Wing in relation to the amount of the delivery charges.  This is the evidence of Mr. Yip.

(3) According to Mr. Yip, Luen Wing contacted the Defendant direct as regards time and date of delivery.  However when it came to the failure of Luen Wing to deliver, Mr. Mak asked Mr. Yip to help him to chase up Luen Wing.

48.Having considered the evidence aforesaid, I am not able to find that the evidence points to the fact that Luen Wing was the agent of the Plaintiff in the subject transaction.    

49.On the other hand, it seems clear to me that the oral term as found by me that the Defendant was to pay for the Goods after the Goods were delivered to one of the Defendant’s factories in the PRC has the effect of displacing the presumption in section 34(1) of the Sale of Goods Ordinance which provides that delivery of the goods to the carrier for the purpose of transmission to the buyer is prima facie deemed to be a delivery of the goods to the buyer.   There is no dispute that the Plaintiff has delivered the Goods to Luen Wing.  However by the oral term payment for the Goods by the Defendant is not to be made until after the Goods has been delivered to one of the Defendant’s factories in the PRC.   This term contradicts the presumption in section 34(1) of the Sales of Goods Ordinance.  The said oral term would take precedence over the presumption in section 34(1) of the Ordinance, which is therefore displaced and does not apply to the terms of the subject transaction.      

Issue (7)

50.Section 34(2) of the Sale of Goods Ordinance states,

(2) Unless otherwise authorized by the buyer, the seller must make such contract with the carrier on behalf of the buyer as may be reasonable having regard to the nature of the goods and the other circumstances of the case.  If the seller omits to do so, and the goods are lost or damaged in the course of transit, the buyer may decline to treat the delivery to the carrier as a delivery to himself, or may hold the seller responsible in damages.     

51.In evidence, Mr. Yip stated that he did not negotiate the price of the transmission charged by Luen Wing but the Defendant negotiated this with Luen Wing themselves.  He did not negotiate any terms of insurance to be arranged by Luen Wing on behalf of the Defendant to cover the risks of loss of the goods.  He also did not negotiate with Luen Wing for any terms to protect the Defendant’s interests in the event of failure by Luen Wing to deliver the Goods.  

52.In paragraph 8-015 of Benjamin, Sale of Goods, 6^th Edition, at page 369, reference is made to section 32(2) of the 1979 Sales of Goods Act.  This is the same as section 34(1) of the Sale of Goods Ordinance.  In relation thereto, it states,

“The duty of the seller under this subsection is, however, merely to make a reasonable contract on ordinary terms: it is not to ensure that the buyer will in any event have a remedy against the carrier.  The seller is entitled to assume that the duration of the transit will not be prolonged beyond that which is usual, taking into account ordinary vicissitudes; and, although he is bound to possess reasonable knowledge of the characteristics of the goods he is selling and must ensure that the contract of carriage provides for the taking of any necessary precautions to preserve them during the transit in question, he need not stipulate for exceptional measures to be taken.”

53.At para 8-16 in the paragraph headed “Insurance” it states,

“The duty to make a reasonable contract of carriage does not carry with it a duty to insure the goods during transit unless so agreed or unless it is customary for the seller to assume such a duty.” 

54.Having regard to the aforesaid, it would seem that the Defendant has not been able to establish that the Plaintiff failed to make a contract with the carrier that may be reasonable. 

55.The Defendant could have sought to arrange for the insurance of the said goods in transit if he so wished or made an attempt through the Plaintiff to ensure that this were done by Luen Wing.   The Defendant failed to do this.  

56.Having considered my finding on the issues aforesaid, in particular on the oral term between the parties herein and its effect on the provisions of section 34(1) of the Sale of Goods Ordinance, I find that the Plaintiff’s claim against the Defendant must fail.

57.I therefore make the following Order:

Claim dismissed with an order nisi for costs of the action to be paid by the Plaintiff to the Defendant to be taxed if not agreed with Certificate for Counsel.

Representation:

Mr. Dennis W. Sit instructed by Messrs Ng & Fang for the Plaintiff.

Mr. Jenkin Suen instructed by Messrs Benny Kong & Peter Tang for the Defendant.