Kai Hon Electroplate (Shenzhen) Co Ltd v. Marble Watch Manufacturing Ltd
Read the full judgment text of DCCJ 2192/1999 on BabelCite. This District Court judgment.
1. The Plaintiff was/is a PRC company with an electroplating factory in Shenzhen (“ Plaintiff Factory ”). The Defendant was/is a watch manufacturer with an associated PRC factory known as Marble Watch Company (“ Defendant Factory ”) that manufactured, processed and assembled watch/electronic components supplied by the Defendant.
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DCCJ2192/1999 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 2192 OF 1999 ------------------------ BETWEEN
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Coram: H H Judge Marlene Ng in Court Dates of Hearing: 12th, 13th, 14th June and 10th July, 2006 Date of Handing Down Judgment: 17th October, 2006
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I. Introduction 1.The Plaintiff was/is a PRC company with an electroplating factory in Shenzhen (“Plaintiff Factory”). The Defendant was/is a watch manufacturer with an associated PRC factory known as Marble Watch Company (“Defendant Factory”) that manufactured, processed and assembled watch/electronic components supplied by the Defendant. II. Plaintiff’s claim 2. The Plaintiff claimed for outstanding electroplating charges in the sum of HK$92,178.58. On the third day of trial, the Defendant conceded liability for such sum subject to the defence of set-off against so much of its counterclaim as would be sufficient to extinguish the Plaintiff’s claim. III. Defendant’s counterclaim 3. The Defendant claimed that on/about 20th September 1997 it entered into an agreement with Jamee West Watch Creations (“Jamee West”) as evidenced by an Order Confirmation of the same date (“JW Order”) to supply 50,000 sets of watch components (“JW Goods”) to Jamee West for the price of HK$427,000.00 :
4.The JW Order expressly provided as follows :
5.The Defendant claimed that 30,000 sets of the JW Goods required “acid gold + nica” electroplating (see the Defendant’s breakdown in paragraph 16 below, “JW Acid Gold Goods”) whilst the remaining 20,000 sets required “mic gold” electroplating (“JW Mic Gold Goods”). Ms Gwilt, counsel for the Defendant, submitted the JW Mic Gold Goods were electroplated by another electroplating factory with no problem, but there are no pleadings or evidence on the subject. 6.The Defendant further claimed that in/about October/November 1997, it was agreed inter alia that (a) the Plaintiff would electroplate watch components (“Goods”) according to the drawings, plans, instructions and specifications (“Specifications”) and samples (“Samples”) supplied by the Defendant, and (b) the Defendant would pay the Plaintiff electroplating charges 120 days after delivery of the electroplated Goods (“Electroplated Goods”) to the Defendant Factory (“Agreement”). 7.Pursuant thereto, the Defendant delivered the Goods to the Plaintiff, including instalment deliveries of the JW Acid Gold Goods together with relevant Samples (“JW Samples”) and Specifications (“JW Specifications”) in November 1997. 8.In breach of the Agreement, the Plaintiff’s electroplating of the JW Acid Gold Goods was defective and/or not done with reasonable care and skill :
9.The Plaintiff delivered 66,538 pieces of the electroplated or re-electroplated JW Acid Gold Goods (“JW Electroplated Goods”) to the Defendant, of which 26,355 pieces or 39% did not conform to the JW Samples and/or satisfy the JW Specifications and were not of merchantable quality (“JW Rejected Goods”). All of the JW Rejected Goods were re-delivered to the Plaintiff for remedial work and/or re-electroplating, but the Plaintiff failed to rectify the defects or do so in time for the Defendant to meet its delivery deadline under the JW Order. On 23rd November 1997, Jamee West rescinded the JW Order. 10.The Defendant counterclaimed for loss and damages in the sum of HK$427,000.00 being (a) wasted cost of the JW Goods (HK$381,400.00) and (b) loss of profits under the JW Order (HK$45,600.00). IV. Documents and schedules 11.This case turns mainly on the contemporaneous documents and various schedules prepared by the Defendant, the contents of which were largely undisputed. (1) Documents 12.In November 1997, the Defendant issued certain 電鍍單(“Electroplate Forms”) to the Plaintiff and the Plaintiff issued certain invoices (“Invoices”) and 送貨計款單 (“Delivery Notes”) to the Defendant, which documents were disclosed by the Defendant in the course of discovery. Neither party disclosed the November 1997 monthly checklist of electroplating transactions between (and verified/confirmed by) the parties (“Checklist”). 13.The Plaintiff’s managing director/shareholder Mr Cheng Hoi Hung (“Mr Cheng”) claimed the Plaintiff gave the duplicate Invoices and Checklist of November 1997 to the Defendant when the latter paid the corresponding electroplating charges. He further claimed the Plaintiff would only keep the Electroplate Forms and Delivery Notes for two years after the corresponding Invoices were settled. So the Plaintiff no longer had any relevant records for the electroplating transactions of November 1997 between the parties. (2) Common ground between the parties 14.There was no dispute (a) the Defendant delivered at least 50,000 pieces of the Goods to the Plaintiff in November 1997 and (b) the unit cost for electroplating case, ring and case and back plating were respectively HK$0.39, HK$0.31 and HK$0.39. Although Mr Cheng doubted whether in October/November 1997 (i) the Defendant placed any electroplating order with the Plaintiff involving 50,000 pieces of the Goods and/or (ii) the Plaintiff actually electroplated such quantity for the Defendant, Mr Sher, counsel for the Plaintiff, did not seek to resile from the above undisputed matters. 15.Such matters are borne out by the information in Schedules A and B (see below) that the Defendant delivered over 50,000 pieces of the Goods to the Plaintiff and that the Plaintiff delivered over 50,000 pieces of the Electroplated Goods to the Defendant in November 1997. Of the aforesaid Goods and/or Electroplated Goods, there is no dispute that some of them were “repeats” re-delivered by the Defendant to Plaintiff for remedial work and/or re-electroplating. 16.Rather, the issue (which will be canvassed in more detail below) is whether the aforesaid Goods delivered by the Defendant to the Plaintiff for electroplating or re-electroplating were in fact the JW Acid Gold Goods. Mr Sher submitted there was no correlation between the two. But Ms Gwilt submitted they were one and the same with breakdown as follows :
(3) Schedules 17.Both counsel agreed on the contents of the schedule at pp.318 (English version) and 357 (Chinese version) of the trial bundle. Such schedule particularised the Goods which the Defendant delivered to the Plaintiff in November 1997 for electroplating or re-electroplating as extrapolated from the November 1997 Electroplate Forms. It is now presented in a different format as “Schedule A” attached to this judgment. Mr Sher only disputed the notation at the bottom of pp.318 and 357 of the trial bundle which stated that “注：其中電壞有[26,355PCS或26,516PCS],佔總數39%”. 18.Both counsel further agreed on the contents of the schedule at p.203 of the trial bundle (partially extracted from the schedules at pp.318 and 357 of the trial bundle and presented as shaded items nos.2, 6, 10-11, 16-18, 23-25 and 28-31 of Schedule A). Such schedule showed that 26,316 or 26,355 or 26,321 pieces (see explanatory note [Bold] of Schedule A) of the Electroplated Goods received by the Defendant were re-delivered to the Plaintiff for remedial work or re-electroplating (“Repeated Goods”). However, the Plaintiff denied (a) the original electroplating of the Repeated Goods was defective and/or (b) the Repeated Goods were in fact the JW Rejected Goods. 19.Furthermore, both counsel agreed on the contents of the schedule at p.358 of the trial bundle. Such schedule particularised the Electroplated Goods the Plaintiff delivered to the Defendant during November 1997 and on 8th December 1997 as extrapolated from the Plaintiff’s Invoices. It is now presented in a different format as “Schedule B” attached to this judgment. Mr Sher only disputed the notation at the bottom of p.358 of the trial bundle relating to short delivery, but Ms Gwilt confirmed that the Defendant would not claim for short delivery. 20.Apart from the aforesaid common grounds, the issues arising from Schedules A and B are (a) whether the Goods and the Electroplated Goods identified therein were referable to the JW Acid Gold Goods and JW Electroplated Goods respectively (and as a corollary thereto, whether the Repeated Goods were in fact the JW Rejected Goods) and (b) if so, whether the electroplating of the Repeated Goods was defective and amounted to breach of contract. Ms Gwilt confirmed that the Defendant would not rely on any delivery of the Goods for electroplating or any re-delivery of the Electroplated Goods to the Plaintiff for re-electroplating apart from those listed in Schedules A and B. V. Issues 21.Apart from those already highlighted above, the issues in the present proceedings are as follows :
VI. Witnesses and dramatis personae 22.Mr Cheng and Madam Yim Siu Man (“Madam Yim”), the Plaintiff’s former sales manageress, gave evidence for the Plaintiff. Mr Cheng had been in the electroplating trade for ten odd years. He was in charge of the Plaintiff and was the sole proprietor of Kai Hong Medicine Trade Company (“HK Kai Hong”), a Hong Kong company that collected electroplating charges from Hong Kong customers on behalf of the Plaintiff. He was also responsible for technical matters in relation to production, but was not involved in the daily routine of soliciting electroplating orders, collecting/delivering the Goods or Electroplated Goods, issuing the Invoices, Delivery Notes or Checklists, and carrying out the Verification (see below). Mr Cheng could only describe the Plaintiff’s usual practice in relation to these matters. 23.Madam Yim left the Plaintiff in mid-January 2000. She claimed she was no longer involved in the Plaintiff’s business although she would answer queries by the Plaintiff’s staff. But in her witness statement she said even after her resignation she often worked for the Plaintiff when requested and was paid for her work. 24.Madam Yim gave evidence that she was only responsible for after sales work (ie collecting and/or chasing for payment of electroplating charges), supervising about ten odd sales representatives and reporting to Mr Cheng. She had no other contact with the Plaintiff’s customers and was not responsible for soliciting or negotiating electroplating orders, collecting the Goods from customers, supervising the electroplating process, delivering the Electroplated Goods to customers, dealing with complaints as to quality and preparing/ dispatching the Invoices/Checklists. Her evidence is therefore of limited value vis-à-vis the Defendant’s counterclaim. 25.Only the Defendant’s director Mr Chung Yi Shing (or Mr Lit Chung (“Mr Chung”)) gave evidence for the Defendant. He had twenty years’ experience in the watch manufacturing trade. He established the Defendant in 1996 and was in charge of its operations. Prior to establishing the Defendant, he ran the Defendant’s predecessor, an unlimited company, for ten odd years. 26.The direct participants in the electroplating transactions between the parties were the Plaintiff’s sales representative Mr Yiu Yuk Chung (“Mr Yiu”) and the Defendant’s manager Mr Lee Chun Chi (“Mr Lee”). Both had left their respective employments. 27.In assessing witnesses’ credibility, the court should consider the totality of the witnesses’ evidence against the documentary evidence, inferences based on inherent improbabilities and/or undisputed facts (see the principles set out by Chung J at paragraph 12 of Star Glory Investment Ltd v Kai Tua (H.K.) Technology Ltd & ors HCA3523/2002 (unreported, 13th August 2005)). In my view, neither Mr Cheng nor Mr Chung told the entire truth. VII. Dealings between the parties 28.There is no dispute there were electroplating transactions between the parties since 1997. I accept it was rare in the electroplating trade to have written contracts for “acid gold + nica” electroplating and there was in fact none between the parties. VIII. Usual handling of the electroplating orders (1) Electroplating orders and delivery of the Goods 29.When the Defendant received an order from a customer, it would purchase and process (including polish (打磨) and shine (拋光)) the requisite Goods before sub-contracting the electroplating work. Normally Mr Lee would place electroplating orders with Mr Yiu. Mr Yiu would report to Madam Yim, who would report to Mr Cheng for approval to do business with the Defendant. 30.I accept Mr Chung’s evidence that after processing the Goods (a) the Defendant’s quality surveyors (“QCs”) would check and discard those with tiny pin holes (沙孔, “Pin Holes”) and (b) the workers would pack the Goods into boxes with foam partitions (exhibit D3). The Plaintiff would arrange collection of the Goods from the Defendant Factory together (i) with an Electroplate Form (to be countersigned by the Plaintiff’s driver) setting out the Specifications and (ii) sometimes with colour samples (ie the Samples) or other specifications by the Defendant’s customer. (2) Electroplating process 31.The Plaintiff would clean the Goods before carrying out electroplating. Usually, three types of electroplating were done for the Defendant :
The gold colour from “acid gold” electroplating varied from “1N” to “3N” (ie light to dark shades). If there were no Samples, the Plaintiff usually adopted “2N” standard gold colour; otherwise the gold colour of the Electroplated Goods had to conform to the Samples and/or Specifications. The Specifications might require adding a nica layer; otherwise the Plaintiff would dip the Electroplated Goods into chemicals (保護水) for protection. (3) Delivery of the Electroplated Goods 32.The Plaintiff’s QCs would inspect the Electroplated Goods. After passing quality inspection, they would be packed in boxes with labels stating the quantity and the electroplating process used. The Plaintiff then delivered the Electroplated Goods and (according to Mr Cheng) the Samples (if any) to the Defendant Factory where staff would tally up the total delivered quantity from the box labels. (4) Invoices and/or Delivery Notes 33.In 1997, the Plaintiff would send a Delivery Note and Invoice (in duplicate) to the Defendant together with the Electroplated Goods. If the quantity were in order, the Defendant’s staff would keep the original Invoice as well as sign/stamp and return the Delivery Note and duplicate Invoice to the Plaintiff. The Plaintiff doubted whether the Invoice was sent with the Electroplated Goods. I find it would have been so sent since the Defendant’s “收貨章” stamped on the November 1997 Invoices stated that “貨來核驗 照單暫收 如貨不合 有權退回”. Mr Cheng claimed the Defendant Factory would send the original Invoice to the Defendant’s Hong Kong office to arrange for payment of the electroplating charges. (5) Time required for the electroplating process 34.Mr Chung said according to common trade practice and the parties’ dealings, it took one to two days (viva voce evidence) or two to three days (witness statement) but in any event not more than four days for the Plaintiff to complete the electroplating process, ie from collecting and electroplating the Goods until delivering the Electroplated Goods to the Defendant (“Electroplating Process”). Mr Cheng, on the other hand, said the Electroplating Process would usually take two to three days or sometimes (but not longer than) four to five days, which process might be affected by electricity stoppage or the need for re-electroplating. I find on balance the Electroplating Process would normally require two to three days. (6) Complaints and re-electroplating 35.The Defendant would check the Electroplated Goods for defects (if any) before packing them for shipment. If there were, say, incorrect colour, Pin Holes or scratches, the relevant Electroplated Goods could be re-electroplated. Mr Chung claimed such problems were electroplating defects. Mr Cheng denied this, but the Plaintiff did not disclose any records of its quality testing and complaints departments in respect of customers’ complaints/queries in relation to the electroplating quality of the Electroplated Goods under the November 1997 Invoices. 36.Mr Cheng further claimed (a) the reasons for re-electroplating and/or waiving the electroplating charges must be recorded, (b) the re-electroplating order must be signed by both parties and (c) internal written authorisations were required before the Plaintiff would carry out re-electroplating for a customer. Sometimes, if the quantity were small, the Plaintiff would just waive the re-electroplating charges. No such written record/order/authorisation for re-electroplating under the November 1997 Invoices was produced. 37.But despite Mr Cheng’s contentions, the undisputed (a) non-italicised remarks in Schedule A and (b) remarks in Schedule B plainly showed the Defendant requested re-electroplating through the Specifications in the Electroplate Forms and the Plaintiff carried out re-electroplating and/or other remedial work as listed in the Invoices for the Defendant. (7) Checklistand payment of the electroplating charges 38.After each calendar month, the Plaintiff would prepare a monthly Checklist of electroplating transactions and charges from the duplicate Invoices. After the fifth day but before the end of the following month, the Plaintiff’s staff (sometimes Mr Yiu) would bring the Checklist and relevant Invoices to the Defendant Factory to meet with the Defendant’s staff (sometimes Mr Lee) to verify the transactions and charges (對賬, “Verification”). Although each Invoice carried a stamp requesting the recipient to raise complaints on quality and/or price within seven days, the Defendant could still raise such complaints and seek deduction or waiver of the electroplating charges during the Verification. Once the electroplating transactions and charges were confirmed, the Defendant’s staff would sign or affix the company chop on the Checklist. 39.Mr Yiu would return the verified Checklist to Madam Yim for forwarding to the Plaintiff’s designated staff for safe-keeping. A copy would be sent to Mr Cheng in Hong Kong. On expiry of the credit period HK Kai Hong would send staff to the Defendant’s Hong Kong office with the Checklist and the relevant Invoices to collect payment. Nothing in the counterclaim turned on the dispute between the parties as to the credit period for payment. 40.With the above in mind, I now turn to the present disputes. IX. JW Order 41.On/about 20th September 1997, the Defendant and Jamee West entered into an agreement evidenced by the JW Order. The Defendant bought blank watch case and ring, and carried out turning, gearing and polishing processes. Since the Electroplating Process would take about two to three days, the Defendant claimed it was confident in meeting the delivery deadline of 20th November 1997 under the JW Order. X. Electroplating orders for the JW Acid Gold Goods 42.On/about 2nd November 1997, the Defendant delivered 50 pieces of model no.B888G brass case under Electroplate Form no.1420 (which I accept to be referable to model no.A888G “brass case & ring” in the JW Order, ie part of the JW Mic Gold Goods) to the Plaintiff for “1 mic gold plated” electroplating (item 1 of Schedule A, “50 Mic Gold Goods”). 43.The Plaintiff delivered the electroplated 50 Mic Gold Goods the following day (item 1 of Schedule B), but the electroplating was unsatisfactory. The nica layer had to be removed (脫叻) and the 50 Mic Gold Goods re-polished before they were re-delivered to the Plaintiff on 13th November 1997 for re-electroplating (item 2 of Schedule A). Two days later the Plaintiff delivered the re-electroplated 50 Mic Gold Goods to the Defendant (item 2 of Schedule B). 44.Mr Cheng said the Plaintiff did not charge for electroplating the 50 Mic Gold Goods (see explanatory notes in bold and italicised bold for items 1 and 2 of Schedule B) due to the small quantity. I prefer the Defendant’s contention that it was due to defective electroplating. The Plaintiff did not dispute the non-italicised remarks for item 2 of Schedule A (“電壞,返電”) and could not otherwise satisfactorily explain the need to remove the nica layer. 45.I accept on balance that :
46.On balance I reject Mr Cheng’s evidence that the Plaintiff was not informed of the Original Delivery Time. First, Mr Cheng was not involved in the negotiations over the terms of the relevant electroplating orders. Secondly, under the JW Order the Defendant was obliged to deliver the JW Goods on/before 20th November 1997, so there was every reason for the Defendant to set a delivery deadline for the Plaintiff. XI. Delivery of the JW Acid Gold Goodsto the Plaintiff (1) Defendant’s case 47.On 11th November 1997 the Defendant started to deliver the JW Acid Gold Goods (ie 4,000 pieces of model no.A808L brass ring under the Electroplate Form no.1439) to the Plaintiff for electroplating (item 7 of Schedule A). The JW Specifications therein (remarks for item 7 of Schedule A) showed that the Defendant (a) gave Jamee West’s case and ring colour samples (ie the JW Samples) to the Plaintiff and (b) instructed that the colour of the JW Electroplated Goods should conform to that of the JW Samples. In November 1997, the Defendant delivered all of the JW Acid Gold Goods (ie model nos. with references to “A888” and “A808” listed in the November 1997 Electroplate Forms) to the Plaintiff for electroplating (items 3 to 31 of Schedule A). (2) Issue 48.The issue is whether the Defendant delivered all of the JW Acid Gold Goods in time for the Plaintiff to complete the Electroplating Process on/before (a) the Original Delivery Time or (b) (upon Jamee West’s extension of the delivery deadline under the JW Order to 22nd November 1997 (see below)) 20th November 1997 (“Extended Delivery Time”). Bearing in mind the Plaintiff normally required two to three days to complete the Electroplating Process (see paragraph 34 above) and the Defendant required time thereafter to pack the Electroplated Goods in individual plastic bags for shipment, the Defendant should deliver all of the JW Acid Gold Goods to the Plaintiff at the latest two days before the aforesaid deadlines, ie on/before 16th or 18th November 1997. (3) November 1997 Electroplate Forms 49. The countersigned November 1997 Electroplate Forms showed that the Plaintiff took delivery of the Goods listed therein for electroplating. I find on balance some of these Goods were part of the JW Acid Gold Goods as admitted by Mr Cheng during examination-in-chief :
But what items in the November 1997 Electroplate Forms were part of the JW Acid Gold Goods? This required a consideration of the model nos. in the November 1997 Electroplate Forms and in the JW Order. (4) Model nos. in the November 1997 Electroplate Forms 50.Items 1 and 2 of Schedule A were irrelevant as they referred to the JW Mic Gold Goods. I also find model no.D808G case (item 38 of Schedule B) irrelevant because (a) there is no evidence “1咪PNP” electroplating for such Goods was “acid gold + nica” electroplating and (b) the gold layer under “1咪PNP” electroplating had a thickness of one micron but the gold layer under “acid gold + nica” electroplating had no measurable thickness. 51.The JW Order adopted model nos.A888L and A888G for the JW Acid Gold Goods. The November 1997 Electroplate Forms and Invoices contained various model nos. apart from A888L and A888G, but I disagree this meant the November 1997 Electroplate Forms did not refer to the JW Acid Gold Goods. The Defendant did not have to use the same model nos. in the Electroplate Forms as in the JW Order, and Mr Cheng accepted it was the Defendant who assigned the model nos. in the Electroplate Forms. 52.When Mr Chung gave evidence, he explained that in order to follow up on the JW Acid Gold Goods delivered to the Plaintiff for electroplating, the Defendant used references “888” and “808” in the model nos. in the November 1997 Electroplate Forms to respectively denote case and back (single component) and case and ring (two components) of the JW Acid Gold Goods. Mr Chung said prefixes “A” and “B” meant alloy and brass respectively and suffixes “G” and “L” meant gents and ladies respectively. 53.This explanation is somewhat different from what Mr Chung said in his witness statement, namely, models nos.A808G and A808L in the November 1997 Electroplate Forms (without reference to model nos.A888L and A888G that also bore the prefix “A”) were the “alloy” components of the JW Acid Gold Goods. Secondly, Mr Chung did not explain why the November 1997 Electroplate Forms referred to model nos.A888G “ring” and/or A888L “ring” (items 19-30 of Schedule A and items 28-37 of Schedule B). Thirdly, Mr Chung did not explain why the relevant Invoices specified the electroplating unit cost (a) for model no.A808L case was HK$0.38 and not HK$0.39 (items 3-4 and 7-8 of Schedule B), (b) for model no.A808L ring was HK$0.43 or HK$0.44 and not HK$0.31 (items 9-13 of Schedule B), and (c) model no.A888G ring was HK$0.44 and not HK$0.31 (items 28-32 of Schedule B). 54.Nevertheless, despite the aforesaid confusion, given that (a) the Defendant had to sub-contract the electroplating of the JW Acid Gold Goods, (b) the undisputed facts that in November 1997 (i) the Defendant delivered the Goods in items 3 to 31 of Schedule A to the Plaintiff for electroplating or re-electroplating and (ii) the Plaintiff delivered the Electroplated Goods in items 3 to 37 of Schedule B to the Defendant after electroplating or re-electroplating, and (c) Mr Cheng’s admission noted in paragraph 49 above that some of the Goods listed in the November 1997 Electroplate Forms were part of the JW Acid Gold Goods, I am prepared to accept on balance that all of items 3 to 31 of Schedule A and items 3 to 37 of Schedule B were part of the JW Acid Gold Goods. But despite such finding, there are still inherent difficulties in the Defendant’s case. (5) Quantity of the JW Acid Gold Goods 55.The total quantity of the JW Acid Gold Goods listed in Schedule A was 66,238 pieces, ie 66,338 pieces (see explanatory note 15 in Schedule A) less 100 pieces (items 1 and 2 of schedule A), which was more than the 50,000 pieces of JW Acid Gold Goods specified in the JW Order. Mr Chung claimed that (a) some were the Repeated Goods, ie defectively electroplated JW Electroplated Goods re-delivered to the Plaintiff for remedial work or re-electroplating (items 6, 10-11, 16-18, 23-25 and 28-31 of Schedule A totalling 26,266 or 26,305 or 26,271 pieces, ie the quantities stated in explanatory note [Bold] of Schedule A less 50 pieces for item 2) and (b) the Repeated Goods were in fact the JW Rejected Goods. 56.The Defendant averred in its pleadings that all defectively electroplated JW Electroplated Goods (ie the Repeated Goods and/or the JW Rejected Goods) were re-delivered to the Plaintiff. To avoid double counting, 26,266 or 26,305 or 26,271 pieces of the Repeated Goods should be deducted from the total quantity of 66,238 pieces. Since the Defendant would not rely on any delivery of the JW Acid Gold Goods to the Plaintiff other than those shown in Schedule A, the Defendant delivered 66,238 – 26,266 (figure most favourable to the Defendant) = 39,972 pieces of the JW Acid Gold Goods to the Plaintiff for electroplating. Mr Chung did not or did not satisfactorily explain why the delivered quantity was less than the 50,000 pieces of JW Acid Gold Goods specified under the JW Order, especially when he emphasised Jamee West would not accept instalment deliveries. I reject his claim that the Defendant delivered all of the JW Acid Gold Goods to the Plaintiff during November 1997. (6) Ladies’and gents’ components 57.According to the JW Order, the JW Acid Gold Goods comprised 25,000 ladies’ and 25,000 gents’ components. Mr Chung explained that suffixes “L” and “G” in the model nos. referred to ladies’ and gents’ components respectively, so the total quantities of ladies’ and gents’ JW Acid Gold Goods (exclusive of the Repeated Goods or the JW Rejected Goods) were 19,790 pieces (items 3-5 and 7-9 of Schedule A) and 20,177 pieces (items 12-15, 19-22 and 26-27 of Schedule A) respectively. There was no or no satisfactory explanation why the quantity for ladies’ and gents’ components of the JW Acid Gold Goods was less than 25,000 pieces respectively, especially when the Defendant did not rely on any delivery other than those shown in Schedule A and Jamee West was not prepared to accept instalment deliveries. I find the Defendant did not deliver the required quantities of ladies’ and gents’ components of the JW Acid Gold Goods to the Plaintiff for electroplating. (7) Timing of the deliveries to the Plaintiff 58.As explained above, the usual time required for the Electroplating Process was two to three days. For present purposes, I adopt two days in favour of the Defendant, so the Defendant had to deliver the JW Electroplated Goods to the Plaintiff on/before 16th or 18th November 1997. 59.However, the Defendant’s original deliveries of the model no.A808L case of the JW Acid Gold Goods to the Plaintiff were from 19th to 21st November 1997 (items 3-5 of Schedule A), which matched the Plaintiff’s original deliveries of the corresponding JW Electroplated Goods to the Defendant from 20th to 24th November 1997 (items 3-4 and 7 of Schedule B) since the Electroplating Process normally took two to three days. But there was no or no satisfactory explanation why all deliveries of such Goods to the Plaintiff for electroplating were made after 16th or even after 18th November 1997. 60.The JW Acid Gold Goods for model no.A888G case were delivered to the Plaintiff from 16th to 21st November 1997 (items 12-15 of Schedule A), which contradicts items 19-21 of Schedule B that showed deliveries of electroplated model no.A888G case to the Defendant on 3rd November 1997. The latter date could not be right since even on the Defendant’s case it only started to deliver the JW Acid Gold Goods to the Plaintiff on 11th November 1997. I refer to explanatory note 3 of Schedule B wherein I explained why the relevant date should be between 22nd and 24th November 1997. However, there was no or no satisfactory explanation why some of the deliveries to the Plaintiff for electroplating (items 13-15 of Schedule A) were made after 16th and/or 18th November 1997. 61.The JW Acid Gold Goods for model no.A888G ring were originally delivered to the Plaintiff from 13th to 20th November 1997 (items 19-22 and 26-27 of Schedule A), which sat well with the timing of the original deliveries of the corresponding JW Electroplated Goods from 15th to 20th November 1997 (items 28-32 and 35-36 of Schedule B). But there was no or no satisfactory explanation why the Defendant delivered some model no.A888G ring to the Plaintiff (items 26-27 of Schedule A) after 16th or even after 18th November 1997. 62.There is no dispute that the non-italicised remarks in items 3 to 31 of Schedule A were factually correct, so I accept the Defendant delivered the quantities of the JW Acid Gold Goods listed therein (together with the corresponding Electroplate Forms) to the Plaintiff for electroplating or re-electroplating. But even on the Defendant’s own case, I am not satisfied it had delivered (a) all 50,000 pieces of the JW Acid Gold Goods to the Plaintiff or (b) all of the Goods listed in Schedule A on/before 16th and/or 18th November 1997 to enable the Plaintiff to complete the Electroplating Process on/before the Original/Extended Delivery Times. This calls for an explanation since (i) the Defendant knew Jamee West would not accept instalment deliveries of the JW Goods and (ii) the Defendant did not rely on any delivery of the JW Acid Gold Goods to the Plaintiff other than those shown in Schedule A. But none was forthcoming. (8) Knowledge of resale 63.Although Mr Cheng initially asserted he did not know the JW Acid Gold Goods were intended for resale by the Defendant (which assertion I reject), he was later constrained to admit he knew (a) the JW Acid Gold Goods could not be for the Defendant’s own use and (b) they would be re-sold as watch cases or (after assembly/manufacture) as watches. This should also be obvious from the Jamee West logo etched on the JW Acid Gold Goods as delivered to the Plaintiff for electroplating. XII. Delivery of the JW Electroplated Goods to the Defendant 64. After the Electroplating Process, the Plaintiff delivered 65,746 pieces (being 65,870 – 100 (items 1 and 2 of Schedule B) – 24 (item 38 of Schedule B)) of the JW Electroplated Goods listed in items 3 to 37 of Schedule B together with the corresponding Delivery Notes and Invoices to the Defendant. The Defendant caused those JW Electroplated Goods that were in order to be packed in individual plastic bags. 65.Of the aforesaid 65,746 pieces, 36,866 pieces were “repeats” for which the Plaintiff carried out remedial work and/or re-electroplating according to the undisputed remarks for items 5-6, 8, 14-18, 25-27, 33-34 and 37 of Schedule B. Thus, the original deliveries of electroplated model nos.A808L and A888G case and ring listed in Schedule B by the Plaintiff to the Defendant exclusive of such “repeats” (items 3-4, 7, 9-13, 19-24, 28-32 and 35-36 of Schedule B) were for 28,880 pieces (65,746 pieces less 36,866 pieces of “repeats”). 66.Strangely, Mr Chung did not give any or any satisfactory explanation why the above quantity of 28,880 pieces (a) did not match the total quantity of 39,972 pieces of the JW Acid Gold Goods (exclusive of the Repeated Goods or, according to the Defendant, the JW Rejected Goods) delivered by the Defendant to the Plaintiff under Schedule A (see paragraph 56 above), (b) was less than the 30,000 sets (or 50,000 pieces) of JW Acid Gold Goods specified under the JW Order, and (c) was less than the 36,866 pieces of “repeats” on which the Plaintiff carried out remedial work and/or re-electroplating (see paragraph 65 above). Further, there was also no or no satisfactory explanation why the aforesaid “repeats” of 36,866 pieces were more than the quantity of the Repeated Goods (or, on the Defendant’s case, the JW Rejected Goods) of 26,266 or 26,305 or 26,271 pieces (see paragraph 56 above) delivered by the Defendant to the Plaintiff for re-electroplating. 67. Further, the total quantity of ladies’ (items 3-4, 7 and 9-13 of Schedule B) and gents’ (items 19-24, 28-32 and 35-36 of Schedule B) components listed in Schedule B exclusive of the aforesaid “repeats” were 13,683 and 15,197 pieces respectively, which were less than (a) the quantities of ladies’ and gents’ components the Defendant delivered to the Plaintiff under Schedule A for electroplating (see paragraph 57 above) and (b) the 25,000 pieces of ladies’ and gents’ components respectively required under the JW Order. Again, no or no satisfactory explanation was forthcoming. 68.Even assuming in favour of the Defendant there was short delivery by the Plaintiff of 668 pieces (as claimed by the Defendant), the above analysis still adds weight to the conclusion that even on its own case the Defendant failed to establish it delivered the requisite quantity of 50,000 pieces of the JW Acid Gold Goods to the Plaintiff on/before 16th and/or 18th November 1997 for the Defendant to carry out the Electroplating Process to meet the Original and/or Extended Delivery Times. XIII. Defects of the JW Electroplated Goods (1) Defendant’s case 69.Mr Chung claimed that when the Defendant received the JW Electroplated Goods from the Plaintiff, it discovered 39% (ie the JW Rejected Goods) were defectively electroplated :
Mr Chung further claimed that (i) a defective case or ring would render the whole set useless and (ii) the proportion of defective JW Electroplated Goods was well in excess of the 1%-2% defect allowance tolerated in the electroplating trade. 70.Mr Chung complained to the Plaintiff Factory and was told to re-deliver the defectively electroplated JW Rejected Goods to the Plaintiff for re-electroplating or for adding the nica layer. The Defendant re-delivered the JW Rejected Goods as listed in items 6, 10-11, 16-18, 23-25 and 28-31 of Schedule A to the Plaintiff for remedial work and/or re-electroplating, and reminded the Plaintiff to complete the re-electroplating process within two days of the re-deliveries. But the results were still unacceptable. (2) Plaintiff’s case 71.Mr Cheng agreed the Plaintiff would normally try to control the re-electroplating percentage at 1-2%. It would be abnormal to exceed 5%, whereupon the Plaintiff would send staff of its quality department to attend the customer’s factory to discuss what went awry. Although Mr Cheng claimed the Electroplated Goods delivered to the Defendant in November 1997 had no major defects, he accepted (a) the Plaintiff re-electroplated some of the Electroplated Goods and (b) the quantity of the Repeated Goods suggested there was a quality problem. Yet he denied any knowledge of such quality problem or the Plaintiff caused such problem. Mr Chung claimed that except for verbal complaints of minor defects that the Plaintiff entertained by deducting the electroplating charges (see paragraph 100 below), the Plaintiff did not receive any letter of complaint. (3) Exhibits D1 and D2 72.The Defendant produced exhibits D1 and D2 (one ladies’ and one gents’ alloy case with the Jamee West logo etched thereon) to illustrate the aforesaid defects. Mr Cheng queried whether it was the Plaintiff that electroplated exhibits D1 and D2 since the relevant electroplating should have been done almost nine years ago and there was no evidence of the condition of the exhibits except that they were stored at the Defendant Factory. However, Mr Cheng and Madam Yim admitted they did not personally handle the JW Electroplated Goods. I accept on balance exhibits D1 and D2 were electroplated by the Plaintiff for the Defendant. (4) Colour defect 73.Mr Cheng denied any colour defect. He claimed that the “correctness” of the electroplated gold colour depended on the subjective views of the beholder, so the fact that the Plaintiff re-electroplated the Repeated Goods to a darker shade did not necessarily mean there was any colour defect. But here colour samples (ie the JW Samples) were provided, so there should be no subjective diversity in opinion as to the specified gold colour. There was also no need to apply standard colour “2N”. Further, as was obvious from the undisputed (a) non-italicised remarks in Schedule A and (b) remarks in Schedule B, I accept on balance (i) some of the Repeated Goods (eg items 6, 16-18, 28-29 and 31 of Schedule A) failed to satisfy the JW Specifications and/or conform to the colour of the JW Samples in that the electroplated gold colour was too light and (ii) this defect led to the need for remedial work and/or re-electroplating. 74.It was suggested such colour problem was not a true defect since it could be remedied by re-electroplating, which was usual in the electroplating trade. But in my view the Defendant as customer was entitled to reasonable skill and workmanship in the Plaintiff’s electroplating and was not contractually bound to re-deliver any defective Repeated Goods for re-electroplating. After all, re-electroplating delayed the whole process since the nica layer had to be removed and the Repeated Goods re-polished before re-electroplating could be done. At best, if the Defendant chose to re-deliver the Repeated Goods for remedial work and/or re-electroplating for colour defect, it would only be an attempt to mitigate loss arising from the defective electroplating. 75.In the circumstances, I reject Mr Sher’s submission that the colour problem was due to the Defendant’s fault in commencing delivery of the JW Acid Gold Goods to the Plaintiff on 11th November 1997 thereby leaving inadequate time for re-electroplating. The short answer is that had the quality of the Plaintiff’s electroplating been in order, re-electroplating would have been unnecessary. (5) Nica layer 76.There were several aspects to the issue in relation to the nica layer. First, Mr Cheng agreed the remarks in items 15-18 of Schedule B (ie “脫叻”, “返脫叻退回”, “男裝脫叻退回” and “脫叻退回”) referred to the Defendant’s requests to the Plaintiff to use chemicals to remove the nica layer on the Electroplated Goods specified therein, and thereafter such Electroplated Goods would be returned to the Defendant for polishing and shining before re-delivering to the Plaintiff for re-electroplating. In my view, such process is part and parcel of the colour defect discussed above and does not create a separate and independent defect. 77.Secondly, Mr Chung claimed that the Plaintiff in breach of the JW Specifications failed to add the nica layer to some of the JW Rejected Goods. But such complaint was reflected in the remarks for only two items in the schedule at p.203 of the trial bundle prepared by the Defendant (remarks in [bold] for items 24 and 25 of Schedule A) and not in the primary Electroplate Forms (see the undisputed non-italicised remarks for items 24 and 25 of Schedule A) or Invoices. Re-electroplating Specifications in the Electroplate Forms for “acid gold” electroplating and adding nica layer did not necessarily suggest that the Plaintiff failed to add the nica layer in the first place. The original nica layer had to be removed for re-electroplating, so the nica layer had to be added after re-electroplating whether there was or was not any nica layer in the first place. I do not accept this head of complaint. 78.Thirdly, Mr Cheng admitted that if the Plaintiff failed to properly apply the nica layer the Electroplated Goods would have to be re-electroplated (“沖叻個時沖得唔好要全部翻電亦都有嘅”) and the Plaintiff would not charge for the same. But the Defendant did not plead any complaint of poor workmanship in applying the nica layer. Rather the complaint was that the nica layer had not been applied at all to some of the Electroplated Goods. Mr Cheng’s admission therefore did not assist the Defendant. 79.In such circumstances, I am not persuaded the Defendant has on balance established this head of complaint. (6) Damage (eg scratch and chip) to the JW Rejected Goods 80.Mr Chung pointed out (and Mr Cheng accepted) there were some scratches at that the back of exhibits D1 and D2, but Mr Cheng denied they were caused by the Electroplating Process. 81.Mr Cheng explained that “acid gold” electroplating was done by “washing” a thin liquid gold layer onto the component, so the process would not cause any scratch. If the component’s surface were well-polished, the electroplated surface would be smooth. But if there were pre-existing scratch marks, they would remain visible after electroplating. Mr Cheng suggested it was more likely the scratch marks were caused by further processing or packaging by the workers at the Defendant Factory after receipt of the JW Electroplated Goods. 82.There is no evidence before me to refute the nature of the Electroplating Process (ie liquid coating of the gold layer on the Goods) described by Mr Cheng. Mr Chung did not explain how defective electroplating could have caused the scratches and chips. Further, none of the contemporaneous Electroplate Forms mentioned that the re-electroplating of the JW Rejected Goods was for rectifying the damage (eg scratches or chips) to the surface of the components. There also was no such specific complaint in the schedule at p.203 of the trial bundle (remarks in [Bold] in Schedule A) and no evidence clarifying whether “電壞” (items 23 and 31 of Schedule A) or “質量太差” (items 10-11 of Schedule A) actually meant scratches or chips to the surface of the components. I am not satisfied on balance the scratches and chips found on exhibits D1 and D2 were caused by defective electroplating. (7) Unevenness of the surface and the Pin Holes 83.Mr Chung said re-polishing the JW Rejected Goods for re-electroplating could easily cause Pin Holes and there were some minor Pin Holes at the back of exhibit D2. Mr Chung claimed such Pin Holes could be covered by “厚銅打底” before proceeding with “acid gold” electroplating. But Mr Chung did not explain how the Electroplating Process would cause the unevenness of the surface and the Pin Holes. 84.Mr Cheng, on the other hand, claimed the Pin Holes were pre-existing and caused by the Defendant’s own processing or polishing of the Goods. He said the liquid “washing” of the gold layer during the Electroplating Process would be unable to cover up any pre-existing Pin Hole or unevenness of the surface of the component. 85.Although the Defendant gave comments such as “有凸起”, “起凸、有沙孔” (remarks in [bold] for items 11, 23 and 30-31 of Schedule A) for various items in the schedule at p.203 of the trial bundle, they were not reflected in any undisputed non-italicised remark in Schedule A save for item 31. But in fact Electroplate Form no.2785 for such item did not mention “返電(電壞、起凸、有沙孔)” (see explanatory note 11 of Schedule A). Further, the re-electroplating under item 31 of Schedule A was for colour defect (“退回返調色，跟足辦 ……”), so it is unclear whether the unevenness of the surface and the Pin Holes (if any) were caused by re-polishing preparatory to such re-electroplating. In the circumstances, the Defendant has failed on balance to establish that any unevenness of the surface of and Pin Holes on the JW Electroplated Goods were caused independently by defective electroplating. At best, they were part and parcel of the colour defect. (8) Summary 86.In the circumstances, I find that some JW Acid Gold Goods delivered to the Plaintiff by the Defendant were defectively electroplated in that they had the colour defect referred to above, which necessitated removal of the nica layer and re-polishing before re-electroplating, and such remedial processes might cause unevenness of the surface and Pin Holes. It is also apparent from the undisputed non-italicised remarks in Schedule A relating to the colour defect (eg “返調色”, “跟足辦”, “返調深色”, “返電酸金+叻架” and “返電深酸金+叻架”) that such defectively electroplated items exceeded the 1-2% threshold allowance. XIV. Timing of the delivery of the JW ElectroplatedGoods (1) Defendant’s case 87.Mr Chung claimed the Defendant had time and again reminded the Plaintiff of the Original Delivery Time to enable the Defendant to meet the delivery deadline imposed by its customer. Mr Chung reckoned (although he could not remember clearly) the Plaintiff delivered over half of the JW Acid Gold Goods (ie more than 25,000 out of the 50,000 pieces) to the Defendant on/before the Original Delivery Time, over half of which were acceptable in quality and packed by the Defendant for shipment. The Plaintiff had to deliver the remaining JW Electroplated Goods after the Original Delivery Time because the JW Rejected Goods had to be re-worked before re-electroplating could be done. But the Plaintiff’s failure to deliver all of the JW Electroplated Goods on/before the Original Delivery Time meant the Defendant could not ship the Goods on/before 20th November 1997 pursuant to the JW Order. (2) Analysis 88.I reject Mr Chung’s assertion that the Plaintiff delivered over 25,000 pieces of the JW Electroplated Goods to the Defendant on/before the Original Delivery Time. First, the Defendant never delivered so much of the JW Acid Gold Goods to the Plaintiff for electroplating in the first place. Deliveries of the JW Acid Gold Goods from 11th to 16th November 1997 (items 7-9, 12 and 19-22 of Schedule A) totalled 17,619 pieces only. Secondly, deliveries of the JW Electroplated Goods from 15th to 18th November 1997 (items 9-13 and 28-32 of Schedule B) totalled 16,792 pieces only. I have concluded that items 19-21 of Schedule B should be dated between 22nd and 24th November 1997 instead of 3rd November 1997 (see paragraph 60 above). But even taking these items into account, the total quantity of the JW Acid Gold Goods delivered on/before the Original Delivery Time would be 19,124 pieces, which were still less than 25,000 pieces. 89.I further find Mr Chung’s assertion that more than half of the above delivered pieces were acceptable in quality did not sit well with the Defendant’s case. According to the agreement between the parties (see explanatory note in bold in Schedule B and paragraph 100 below), the Plaintiff waived the electroplating charges for items 9-13 and 28-32 of Schedule B (exclusive of the “repeats”) due to incorrect colour of such Electroplated Goods. This suggested that all deliveries of the JW Electroplated Goods made on/before the Original Delivery Time (see paragraph 88 above) had incorrect colour and none was in order. 90.I particularly bear in mind that the Defendant did not rely on any delivery of the JW Electroplated Goods other than those shown in Schedule B. I find the deliveries of the JW Electroplated Goods were less than Mr Chung’s assertion because the Defendant did not deliver the full quantity of the JW Acid Gold Goods to the Plaintiff for electroplating in the first place. (3) Extended deadline 91.Mr Chung said Jamee West was very angry over the non-delivery, and was only prepared to allow one to two days’ extension (ie the Extended Delivery Time). Jamee West said if it did not receive the shipping documents by 22nd November 1997, it would cancel the JW Order. 92.Mr Chung claimed that by 22nd November 1997 the Plaintiff was still unable to deliver all the JW Electroplated Goods to the Defendant, who in turn was unable to deliver the JW Acid Gold Goods to Jamee West. On that day, Jamee West wrote to inform the Defendant it had no choice but to cancel the JW Order without further notice unless the Defendant was able to confirm that shipment had been effected. But the Defendant had to wait until 8th December 1997 for the Plaintiff to complete delivery of all the JW Electroplated Goods. 93.Since I have found that model no.D808G case at item 38 of Schedule B delivered by the Plaintiff to the Defendant on 8th December 1997 was not referable to the JW Acid Gold Goods (see paragraph 50 above), the last deliveries of the JW Acid Gold Goods made by the Plaintiff to the Defendant were on 24th November 1997 for model no.A808L case (items 7-8 of Schedule B). But the Plaintiff could not be blamed for the timing of these deliveries since the Defendant only delivered the corresponding Goods to the Plaintiff for electroplating on 19th to 21st November 1997 (items 3-6 of Schedule A). 94.Nevertheless, there were still a few re-electroplated items for model no.A888G case and ring in Schedule B that were delivered by the Plaintiff to the Defendant after the Extended Delivery Time (items 26-27 and 37 of Schedule B). It cannot be disputed that the re-electroplating for items 26 and 37 of Schedule B was due to the colour defect (remarks for these items in Schedule B). This was also confirmed by the agreement between the parties (see explanatory note in bold in Schedule B and paragraph 100 below) to waive the electroplating charges for these items due to incorrect colour. No electroplating charges were stated for item 27 of Schedule A in Electroplate Form no.7544 as well. (4) Termination of the JW Order 95.On 23rd November 1997, Jamee West wrote to cancel the JW Order and reserved the right to claim against the Defendant if its customer made a claim against it. The Defendant disclosed a copy invoice for HK$427,000.00 to Jamee West dated 19th November 1997 for the JW Goods. Mr Chung explained (and I accept) it was merely the Defendant’s usual practice to prepare the invoice in advance, but it was not despatched in this case. 96.On balance, I do not accept Mr Chung’s claim that when he informed Mr Yiu the Defendant’s customer had cancelled the order, Mr Yiu on behalf of the Plaintiff agreed to be responsible for the Defendant’s loss arising out of the defective electroplating (“Plaintiff’s Promise”). First, I am not convinced of the veracity of such assertion. Such an important admission of liability was only elicited under cross-examination and did not feature in the Defendant’s pleadings or Mr Chung’s witness statement. Secondly, Mr Yiu was required to report to Madam Yim who in turn had to report to Mr Cheng. I find it implausible that Mr Yiu would have made the Plaintiff’s Promise without prior discussion/approval from his superiors. I find on balance it was outside Mr Yiu’s scope of duty to make and he did not make the Plaintiff’s Promise. (5) Causation 97.I do not agree that the Plaintiff’s electroplating defect (ie the aforesaid colour defect) and/or its failure to rectify such defect on/before the Original/Extended Delivery Times were effective causes of the cancellation of the JW Order and/or the Defendant’s loss and damages (if any). 98.In my view, the Defendant has not been able to establish, even on its own case, that it delivered to the Plaintiff the following for electroplating : (a) the full quantity of 30,000 sets (or 50,000 pieces) of the JW Acid Gold Goods, (b) the requisite balance of 25,000 ladies’ and 25,000 gents’ components of the JW Acid Gold Goods as required by the JW Order and (c) all of the JW Acid Gold Goods on/before 16th November 1997 to give the Plaintiff sufficient time to complete the Electroplating Process. Further, on the Defendant’s own case, Jamee West would not accept instalment deliveries of the JW Goods and the Defendant did not rely on any delivery of the JW Acid Gold Goods other than those shown in Schedules A and B. The Defendant was the author of its own misfortune and the JW Order would have been cancelled in any event. The aforesaid colour defect and the time required for re-electroplating were not effective causes of the Defendant’s loss (if any). They did not (i) negative the Defendant’s responsibility for the consequences of its own fault or (ii) interrupt the direct relationship between the Defendant’s own failure and the cancellation of the JW Order. 99.This is sufficient to dispose of the matter. But for completeness, I will also briefly deal with (a) two miscellaneous matters that have been canvassed in the witnesses’ evidence in Parts XV and XVI below and (b) on the assumption the Defendant were successful in establishing causation the issue of its loss and damage (if any). XV. Deduction of electroplating charges and further electroplating orders 100.I have referred to the deduction or waiver of electroplating charges by the Plaintiff above. In fact, the Defendant’s Mr Lee and the Plaintiff’s Mr Yiu signed an agreement to the effect that the electroplating charges for certain JW Electroplated Goods (including those under items 1, 9-13, 26, 28-32 and 37 of Schedule B (explanatory note in bold of Schedule B)) in the total sum of HK$16,468.46 (of which HK$7,648.46 concerned the JW Acid Gold Goods) be waived due to the incorrect colour. Apart from such waiver, the Defendant had paid the electroplating charges for November 1997 and continued to place electroplating orders with the Plaintiff (because not all of the JW Electroplated Goods were defectively electroplated). XVI. 3rd May 1998 101.It was suggested that a subsequent event in 1998 touched on witnesses’ credibility. (1) Defendant’s case 102.In/about April 1998, Mr Yiu urged Mr Chung to pay the outstanding electroplating charges because the Plaintiff was in financial difficulties. On 3rd May 1998, Mr Yiu came to Defendant Factory to chase for payment. Mr Chung proposed a set-off against the loss and damages payable by the Plaintiff under the Plaintiff’s Promise, but Mr Yiu insisted it should be dealt with separately and (given the Plaintiff’s financial difficulties) asked the Defendant to help by paying the outstanding electroplating charges. Upon Mr Yiu’s reassurance over the Plaintiff’s Promise, Mr Chung agreed. Later on the same day, Mr Yiu asked Mr Chung to give a written confirmation for him to show to his boss. So Mr Chung sent a fax dated 3rd May 1998 to the Plaintiff, and the Defendant made part payments of the outstanding electroplating charges in July 1998. (2) Analysis 103.On balance I do not accept Mr Chung’s evidence above. First, I have rejected the Plaintiff’s Promise. It is also strange that despite the alleged Plaintiff’s Promise, the Plaintiff did not ask for and the Defendant did not provide any particulars or supporting proof of the Defendant’s alleged loss/damages. Secondly, there is no mention of the Plaintiff’s Promise in the Defendant’s fax of 3rd May 1998 when according to the Defendant it was part and parcel of the arrangement though to be dealt with separately. Thirdly, there is no evidence apart from Mr Chung’s assertion that the Defendant qualified its part payments made in July 1998 by reservation of right to claim under the Plaintiff’s Promise. 104.I prefer Madam Yim’s evidence that the Plaintiff’s staff attended the Defendant Factory on/about 3rd May 1998 to negotiate with Mr Chung for settlement of the outstanding electroplating charges. It was agreed (as evidenced by Mr Chung’s fax of 3rd May 1998) that the Plaintiff would give a 2% discount and the discounted outstanding electroplating charges would be paid by two instalments on or before 10th June and 15th July 1998 respectively. But in breach thereof, the Defendant only made two part payments on 10th and 25th July 1998 respectively. I further accept the Defendant claimed it had no money when the Plaintiff chased for payment of the outstanding balance. XVII. Defendant’s counterclaim for loss and damages (1) Value of the JW Electroplated Goods 105.Mr Chung claimed that since the JW Electroplated Goods were solely for the JW Order with the Jamee West logo etched thereon, there was no market for such Goods and attempts to sell them were in vain. Even Mr Cheng admitted he was unsure whether such Goods could be resold. I therefore accept on balance the JW Electroplated Goods were of no value when Jamee West cancelled the JW Order. (2) Defendant’s counterclaim 106.The Defendant claimed it suffered loss and damages in the sum of HK$427,000.00 being the cost of the JW Goods (HK$381,400.00) and loss of profits (HK$45,600.00). (3) Cost of the JW Goods 107.Mr Chung claimed the Defendant purchased the following Goods solely for the JW Order, namely, blank (a) brass case and brass ring, (b) alloy case and brass ring and (c) alloy case and back as well as other parts/accessories set out at p.204 of the trial bundle (“Price List”). The Price List was prepared by Mr Chung and set out inter alia the price for each of the relevant parts, the electroplating costs and the labour costs that comprised the unit cost of each of (a) (ie the JW Mic Gold Goods), (b) and (c) (ie collectively, the JW Acid Gold Goods) above. 108.According to the Price List, the net cost (ie less profits) per piece for (a), (b) and (c) above was HK$13.00, HK$5.00 and HK$2.14 respectively. In the circumstances, Mr Chung claimed the cost of the JW Goods of HK$381,400.00 comprised the following :
109.The Defendant did not produce any invoice, receipt or record for the purchase of the blank components or parts/accessories of the JW Goods. Mr Sher submitted the claimed cost was just Mr Chung’s bare assertion. 110.However, I find the Price List was partially corroborated by Mr Cheng’s evidence. First, Mr Cheng said an alloy watch case would cost a few ten cents and a brass case would cost HK$2.00 odd. This lends support to the Price List which stated that a blank alloy case or blank alloy case and back cost HK$0.40 and a blank brass case cost HK$2.80. Secondly, the unit cost of “acid gold” electroplating for case plating (HK$0.39) and ring plating (HK$0.31) was not disputed. Further, the unit cost of “mic gold” electroplating in the Price List of HK$4.30 (ie the aggregate of the unit electroplating cost of brass case (HK$2.80) and brass ring (HK$1.50)) was more modest than Mr Cheng’s claim that it would cost about HK$10.00. Thirdly, there was no suggestion/evidence that the parts/accessories listed in the Price List were irrelevant or unnecessary. 111.Since it cannot be said that the components/parts and the associated material and/or labour cost were unreasonable, I accept the unit cost for (a), (b) and (c) in paragraph 108 above, but disagree the Defendant was entitled to the cost of all 50,000 sets of the JW Goods. 112.In relation to the JW Mic Gold Goods, there was no evidence the Defendant purchased the relevant components and parts/accessories or if so purchased the quantity thereof. There was also no evidence as to whether the Defendant carried out or sub-contracted any manufacturing and electroplating process for such components and parts/accessories, whether they were ready for delivery to Jamee West on/before 20th November 1997, etc. There is simply no evidential basis for awarding damages in relation to the cost of the JW Mic Gold Goods. 113.In relation to the JW Acid Gold Goods, the Defendant only delivered 39,972 pieces (exclusive of the Repeated Goods or the JW Rejected Goods) to the Plaintiff for electroplating (see paragraph 56 above) and there is no evidence the remaining 10,028 pieces (ie 50,000 pieces less 39,972 pieces) were purchased or electroplated at all. Further, although the alloy case/brass ring should be a set, strangely there were more rings than case. Of the 39,972 pieces, there were 16,737 pieces of case or case and back (items 3-5 and 12-15 of Schedule A) and 23,230 pieces of ring (items 7-9, 19-22 and 26-27 of Schedule A)1. Even further, the total pieces of model no.A888G case (6,350 pieces) and ring (13,827 pieces) that were exclusive of the Repeated Goods (or the JW Rejected Goods) were obviously not in matching sets. Questions therefore arise as to whether (a) the total delivered quantity of 16,737 pieces of case plating and (b) the 6,350 pieces of model no.A888G case were alloy case or alloy case and back. I also bear in mind the confusion in relation to model nos. discussed in paragraphs 52 and 53 above. It is also impossible to rely on Mr Chung’s assertion that model nos. with references to “888” and “808”denoted case and back (single component) and case and ring (two components) respectively because model nos.A888G and A888L in Schedule A referred to case and ring and not case and back. 114.Since the composition of (a) case and back (single component) and (b) case and ring (two components) in respect of the aforesaid 39,972 pieces delivered by the Defendant to the Plaintiff is unclear, it is impossible to ascertain the cost thereof because each category of the JW Acid Gold Goods carried different cost (see paragraph 108 above). But if the lower unit cost for alloy case and back of HK$2.14 was adopted, the cost would have been HK$85,540.08 (HK$2.14 x 39,972 pieces). (4) Loss of profits 115.I am not persuaded the Defendant is entitled to claim for loss of profits in the sum of HK$45,600.00 (ie the price under the JW Order of HK$427,000.00 less the cost of the JW Goods of HK$381,400.00). 116.For the reasons set out in paragraph 112 above, there is no evidence to support the claim for loss of profits in relation to the JW Mic Gold Goods. 117.In relation to the JW Acid Gold Goods, since the Defendant only delivered 39,972 pieces to the Plaintiff for electroplating (see paragraph 56 above) and there is no evidence it acquired the remaining 10,028 pieces, the Defendant is not entitled to claim for loss of profits for the remaining 10,028 pieces. The Price List showed that due to the different unit cost of (a) alloy case/brass ring and (b) alloy case and back, the profit per piece is respectively HK$0.20 and HK$0.16. Again, for the reasons set out in paragraphs 113 and 114 above, it is impossible to ascertain the precise loss of profit because the delivered quantities of (a) and (b) above were unclear. But if the lower profit rate of HK$0.16 per piece was adopted, the loss of profit would have been HK$0.16 x 39,972 pieces = HK$6,395.52. 118.Thus, had the Defendant been successful in establishing liability against the Plaintiff for its counterclaim and ignoring the Defendant’s own default in delivering sufficient quantity of the JW Acid Gold Goods on time to the Plaintiff for electroplating, it would have been entitled to loss and damages of HK$85,540.08 + HK$6,395.52 = HK$91,935.60, which would still be insufficient to extinguish the Plaintiff’s claim. XVIII. Conclusion 119.The Defendant’s counterclaim is dismissed. I therefore grant judgment in favour of the Plaintiff in the sum of HK$92,178.58 with interest thereon at the rate of 11% pa from the date of the writ of summons to the date of judgment and thereafter at judgment rate until payment. 120.There is no reason why costs should not follow event. I therefore grant a costs order nisi that the Defendant do pay the Plaintiff costs of the present proceedings (including costs of the counterclaim and all costs reserved, if any) to be taxed if not agreed. There shall be certificate for counsel.
Representation: Mr Sher Hon Piu instructed by Messrs Y L Yeung & Co for the Plaintiff. Ms Angela Gwilt instructed by Messrs Huen & Partners for the Defendant. 1 The total quantity of (a) case/case and back and (b) ring was 39,967 pieces (16,737 pieces + 23,230 pieces) and not 39,972 pieces. This is because in paragraph 56 above, I have adopted 26,266 pieces as the quantity of the Repeated Goods in favour of the Defendant instead of the arithmetical total quantity of 26,271 pieces shown items 6, 10-11, 16-18, 23-25 and 28-31 of Schedule A.
Legend : 1 “，電壞，返電” could not be found on the corresponding Electroplate Form for this item. 2 “，返電(顏色太淺)” could not be found on the corresponding Electroplate Form for this item. 3 “，返電” could not be found in the corresponding Electroplate Form for this item. 4 “，返電(殼、圈顏色不同)” could not be found in the corresponding Electroplate Form for this item. 5 “，返電(顏色不同)” could not be found in the corresponding Electroplate Form for this item. 6 The schedules at pp.318 and 357 of the trial bundle prepared by the Defendant stated that Electroplate Form no.2762 dated 17/11/97 specified 400 pieces of model no.A888G ring. But (a) such Electroplate Form only referred to 200 pieces of model no.A888G ring (“返電酸金+叻架”) and “外加200PCS樣板” and (b) the schedule at p.203 of the trial bundle prepared by the Defendant only referred to 200 pieces of model no.A888G ring (but also 200 pieces of model no.A808L ring – see item 30 of Schedule A and explanatory note 9) for Electroplate Form no.2726 dated 17/11/97. For this item, I adopt the quantity of 200 pieces of A888G ring because the remaining 200 pieces were stated to be samples. 7 “返電” after the phrase “外加200PCS樣板” could not be found in the corresponding Electroplate Form for this item. 8 The schedule at pp. 318 and 357 of the trial bundle prepared by the Defendant stated that Electroplate Form no.2785 dated 21/11/97 specified 406 pieces of model no.A888G ring. But the schedule at p.203 of the trial bundle prepared by the Defendant referred to 401 pieces of model no.A888G ring for such Electroplate Form. 9 The corresponding Electroplate Form referred to this item as model no.A808L ring and not model no.A888L ring. 10 Electroplate Form no.2785 dated 21/11/97 and the schedule at p.203 of the trial bundle prepared by the Defendant referred to this item as model no.A808L case instead of model no.A888L case. 11 “，返電(電壞、起凸、有沙孔)” could not be found in the corresponding Electroplate Form for this item. 12 The sub-total quantities related to the non-shaded items for the particular model no. 13 The sub-total quantities related to the shaded items for the particular model no. 14 The sub-total quantities were based on 200 pieces for item 23 of Schedule A (see explanatory note 6) and 406 pieces for item 29 of Schedule A (see explanatory note 8). But the sub-quantities based on 400 pieces for item 23 as shown in the schedules at pp.318 and 357 of the trial bundle prepared by the Defendant were 9,968 and 23,795 pieces respectively. 15 The total quantity stated in the schedules at pp.318 and 357 of the trial bundle prepared by the Defendant was 66,538 pieces (see explanatory note 14 of Schedule A). [Bold] These items were re-delivered to the Plaintiff for re-electroplating ie the Repeated Goods or, according to the Defendant, the JW Rejected Goods (see schedule at p.203 of the trial bundle prepared by the Defendant). The total quantity listed in the schedule at p.203 of the trial bundle was 26,316 pieces. The total arithmetical quantity for items 2, 6, 10-11, 16-18, 23-25 and 28-31 of Schedule A was 26,321 pieces (see also explanation in explanatory note 6 above whereby the quantity adopted for item 23 was 200 and not 400 pieces). For the difference of 5 pieces between 26,316 and 26,321 pieces, please see explanation in explanatory note 8 above. The Defendant’s pleadings referred to 26,355 pieces of the JW Rejected Goods. The remarks set out in [bold] in Schedule A were drawn from the schedule at p.203 of the trial bundle prepared by the Defendant.
Legend : 16 Although the schedule at p.358 of the trial bundle referred to model no.A888G case, Invoice no.7142 showed that the model no. should be B888G. 17 Copies of Invoices nos.15353, 15364 and 15419 were not available. 18 Invoice no.7600 was actually undated. It was unlikely to be dated 3/11/97 since Invoices nos.7544 and 7643 were dated 22/11/97 and 24/11/97 respectively. Invoice no.7600 was likely to be dated between 22/11/97 and 24/11/97 inclusive. 19 The sub-total related to the non-shaded items for the particular model no. 20 The sub-total related to the shaded items for the particular model no. Bold Pursuant to a written agreement between the parties (p.337 of the trial bundle), the Plaintiff agreed to waive the electroplating charges for these items because 電鍍產品顏色不對. Bold These Invoices did not have any electroplating charges marked for the Electroplated Goods listed below :
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Further hearings and rulings under DCCJ 2192/1999