Four Corners Ltd v. Per Owe Friberg and Another t/a Pro Design International
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DCCJ 1545 /2003 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 1545 OF 2003 -------------------- BETWEEN
-------------------- Coram: Deputy District Judge S. T. Poon in Court Dates of Hearing: 1st – 2nd February 2007, 5th – 8th February 2007 & 30th March 2007 Date of Handing Down Judgment: 6th June 2007 _________________ JUDGMENT _________________
Introduction 1.The Plaintiff placed 2 purchase orders to the Defendants for manufacture of toy furniture (“cradle” and “highchair”) for re-sale to a buyer in France. It is the Plaintiff’s case that as a result of the Defendants’ failure to submit proper samples for approval and finally to deliver on time, the Defendants were in breach of the purchase contracts and liable to compensate the Plaintiff’s loss. The Plaintiff also alleges that the Defendants had refused to deliver the cargo receipts for the goods of the first purchase order to them that also constituted a breach of contract. 2.The Defendants say that the delay in submitting samples was due to the Plaintiff’s changes to their instructions on the colours to be applied to the goods. They did deliver part of the first purchase order and the Plaintiff had wrongly terminated the second one. They counterclaim for the balance of the purchase prices and damages. 3.The Plaintiff says the samples submitted by the Defendants did not conform with the specifications of the goods and the changes of colours were only to accommodate the low quality of the Defendants’ wooden materials. 4.At the beginning of this trial, the Plaintiff applied for an adjournment and the court’s leave to re-amend its Amended Statement of Claim to introduce a new averment of economic duress and new heads of damages. Whilst I appreciate the rights of the Plaintiff to put forward all its claims to the court, regard must also be had to the prejudice that the Defendants may suffer as a result. 5.This action was started in March 2003. The Statement of Claim had been amended in April 2004. The Defendants are now acting in person. 6.In allowing the re-amendments the Defendants will be facing new issues that they have not prepared to deal with and the anxieties that follow will be immense. Besides, it means that new evidence has to be adduced by parties and there will be further delay of this matter which has been pending for almost 4 years. 7.In the circumstances I exercised my discretion not to allow the Plaintiff’s applications. Evidence 8.The Plaintiff relied mainly on the evidence of its director Mr. Marvin Lebowitz (“Marvin”). 9.Although the Defendants had filed the statements of 3 witnesses including the Defendants themselves, both of the Defendants chose not to give evidence and only the wife of the 1st named Defendant, Ms. Bonnie Wong (“Bonnie”), testified in court. 10.This is remarkable because Marvin had in his evidence made some serious allegations against Bonnie and her father, the 2nd named Defendant (“Wong”), based on admissions of the 1st named Defendant (“Per”) to him. In choosing not to give evidence, there would be no evidence from Per to rebut such allegations. When Per expressed his intention not to give evidence to the court, I have explicitly drawn to his attention the above situation. But still, Per decided not to testify in the witness box. 11.The abovementioned allegations are that, during the course of events, Per admitted to Marvin that Bonnie had lied to Marvin and he had once told Bonnie to grab whatever money she could get from the Plaintiff. Per also told Marvin that Wong said Marvin could be cheated very easily. Although these allegations alone cannot be sufficient to prove that the Defendants intended to cheat the Plaintiff or Marvin, it can and does to a certain extent undermine the credibility of the Defendants and Bonnie. 12.Apart from the above allegations, Marvin had also by way of email sent to Bonnie at the material times accused Bonnie of lying to him. There was no reply or denial from Bonnie to those accusations. Bonnie explained in her evidence that she did not respond to the accusations because she wanted to maintain the amicable business relationship with the Plaintiff. I have serious doubt on this explanation. I can see Bonnie advanced her arguments through emails in reply to some of the complaints from the Plaintiff about the quality of the goods, there was simply no reason that Bonnie would only leave out those personal attacks and choose not to reply to them. Moreover, at that point of time the relationship between them had obviously started to turn sour, by not giving any explanations to the serious accusations from Marvin would only worsen the situation. 13.Furthermore, as submitted by Mr. Lee, counsel for the Plaintiff, there were also other areas of Bonnie’s evidence in court that had not been made out in the email correspondences between the parties. Bonnie explained that it was due to “misunderstandings” but there was no elaboration from her as to what exactly the misunderstandings were. 14.Another point to note is that, Bonnie initially denied having signed by anyone of the Defendants a document titled “Manufactures Responsibilities, Quality Standards and Requirements” (“the Manufacturer’s Responsibilities”). However, upon cross-examination by Mr. Lee, she finally admitted that Per had in fact signed the same. Again, this is another factor to suggest that Bonnie’s evidence is unreliable. 15.I have also observed the demeanor of Bonnie in giving her evidence. Her answers to counsel’s questions were often uncertain and she changed her evidence easily. I am of the view that Bonnie is not a credible witness. 16.On the other hand, Marvin’s evidence was unshaken in cross-examination. Although his evidence relating to the damages the Plaintiff suffered seemed to be unsatisfactory, on the whole he was a straightforward and unhesitant witness. I find his evidence reliable. 17.In so far as there is any inconsistency between the evidence of Marvin to that of Bonnie, I prefer the version of Marvin. Facts 18.In October 2001, Marvin met Per and Bonnie in a furniture exhibition held in Hong Kong. After talking to Per, he learnt that they were operating a factory in the Mainland looking for businesses. He had a good impression on Per and later on decided to try ordering products from him. 19.In May 2002, Marvin had a meeting with Per and Bonnie at the Plaintiff’s office discussing the order of wood doll furniture to be supplied to a French company named “Corolle” which was owned by an internationally renounced toy company “Mattel”. 20.As a result of the meeting a purchase order dated 24th May 2002 (“the 24/5 PO”) as regard 1,500 pieces of wooden cradle and 1,200 pieces of wooden high chair was signed by Marvin, Per and Bonnie on behalf of the Plaintiff, the Defendant and “Tung Tak Craft Manufactory Co.” respectively. This purchase order formed the first purchase agreement between the parties (“the first order”). 21.It is stipulated on the 24/5 PO, inter alia, that :
The shipping date and mode were stated as “July 23, 2002 by sea to France”. 22.Apart from the 24/5 PO, Marvin and Per also signed the Manufacturer’s Responsibilities. Amongst other things, it is stipulated that,
23.The Plaintiff also sent a file of specifications of the products to the Defendants. 24.In or around July 2002, Per brought samples of products to the Plaintiff’s office. Marvin was satisfied with the quality of the samples. Marvin sought comments from the ultimate buyer and received instructions to paint the products with “white wash” colour. However, it transpired that the Defendants had been unable to provide further samples with satisfactory quality for approval thereafter. In Bonnie’s evidence, she put the blame on the Plaintiff for frequently changing the colours of the products. On the other hand, Marvin said the quality of the wood used by the Defendants was not up to standard. As I mentioned previously in this Judgment, I prefer Marvin’s version to that of Bonnie. 25.As can be seen from the email records, apart from the Defendants’ failure to deliver satisfactory samples, there were other reasons that delayed the manufacturing of the products including, amongst other things, the requirement of affixing heat-transfer label by the end buyer. Suffice it to say is that, the Plaintiff should bear also a part of the responsibilities in delaying the production. 26.As a result, the Plaintiff and the Defendants revised several times the shipment date and also the prices of the first order. In the last version of the first order dated 14th January 2003, the shipment date was stated as “Jan 1, 2003 1x20FCL, Jan 15, 2003 1x40FCL”. The prices of the wooden cradle and wooden high chair were increased from initially US$5.85 each to US$8.60 and US$7.85 respectively. 27.I am of the view that the terms of the first order in relation to the purchase prices and delivery had been agreed and altered by the parties pursuant to the latest purchase order. However, as revealed by subsequent conducts of the parties, the shipment date of the first order had further been postponed as agreed by the parties. 28.By a purchase order dated 28th October 2002, the Plaintiff placed a second order (“the second order”) for wooden cradle and high chair from the Defendants to be delivered on 27th December 2002. Due to similar reasons, the second order had been revised several times and finally in a purchase order dated 27th December 2002, the shipment date was changed to 31st January 2003. 29.As stipulated under the terms of the purchase orders and the Manufacturer’s Responsibilities, the Defendants had the obligation to produce 50% of the products for the Plaintiff’s inspection and approval before shipment. 30.Pursuant to the above stipulation, the Defendants had arranged altogether 3 inspections for people from the end buyer to inspect the products at the Defendants’ factory. However, for the first 2 inspections, there were insufficient products completed for inspection and the quality of the products was also poor (as evidenced by the inspection reports of the end buyer). In the third inspection, the quality of the products was still below standard but the inspectors had reluctantly selected 420 pieces of each type for shipment so as to meet the already delayed schedule for the first order. As a result, only 840 pieces out of the total quantity of the first order were delivered to the Plaintiff. 31.I find that these 840 pieces of goods had been accepted by the Plaintiff as part performance of the first order by the Defendants. 32.It can be seen from the email correspondences that, at the end of December 2002, the parties could not agree to a delivery date for the second order. The Plaintiff suggested 31st January 2003 but Bonnie proposed March 2003. As a result, the Plaintiff terminated the second order. 33.As I have indicated to parties and agreed by them during the final submission of Mr. Lee, whether the Plaintiff was entitled to terminate the second order is a very important issue in this matter. 34.I find that the delay in delivery of the remaining quantities of the first order and also the second order was caused by the Defendants’ breaches of contract in failing to arrange sufficient complete products for inspection. 35.I find further that in view of the delay in delivery of the second order and also the indication that the productions could only be available for delivery in March 2003, the Defendants had committed a repudiatory breach of the second order and the Plaintiff was entitled to accept the breach and terminate the second order. In legitimately terminated the second order, the Defendants were liable to repay the deposits for the second order to the Plaintiff or to apply the said deposits as further payment of the products for the first order as instructed by the Plaintiff. 36.The reason given by the Defendants in withholding the cargo receipt was that the Plaintiff had failed to provide further payment for the first order in accordance with the agreement. It was stipulated under the agreement that the Plaintiff should pay a total of 60% purchase price after inspection. As in January 2003, the Plaintiff had paid to the Defendants, including the deposits for the second order, a total sum of HK$83,743.93. 60% of the price of the 840 pieces delivered under the first order amounted to approximately HK$32,334, which was much lower than the total amount paid by the Plaintiff to the Defendants. In this light, the Plaintiff had in fact paid more to the Defendants than what was required under the first order. 37.The Defendants had therefore wrongfully detained the cargo receipt of the 840 pieces delivered and were in breach of contract. By so doing the Defendants had also manifested their intention to rescind the first purchase order. 38.In the circumstances, I find the Defendants liable to the damages suffered by the Plaintiff consequential to their breaches of contract as regard the first and second orders. Quantum 39.Marvin listed out the heads of damages suffered by the Plaintiff as a result of the Defendants’ breach of contract in his supplemental witness statement (“MSW”). The Plaintiff also relies on the evidence of Miss Betty Wu, a former employee of Corolle to support its claim on loss of future business. 40.However, Miss Wu could not explain the basis upon which she could estimate the sales figure of the relevant products for the relevant years and therefore it would only be a pure speculation as to whether Corolle would place any further order to the Plaintiff for the same or other products in future but for the breaches of contract of the Defendants. 41.No damages would be awarded under the head of loss of future business. 42.As regard other heads of damages, I am satisfied that the Plaintiff had suffered damages as set out under paragraphs 5, 8, 9, 10, 11 and 12 of MSW. 43.For the increased prices charged by the other manufacturer, there was only an extra amount of US$0.2 for the cradles. The price of the high chairs was even cheaper. I would therefore award the amount of US$0.2 x 2,480 = US$496 under this head. 44.For damages claimed under paragraph 15, I am of the view that the Plaintiff had paid the amount as a result of a further agreement with the Defendants and the Plaintiff is not entitled to claim it back as a consequence of the Defendants’ unrelated breaches. 45.The total amount of damages is thus, US$496 + {US$13,991.26 + HK$22,228.19}(paragraph 5 of MSW) + HK$8,862 (paragraph 8 of MSW) +US$324.63 (paragraph 9 of MSW) + HK$4,967.66 (paragraph 10 of MSW) +US$423 (paragraph 11 of MSW) + HK$63,680.64 (paragraph 12 of MSW) = US$15,234.89 + HK$99,738.49. 46.Taking into account the amount already paid by the Plaintiff to the Defendants and the prices of the goods delivered. The amount to be awarded would be US$15,234.89 + HK$99,738.49 + HK$83,743.93 – (US$8.6 x 420 + US$7.85 x 420) = US$8,325.89 + HK$183,482.42. Order 47.Judgment be entered in favour of the Plaintiff against the Defendants in the sum of US$8,325.89 or its equivalent in Hong Kong currency and HK$183,482.42 together with interest thereon at Judgment Rate from the date of Writ until payment. 48.The Defendants’ counterclaims be dismissed. 49.An order nisi that costs of the original action and counterclaim be to the Plaintiff, with certificate of counsel, to be taxed if not agreed. This costs order nisi shall become absolute upon the expiry of 14 days from the handing down of this judgment.
Mr. Kenneth Lee instructed by Messrs Huen & Partners for the Plaintiff. Defendants, in person, present. |