Mg Overseas Ltd v. Yarntex Mill Ltd
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DCCJ 3303/2007 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 3303 OF 2007 and 3481 OF 2007 (consolidated) ----------------------
---------------------- Coram : Deputy District Judge Osmond Lam in Court Dates of hearing : 22nd, 23rd and 29th June, 2009 Date of handing down Judgment : 10th July, 2009 ---------------------- J U D G M E N T ---------------------- 1.This is a case of sale of goods and the Plaintiff says that goods were paid for but not delivered by the Defendant. 2.Although the trial was conducted in punti, there were many contemporaneous emails which by necessity have to be referred to in this judgment. I have enquired with the Defendant who was represented by Mr. Lai Kwok Leung Tony (“Mr. Lai”) and he had no quarrel with this judgment given in English. Mr. Lai has a good understanding of the English language and he wrote most if not all his emails in perfect English. Background 3.The facts of the case itself cannot be simplier enough. 4.The Plaintiff wanted to buy urgently and the Defendant had the goods to sell, namely a quantity of gold colour yarn. The Defendant also had other colours to sell, namely 3 specific colours of Love U Blue, Classic Red and Strawberry which the parties contracted as well. 5.By an admission dated 16th December 2008 and under Order 23 of the Rules of the District Court, both parties agreed that they entered into two Contracts of sales namely Contract no. C07062R.2 for 3,800 lbs of gold colour yarn A202 dated 12th June 2007 and C07064R.2 for 11,600 lbs of 3 specific colours of lurex yarn namely 4,000lbs SKT-023 (Love U Blue), 4,000lbs H-176 (Classic Red) and 3,600 lbs H-194(Strawberry) dated 22nd June 2007 respectively with the terms as follows :-
6.It is also agreed between parties that the Defendant collected HK$334,500.00 from the Plaintiff on 22nd June 2007, being the full contract sum for the 1st Contract and 50% deposit of the contract price under the 2nd Contract. Issues 7.Thus, since it is agreed that none of the goods contracted were delivered, the simple issue falls to be decided, in layman’s terms, is why. In other words, whether the Defendant was in breach of the contracts by its failure to deliver. If the Defendant was in breach, then the Plaintiff is entitled to have the refund of the full contract sum for the 1st Contract and the deposit for the 2nd Contract and any consequential damages as a result of the breach. I am told during the trial that the Plaintiff is not seeking any further assessment for damages suffered or any consequential damages as claimed or at all. 8.Nonetheless, Mr. Lai of the Defendant says there was a twist to it. He said that even though on the face of it there were two Contracts, in fact the parties only intended to enter into and in fact did enter one overriding contract. This is one of the main issues of the case that I have to decide. Of course, it flows from that decision where there were two contracts independently entered into, breach of or canceling the first one did not negate the contractual obligations of the second. 9.Insofar as other issues are concerned, there is the question of when was the actual delivery date. Mr. Lai of the Defendant claims that while he got the cheque on 22nd June 2007 late in the afternoon, he could not cash it until the next business day. The terms of the 1st Contract was 14 days upon payment of the full contract sum and thus the date of delivery should not have been on or before 6th July 2007. 10.Then, there is the issue whether the 1st Contract was in fact terminated by the Plaintiff in breach of the agreement. The subsidiary issue here is whether Defendant was ready and willing to perform its part of the bargain and it was due to the many changes from the instructions and/or the lack of information provided by the Plaintiff that led to the failure to deliver on 6th July 2007. In layman’s terms, the fault was the Plaintiff’s and the Defendant was always ready and willing to perform its side of the bargain. 11.There are some other miscellaneous issues that I have to decide upon. But once I have determined on the main issues as set out above, the other minor issues can be easily dealt with. 12.In this case, Ms. Mak Wan Fung Betty (“Ms. Mak”) gave evidence on behalf of the Plaintiff whereas Mr. Lai and one Mr. Siu Yim Fai Ringo (“Mr. Siu”) being the person originally responsible for this transaction and took the stand on the Defendant’s side. I shall deal with their credibility in due course. Two Contracts or One 13.Mr. Lai of the Defendant raised a number of points here. 14.From the beginning, when the Plaintiff was negotiating with the Defendant, the former were dealing with both gold colour yarn together with the other 3 colour yarns. Thus, they were inseparable. It was a mutual understanding that the Defendant were to sell all four colour yarns. What was lacking was merely final details and the signature of the parties. Further, Mr. Lai pointed to the fact that the other three colour yarns were very special and the Defendant would not sell them independently apart from the golden colour yarn. Otherwise, he could not find another buyer. As, which is a common ground, the Plaintiff was in urgent need of the golden yarn, thus the parties signed the 1st Contract first, with the common intention of entering into the 2nd Contract for the other three colour yarns. Thus, the division into two contracts were merely for convenience and expediency of the parties. Mr. Lai also pointed to the fact that in fact only one cheque paying the full price of the 1st Contract and half deposit of the 2nd Contract was an indication that the two contracts were in fact originally one. Further, when the Plaintiff cancelled the contracts, Mr. Lai said, they asked for the return of the deposit (and thus referring to the 2nd Contract) and thus signifying that the Plaintiff was also dealing with both contracts at the same time. 15.I do not agree. Mr. Lai is an experienced business man. Mr. Siu appears to have been in the business for a long time. Similarly, Ms. Mak is also an experienced person in the business world. When the terms of the contracts were not agreed amongst the parties, they were not signed, (e.g. at page 99 of the Trial Bundle C) when the four colour yarns with their different quantity were placed together, it was not signed by both parties, as they had not agreed on the terms of the contract. After much negotiations, the two contracts as we now see (at pages 106 and 110 respectively of Trial Bundle C) were agreed upon and entered into. I do not expect experienced business man like Mr. Lai signed on contracts without being careful with their terms. That is simply incredible. 16.Further, if the parties had intended to enter into one overriding contract only, it would have been easily indicated by way of writing the terms “in supplemental to the 12th June contract” or in the 1st Contract stating clearly that it anticipated a supplemental or subsidiary contract. None of this happened and I have checked the emails of the Plaintiff at the time, Ms. Mak was still writing at 7:41pm on 12th June (the date of the 1st Contract) to her American Headquarters in the following terms :
17.It can be seen that even when entering into the 1st Contract with the Defendant, the Plaintiff has yet to agree on the price and to test the two colours yarn samples of the 2nd Contract. The payment terms were also different as here the payment of 30% as the deposit which was subsequently changed into 50% under the 2nd Contract. The parties can hardly be said to be in agreement on anything. I cannot accept what Mr. Lai said that the parties have agreed on everything but the quantity or fine details. That is simply not true. 18.The fact that the payment was made by one cheque for the two contracts is neither here or there. It can be for simple convenience of either party. I do not see the significance as given by the Defendant. 19.I am very sure that whilst many negotiations of different terms were taking place at the time, they eventually entered into two separate and independent contracts for the sale of two different types of goods to be delivered on two different dates. Hence, I find that there were two Contracts with their two different delivery dates. 20.Suffice to say that where two different versions of events were described by the parties, I find Ms. Mak for the Plaintiff credible, straightforward and honest. She has left the Plaintiff employment and has no axe to grind. I accept her evidence in its entirety. When the parties diverge, I reject the Defendant’s version of events. Delivery date 21.I can deal with this fairly easily. Mr. Lai said that since he got the cheque from the Plaintiff in the late afternoon and could not cash it on 22nd June 2007 (which was a Friday). Thus, the counting of the date should be postponed only starting from the time of presentation of the cheque to the Bank. The fallacy of this argument is simply that if the Defendant were never to cash it, then the delivery dates, according to Mr. Lai’s theory, would never start to count. That is simply absurd in the commercial world. I do not need to go into any more details about cheques and its history as substitute for payment, and suffice to say that a cheque is as good as cash and unless the terms of the contract state otherwise (for instance payment by cashier order), it is a recognized mode of payment. 22.Thus, the delivery date for the 1st Contract was and should be on 6th July 2007. Who terminated the contract and whose fault was it? 23.Mr. Lai’s defence is threefold. First of all, he said that the Plaintiff knew that the Defendant could not export from the mainland from their previous dealings. Thus, it was always intended for the Plaintiff to help out the Defendant through its Shanghai office. Then, as the Plaintiff was in urgent need to transport the goods, it then changed the mode of transport initially by sea and then through air and then finally take delivery in the mainland. Further, the Plaintiff never gave the Defendant the proper documentations. Finally, at the last hours, the Plaintiff also changed the package details and contributed to its failure in delivery. 24.Put simply, the fault was the Plaintiff and not the Defendant. If there was any delay and/or failure, it was caused by the Plaintiff’s forever changing and confusing instructions. 25.The matter has to go back to the end of June 2007. Prior to the 1st Contract, Mr. Siu sent an email to Greg of the Plaintiff’s American headquarters that “the lurex is confirmed. I’ve done u a great favour including a very low price and the soonest shipment. Commercial, it goes beyond the scope, yet, our friendship is beyond doubt. So, u own me drinks. Now everything is ready, please arrange the TT payment the latest on 21/6 and fax me with the bank receipt on the same day. No more delay, friend.” 26.Thus, it can be seen the representations made to the Plaintiff was that it was ready for the shipment and as soon as payment was made and it would be shipped to the Plaintiff soonest. That is corroborated by Ms. Mak’s evidence in court. 27.Then Ms. Mak sent a revised shipping addresses with more factory addresses on 29th June 2007 but Mr. Lai said although he did receive this email but the attachment was not clearly marked and therefore he did not read this revised addresses. Nor did Mr. Siu read them when he told me that he seldom read emails. 28.There were further disputes as to how the goods were to be transported. The 1st Contract (for that matter the 2nd Contract as well) stipulated FOB China. However, Mr. Lai said that the Plaintiff knew all along that the Defendant could not export from China in the first place due to their previous dealings with the Defendant. Mr. Lai further pointed to an obscure email from Vincent Chu of the Plaintiff dated 27th June 2007 (at page 24 of the C Trial Bundle) in which Mr. Chu said “they don’t have export service, please handle by yourselves” as evidencing only by late June did the Defendant know that they had to arrange export by themselves hence contributing to the delay. But this Vincent Chu was no longer involved in the day-to-day operation of these two contracts and Mr. Lai told me that he was well aware that Ms. Mak, the superior of Mr. Vincent Chu, was calling the shots here. Thus, it is strange that Mr. Lai were relating to this Mr. Vincent Chu about the export problems of the Defendant. Furthermore, from the email correspondences, it is evident that Ms. Mak was genuinely shocked when this problem was first raised with her and that the delivery would be later than scheduled. If she had heard about this earlier, no doubt she would have voiced her displeasure quite earlier on, as she was evidently quite an assertive, forthrightand demanding person. 29.The problem was first raised by the Defendant in an email dated 3rd July 2007 at 5:21pm in this manner :
30.The reply when it came from Ms. Mak on the same day (3rd July 2007) at 11:23pm was understandably less than cordial.
31.Ms. Mak also complained about the other three colour yarn delivery date. But that is not of our concern here. However, it is evidently clear from the email (and also from her evidence in the box) that this was the first time Ms. Mak heard about the export difficulties and also the delay in delivery of gold lurex yarn, which was apparently ready for delivery after payment. 32.Then she fired off another email to the Defendant at 11:39pm of the same evening.
33.This urgent email prompted Mr. Lai of the Defendant the following reply via email dated 4th July 2007 at 12:32pm in the following terms :
34.It is clear from this email, the Defendant is denying that the delay was caused by them. In fact it said that the delivery date was later than 6th July (a point that I have already dealt with earlier in paragraphs 21-22 above). The Defendant was also demanding extra courier costs to be borne by the Plaintiff. 35.To this request, Ms. Mak was clearly not impressed. She said in a follow-up email at 12:48pm that :
36.Then on top of this email, Vincent Chan of the Plaintiff, a superior to Ms. Mak wrote this email while both sides were arguing on who should bear the courier costs. He said at 2pm on 4th July 2007 that :
37.There were further real arguments over emails. Suffice to say that this was the first notice put to the Defendant that time was of the essence with legal consequences and that they should perform according to the terms of the contract. What followed were the details of the forwarder given to the Defendant. Of course, it did not stop the Defendant from complaining about lack of handover address on 6th July 2007; that it was originally an air-forwarder, now a different one; two lots of goods changed into a single shipment and needing modification of documents; first a HK forwarder than now a China forwarder; no information from the Plaintiff about warehouse for delivery of cargos etc. In short, the Defendant made a lot of complaints and arguments here in emails and in court. 38.I do not need to repeat the answers of the Plaintiff to all these allegations. There were far too many emails to and fro in dealing with all these problems. Suffice to say that neither side accept responsibility for any possible delay. But it was still early. The deadline was midnight 6th July 2007 and until then the Defendant was not in breach. 39.That is evident in an email dated 6th July 2007 at 6:36pm from Vincent Chan of the Plaintiff to Mr. Siu and Mr. Lai. In it, Mr. Chan stated : “Today is the deadline the you have to deliver the goods failing which the order is cancelled. We shall hold you personally and Yarntex responsible for costs, damages, loss of profit and interest. Our estimated claim will not be less than USD150k together with the refund of deposit.” 40.Stranger still was the Defendant’s response. At 7:21pm on the same day, Mr. Lai wrote this “We had already completed the production & ready for export of the goods but was interrupted by yr. alterations from time to time. While our party is working hard to do the modification works according to yr changes, order had been cancelled by yr. co.. What kind of Business manner it is. Yr unfaithful action make me lost all the confidence to complete the whole contract with you. Legal action will therefore against yr company for all our financial lost and repitation damages.” (emphasis added) 41.This was an email that indicated the Defendant thought the two contracts were cancelled by the Plaintiff and the Defendant was no longer liable to complete its bargain. During evidence, I did ask Mr. Lai how come he interpreted Mr. Chan’s earlier email as having cancelled all the contracts, as it clearly did not. Mr. Lai told me that since Mr. Chan used the words “the refund of deposit” and it was only the 2nd Contract which the Plaintiff had paid deposit thus his logic was that the Plaintiff had meant the cancellation of both contracts and this was also an indication that all along the Plaintiff had only one contract in mind. 42.This is the kind of convoluted logic in Mr. Lai’s argument. And I reject it. Mr. Chan’s email clearly stated if the Defendant did not deliver on 6th July, it was liable to be sued by the Plaintiff. At the time of the email, there were still some five odd hours to go before midnight. Performance of the 1st Contract was still possible. At about 2pm that day, the Plaintiff already inspected the goods in Tung Kuen (東莞) and what remained to be done was the Defendant making some modifications to the labeling and packaging of these goods. I asked Ms. Mak as to the time needed to make such modifications. She mentioned a couple of hours. I subsequently also asked Mr. Siu a similar question. In fact, Mr. Siu was going to Tung Kuen (東莞) with those amendments ready at hand. He put the timing about five in the afternoon. That was prior to that email from Mr. Vincent Chan I mentioned earlier on in paragraph 40 hereinabove. I further asked Mr. Siu as to how long it would have taken him to modify those labeling and packaging. Mr. Siu also said a couple of hours. In fact, Mr. Siu was of the view that had he not told by Mr. Lai of the Defendant to stop that evening, delivery to the Plaintiff could have been carried out. However, since he was told by Mr. Lai that the Plaintiff had cancelled the order, he did not make any modifications as to the packaging for the completion of the 1st Contract. 43.Thus, it is evidently clear that if the Defendant wanted to deliver on the night of 6th July, it could have done so. It chose not to do so for reason of its own. But it certainly, as I find, not for the reasons Mr. Lai gave in court. 44.Subsequently, there were negotiations to reinstate the agreements, as the Plaintiff was still in urgent need of the goods. Somehow nothing came of such negotiations and the parties decided to litigate here. I do not think there is any point of going through all the correspondences. They are not relevant to the issues at hand. 45.What I have to decide is whether it was the fault of the Plaintiff as claimed by the Defendant. There is no doubt that there were changes made at the last moment by the Plaintiff. However, as I already mentioned that it is also abundantly clear that these changes did not prevent the delivery on or before midnight on 6th July 2007. In fact, Mr. Siu was going to Tung Kuen (東莞) to help with the delivery. Thus, I find as a fact that the Plaintiff was not in any fault in causing or contributing to the Defendant’s failure to deliver. In fact, quite the contrary, despite all the difficulties that the Plaintiff had encountered with the Defendant, I have seen emails that throughout the Plaintiff was very keen to get delivery of these goods, even for a few weeks after the failure of the Defendant to deliver the 1st Contract. 46.Consequently, the Defendant not only cancelled the 1st Contract unilaterally, but also decided not to carry out the 2nd Contract and not delivered these goods to the Plaintiff on the delivery date which was 22nd July 2007. Since I have found for the Plaintiff on the 1st Contract, the Defendant was also in breach of the second one, having failed to deliver on the scheduled delivery date. As to the reasons, I was told that since the Defendant accepted termination by the Plaintiff of both contracts in the first place, it was not liable for the 2nd Contract. I reject such argument as well. 47.There are other minor miscellaneous issues raised by the Defendant. For instance, whether the Defendant had done everything to minimise their losses and whether the Defendant could make any set-off without pleading it. Or there is a point where Mr. Lai criticised Ms. Mak’s evidence as incorrect, exaggerated and not truthful. 48.As I have already mentioned, I accept Ms. Mak’s evidence in its entirety, thus I reject Mr. Lai’s argument. Further, Mr. Lai’s point that the Defendant did everything to minimise their losses is neither here nor there. The losses rested with the Plaintiff, who paid for goods never got them. No doubt the Plaintiff had to pay for more to make the urgent delivery date. But since it is not claiming any damages arising, I do not have do decide on it. It would be preposterous to allow any of the Defendant’s claim, even if it had pleaded its case. 49.I therefore grant judgement for the Plaintiff and make an Order that the Defendant do pay the Plaintiff the sum of HK$108,300.00 under the 1st Contract, the sum of HK$226,200.00 under the 2nd Contract, totalling HK$334,500.00 with interests from 26th June 2007 being the date of the first Writ of Summons until date of judgement at judgement rate, and thereafter at judgement rate until full payment. I further make an order nisi that costs of this action be to the Plaintiff, to be taxed if not agreed. The order nisi shall be made absolute 14 days from today unless any of the parties applies to vary the same by Summons.
The Plaintiff : represented by Mr. David Lam of Messrs. Wong & Yip, Solicitors. The Defendant : Yarntex Mill Limited, in person, represented by Mr. Lai Kwok Leung. |
Further hearings and rulings under DCCJ 3303/2007