Pan Asia Textiles Ltd v. Fidus Co

IN THE COURT OF APPEAL

Civil Appeal
No.85 of 1987

BETWEEN

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Coram: Hon. Cons, V.-P., Barker, J.A. & Macdougall, J.

Dates of hearing: 25^th – 26^th November, 1987

Date of delivery of judgment: 17^th December 1987

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JUDGMENT

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Barker, J.A.:

1. This is the judgment of the Court.

2. This is an appeal from a judgment of His Honour Judge Scriven in which he awarded to the Respondents, Defendants in the action on their counterclaim HK$167,186.47 and US$2,250.00 together with interest of HK$43,014.07.

3. This action the subject matter of the judgment arose out of a series o seven contracts for the sale and purchase of cotton yarn. Each party claimed commission as provided for in the respective contracts and the Respondents counterclaimed also for damages for the Appellant’s failure to comply with the terms of the contracts, either by failure to take delivery of the goods or part thereof, or by failure to open letters of credit. In the event the Judge made no award on two of the contracts, the third and the sixth.

4. The first submission of the Appellants was that on the true construction of the contracts the Respondents were agents only and that it was not possible for them to be liable as principals and therefore they had no right to sue on their own behalf.

5. It is therefore necessary to set out the relevant parts of a typical contract (they were in the same terms so far as this submission is concerned).

Each contract is headed –

“FIDUS COMPANY
SALES CONTRACT

AGREEMENT made this day between FIDUS COMPANY (hereinafter called the ‘Sellers’) and Messrs. Pan Asia Textiles Ltd. Rms. 208-210 Empire Court, 2-4 Hysan Avenue, Causeway Bay, Hong Kong (hereinafter called the Buyers) whereby the Sellers agree to sell and the Buyers agree to buy the goods specified below subject to the terms and conditions stated hereunder.”

6. There then followed the various terms and conditions, followed by under the heading “Remarks” –

“3) Upon opening L/C to China, please deduct 2% commission on behalf of Sellers. This 2% agent’s commission given by China, Sellers agree the Buyers share 1%, the balance 1% should be paid back to the Sellers by post-dated cheque immediately upon the shipment of cargo.”

At the bottom of the page, on the left there is –

“Confirmed by
Pan-Asia Textiles Ltd.”

then a signature –

“Authorised signature
(Buyers)”

and on the right there is –

“FIDUS COMPANY”

then a signature –

“(Sellers)”

7. Mr. Chong for the Appellants argued that because the words 2% commission and 2% agents commission were used this must mean that the Respondents were agents.

8. In The Virgo(1) the charter provided inter alia:-

“It is this day mutually agreed between Tudor Manai owners of the Virgo…
[and was signed Greenwich Marine Incorporated as Agents for Tradax Export S.A.”]

9. It was held by the Court of Appeal that this clause could not be regarded as compelling or as indicating the conclusion that the parties to the charter intended that Tradax initially described as Charterers were to have the status of agents only with no rights or liabilities of their own.

10. Shaw L.J. said at p.148:

“The status and capacity of the asserted or purported parties to a contract is to be determined by reference to the provisions of the contract looked at in its entirety. It is not sufficient and it is certainly not conclusive to have regard only to the terms in which the actual signatures to the contract are described, or to the fact that no qualifying description of their status accompanies their signatures.”

11. Mr. Chong sought to introduce extrinsic evidence to show that the Respondents were acting as agents and were not personally bound by the contracts. This evidence the Judge refused to admit and in our view his refusal was correct.

12. We are of the opinion that viewing the contracts as a whole, the proper construction of them is that both parties contracted as principals.

13. The next submission was that time was of the essence of the contract, and it was relevant only to the seventh contract in which the Appellants refused to accept 100 bales of cotton yarn which had been sent by rail, being admittedly loaded on the 1^st February 1985, no shipment having been made at all during the month of January 1985.

14. The seventh contract read so far as relevant “QUANTITY 200,000 lbs. 500 bales DELIVERY Shipment from Hebei during November 1984 to March 1985 equally be sea or rail at suppliers’ option”.

15. In our opinion, as matter of construction “equally” must mean that each month 100 bales must be shipped, by sea or rail. This was tacitly accepted by both parties below and we refused to allow, during the course of the appeal, and application to challenge it by way of a Respondent’s Notice.

16. If therefore time was of the essence of this contract, the Appellants were entitled to refuse the 100 bales loaded on the 1^st February 1985 albeit as the Respondents put it the loading was only one day late.

17. It is to be observed that there was no express term in the contract making time of the essence. However this was a mercantile contract.

18. In paragraph 1391 of Chitty on Contracts 25^th edition appears the following:

“It is only in the following cases that time is of the essence of the contract.

(2) Where the circumstances of the contract or the nature of the subject-matter indicate that the fixed date must be exactly complied with e.g. … mercantile contracts …. However the mere fact that a contract can be labelled mercantile or commercial does not determine the issue. The question is whether the time specified in the particular clause was (expressly or by necessary implication) intended by the parties to be essential.”

19. The question is a nice one, but in the end we have come to the conclusion that time was of the essence of the contract. The evidence of the Appellants was that prices could vary from day to day, and therefore it was essential for them to know when the yarn was shipped, even though the time of the journey might vary somewhat.

20. We are of the opinion that the Appellants were entitled to refuse to accept the 100 bales and would therefore se aside the award of HK$40,908.67 made in respect of the seventh contract.

21. It was submitted that the Respondents had failed to mitigate their loss. The Judge held that consequent upon breaches by the Appellants the Respondents acted properly in the difficult market conditions then prevailing. We see no reason to disagree with this conclusion.

22. We turn finally to the award of interest. It was contended on behalf of the Respondents that interest is claimable as a result of the Appellants’ failure to open Letters of Credit. The Appellants submit that the Appellants only have to pay the expenses of the opening of a Letter of Credit, and any interest that might be incurred in such opening, which could only be small. We consider that the Appellants’ contention is correct. There is no evidence as to how much this interest might be and the burden of proving this lay on the Respondents. We would therefore set aside the award of HK$43,014.07 in respect of interest.

23. To the extent we have set out in this judgment we would allow the appeal. We would not interfere with the awards under the first, second, fourth and fifth contracts.

Mr. K.M. Chong (H.H. Lau & Co.) for Plaintiff/ Appellant.

Mr. Adrian Bell (Samuel Soo & Co.) for Defendant /Respondent.

(1) (1976) 2 L1. Rep. 135