4077571 Canada Inc. t/a Kristom Canada v. Pine Trading Co Ltd

HCA1272/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1272 OF 2006

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BETWEEN

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Before :     Deputy High Court Judge Au-Yeung in Court

Dates of Hearing :     8 – 12 November 2010

Date of Handing Down Judgment :     1 December 2010

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JUDGMENT

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1.The plaintiff sues the defendant for damages for failing to take delivery of goods as ordered.  The defendant contends that the plaintiff had unilaterally varied the payment term in the middle of the contracts. 

BACKGROUND

2.The parties had been trading in frozen poultry between about May 2004 and March 2006.  The sales confirmations issued by the plaintiff contained the payment term “as usual”.  The invoices stated the payment term to be “CAD”[1].

3.It is common ground that before the trading started, the president of the plaintiff seller (PW1 : Mr Koshelowsky) and a director of the defendant buyer (DW1 : Ms Chow) had agreed that the payment term would be “cash against documents” (“CAD”) but the parties would not go through the banks in order to save charges.  “D” stands for those documents which would pass title in the goods to the defendant e.g. a bill of lading. 

4.At the start, the parties adopted the “telex release” mode.  It was  done close to the time of arrival of a shipment.  The defendant would first pay the plaintiff.  The plaintiff would then send the original bills of lading (“OBLs”) to its shipping company in Montreal and request it to telex the shipping company in Hong Kong to release the goods to the defendant.  Once the Montreal shipping company confirmed that was done, the plaintiff would in turn advise the defendant by email about the telex release.  As there is a 12-hour difference in time between Canada and Hong Kong, the defendant could enter the relevant instructions into the computer on the following morning.  She could assume title and obtain delivery of the goods.  The use of telex release lasted up to about June 2005.  This period will be called “the telex release period”.

5.Since about July 2005, at the defendant’s request, the plaintiff had been sending them the OBLs instead of telex release.  It was because errors in the telex release process caused delay in obtaining delivery and the defendant had to incur demurrage charges.  The defendant would receive an OBL by courier (which would take 3-4 days to travel from Canada to Hong Kong) together with other non-title documents.  Close to arrival of the shipment, the defendant would send the OBL to people who would do the import declaration for her at Yiantian, China.  The defendant did not have to physically collect the goods and send to the customers.  People would call her when the products were ready for release by the Chinese customs.  The defendant would advise whom to deliver to.  This period since July 2005 will be called “the OBL period”. 

6.Sometime after business started, the defendant began to pay the plaintiff only after the telex release was issued.  The payments were initially soon after the telex release and gradually had become late during the OBL period.  Relationship between the parties remained good until the end of 2005.

THE PLAINTIFF’S CASE

7.The plaintiff alleges that the defendant had been delaying payment despite reminders.  In late 2005, the defendant informed the plaintiff that it had financial difficulties and asked for a price cut, which was refused by the plaintiff. By March 2006, the delay in payment was so serious that the plaintiff asked the defendant to make payment first before telex release.  The defendant refused to do so.  The plaintiff says it was because the market was then dropping by about 20% that the defendant simply walked away from the orders. 

THE DEFENDANT’S CASE

8.The defendant alleges that there was an oral agreement in July 2004 (“the Oral Agreement”) between Ms Caron of the plaintiff and Ms Chow of the defendant to the following effect:

(a)     That the payment term be varied so that the defendant could pay after instead of before telex release or obtaining the goods (“the deferred payment term”). 

(b)     That there be no fixed time for payment afterwards (“the open account term”). 

9.However, on 9 and 11 March 2006, the plaintiff without any prior notice recklessly changed the payment term from open account to telex release order upon receipt of payment.  It was to apply to outstanding and future orders.  The defendant considered this to be an act of repudiation and purportedly accepted it on 17 March 2006.  Discussions to salvage the orders bore no fruit.  The plaintiff threatened legal action and offered to defer shipment, but to no avail.  The plaintiff alleged that the defendant was in repudiation and accepted it on 10 April.

THE ISSUES

10.The issues are: 

(a)     What was the true meaning of CAD?

(b)     Whether the Oral Agreement on deferred payment existed?

(c)      Alternatively, was there an implied term by reason of the course of dealings since July 2004 that the plaintiff was to be paid after the relevant goods or title documents were released to the defendant?

(d)     Whether the parties had agreed upon “open account”?

(e)      Who was in breach?

(f)      Quantum of damages.

SOME GENERAL OBSERVATONS

11.It is regrettable that a simple case was made to appear more complicated by the various versions of pleadings on each side. 

12.Except for Ms Caron (PW2), the witnesses were not entirely reliable.  There were material inconsistencies between the witnesses’ statements and their oral evidence which will be analyzed under the individual issues.  The contemporaneous documents speak a lot about the true situation and I rely heavily on them to assess the credibility of witnesses.

THE TRUE MEANING OF CAD

13.From one definition in his witness statement, Mr Koshelowsky has come up with 5 options for payment said to fall within the term “CAD” :

(a)     Payment first before delivery of documents for the goods. 

(b)     Payment on the same day the defendant obtained release of the goods;

(c)      Payment on the same day the defendant obtained the OBL;

(d)     Payment a few days after the defendant obtained release of the goods;

(e)      Payment a few days after the defendant obtained the OBL.

Only item (a) appeared in his first witness statement and was not challenged by Ms Chow.  Mr Koshelowsky claimed that the method of transferring documents had changed but not the cash payment.  Upon presentation of documents, the defendant needed to pay. Whether payment was immediately before, on the same day, immediately after telex release or a few days later, it was “CAD”.

14.The meaning of CAD had to be ascertained at the time of the agreement.  At that time, were the parties to go through banks on CAD terms, the plaintiff had to send the original title documents to its bank who would notify the defendant’s bank.  The defendant would pay its own bank and then notify the plaintiff’s bank of such payment before the defendant’s bank would release the title documents to the defendant.  The bank would levy charges.  By agreeing “CAD but not through banks”, the parties clearly intended, in my view, there to be payment first before release of documents.  I find that the definition in paragraph 13(a) was the true meaning of CAD.

WHETHER THE ORAL AGREEMENT ON DEFERRED PAYMENT EXISTED?

15.Ms Chow claims that after the first few deliveries, in July 2004, she asked Ms Caron over the phone if it was possible to make payment after telex release.  Ms Caron said she would come back to her.  One to 2 days later, Ms Caron said that it was OK.  Ms Chow knew that Ms Caron did not have the authority to agree upon the payment terms but Mr Koshelowsky had.  Her impression was that it was he who gave the OK.  Thereafter, for about 20 months between July 2004 and February 2006, most of the orders were paid for after the goods or title documents were received. 

16.The plaintiff denied the existence of the Oral Agreement.  Mr Koshelowsky and Ms Caron testified that the latter was only involved in logistics and had no authority to negotiate payment term.

17.In assessing the credibility of Ms Chow’s version, I have taken into account the following matters :

(a)     Ms Chow had been constantly on the phone with Mr Koshelowsky in June and July 2004.  For each order, there would be 2-3 calls, if not more. She could have raised the issue of deferred payment with Mr Koshelowsky instead of Ms Caron whom she knew had no authority.

(b)     The alleged Oral Agreement was not mentioned in the correspondence in April and May 2006 when relationship broke down.

(c)      Nor was it mentioned in the defence until almost 3 years after it was first included as part of the amended defence.

(d)     Ms Caron expressly denied that there was such an oral agreement but the contrary was not put to her in cross-examination despite the reminder of Mr Hung to Mr Chan, counsel for the plaintiff and defendant respectively. 

I am not satisfied on the balance of probabilities that it was Ms Caron who conveyed Mr. Koshelowsky’s approval.

18.On the other hand, Mr Koshelowsky admitted that :

(a)      After the first few transactions, occasionally the defendant would request to first release documents before payment.  The plaintiff gave consent to that provided the defendant paid within a few days afterwards.  Such consent was given on a case by case basis and subject to the plaintiff’s sole discretion.  The plaintiff never agreed that to be a variation of the CAD term.

(b)     The plaintiff would do telex release upon either the defendant’s confirmation of payment of the price or that she would “as usual” make payment on the same day as she obtained the release of the goods.

19.How Mr Koshelowsky conveyed the consent in paragraph 18 was not clear.  There was no evidence of a case by case application for approval by the defendant and corresponding grant by the plaintiff.  The Financial Controller (PW3: Mr Calway) was unable to state the basis for exercise of the discretion and what amount or age of a debt would be beyond the limits of tolerance.  The pattern of payment during the telex release period disclosed in items 1-71 in the table of transactions prepared by counsel (“the Table”) was that :

(a)     The following statements were all over the emails from Ms Chow :

·           “Payment will be made on the same day the orders are released; payment instruction attached.”

·           “As usual payment will be made on the same day the order is released; payment instruction attached.”

·           “Telex release on Friday; payment would be on Monday as Friday is a public holiday.”

·           “Thanks for the telex release; we have arranged payment today.”

·           “Payment as usual.”

(b)     There were 9 occasions of payment on the same day.

(c)      There were 30 occasions of payment one day after telex release.

(d)     There were 27 occasions of payment more than 1 day after telex release but they never exceeded 5 days.

(e)      There were 5 occasions when it is not clear whether payment was before or after telex release.

(f)      Contrary to Mr Koshelowsky’s assertion, payment after telex release was the norm and not the exception.

The pattern during the OBL period (from item 72 onwards in the Table, save for a few telex releases) was that payment ranged from 2 to 63 days after receipt of OBL.

20.On the plaintiff’s own evidence, I find that the defendant did give a general consent to payment after telex release.  There was basis for this as the defendant had been trading with Mr. Koshelowsky when he was previously working with one Northam Food Trading before setting up the plaintiff.

21.During the telex release period, with the consent arrangement, the defendant would be able to obtain title and even delivery on the same day or very soon after, before she actually paid.  That explained why options (b) and (d) in paragraph 13 came about.  That was also consistent with the explanation by Mr Koshelowsky that, if the plaintiff sent a telex release on Monday to the defendant, the earliest time the defendant would receive it would be Tuesday morning when the defendant’s office started operation; the plaintiff would expect to be paid on Tuesday.  If the plaintiff sent a telex release on Friday to the defendant, the earliest time the defendant would receive it would be Saturday or Monday morning; the plaintiff expected to be paid on Monday or, if Monday was a public holiday, on Tuesday.  That was why payment would be at most 5 days after telex release.  This pattern of payment had been extended to the OBL period.  By the same token, options (c) and (e) in paragraph 13 was acceptable to the plaintiff.

22.On the plaintiff’s own evidence, I find that the defendant did give a blanket consent to payment after telex release.  The “as usual” term of payment established in the course of dealing was as stated in paragraphs 13 and 21.  The plaintiff was happy with the defendant’s payments and had no complaint.

IMPLIED TERM FOR THE PLAINTIFF TO BE PAID AFTER THE GOODS OR TITLE DOCUMENTS WERE RELEASED TO THE DEFENDANT

23.In BP Refinery (Westernpoint) Pty Ltd v. Shire of Hastings (1978) 52 ALJR 20, 26 , it is said that,

“… for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.”

24.These principles were adopted in Kensland Realty Ltd v. Whale View Investment Ltd & anor [2002] 1 HKLRD 87, 106-107, per Ribeiro PJ.

25.Applying these principles, the term to be implied contradicted the express CAD term.  It was not shown to be necessary to imply such a term to give business efficacy. The orders could well operate without it.  It was also not reasonable and equitable to imply such a term because it would subject the plaintiff to the risk of non-payment after it had released the title to the goods to the defendant.  I decline to imply the term as invited.

WHETHER THE PARTIES HAD AGREED UPON “OPEN ACCOUNT”?

26.“Open account”, according to the defendant, meant that the defendant could pay at any time after receipt of the title documents or the goods.  With her own customers trading on open account, she would ask them when payment would be coming after delivery.

27.In determining this issue, the Court is concerned with the objective evidence and not what a party unilaterally thought.

28.There was a difference between the witness statement of Ms Chow and her evidence in court.  The former stated that she asked Ms Caron if there could be payment after delivery of documents whereas the latter (and the pleaded case) was that she asked if there could be payment after delivery of documents or goods. In either scenario, there was no mention at all about the credit period.  

29.The parties had been trading on “CNF Hong Kong” basis.  It has been said that the purpose of such a contract is not a sale of the goods themselves but a sale of the documents relating to the goods.  The seller discharges his obligations as regards delivery by tendering a bill of lading covering the  goods.  See Schmitthoff’s Export Trade, 11^th ed, para. 2-020.

30.It could not be the intention of the plaintiff, in agreeing to accept deferred payment, should also agree to give the defendant an indefinite credit period which had the effect of displacing the CNF term.  Therefore, at best, the defendant could only prove an oral agreement reversing the sequence of payment and delivery of documents but she could not elevate it to an open account term.  This was especially so when during the OBL period, the OBLs were sent by courier so that title in the goods would have passed to the defendant well in advance.  Ms Chow confirmed that she did not need to physically receive the goods.  In my view, she should have paid upon receipt of the OBL and not the goods.  At best, relying on the “as usual” term, she should pay within 5 days of receipt.

31.The defendant says that the “open account term” was to enable it to have a better planning on cash flow.  What planning was involved?  In fact the defendant had been deferring payments by many weeks since receipt of OBLs.  It showed no “planning” at all. 

32.Further, Ms Chow claimed that but for the open account term, the defendant would not have placed so many orders with the plaintiff.  There was no evidence that this matter was disclosed to the plaintiff or otherwise used as an inducement for varying the payment term.  Mr Koshelowsky in fact denied that because business was predominantly based on relationship with his supplier and not the customer.

33.I find that the plaintiff had never agreed to trade on “open account”.  The time for payment was as described by Mr Koshelowsky in paragraphs 13 and 21. The plaintiff had not received any inducement or consideration in consenting to payment after telex release.  It merely granted indulgence to the defendant without giving up its rights under the CAD term.

WHO WAS IN BREACH?

34.The plaintiff claims that the defendant was in breach in 2 respects :

(a)     Continuous delay in payment;

(b)     Repudiation of the outstanding orders.

(a)     Delay in Payment

35.Given my finding on the time for payment, delay in payment during the OBL period was serious.  It ranged from 2 to 63 days, mostly 1-3 weeks.   

36.The defendant claimed that sometimes the original bills of lading would arrive 1-3 weeks earlier than the goods; she would pay after the goods had arrived.  With respect, this departed from the common intention of the parties under a CNF contract, i.e. that the time for payment was tied with delivery of documents and not delivery of goods.  In any case there was no evidence on when the goods actually arrived in the OBL period.  Even if I accept Mr Chan’s submission that payment within 3 weeks of delivery of OBL could be regarded as reasonable, some payments were well over 3 weeks.  The defendant was in breach.

37.The witness statements of Mr Koshelowsky and Mr Calway stated affirmatively that the latter had repeatedly reminded the defendant to pay within time and that Mr Koshelowsky instructed Mr Calway not to chase too hard for payment from the defendant.  Yet in oral evidence, Mr Calway was adamant that he had never spoken to the defendant on the phone but that demands were made through Mr Koshelowsky.  For this clear inconsistency, I disbelieve both witnesses in this respect.

38.I find that the plaintiff had not given any express complaint of delay or demand for payment except by one email of Ms Caron dated 29 July 2005.  It was issued on the instructions of Mr Koshelowsky or Mr Calway in the following terms:

“Please advise concerning orders 3271 to 3274 and 3292A, 3292A(sic). Our accounting department has asked me not to send any more original documents until we get caught up. Please advise expected dates for payment so that I can advise them.”

Given at the early state of the OBL period, this email carried a firm message that the defendant’s delay in payment was unacceptable and might after delivery under other orders. It was effectively an attempt to get the plaintiff back to the “as usual” pattern of payment in the telex release period.  That was why the plaintiff asked for the expected dates for payment instead of immediate payment. The defendant immediately replied stating that for 2 orders, payment would be made early in the following week; and for the other 2 orders, on the same day as the exchange for the release orders.  I accept Mr Koshelowsky’s evidence that being satisfied with the defendant’s reply, business continued as usual.  As described by Mr Calway, the plaintiff tolerated the delay until they found the situation unbearable. 

(b)    Repudiation of the Outstanding Orders

39.The background was that in January 2006, one Ms Cheng of the plaintiff informed Ms Chow that the plaintiff wanted to change the payment terms and requested the defendant to pay before the release of the goods or title documents in all outstanding and future orders.  Ms Chow insisted that the change should only apply to new but not outstanding orders. 

40.The plaintiff denied proposing the change.  However, I do find support of its existence from Ms Cheng’s email dated 13 January 2006.  She was telling Ms Chow that the receivables were growing and asked for the defendant’s bank details.  The irresistible inference was that the plaintiff was considering using CAD through banks.  However, there was no evidence that this was pursued.  The defendant continued to receive OBLs as before.

41.By emails dated 9 and 11 March 2006 (“the 2 Emails”), the plaintiff stated in similar terms in respect of 4 orders (nos. 4007, 3779, 4006 and 3774) :

“Please note that we held b/l for [order no. 3779]. We will do telex release upon release of payment.”

42.In my view, the 2 Emails were similar attempts to the 29 July 2005 email to get the plaintiff back on track in terms of payment.

43.The defendant did not accept the proposal.  By email dated 14 March, Ms Chow made clear that she could not accept change of payment or credit terms in the middle of the contract. The change of the payment term should only apply to new orders made from that day onwards.  Ms Chow referred to an alleged telephone conversation with Mr Koshelowsky on 16 March wherein the latter confirmed that the proposed change would apply not only to outstanding but also future orders.  Ms Chow regarded that as a repudiation and accepted it by email on 17 March.  In that email, she said that in respect of those orders for which the defendant had received the OBLs, she would arrange payment within a few days.  In respect of those for which the defendant had not received the OBLs, she would return all original (non-title) documents to the plaintiff on the following Monday.  It is not disputed that she honoured her words.

44.Mr Hung submits that this assertion about the telephone conversation on 16 March had all the hallmarks of recent concoction as it had never been referred to on the occasions below :

(a)     The email on the following day;

(b)     The email on 4 April, 2006 from Ms Chow reiterating her refusal to accept change of payment term;

(c)      Ms Chow’s lengthy letter dated 19 May 2006 in reply to the letter before action;

(d)     The first version of the defence;

(e)      The witness statement of Ms Chow dated 19 April 2007;

(f)      In the cross-examination of Mr Koshelowsky.

It was only 3 years later in March 2009 that the defendant amended its case to plead this assertion.

45.Note that Ms Chow did not accept “the plaintiff’s repudiation” on 14 March. She was concerned enough to call up Mr Koshelowsky on 16 March as evidenced by her email dated 17 March.  I would be surprised if that telephone conversation did not refer to the plaintiff’s reason for issuing the 2 Emails and Ms Chow’s objection to it.  It was more likely than not that the telephone conversation on 16 March did occur as alleged by Ms Chow.

46.However, assuming I am wrong about the occurrence of that telephone conversation, the plaintiff was left in no doubt as to Ms Chow’s objection and the grounds thereof by virtue of her email on 14 March.  The plaintiff did purport to unilaterally revert to CAD term for the outstanding orders.  The question is whether or not it was such a breach as to amount to repudiation of the orders?

47.As of 9 March, various orders were unpaid (items 126, 128, 131, 132, 133 and 135 in the Table).  Some were already due for one month counting from delivery of OBLs. 

48.It was accepted by both parties that a telex release was as good a title document as a bill of lading.  It was used in the past close to the arrival of the shipment.  It had been in use for over a year.  Based on my findings as to the payment term, there was little advantage to be gained by the defendant in terms of time for payment (less than 5 days to pay after telex release, as there were no public holidays in March 2006).

49.The plaintiff was entitled to give notice of reversion to the CAD term.

“The party who forbears will be bound by the waiver and cannot set up the original terms of the agreement. If, by words or conduct, he has agreed or led the other party to believe that he will accept performance at a later date than or in a different manner from that provided in the contract, he will not be able to refuse that performance when tendered. However, in cases of postponement of performance, if the period of postponement is specified in the waiver, then, if time was originally of the essence, it will remain so in respect of the new date. If the period of postponement is not specified in the waiver, the party forbearing is entitled, upon reasonable notice, to impose a new time-limit, which may then become of the essence of the contract. Similarly, in other cases of forbearance, he may be entitled, upon reasonable notice, to require the other party to comply with the original mode of performance, unless in the meantime circumstances have so changed as to render it impossible or inequitable so to do. He cannot treat the waiver as entirely without effect.” Chitty on Contracts, 13^th ed, para. 22-042.

50.In Panoutsos v. Raymond Hadley Corporation of New York [1917] 2 KB 473, a contract was made in September for the sale and shipment of flour to Greece not later than November 7.  It  provided that each shipment shall be deemed a separate contract and that payment should be “by confirmed bankers’ credit.  The buyer opened a bankers’ credit which was not confirmed.  The seller, with notice of that fact, made several shipments in October and received payment therefor by means of the credit and also obtained from the buyer an extension of time to 30 November for shipment of the balance of the goods.  On November 25, the seller cancelled the contract as to shipment of the balance, without any previous notice, upon the ground that the credit was not in accordance with the contract.  Viscount Reading CJ held that,

“It is open to a party to a contract to waive a condition which is inserted for his benefit. If the sellers chose to ship without the safeguard of a confirmed bankers’ credit, they were entitled to do so, and the buyer performed his part of the contract by paying for the goods shipped, though there was no confirmed bankers’ credit, inasmuch as that condition had been waived. If at a later stage the sellers wished to avail themselves of the condition precedent, in my opinion there was nothing in the facts to prevent them from demanding the performance of the condition if they had given reasonable notice to the buyer that they would not ship unless there was a confirmed bankers’ credit. If they had done that and the buyer had failed to comply with the condition, the buyer would have been in default, and the sellers would have been entitled to cancel the contract without being subject to any claim by the buyer for damages.”

51.By the 2 Emails, the plaintiff gave notice to the defendant about the proposed reversion to CAD.   Even when the defendant resolutely decided not to take further deliveries and returned original documents, the plaintiff still tried to persuade her to take delivery by email dated 22 March.  On that day, an attached list (“the list”) to the email showed that one shipment (no. 3786) had arrived on 18 March.  The next earliest shipments were expected to arrive on 26/27 March.  That would still give the defendant reasonable time to arrange payment.  There were no circumstances making it impossible or inequitable so to do.

52.Ms Chow said that with regard to order no. 3786, the plaintiff’s telex release on 21 March was too late.  The defendant needed documents for the export licence and health declaration and would incur demurrage charge.  Even so, the defendant could at best only show that the plaintiff’s breach was in respect of one order.  That would not entitle her to reject delivery of the rest of about 30 orders (according to the list).

53.I find that the plaintiff was not in repudiation of the orders on 17 March 2006.  By not taking delivery and returning (non-title) documents to the plaintiff, the defendant evinced an intention to repudiate.

54.The plaintiff refused to accept the repudiation of the defendant.  On 17 March 2006, Mr Koshelowsky replied, “As explained, we are holding B/Ls as a bank requirement and will release upon arrival of container.  I am confused by your email below.  Does this mean you are walking away on contracts?”  So the orders continued in existence.

55.On 21 March, 2006, the plaintiff telex released order no. 3786 even though no payment was received.  Ms Chow reiterated that following her email to Mr Koshelowsky on 17 March, all the original documents that did not come with OBLs have been returned.

56.On 22 March 2006, Mr Koshelowsky gave Ms Chow a list of outstanding order.  He urged Ms Chow to reconsider walking away from them – especially those that were on the water.  The list showed orders with “documents sent, awaiting instruction for release – all shipment accepted by [Ms Chow] on email”, those on water and those unshipped.

57.On 3 April 2006, Mr Calway alleged being informed that it was due to fluctuations in the market that Ms Chow did not honour her commitment.  He threatened legal action, advertising Ms Chow’s “change of heart” and ruining the business reputation of the defendant.

58.On 5 April 2006, Mr Calway informed the defendant that 4 FCLs were arriving on 20 April and they were willing to delay shipment of the remaining 8 FCLs for April/beginning May.  For those not yet shipped, the plaintiff was willing to delay shipment until April/May.  The defendant refused, repeating that it was the plaintiff who was first in breach.

59.On 10 April 2006, the plaintiff purportedly accepted the defendant’s repudiation.

60.The plaintiff alleges that the reason for the defendant’s repudiation was the falling market.  The undelivered goods amounted to US$1,175,000.  Although she might have already contracted to sell to the customers, her exposure to the loss as a result of a falling market was much greater than the HK$150 per ton profit that she could make.  However, this allegation of a falling market was not supported by objective evidence.  The letter from Mr Calway dated 3 April 2006 was inflammatory, unnecessary and unsubstantiated.  I will not rely on this allegation to base my findings.

61.I find that the defendant genuinely believed that the plaintiff had unilaterally changed the payment terms in the middle of the order when the plaintiff gave reasonable notice to revert to the contractual CAD term.  The defendant failed to comply and was in repudiation.

62.The plaintiff had shown itself ready, willing and able to complete its side of the contract and had done as far as possible without the concurrence of the other party.   It was even willing to defer delivery.  The defendant resolutely refused to come to terms.  The plaintiff was entitled to accept the repudiation on 10 April 2006. 

DAMAGES TO THE PLAINTIFF

63.The plaintiff is entitled to damages because the defendant wrongfully refuses to accept the goods: section 52 Sale of Goods Ordinance, Cap. 26.

64.In mitigation the plaintiff had resold some goods at salvage price and cancelled some unshipped orders with its new buyer.  The plaintiff also cancelled the rest of the defendant’s outstanding orders with its suppliers to mitigate its loss but does not claim such loss against the defendant.  The computation of damages in the sum of US$162,928.01 is not disputed by the defendant. 

DAMAGES TO THE DEFENDANT

65.For completeness’ sake, I have considered the position of the defendant in case my findings on liability were wrong.  Mr Hung’s comments on the defendant’s alleged loss of profit of HK$176,925 were twofold :

(a)     That there was no mitigation;

(b)     That it was doubtful if the defendant had compensated its own customers.

66.Mr Hung submits that the plaintiff had offered to delay shipment of the goods but Ms Chow had refused to take up this offer.  It amounted to failure to mitigate, so he submits.  However, I agree with Ms Chow that if the parties could not agree on the then fundamental issue, i.e. whether there should be payment first before delivery, there was no point in talking about any mitigation of loss.  Refusal to accept Mr Calway’s terms was not in itself failure to mitigate.

67.As to the loss suffered by the defendant, evidence of payment of compensation to those customers, how it was paid, complaint letters from them, explanation letters/conversations from Ms Chow were all missing.  The defendant simply failed to discharge the burden of proof.

CONCLUSION

68.The true meaning of CAD was payment before release of title documents.  Ms Chow failed to establish the Oral Agreement.  No term could be implied as to deferred payment.  However, on the plaintiff’s own admission, it had consented to telex release before payment.  Payment could be before, on the same day or a few days after release of documents or goods depending on whether there were intervening weekends or public holidays.  There was no oral agreement to trade on open account term.  The time for payment was as stated in paragraphs 13 and 21.  The defendant had been in breach for being constantly late in payment within the OBL period.  The plaintiff unilaterally insisted upon payment before telex release, but reasonable notice had been given to the defendant about the change.  At best, the defendant could only show that the plaintiff did not give reasonable notice with regard to one order (no. 3786) out of over 30 but that was not sufficient to constitute repudiation by the plaintiff. The defendant refused to take delivery and was in repudiatory breach, which the plaintiff accepted on 10 April 2006.

69.There shall be judgment to the plaintiff in the sum of US$162,928.01 or its Hong Kong dollar equivalent at the time of payment.  The counterclaim is dismissed.

70.I order nisi that :

(i)      There be interest on the judgment sum at judgment rate from the date of the writ to the date of payment;

(ii)     Costs of the action be to the plaintiff to be taxed if not agreed.

71.I thank counsel for their thorough preparation and assistance to the Court.

Mr Andy Hung, instructed by Messrs Leung & Wan, for the plaintiff

Mr Anthony Chan, instructed by Messrs Michael Cheuk, Wong & Kee, for the defendant