Far East Hairgoods Mfg. Co Ltd v. Po Lee Hong Co (A Firm)

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 2387 OF 1971

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Coram: Briggs, J. in Court

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J U D G M E N T

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1.  The plaintiffs are a company engaged in the wig trade. The defendants are a firm which imports synthetic fibre from Japan. At the relevant period the defendants supplied the plaintiffs with fibre from which they manufactured wigs. The plaintiffs then sold the wigs to the defendants, who exported them, largely, I gather, to Japan. The plaintiffs’ claim is that between December 13th 1970 and May 4th 1971 they supplied the defendants with twelve separate consignments of wigs for which they have not been paid.

2.  The defendants admit that they have not paid for nine of such consignments. But they dispute the other three consignments for various reasons, which I will deal with fully later in this judgment.

3.  The defendants’ counterclaim for $29,825.14 for synthetic fibre, ordered by the plaintiffs on August 3rd 1970 of which they have failed to take delivery.

4.  These goods are now being stored at the expense of the defendants.

5.  In their reply the plaintiffs set out their defence to the allegations made by the defendants with regard to the three disputed consignments of wigs. The plaintiffs also say that the defendants have failed to deliver the consignment of synthetic fibre as ordered by the plaintiffs for which they state they have made part payment. They ask for the return of this, a sum of $8,760. There is also a claim for loss of expected profits, to an amount of $150,000 but this claim was withdrawn at the trial.

6.  Each side only called a single witness. The plaintiffs called Ip Wai, a director of the company. The defendants called Lau Mei Lau, a married woman described as the sole proprietress of the defendant firm. There was also exhibited an agreed bundle of documents including various invoices of the plaintiffs and defendants evidencing certain sales.

7.  I will first deal with the three consignments of wigs to the defendants about which the parties cannot agree.

8.  The parties first engaged in business together in 1970. Mr. Ip said the method of business was that the defendants could order individual consignments of wigs either in writing or by telephone and then the plaintiffs would manufacture the wigs in accordance with that order. When the goods were received the plaintiffs would be paid, less a commission.

9.  The first disputed consignment was a consignment dated December 8th 1970.

10.  Two invoices of the plaintiffs both dated December 8th 1970 were exhibited. One was for 50 wigs the other for 83 wigs. In both cases various types of wig were itemised. In one there are 4 items, 4 different types of wig: in the other 11 items and 14 different types of wig. The first four items of the invoice for 83 wigs duplicates the four items of the invoice for 50 wigs.

11.  The plaintiffs’ case is that there were two different transactions, one for 50 and the other for 83 wigs, and the plaintiffs have not been paid for either consignment.

12.  Mr. Ip said that on December 8th 1970 the plaintiffs delivered 50 wigs to the defendants. A second delivery of 83 wigs was made at a later fate. However the invoices for the two orders were both made out for the same date, December 8th1970. The second consignment was the one for 83 wigs. Mr. Ip said he would not charge for those 33 wigs, he would only charge for the 50 which were accepted.

13.  Mr. Ip said that when he delivered goods to the defendants he would take two copies of his invoices. The original would be left with the defendants and he would retain the copy. The defendants would sign the copy which was retained by him, Mr. Ip. And he produced two copies of his invoices each of which was signed by the defendants’ manager, who is the husband of the defendants. He was in court during the hearing but was not called as a witness.

14.  Mrs. Lau said that the two invoices dated December 8th 1970 refer to the same transaction. She said the defendants received 83 wigs and an invoice together. 33 of the 83 wigs were rejected because of their colour. The second invoice, that for 50 wigs was a replacement for the invoice for the 83 wigs after 33 wigs had been rejected: the two invoices referring to a single transaction, namely the sale and delivery of 50 wigs.

15.  I cannot accept the evidence of the defendants as to this. At first Mrs. Lau said she received the goods i.e. the consignment of 83 wigs: later she said that her foci received them. At first she said that she thought the 33 rejected wigs were returned to the plaintiffs later that she was sure of this. The witness agreed that both invoices were signed by her husband but said that this did not mean that the goods has been received. But what else could it have meant? That, surely, was the sole reason for the signature. Such a signature would not prevent a subsequent rejection of part of the goods. And having signed one invoice what was the purpose of signing a further invoice unless it was accompanied by a further consignment of goods. The defendants’ evidence was that the rejection of 33 wigs was made not at the time of delivery but at a later date.

16.  I am therefore of the opinion that they were two separate consignments each of which resulted in the delivery of 50 wigs to the defendants. These have not been paid for. However, I do not think that the defendants need pay for the 33 rejected wigs. There is some doubt in my mind whether they were taken back by the plaintiffs or not. Mr. Ip said that they were not. However, Mr. Ip in his evidence clearly said that he told the defendants that he would make no charge for the rejected wigs.

17.  The second consignment about which there is a dispute is a consignment of men’s wigs on December 27th 1970. The invoice for this consignment is receipted as having been paid by the defendants on December 30th. Mr. Ip says that this is a mistake. That payment refers to a previous consignment of a duplicate number of men’s wigs which were delivered, with an invoice on December 7th 1970. The consignment of December 27th has not been paid for.

18.  An invoice dated December 7th 1970 was exhibited which has been chopped by the defendants. It also bears an entry in Chinese recording its payment on December 30th 1970 together with the numbers of the two checks of the defendants by which payment was made. This inscription was put on it by Mr. Ip when he found out that he had receipted the wig invoice. This inscription therefore does not assist in reaching a decision whether there were two sales or only one.

19.  The position so far as the plaintiffs are concerned is that there were two similar consignments: one on the 7th, the other on the 27th December 1970. They received payment for the first but accidentally receipted the invoice for the second, for which they have not yet been paid.

20.  The defendants’ case is that there was only one consignment. Mrs. Lau said that the second invoice dated December 27th 1970 replaced the invoice dated December 7th 1970. There was only one transaction, that of December 7th 1970. The plaintiffs said they has lost the invoice for December 7th and so replaced it with the second invoice.

21.  But if that were so, both invoices would bear the same date. The second invoice does not bear the same fate as the first. And even if the first had been lost, it need not have been replaced, for the goods had been delivered and there would be the original of the invoice with the defendants. Again I cannot accept the version of the defendants. I find that there were two sales, one dated the 7th and the other the 27th of December 1970.

22.  The third consignment is dispute is dated April 3rd 1971. This was a consignment of 1,000 wigs. Delivery was made on April 3rd 1971. The plaintiffs needed the money and so Mr. Ip went to the defendants and requested payment. He then agreed that if the defendants customer returned the goods, he, Mr. Ip representing the plaintiffs, would be responsible. And the invoice was endorsed with this statement in Chinese. The defendants therefore paid the plaintiffs. I understand that the agreement was that upon the customer of the defendants rejecting and returning any part of the consignment the plaintiffs would reimburse the defendants for any loss incurred by them.

23.  No goods were returned. There was a further consignment to the defendants on May 4th 1971. This has not been paid for. The plaintiffs’ case is that this order was not a replacement of part of the consignment of April 3rd 1971. It was a new order.

24.  The defendants agree that they have not paid for the consignment dated May 4th 1971. But their case is that they are not liable. For it is their case that this second consignment, dated May 4th 1971, was a replacement of part of the consignment of April 3rd 1971.

25.  Mrs. Lau said that she complained to the plaintiffs that a considerable quantity of the goods delivered on April 3rd 1971 were not up to standard.

26.  The goods were shipped to the customer of the defendants who complained also. The complaint was as to 320 wigs. The customer did not returned ant wigs to the defendants. I was told that the reason was that the customer has paid import duty on them in Japan. The relevance of this I am unable to assess.

27.  Mrs. Lau said in consequence she received a consignment of 320 wigs from the plaintiffs to replace those rejected by the plaintiffs. This is the consignment dated May 4th 1971.

28.  Mrs. Lau agreed that her customer had not returned any wigs: and that she is in consequence has returned no wigs to the plaintiffs. The 320 wigs she said were a replacement for the poor quality of the wigs first delivered. But that she herself has suffered no loss.

29.  I totally reject the defendants’ version of this transaction. And I accept the evidence of Mr. Ip that the consignment dated May 4th 1971 was a new consignment and not a replacement of part of the consignment of April 3rd 1971.

30.  The two invoices have been exhibited and a glance at them shows that they refer to two quite different transactions. For example the second consignment refers to 100 wigs of colour No.2. The first to only 30 wigs of that colour. It is unnecessary to go into further detail, the invoices speak for themselves. And in any event there was nothing to replace since no wigs had been returned and the defendants agreed that no loss had been incurred.

31.  I now come to counterclaim of the defendants. The parties made an agreement on April 4th 1970 under which the defendants were to supply the plaintiffs with synthetic hair from Japan. The agreement covered a year, i.e. from May 1970-April 1971. The contract provides that the defendants shall deliver between 1,500 kilos per month to 3,000 kilos per month. On several occasions the defendants delivered certain quantities of fibre to the plaintiffs, but the provisions of the contract were not complied with. For example the contract contains definite provisions as to payment: the plaintiffs were to open a letter of credit monthly in favour of the defendants. That this was not done is admitted by both parties. The parties seem to have ignored the contract’s terms. When the plaintiffs required a quantity of fibre, they ordered it directly from the defendants and the defendants supplied the order and were paid. But it was the defendants who provided the credit facilities. So I do not think that we need consider the term of contract when we consider the single transaction about which the parties are in disagreement.

32.  This is an agreement made on August 3rd 1970. On that date the plaintiffs placed an order with the defendants for the supply of 1,000 kilogram of synthetic fibre. They paid a deposit of $8,760. It does not look to me as if that order was made under the written contract which specifies quantities of $1,500-$3,000 per month. Be that as it may both parties are agreed that 1,000 kilos of synthetic hair were ordered on that date.

33.  Mr. Ip says that he has received nothing under the contract of August 3rd. Though he expected delivery of the goods in September 1970, he said he was never advised of the arrival of any goods in Hong Kong and no goods have been delivered to him up till now.

34.  He said that on September 24th 1970 as a result of two other orders be placed with the defendants he received and paid for no less than 2,330 kilograms of fibre. He had also received and paid for a consignment of 1,400 kilos in August. The point of their delivers is that it is Mr. Ip’s evidence that at that time, in August and September 1970 the plaintiffs wanted synthetic fibre, and could not get enough. If Mr. Ip said, anything had been delivered to his company under the disputed order of August 3rd he would have willingly accepted and paid for it.

35.  The plaintiffs said that the method of delivery was that the defendants cleared the goods and delivered them to him.

36.  In his reply the plaintiffs said that on June 30th 1971 they received from the defendants two delivery orders from a godown concerning two consignments of fibre, one dated 31st May 1971 for 355 kilos and the other dated 22nd October 1970 for 360 kilos. No questions were put to Mr. Ip about those documents. But the two documents are included in the agreed bundle. It appears from other documents in the agreed bundle and from the evidence of Mrs. Lau that one consignment of 355 kilos arrived in Hong Kong from Japan on September 18th and was stored on September 22nd, and that another consignment arrived later and was stored on October 16th. The two shipments total 715 kilos.

37.  The defendants say that this was purchased by them so that they could satisfy the order for 1,000 kilos placed with them by the plaintiffs on August 3rd 1970. They further state that when each of the two consignments arrived they notified the plaintiffs of that fact and requested that they should take delivery. The plaintiffs asked for time but have in fact never taken delivery. The goods in question are still deposited in a godown under the name of, and at the expense of the defendants.

38.  Mrs. Lau said that the usual method of delivery was this. The plaintiffs would be told of the arrival of the goods. The plaintiffs would pay the defendants who would reimburse the Bank at which the defendants had opened a letter of credit to finance the transaction. Then the godown warrant would be handed to the plaintiffs who would collect the goods.

39.  The defendants said that so far as each of the two consignments were concerned an invoice was sent to the plaintiffs on each occasion, one on September 22nd and the other on October 17th. These were exhibited. Neither is chopped by the plaintiffs and Mr. Ip said his company had never received them.

40.  When the order was placed in August 1970, the defendants admitted that they had other customers for such goods. It was not until later that the wigs trade declined.

41.  The parties both agree that on September 24th 1970 the plaintiffs received a very large consignment of fibre from the defendants. No less than 2,330 kilos. There were two separate contracts and the plaintiffs paid for them upon delivery of the goods.

42.  The defendants said that the reason why the plaintiffs accepted the 2,330 kilos of fibre but would not accept the 715 kilos, was because the former was of several different colours. However I do not think there is anything in this since the documents clearly show that one of the disputed consignments consisted of hair of at least four colours.

43.  The position therefore is that according to the defendants the plaintiffs refused delivery of a mere 355 kilos of hair on September 22nd but accepted a consignment of 2,330 kilos on September 24th. And again he refused a further consignment in October.

44.  I am not satisfied that two consignments totally 715 kilos were imported to honour the plaintiffs’ order of August 3rd 1970. Nor that they were appropriated to that contract or order. Mr. Ip said he would have accepted the 715 kilos though it was a quantity below that for which he had contracted. So the fact that there was an insufficiency of goods to satisfy the contract need not detain us. But I am not satisfied that the plaintiffs were made aware that the subject matter of those consignments were available to satisfy his order of that date. I do not think that they refused to accept delivery. The defendants’ counterclaim therefore fails.

45.  There is no question of fraud in this case. But there is evidence of very considerable carelessness in the business relationship between the parties. It seems to have taken a very severe regression in the wigs trade for the true position to become known. I was also handicapped by lack of evidence on both sides.

46.  There will be judgment for the plaintiffs for $38,120.86 on the claim and for $8,760 on the plaintiffs’ counterclaim to the counterclaim of the defendants, making a total of $46,880.86 with costs.

47.  The counterclaim of the defendants is dismissed with costs.

48.  The claim in this case is stated in United States Dollars. This is wrong and can lead to difficulties and confusion. Claims made for money in Hong Kong should always be stated in Hong Kong currency.

Wesley Wong (Chan & Ho) for Plaintiff.

Caesar Wong (Deacons) for Defendant.