Cheung Tak Co (A Firm) v. Combined Trading Export (H.K.) Ltd
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IN THE SUPREME COURT OF HONG KONG (ORIGINAL JURISDICTION) ACTION NO. 154 OF 1972 __________________
Coram: Briggs, J. in Court ______________ J U D G M E N T ______________ 1. In the statement of claim in this action the plaintiff claims the sum of $66,576 and costs. In Order 14 proceedings on February 29, 1972 judgment was signed in favour of the plaintiff for $16,576. This was a consent order. The defendants admitted that they owed the plaintiff $66,576 but claimed to set off against that sum a total of $47,741.30. 2. The defendants is a firm which exports garments chiefly to the United Kingdom. Their mode of business is this: they receive an order from abroad for the supply of so many garments. They then purchase material in Hong Kong, deliver it to a manufacturer who makes the garments up. The garments are then shipped. 3. In June 1971 a firm called Norman Garments, who are not a party to these proceedings, agreed with the defendants to manufacture 510 ½ dozen shirts. The material for the shirts was provided from another source by the defendants and it is not in dispute that the shirts when made, were the property of the defendants. The defendants owed Norman Garments $14,650 for the making up of the shirts. The contract stipulated that the shirts were to be delivered to the defendants before the last day of July, 1971. 4. At the material time, Norman Garments owed a considerable sum to the plaintiffs. They still do. 5. A written agreement was reached between Norman Garments and the plaintiff that Norman Garments would pledge the defendants’ shirts with the plaintiff and that the plaintiff would collect from the defendants the $14,650 which was owed to Norman Garments by the defendants. The plaintiff could then release the shirts to the defendants. The shirts have been and still are warehoused by the plaintiff. 6. It was conceded during the hearing that this transaction did not pass a good title to the shirts to the plaintiff. The transaction was not made with the approval or knowledge of the defendants, the owner of the shirts. 7. The defendants claim therefore that they have suffered damage from the wrongful pledge of their shirts. This I will call the first claim. The defendants also claim to set off two sums under two separate contracts: (1) for $2,700 for a 10% wastage of material supplied to the defendants by the plaintiff under a contract dated October 22,1971; and (2) for $3,544.30 which was paid by the defendants to replace certain faulty material supplied to the defendants by the plaintiff under a contract dated December 4,1971. I will call these the second and third claim respectively. 8. The first claim is made up of the following sums –
9. Immediately the question of the mitigation of damage arises. The contract with Norman Garments was to have been completed by July 31, 1971. The defendants’ evidence was that this was not the case and that the shirts were not ready until September 1 by which time they had not got a quota so as to be able to ship them. Mr. Jorry, a director of the defendant company, said that the shirts bear a trade name registered in England, this also appears on the bags in which they are packed. The shirts are of two types, one with button down collars and one which is made of gingham checks. They were designed for the fashions of last summer and would only be marketable now if the owners of the trade name give permission and if they were suitable goods for next summer’s wear. As to this there was no evidence. Mr. Jorry said in effect that the shirts are of no use to him at present. They have been warehoused for more than a year. And if they were to be sold without the permission of the London owners of the trade name each shirt would have to have its name tab replaced and to be repacked afresh. 10. The Plaintiff called one SIU Yu who at the relevant time was a director of Norman Garments, and employed by them as a supervisor of a factory. He stated that Norman Garments completed the contracts of the defendants by July 15, 1971. The defendants, he said refused to take delivery because they were unable to obtain a quota at that time. They were frequently pressed to take delivery but refused. In October Norman Garments put the shirts into storage in a godown. 11. There is, therefore, a discrepancy between the evidence for the defendants and the evidence for the plaintiff as to the date when the garments were ready for delivery to the defendants. Mr. Jorry suggested that there was no storage space at Norman Garments. The shirts were not warehoused until October, and he asked me to draw the inference that this showed that the garments were only ready in September. 12. I regard SIU Yu as an independent witness and he gave his evidence readily and without exaggeration. I accept that there was very little storage space at Norman Garments. SIU Yu agreed with this. But at that time that firm was running down. It finally ceased to manufacture early in November. The defendants’ profits on the sale of shirts to their foreign customer was very small. If a quota had to be purchased, especially if it were expensive, the contract with their U.K. purchasers would not have been profitable. 13. Time was not expressed to be of the essence of the contract between Norman Garments and the defendants. The goods were to be ready by the end of July. The defendants did not accept delivery of the goods, but I think they should have done so before the goods were placed in a godown. 14. Part of the first claim is an element representing loss of profits to the defendants. The sum is $24,360. I do not think that the defendants are entitled to that sum in the circumstances. I agree with counsel for the plaintiff here. 15. However, I think that the defendants are entitled to the value of the materials used etc. and for the manufacturing charges. Mr. Jorry gave evidence as to this. And that evidence was to some extent backed up by documentary evidence. Though in some parts the evidence of Mr. Jorry was a little vague, in the main it was unchallenged and I think it is safe to accept it on the balance of probabilities. And I will award, therefore, the sum claimed which is $24,411. In addition the defendants are entitled in the sum still owed to Norman Garments. The total comes to $39,061. 16. The second claim of the defendants concerns a contract dated October 22, 1971. Material was supplied by the plaintiff for this contract and some 10% of it was found to be defective. It had been badly dyed. Miss Khoo, an independent witness from the firm which made up the articles under the contract, said that the badly dyed material was replaced. This was at the expense of the defendants. The fact that she said that a 5% wastage was acceptable to her firm is immaterial. For the defendants have to pay for that wastage. I will award the sum claimed namely $2,700 here. This is admittedly an approximate amount. 17. The third and last claim is in respect of a contract dated December 4, 1971. The plaintiff supplied certain material under this contract which was found to be faulty and which had to be replaced by the defendants. Mr. Jorry’s evidence as to this was not challenged and I accept it. I will award the sum claimed under the head, which was included in the Defence and Counterclaim by amendment i.e. $3,544.30. 18. The total therefore comes to $45,305.30. It is this sum which must be set off against the $50,000 owed by the defendants to the plaintiff. There will be judgement for the plaintiff for $4,694.70. 19. The plaintiff is to have the costs of the action including the Order 14 proceedings up to March 1 1972. There will be a certificate for counsel for the Order 14 proceedings. The defendant is to have 60% of the costs of the action from March 1, 1972 until today. By consent the shirts which are in the possession of the plaintiff are to be disposed of by the plaintiff.
Caesar Wong (Stephen Lo & Co.) for the Plaintiff. Martin Lee (Deacons) for the Defendant. | |||||||||||||||||