Welltus Ltd v. Fornton Knitting Co Ltd

CACV 268/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 268 OF 2011

(ON APPEAL FROM HCA NO. 349 OF 2007)

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JUDGMENT

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Hon Cheung CJHC:

1.I will presently ask Lam JA to give the judgment of the court.

2.This litigation, rather unfortunately, serves as an illustration of the importance of delivering judgment without undue delay and of the duty to give adequate reasons.  In the court’s judgment that Lam JA is going to give, a number of authorities, both local and overseas, on these matters will be referred to.  

3.It is necessary to state, emphatically, the following.  First, all judgments should be delivered within a reasonable time. Whilst reasons for late judgments vary, every effort should be made to avoid inordinate and therefore unacceptable delay.

4.Secondly, a judge must give adequate reasons for his decision.  It is self‑evident that the longer a judge delays in giving judgment, the greater the chances of his not recollecting fully the arguments or evidence, and thus of his failing to give adequate reasons.

5.This case, unfortunately, illustrates a third point also.  The amounts in dispute are, relatively speaking, moderate.  Yet, the costs that have been incurred, and (given our decision today) the costs that are still to be incurred, are and will be wholly disproportionate to the amounts at stake.  The case, even at this late stage, cries out for a sensible resolution by alternative means.  Despite the achievements of the Civil Justice Reform, full-blown litigation in the superior courts remains inevitably expensive.  Affordability aside, equally if not more important than the actual amount of costs is the consideration of proportionality, that is, that the amount of costs (and thus time and efforts) to be expended on a case should bear a rational and reasonable proportion to the amount or other interests at stake.  Cf Order 1A, rule 1(c), the Rules of the High Court (Cap 4A). This case serves as a timely reminder of the many cogent reasons why alternative dispute resolution should be seriously explored in every, and every potential, civil litigation.

Hon Lam JA (giving the Judgment of the Court) :

6.This is a sale of goods dispute in which the Plaintiff agreed to sell to the Defendant some yarn for the latter’s knitwear manufacturing business.  After a trial which lasted for 12 days, the Deputy Judge [“the Judge”] granted judgment in favour of the Defendant in respect of the counterclaim in the sum of $786,284.23 and dismissed the Plaintiff’s claim. The Judge found that the yarn supplied by the Plaintiff was not in accordance with the samples shown to the Defendant before orders were placed and that the yarn delivered was unmerchantable and unfit for its purpose.  He found that due to its propensity to burst during knitting, the yarn of the Plaintiff was “unknittable”. The Plaintiff appeals against this judgment.

7.The Judge gave an account of the course of dealings between the parties at paras 10 to 40 of his judgment.  We do not propose to repeat that account in this judgment.  In view of our conclusions below, unless parties can settle their disputes by other means, the matter will have to be re-tried by another judge.

8.In coming to his findings, the Judge primarily acted on the evidence of the Defendant’s expert Dr Au (whose evidence he preferred to that of the Plaintiff’s expert) and the factual evidence of a defence witness Rita Law (whose evidence he preferred to the evidence of the Plaintiff’s witness Wayson Choy).  Based on the evidence of Dr Au, which was also supported by the evidence of Chow King Ming a principal of a knitting factory which did sub-contract works for the Defendant, the Judge concluded that the yarn supplied by the Plaintiff was not up to standard and not in accordance with the samples.  Based on the evidence of Rita Law, the Judge rejected the Plaintiff’s case that the Defendant was aware of the problems of the yarn before orders were placed. Also based on her evidence, the Judge found that the Defendant had established its counterclaim.

9.The grounds relied upon by the Plaintiff can be considered under the following heads,

(a) The Judge failed to consider the Plaintiff’s case as to acceptance of the yarn;

(b) The Judge should not have accepted the evidence of Dr Au;

(c) The Judge did not give reasons for preferring the evidence of Rita Law to that of Wayson Choy;

(d) The Judge should not have accepted the evidence of Rita Law on the counterclaim which was not supported by any primary documentary evidence; and

(e) The delay in the Judge in delivering the judgment had affected the Judge’s assessment of the evidence and there were errors in the judgment rendering it unsafe.

Delay in the delivery of judgment

10.As regards the question of delay, the evidence of the trial was completed on 16 November 2010 and the last set of written closing submissions was filed on 31 December 2010.  The judgment was handed down by the Judge on 16 November 2011.  There was a lapse of 10 months and 16 days between the date of last submissions and the handing down of judgment.

11.The importance of giving judgment promptly has recently been highlighted in several authorities in Hong Kong: Yeung May Wan v HKSAR [2005] 8 HKCFAR 137 paras 116 to 125; Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corporation [2007] 3 HKLRD 439 at paras 3 to 7; Mak Kang Hoi v Ho Yuk Wah [2007] 10 HKCFAR 552 at paras 56 to 66.  In Yeung May Wan, the majority of the Court of Final Appeal said at para 124 (with the agreement of Bokhary PJ on this issue as well, see para 166),

“… it must be clearly and firmly reiterated that judges at all levels of court have a duty to give judgments within a reasonable time after the conclusion of the hearing. This is important not only for ensuring that justice is done to the parties but also for the maintenance of public confidence in the Judiciary and the judicial system.”

12.In Mak Kang Hoi paras 57 to 59, Mortimer NPJ set out what an appellant court must be satisfied before acceding to a request to set aside a judgment on the ground of delay,

“57. First, it is necessary to note that even delay of this length cannot alone succeed as a ground of appeal in the absence of it being shown that there are omissions, errors, misunderstandings, inconsistencies and the like which invalidate the Recorder’s findings, render the judgment unsafe, and have led to injustice to the Appellant.

58. Delay of this nature therefore increases the burden on an appellate court. Necessarily it must be vigilant to ensure that the decision and reasoning have not been harmed in any significant or fatal way by the passage of time. Counsel’s submissions and the evidence require detailed examination.

59. On the other hand, much as an appellate court may deplore delay of the length here shown, to overturn an otherwise sound judgment simply on delay would amount to a greater injustice than the delay itself.”

13.In short, there must be grounds for believing that the judgment contains errors that are probably, or possibly, attributable to the delay.

14.In that case, the Court of Final Appeal agreed with the Court of Appeal that a judgment delivered 30 months after the conclusion of the trial should not be set aside because, as observed by Rogers VP in the Court of Appeal, “the judgment itself demonstrates that far from the judge not recollecting the events and issues at the trial, her concise and precise reasoning demonstrates that she was fully aware of all the facts and matters and, indeed, the events of the trial”.

15.In contrast, in Esquire, the Court of Appeal set aside a judgment delivered 16 months after the end of the trial where “there are areas which clearly lead to the conclusion that the judge must have forgotten important conclusions to which he had arrived in the course of the hearing the case” and “the lapses in this case … are almost certainly attributable to the delay in the preparation of the judgment having led the judge to forget important factors and the conclusions to which he arrived as a result of them”. That was a trial which lasted for 24 days.

16.Thus, it is not the mere lapse of time which gives rise to a ground of appeal.  There has to be grounds for believing that the judgment is unsafe on account of errors attributable to the delay.  In many instances whether such grounds exist will depend on the adequacy and cogency of reasons set out in the judgment.

17.In the present case, though the judgment was delivered out of the time scale which one would normally expect a judgment to be delivered, the delay is not so long that one can readily conclude that the Judge had forgotten important evidence or other events at the trial.  Much depends on what the Judge said in the judgment. If the judgment has adequately dealt with the issues raised, both on facts and law, and reviewed comprehensively the evidence canvassed at the trial, the appeal cannot succeed on the ground of delay.  However, if the judgment is demonstrably flawed in some respects, it would lend force to the Appellant’s submission that the Judge had forgotten some important aspects of the trial and the judgment is therefore unsafe.

18.I shall now turn to examine whether there are demonstrable flaws in the judgment and whether such flaws were attributable to the delay. And these questions must be considered in light of the duty on the Judge to give adequate reasons for his judgment.

The duty to give adequate reasons

19.In Oriental Daily Publisher Ltd v Commissioner for Television and Entertainment Licensing Authority [1997-98] 1 HKCFAR 279, Chief Justice Li explained the duty to give adequate reasons.  Two propositions set out in His Lordship’s judgment at p.291 are pertinent for present purposes,

“First, the reasons given should show that the tribunal has addressed the substantial issues before it and show why the tribunal has come to its decision. There may not be any need however to address every single issue. But the reasons should show that the issues that arise for serious consideration have been considered. …

Thirdly, the reasons may not require great elaboration and they may be brief. It is only when they are defective in substance that they should be considered inadequate. Ultimately, what are adequate reasons in the circumstances of a particular case has to be approached sensibly.”

20.In Zhuo Cui Hao v Ting Fung Yee [1999] 3 HKC 634, Chan CJHC (as he then was) said at p.639,

“Generally speaking, a professional judge is under a duty to analyse in his judgment the material points in the evidence of the case and give reasons as to why he has reached a particular conclusion or decision. This is the only way to make people understand why their evidence is not accepted by the court and why they lose in a case. Only by this can justice be seen to be done. Furthermore, the losing party needs to be clear on whether there is any error in the reasons for the decision given by the court before he can decide whether to appeal or not, and, at a later stage, submit to the Court of Appeal his grounds of appeal in order to seek to set aside the original decision.”

21.In that case, the Court of Appeal set aside the judgment because the judge simply stated without any elaboration that the defendant was not a credible witness and that her evidence was not accepted.

22.What the English Court of Appeal  said in English v Emery [2002] 1 WLR 2409, at paras 16 to 21 with regard to adequacy of reasons given by a judge are equally applicable in Hong Kong and bears repetition,

“16. We would put the matter at its simplest by saying that justice will not be done if it is not apparent to the parties why one has won and the other has lost.  

17. As to the adequacy of reasons, as has been said many times, this depends on the nature of the case: see for example Flannery at page 382.  In the Eagil Trust case, Griffiths LJ stated that there was no duty on a Judge, in giving his reasons, to deal with every argument presented by Counsel in support of his case:

‘When dealing with an application in chambers to strike out for want of prosecution, a judge should give his reasons in sufficient detail to show the Court of Appeal the principles on which he has acted, and the reasons which led him to his decision. They need not be elaborate. I cannot stress too strongly that there is no duty on a judge in giving his reasons to deal with every argument presented by Counsel in support of his case. It is sufficient if what he says shows the parties, and if need be the Court of Appeal the basis on which he acted… (see Sachs LJ in Knight v Clifton [1971] 2 AER 378 at 392–393, [1971] Ch. 700 at 721).” (p.122).’

18. In our judgment, these observations of Griffiths LJ apply to judgments of all descriptions. But when considering the extent to which reasons should be given it is necessary to have regard to the practical requirements of our appellate system. A Judge cannot be said to have done his duty if it is only after permission to appeal has been given and the appeal has run its course that the court is able to conclude that the reasons for the decision are sufficiently apparent to enable the appeal court to uphold the judgment. An appeal is an expensive step in the judicial process and one that makes an exacting claim on judicial resources. For these reasons permission to appeal is now a nearly universal prerequisite to bringing an appeal. Permission to appeal will not normally be given unless the applicant can make out an arguable case that the Judge was wrong. If the judgment does not make it clear why the Judge has reached his decision, it may well be impossible within the summary procedure of an application for permission to appeal to form any view as to whether the Judge was right or wrong. In that event permission to appeal may be given simply because justice requires that the decision be subjected to the full scrutiny of an appeal.

19. It follows that, if the appellate process is to work satisfactorily, the judgment must enable the appellate court to understand why the Judge reached his decision. This does not mean that every factor which weighed with the Judge in his appraisal of the evidence has to be identified and explained. But the issues the resolution of which were vital to the Judge’s conclusion should be identified and the manner in which he resolved them explained. It is not possible to provide a template for this process. It need not involve a lengthy judgment. It does require the Judge to identify and record those matters which were critical to his decision. If the critical issue was one of fact, in may be enough to say that one witness was preferred to another because the one manifestly had a clearer recollection of the material facts or the other gave answers which demonstrated that his recollection could not be relied upon.

20. The first two appeals with which we are concerned involved conflicts of expert evidence. In Flannery Henry LJ quoted from the judgment of Bingham LJ in Eckersley v Binnie (1988) 18 Con L.R. 1 at 77-8 in which he said that ‘a coherent reasoned opinion expressed by a suitably qualified expert should be the subject of a coherent reasoned rebuttal’. This does not mean that the judgment should contain a passage which suggests that the Judge has applied the same, or even a superior, degree of expertise to that displayed by the witness. He should simply provide an explanation as to why he has accepted the evidence of one expert and rejected that of another. It may be that the evidence of one or the other accorded more satisfactorily with facts found by the Judge. It may be that the explanation of one was more inherently credible than that of the other. It may simply be that one was better qualified, or manifestly more objective, than the other. Whatever the explanation may be, it should be apparent from the judgment.

21. When giving reasons a Judge will often need to refer to a piece of evidence or to a submission which he has accepted or rejected. Provided that the reference is clear, it may be unnecessary to detail, or even summarise, the evidence or submission in question. The essential requirement is that the terms of the judgment should enable the parties and any appellate tribunal readily to analyse the reasoning that was essential to the Judge’s decision. ”

23.At para 26, the English Court of Appeal also laid down the approach an appellate court would adopt in dealing with a challenge based on inadequacy of reasons,

“Where permission is granted to appeal on the grounds that the judgment does not contain adequate reasons, the appellate court should first review the judgment, in the context of the material evidence and submissions at the trial, in order to determine whether, when all of these are considered, it is apparent why the Judge reached the decision that he did. If satisfied that the reason is apparent and that it is a valid basis for the judgment, the appeal will be dismissed. This was the approach adopted by this Court, in the light of Flannery in Ludlow v National Power PLC 17 November 2000 (unreported). If despite this exercise the reason for the decision is not apparent, then the appeal court will have to decide whether itself to proceed to a rehearing, or to direct a new trial.”

24.We cite this judgment at some length because we are of the view that the same approach should be adopted in Hong Kong.  In the present appeal, it is necessary to identify the following matters in respect of each issue which the Plaintiff said the Judge failed to give adequate consideration,

(a) the competing submissions before the Judge;

(b) the relevant evidence (both documentary and oral) before the court on that issue; and

(c) the relevant parts of the judgment dealing with such competing submissions and evidence.

25.After identifying these materials, we have to read the judgment in the context of the evidence and submissions to see whether it is apparent why the Judge reached his decision on these issues.  If the reason is not apparent, we would have to consider whether the issues can be resolved by us.  But usually it is not the function of this court to hear oral evidence afresh. If there are substantial disputes on evidence which this court cannot resolve, the matter would have to be remitted for a re-trial.  

The acceptance issue

26.The Plaintiff had run a case of acceptance of 14,284.33 lbs of yarn delivered (identified in 13 invoices).  The unpaid prices of those invoices added up to $817,134.18.  The yarn had been utilized by the Defendant for production of garments. A plea of acceptance was made at paras 6 and 8 of the Statement of Claim and para 6(c) of the Re-amended Reply, and the contention was advanced by counsel for the Plaintiff in the written opening as well as closing submissions.

27.There was also evidence capable of supporting a case of acceptance before the Judge.  It was not disputed that the yarn had been utilized though there was a dispute about the quantity delivered.

28.Unfortunately, the Judge did not deal with this contention in his judgment.  He only dealt with the non-acceptance of yarn which were yet to be delivered at para 73 of the judgment.  That was in respect of another 4,659.64 lbs of yarn.

29.Since the Judge had not addressed the issue at all, it is not apparent to this court the reason for his wholesale rejection of the case of the Plaintiff on acceptance.

30.Regrettably, such omission is critical. If the goods had been accepted, the Defendant could no longer reject the same (and there does not appear to be any suggestion that the goods had been returned by way of rejection in respect of the 14,284.33 lbs).  The legal consequence is as follows: even if the yarn were defective, the Plaintiff would still have a valid claim for the price of the goods subject to a set-off arising from the damages that the Plaintiff might have to pay to the Defendant on account of such defects.

31.The Judge had awarded damages to the Defendant by way of the judgment on the Counterclaim. But he had failed to give the Plaintiff any credit for the unpaid price in respect of these 14,284.33 lbs of yarn. Actually, the total of the unpaid prices was higher than the damages awarded by the Judge.  In other words, if the case of acceptance is established, there should at least be judgment in favour of the Plaintiff for the balance as opposed to judgment for the Defendant.

32.Given that the plea of acceptance had been raised on the pleadings and the opening and closing submissions, the failure to deal with this critical issue is probably attributable to the delay in the preparation of the judgment.  

33.Though the Defendant disputed this ground in the skeleton submissions filed, at the hearing of the appeal Mr Shum (appearing on behalf of the Defendant together with Ms Wong) conceded this ground.  At the beginning of the appeal, counsel handed up a written calculation and conceded that after the set-off for damages on account of the Counterclaim, there shall be judgment in favour of the Plaintiff in the sum of $33,981.26 and the judgment in favour of the Defendant should be set aside.  That figure is arrived at as follows,

$817,134.18 (price under the 13 invoices) –

$783,152.92 (judgment on the counterclaim) = $33,981.26

The defects in the quality of the yarn: the evidence of Dr Au

34.The Judge relied mainly on the evidence of Dr Au to come to the conclusion that the yarn was defective.  He recited the evidence of the experts at length at paras 41 to 56 of the judgment.  These were evidence in their expert reports.  Then, without any reference to the evidence of the experts given orally at trial (and the challenges to their evidence by way of cross-examination), the Judge came to these conclusions at paras 57 to 59 of the judgment,

“57. There can be no doubt on the evidence that the yarn supplied by the Plaintiff was simply not up to the job.  The results, with very small exceptions, were disastrous, no buyer of yarn which is to be made up into garments of this type, jersey knit or the more elaborate pointelle knit would find this yarn suitable or acceptable. 

58. Of the two experts, I prefer Dr Au’s evidence. He appears to have studied the issues of quality, reasons for bursting, knittability and comparisons between sample and bulk in a much more considered and comprehensive way.

59. I find as a fact, based on his analysis, that the bulk yarn was in fact inferior to the sample which explains why the sample yarn appears not to have provided any sense of the impending disaster once the bulk arrived.  In this regard, I reject Dr Lo’s conclusion that any problem should have been picked up by the knitter when the samples were being tested. That may well have been so if sample and bulk were of equal quality which in my judgment was plainly not the case as Dr Au has found in the course of his investigations.”

35.Mr Mughal (appearing together with Mr Mak for the Plaintiff in this appeal) submitted that in the Judge’s evaluation of the expert evidence he had failed to have proper regard to: (i) the confirmation in the report of Intertek (a laboratory engaged by the Defendant) that the yarns supplied by the Plaintiff was natural and not “re-generated”; and (ii) that Dr Au did not make an “apple to apple” comparison when he expressed his opinion on the breaking elongation of the yarn.

36.The significance of these was put in the followings terms at paras 20 to 26 of the closing submissions of the Plaintiff’s counsel,

“20. Under actual knitting situation, Dr Au agreed that the yarn would break but not necessarily elongate to the maximum percentage stated in Appendix IV (b) of his report [XXN Dr Au on 24^th September 2010; Bundle 3/466].

21. Dr Au’s evidence is that the manufacturing process between bamboo and regenerated bamboo fibre (viscose rayon or rayon) is different, chemically they are the same but physically there are different parameters for the two materials. [XXN Dr Au; 24^th September 2010]

22. Dr Au maintained his view that the Internet information provided by a copy of statistics about re-generated bamboo [exhibit ”D2”] was relevant to compare with the Breaking Elongation of the bulk Yarn. Nevertheless, those figures quoted therein are stated clearly for re-generated bamboo fibre as “Bamboo fibre is a regenerative cellulose fibre”. [Exhibit “P3”]

23. During the cross-examination of Dr Au, the Plaintiff’s counsel endeavoured to point out that the bulk yarn supplied by the Plaintiff is natural bamboo fibre but not re-generated bamboo fibre. In the re-examination of Dr Au, no evidence has been adduced by the Defendant as to show that it was contrary.

24. It is important to note that the problem just remained unanswered as to why it is not an “apple to apple” comparison {i.e. 60% linen 40% bamboo (natural) bulk yarn vs. 100% bamboo (re-generative) and/or 70% bamboo (re-generative) 30% cotton}. In the light of substantially different constituent for comparison, Dr Au’s opinions should be rejected in its entirety; or that no weight should be attached thereto at least for this issue of Breaking Elongation.

25. On the contrary, Dr Lo’s expert evidence clearly gave a more credible explanation that the linen/bamboo yarn has low Breaking Elongation property since linen fibre is rigid as its inherent characteristic. This characteristic has been fixed by its constituent, which is linen and bamboo in this case. It is apparent that the recommended percentage of Breakage Elongation for Cotton (5.5% to 8.2%) is exclusive only for Cotton but not for linen/bamboo fibre. [Bundle 3/415; para 4].

26. On the other hand, it is also pertinent to note that the text for the Breaking Elongation by Dr Au was done on the bulk yarn only and no test was conducted on any sample yarn or replacement yarn so far.  No generic comparison test has been done for the properties of Breaking Elongation for linen/bamboo yarn by Dr Au.”

37.This is a substantial point which unfortunately the Judge did not address in his judgment.

38.Again, given that (i) the point had been raised in cross-examination and closing submissions; (ii) it being an important ground relied upon by the Plaintiff to challenge the evidence of Dr Au; and (iii) in the absence of any apparent and obvious answer to it in the other part of the evidence, the omission to deal with it is unsatisfactory and probably attributable to the delay in the preparation of the judgment.

39.Mr Mughal also advanced another attack on the evidence of Dr Au by reference to the inconsistency of CV% and Uniformity values of the replacement yarn as set out in the 2^nd Report by Intertek.  However, having regard to the answers given by Dr Au in the course of cross-examination (see Core Bundle p.221F and 225T), criterion (iii) above is not satisfied and we do not think much mileage can be gained by the Plaintiff on this point. Plainly, Dr Au did not simply rely on CV% and Uniformity values in coming to his conclusions.

40.Though the Judge had given a reason for preferring Dr Au’s evidence to those of Dr Lo at para 58, viewed against the competing submissions advanced before him in relation to their evidence, what he said in that paragraph cannot be adequate.  It is not apparent to this court the reason why the Judge rejected the criticism of the Plaintiff on Dr Au’s using an inapposite standard for comparison.  As pointed out by Mr Man in the appeal, Dr Lo had put that in issue in his expert report.  Though Dr Au said in his oral evidence that he was doubtful as to whether natural bamboo fibre was very different from regenerated bamboo fibre in their physical properties, he also told the court that he had not heard of “what is natural bamboo and regenerated bamboo” (Appeal Bundle 4, p.935D).

41.Mr Shum submitted that Dr Au had undertaken some knitting tests on the bulk yarns and relied on that in coming to his conclusions.  However, the Judge did not say that such test results by themselves were sufficient to support his conclusions even taking into account the oral evidence and cross-examination (and we were told that the oral evidence of the experts lasted for 6 days).  This is not an issue which this court could resolve by reference to the materials before us.

42.Although the Judge also referred to the evidence of Mr Chow to reinforce his conclusion on the defects, given the weight he placed on Dr Au’s evidence (and his rejection of Dr Lo’s evidence because of Dr Au’s evidence), it is not possible for us to say that even if one disregarded Dr Au’s evidence, the Judge would have come to the same conclusion.

The assumption of risk and the counterclaim: the evidence of Rita Law

43.The evidence of Rita Law, the defence witness, was the basis of the Judge’s rejection of the Plaintiff’s case that it had informed the Defendant as to the problems of the yarn and it was within the expertise of the Defendant (as opposed to the Plaintiff) to choose the right kind of yarn for the production of its garments.  Her evidence was also relied upon by the Judge in accepting the counterclaim.

44.On the first aspect, there were conflicting accounts in the evidence: one by Rita Law, the other one by Wayson Chow of the Plaintiff. The evidence of Wayson Chow was that the Plaintiff was only a trader in yarn and it could not decide for the Defendant whether this type of yarn was suitable for the production of the Defendant’s garment.  That should be the responsibility of the Defendant’s merchandising manager, Rita.  At a meeting on 3 October 2006, he had drawn the attention of Rita to the risk involved in knitting this particular type of linen/bamboo yarn with a 12-needle one ply knitting machine and warned her about the risk of bursting. Rita Law denied that such warning had been given. The Judge dealt with such conflict in one paragraph, para 72:

“Insofar as it may be necessary to resolve this, I also reject the evidence of Wayson that he had warned Rita that this yarn was problematic due to its make-up and probably unsuitable for what Rita required. I prefer Rita’s evidence that Wayson had made no such statement.”

45.Mr Mughal submitted that the Judge did not give any reason for preferring Rita Law’s version to that of Wayson Chow.  Counsel also referred to various instances during the course of trial which, counsel said, demonstrated that the Judge was critical of Rita Law’s evidence.  Counsel submitted that the Judge did not refer to such instances in the judgment and the inference was that he had forgotten about them due to the lapse of time between the end of the evidence and the preparation of the judgment.

46.The instances of critical comments Mr Mughal highlighted in his skeleton submissions are,

(a) Rita Law’s evidence in response to a question by counsel for the Plaintiff on whether the U.S. client of the Defendant was very demanding in colour standard;

(b) Rita Law’s evidence about the discrepancies in the description in an invoice for replacement yarn;

(c) The Judge’s remarks at the trial on Rita Law’s reference to the counterclaim as her counterclaim;

(d) Rita Law’s comment in her evidence on the Plaintiff’s invoice on soft treatment being “very weird”; and

(e) The Judge’s comment on Rita Law’s evidence as regards the 10% handling fee on the counterclaim.

47.We have examined those instances with care by reading the relevant parts of the transcript.  With respect, none of those instances fall within the kind of matters which one would normally expect any specific references to be made in the judgment.  To start with, in none of those instances can we discern any conclusions formed by the Judge as to the general credibility of Rita Law.  The remarks by the Judge on those occasions were clearly spontaneous and subject to further considerations. On some instances, the comments of the Judge were not even directed against the witness.  By way of example, on the remarks about the counterclaim, the Judge was clearly trying to clarify about the translation of her evidence and the interpreter duly clarified that the witness’ testimony used the expression “our counterclaim” as opposed to “my counterclaim”.  In that respect, we see nothing remarkable about the way she described the counterclaim.  After all she was giving evidence on behalf of the Defendant.

48.Hence, this is not a case like Esquire where the Court of Appeal was able to conclude that the trial judge had forgotten about important conclusions he had arrived at in the course of trial.  At para 5 of the judgment in that case, Rogers VP said,

“What a judge says in the course of argument cannot be taken to be his final view on a matter, but it is entirely different if a judge, in effect, stops counsel in the course of submissions on a particular point. He then might be said to be exercising a case management function. If a judge does stop counsel from addressing him on a particular point, although it cannot bind him irrevocably in respect of that point, the better course may be to give the party concerned an opportunity of addressing the court further should the judge, on reflection, form a different view.”

49.We are satisfied that in none of the instances relied upon by Mr Mughal did the Judge express any concluded views having the effect of stopping counsel from advancing any submissions.

50.With great respect, the remarks uttered by the Judge on some instances, on objective reflection, can even demonstrably be regarded as ill-advised.  For example, the Judge’s description of the 10% handling charges as disgraceful in his exchange with counsel for the Defendant is not called for.  It is not surprising at all that the Judge felt it right to correct himself in the manner he did at para 82 of the judgment,

“82. What I decline to award as an added amount is a “handling charge”, which is based on the amount of extra time taken by Rita in preparing and presenting the case through the considerable effort put in by her in putting together her second supplemental statement and Exhibit D14 which, I accept, must have been very hard and time-consuming work and which I have found, as I have already said, very helpful.  This “handling charge” is not a proper head of damage.  It forms a part of the preparation of the case.  What I can say is that some consideration might be given to this effort by the taxing master when deciding on the appropriate quantum of taxed costs to be awarded to the Defendant. Had this presentational work been done for the Defendant by its solicitors, these costs would almost certainly be allowed as part of the costs of preparing for the trial.  As I say it may well be that the Master will feel able to reflect this feature when taxing the Defendant’s costs.”

51.Be that as it may, it remains that the Judge did not give any reason for preferring the evidence of Rita Law to that of Wayson Chow. Given the importance of their evidence in the trial, and given the submissions advanced by counsel for the Plaintiff in closing on credibility, and given that Wayson Chow’s evidence cannot be said to be so contradicted by any contemporaneous documents or undisputed facts or inherently incredible, it is not satisfactory for his evidence to be rejected in such manner.

52.The Judge apparently did not attach much significance on this factual dispute.  At paras 67 to 69 of the judgment, he said,

“67. Against the finding that sample and bulk did not correspond, as found by Dr Au and, that as a result the bulk was largely unknittable, I now need to determine where that finding leads to in terms of the pleaded issues.  The Plaintiff’s main point is that this was a sale by sample.  Once the sample was accepted then the Defendant must be left to its own devices.  There is the other issue as to whether it was a sale by specification and further, whether Wayson had warned Rita that this linen/bamboo mix was likely to be so problematic to knit that she ought to be on her guard about whether she should really be purchasing yarn of this type to manufacture these ladies tops.  As to this latter point there is also the allegation that Rita, being the representative of an experienced and substantial manufacturer of such garments, could be assumed to have exercised her own skill and judgment which she did by allegedly saying that she had taken all of this into account and accepted that there would be considerable wastage of yarn during the knitting process.

68. Ultimately, the answer to this problem is that what Wayson had delivered in bulk, as opposed to what had been delivered in sample form, was wholly unsuitable and fatally defective.  For this I rely on Dr Au’s expert evidence as I do on Mr Chow’s empirical results when he came to knit the bulk yarn.

69. Once it has been established, which to my complete satisfaction it has, that the bulk did not match the quality of the sample it matters not if this was a sale by sample.  Any answer that the seller/plaintiff might have had to the defence and counterclaim based on a sale by sample is, in these circumstances, completely eliminated from the case.”

53.Thus, one must go back to his conclusions about the quality of the yarn as delivered in bulk as compared with the samples.  In that respect, he relied principally on the evidence of Dr Au.  Though the laboratory test results did set out some primary data regarding the characteristics of some sample yarn and some bulk yarn, whether the variations in such characteristics were so significant that the bulk could properly be regarded as not in conformity with the samples was a matter of expert evidence. Further, whether the characteristics as depicted by the test results (the bulk as well as the samples) rendered the yarn unsuitable for the production of the Defendant’s garments was also a matter of expert evidence.  In these respects, the evidence of Dr Au was in conflict with the evidence of Dr Lo.

54.It is also to be noted that in his report, Dr Au did not say that the samples were suitable for the production of the Defendant’s garments. He also commented adversely in respect of the yarn counts evaluation and the evenness property of the samples.  Therefore, one cannot rely on his evidence to conclude that had the bulk been in conformity with the samples, they would be fit for the Defendant’s production.

55.In our view, the Judge erred in holding that once it was established that the bulk was not in conformity with the samples, the Plaintiff’s case on assumption of risk by the Defendant needed not be considered.

56.The other area where the Judge relied on the evidence of Rita Law was the counterclaim.  At the trial, counsel for the Plaintiff disputed the counterclaim at paras 100 to 126 of his closing submissions.  The Judge was also alive to the criticism that no original document has been produced to support the counterclaim, see the transcript at Core Bundle p.243 though it is fair to say that the Judge did not indicate one way or another as to the validity of that criticism.

57.In his judgment, the Judge dealt with the counterclaim at paras 76 to 81.  Para 82, as already mentioned, dealt with the handling charges.  As far as summarizing the evidence  is concerned, the Judge said at para 78,

“As to these amounts, the evidence is in and it would be pointless to merely rehearse it here all over again. If this matters needs to be considered in another court that exercise can, if necessary be gone through by a consideration of these materials.”

58.With respect, that should not be the approach of a judge in setting out the evidence in a judgment.  Though there is no need to set out the evidence item by item, a judge’s summary of the evidence can often demonstrate his or her understanding on what the case is about.  A concise and clear summary, particularly when it is demonstrably focused on the real issues in dispute, goes a long way in showing that the judge had properly digested the materials placed before the court.

59.It is also not right for a judge to leave it to the Court of Appeal to unravel on its own the evidential aspects of a case.  The purpose of an appeal is not to give counsel or litigant another round of rehearing everything again.  As it has repeatedly been reiterated by this court, it is the duty of a trial judge to digest, analyse and weigh the evidence.  An appellate court only intervenes in the assessment of evidence and findings of fact by a trial judge in limited circumstances: see Ting Kwok Keung v Tam Dick Yuen [2002] 5 HKCFAR 336; Lobo v Kripalani [1998] 2 HKLRD 325.  As a corollary of that, a trial judge must not abdicate from the role of primary assessor of the evidence and fact-finder.

60.As far as weighing of evidence is concerned, the Judge simply said as follows at paras 80-81,

“80. Now that I have heard the evidence in support of these heads of claim, coming as it does from Rita in the form that I have described, I am in no doubt as to the legal basis for these heads of claim in the sense that they flow directly from the Plaintiff’s failure to deliver to the Defendant yarn of the quality contracted for.  Each head of claim has been abundantly proved on the evidence that has been presented through the documents on the defendant’s behalf and as analysed by Rita in her second supplemental statement and her oral evidence part of which is diagrammatically re-produced in Exhibit D14. …

81. Insofar as some of the heads of claim, which Miss Wong has marked with an asterisk in her written opening, represent a reasonable attempt by the Plaintiff to mitigate its loss, I uphold such steps as reasonable which is why I have been prepared to award the amounts counterclaimed in full.”

61.With respect, what the Judge did in those paragraphs was merely stating his conclusions without giving any analysis.  In the light of the substantial disputes on the counterclaim (as outlined at paras 80 to 89 in the skeleton submissions of Mr Mughal) and the challenge as to the evidence of Rita Law, that cannot satisfy the duty to give adequate reasons as discussed above.             

62.The unsatisfactory state of affairs is compounded not only by the delay in the delivery of the judgment, but also the mistake in the figures of the damages awarded by way of counterclaim.  The figure originally set out in the judgment was $1,017,434.29.  The respective heads of the counterclaim were set out at paras 4 to 8 of the judgment.  Originally, the figure under the first head was $245,515.85 and the figure under the third head was $146,626.35.  By a corrigendum of 4 January 2012, the figure under the first head was changed to $9,378.72 and the third head was changed to $151,613.42.  The total became $783,152.92.

63.With considerable regret, taking all these into account, the judgment on the counterclaim cannot be allowed to stand.

64.This court cannot adjudicate upon the issues of assumption of risk and the reasonableness and quantum of the counterclaim (if any) in this appeal.  The matter has to be remitted for a re-trial.

Disposition

65.For these reasons, the appeal is allowed and we set aside the judgment of the Judge.  In view of the concession of Mr Shum, we order partial judgment in the sum of $33,981.26 to be entered in favour of the Plaintiff.  We also order the balance of the Plaintiff’s claim and the Defendant’s Counterclaim be remitted for a retrial before another judge.

66.We note the amounts involved in the substantive dispute between the parties.  By now, the costs incurred by each of them are already wholly disproportionate to the claims and counterclaims.  Based on the estimates supplied by the parties, the Plaintiff has already incurred about $2.4 million and the Defendant has incurred $2 million for costs here and below.  This is a case which cries out for alternative dispute resolution and we strongly urge the parties to consider using mediation to resolve their differences.  However, one must prepare to negotiate with a sense of realism and have a good grasp of what needs to be done to bring the matter to a close before mediation can achieve its purpose.

67.As regards costs, we would make an order nisi that the costs below shall be costs in the cause of the re-trial.  Since the Plaintiff has to come to this court to overturn the judgment of the Judge and the Defendant has resisted the appeal unsuccessfully, the Defendant has to pay the Plaintiff the costs of the appeal, such costs is to be taxed with certificate for two counsels.

Mr Hanif Mohamed Mughal, Mr Man Hon Chiu, instructed by M L Tam & Co, for the Plaintiff/Appellant.

Mr Mr Erik Shum and Miss Abigail Wong, instructed by Tung, Ng, Tse & Heung, for the Defendant/Respondent.