QUAN WA CHEONG v. MAK KEUNG MAU t/a KIEW TAI HONG

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is in part a claim for the price of goods sold and delivered and in part a claim for damages arising from an alleged wrongful refusal to accept delivery. The subject matter of the contract was peanut cake which is something fed either to poultry or to fish and which is made from the residue of peanuts after they have been compressed under heat to extract their oil, and this particular consignment of goods originated, so I have been told, in North East China. After it has been manufactured peanut cake is in the shape of a disc 15 or so inches in diameter. It varies in colour and quality according to the amount of heat to which it has been subjected in the manufacturing process. The less heat to which it has been exposed the lighter it will be in colour and the more it will contain in the way of fats or oils. Contrariwise the more heat it has been exposed to the darker it will be in the result and the less nutritious. It does not follow that because the peanut cake is dark it is without value or use, but it seems to be accepted on both sides that the darker quality peanut cake is worth less in the market than the lighter-coloured peanut cake. The plaintiff is a wholesaler in animal food stuffs. The defendant is a farmer in the New Territories who, from what I can gather, also does a little retail business in animal food stuffs. A large quantity of this peanut cake had been bought by the plaintiff and was lying on a barge at Tsuen Wan. In all there were some 2,215 bags of it. The plaintiff wished to move it on and he got in touch with a broker who deals in animal food stuffs, a Mr. Cheung, and instructed him to negotiate a sale of the whole consignment, if at all possible. On 24th February 1984, Mr. Cheung approached the defendant, Mr. Mak, and, armed with some samples from the peanut cake on the barge, he set about attempting to make a sale. I should say that previously Mr. Cheung had visited the barge. He had opened a number of the sacks and he found that of the 24 bags which he opened 14 contained cake of the lighter variety and the other 10 contained cake of the darker hue.

2. Up to now I merely recount facts which are uncontroversial. It is at this point in the narrative that conflict arises. Because although it is conceded that a contract was forged as a result of negotiations between Mr. Cheung and Mr. Mak the terms of that contract are very much in dispute. As so often happens where a dispute arises and, as in this case, litigation has not been avoided, neither party thought it right or necessary to reduce the terms of their bargain to writing. What the Court has had to depend upon, therefore, is the recollection and the veracity of the parties most closely connected with the negotiations. I have heard on the one hand from Mr. Cheung, the broker, and on the other from the two brothers Mak, but principally from the elder brother Mak Keung-mau. On Mr. Cheung's account he offered for sale the whole of the contents of the barge that is the 2,215 bags. On Mr. Mak Senior's account only 1,100 bags were mentioned. According to Mr. Cheung the samples which he brought were truly representative of the cake which he inspected at the barge and that he had brought both dark and light samples. According to both Mr. Mak Senior and Junior what was shown to them by way of sample although of varying hues was all of better quality or lighter kind. In the end, according to Mr. Cheung, after some fairly tough bargaining it was agreed that if the Mak brothers would take the whole of the consignment the price would be $102 a picul. According to Mr. Cheung, also, it was made absolutely plain that the consignment consisted partly cake of the better or lightor quality and partly of cake of the darker or less good quality, and that that fact was taken into account in fixing the price. According to Mr. Mak, the contract was for cake all of one quality and that of the kind which was, despite the slight variations in the colouring, all of the better or light quality. According to Mr. Mak, although there was an attempt on his part at hard bargaining it did not get him anywhere because Mr. Cheung was not to be budged on the price of $102 a picul which, again according to Mr. Mak, was the price first quoted. They both agreed that an experiment was carried out in which some of the samples brought were put in warm water to see how they reacted and whether or not they produced what is considered to be a solution of the correct appearance something which is important apparently to fish. There are differences between their accounts of those experiments. Mr. Cheung told me experiments were carried out both with the lighter-coloured cake and the darker-coloured cake producing a different result in each case. Mr. Mak has only told me about experiments with light cake which he said did produce a milky substance. Mr. Cheung also told me that one of the matters influencing the mind of Mr. Mak was the fact that he had bought similar goods previously, some of which still remained with him, and he was able to bring out a piece of good quality or light cake for comparison purposes, but I do not think that is a matter which assists me very much in deciding which of these two versions I ought to accept. The next day, 25th February, it is common ground that carriers employed by Mr. Mak went to Tsuen Wan and brought back in several loads 1,100 bags of cake. It is common ground that by the late afternoon or early evening Mr. Mak was complaining that the goods which had been collected thus far were not in accordance with the sample they had seen the day before. There is a conflict as to whom he spoke or, at any rate, the evidence is not entirely clear on the point. Mr. Cheung says that during that afternoon he was paged and asked to call the Mak brothers which he did and it is true, he says, that in the course of that telephone conversation Mr. Mak told him that the goods which had been collected were not up to sample. Mr. Mak, who, I might have thought would have been content to accept that version as being entirely consistent with his case, said he did not speak to Mr. Cheung that afternoon but that instead he telephoned the plaintiff's office and spoke to someone there, though the contents of the conversation which both Mr. Cheung recalled and Mr. Mak recalled seemed to have points of similarity. It is also common ground that Mr. Mak declined to collect or take delivery of any of the remaining bags of feed which remained on the barge incurring storage charges in the meantime until they could be sold, as they were by the plaintiff some five days or so later. When they were sold they fetched a price of $100 a picul. Between the telephone conversation which I have spoken of and the sale of the balance of the goods, the plaintiff issued an invoice for the goods collected by the defendant. Mr. Mak, was not inclined to pay. According to Mr. Cheung there was further conversation between him and Mr. Mak as to collecting the balance and as to paying for those goods which had been collected and some attempt on the part of Mr. Mak to re-negotiate the price of those goods which he had collected. The plaintiff was not to be moved from what he has always claimed was the contract price for the goods and unfortunately that early attempt at settlement of this dispute fell by the wayside. Up to a point Mr. Mak Junior did confirm that which was said by his brother as to the samples which were shown on the 24th February.

3. There is no issue between the parties that this was indeed a sale by sample. I indicated during the course of counsel's addresses to me, for which I am much indebted for the care and thoroughness with which they were presented, that if I were to find that the contract was as contended for by the plaintiff for a mixed consignment of peanut cake, that is consisting in unascertained proportions of dark and light cake, then I would not have been satisfied on the defendant's case that the bulk did not correspond with the sample so entitling the defendant to reject any part of the goods which were embraced by the terms of contract. Even had I found on the plaintiff's case that the contract was for a mixed consignment in which the proportions of light to dark would be more or less in balance I still would not have been satisfied on the defendant's case that the bulk did not correspond with the sample, and I say that having seen, produced by the defendant, 31 samples from the bags of which he says he took delivery. If, as I also indicated in an early stage, I were to find that the contract entered into on the 24th February was for a consignment of peanut cake all consisting of the better or lighter-coloured kind, then I am or would be satisfied on the defendant's case that the defendant's rejection of it was timely, taking place as it did on the 25th February, at the first opportunity reasonably available to him to compare the bulk with the sample. That he did so on both versions of the evidence there can be no doubt. I think, however, that up to a point it may be possible to reconcile those two versions of the evidence. It may very well be that Mr. Mak, after this interval of time, believes that he was speaking to some person whose name he didn't know at the plaintiff's office whereas in fact and in truth it was Mr. Cheung who was responding to his telephone call and in answer to a bleep on his pager, but it matters not. If the rejection came and it were well-founded on the 25th then I am satisfied that the rejection was in sufficient time for the defendant now to be able to claim the advantage of it. So the whole question hinges upon who is right in his account of the contract which was struck on 24th February. Mr. Chain, in his most able address, has drawn to my attention a number of matters which he says should incline me to prefer the evidence of Mr. Cheung to that of Mr. Mak. He mentions in particular the fact that Mr. Cheung obviously, as he says, was entrusted with the task of selling the whole of the consignment, upwards of 2,000 bags. In those circumstances, says Mr. Chain, it is inconceivable that he would not have mentioned to Mr. Mak that there were over 2,000 bags whether or not Mr. Mak was interested in buying over 2,000 bags. Secondly, he says, in further confirmation of Mr. Cheung's account that there is in existence a record which was made the same night, that is 24th February, by Mr. Cheung which indicates or would appear to indicate that there had been an agreed sale earlier that day of 2,250 bags of the plaintiff to the defendant and therefore, says Mr. Chain, most persuasively, on the question of quantity it must be the case that Mr. Cheung is right and Mr. Mak is wrong. That does not, says Mr. Chain, just go to the question of recollection; it goes very much to the question of credit or veracity. Mr. Chain says the only reason for Mr. Mak insisting both in his pleading and on the evidence before me that only 1,100 bags were at stake was because he did not wish to be saddled with damages arising from his breach in failing to take delivery of the balance of the consignment and if he is not prepared to tell the Court the truth about that, why then, says Mr. Chain, he cannot be believed on the other more directly important question as to what the contract was with regard to quality. I think that is a matter which does cause me to pause, and perhaps, if it wore all, to lead me to revise my original impression which I formed when Mr. Mak was giving evidence in the witness box that he was a reliable and honest witness. But it is not the only indication in this case and it is something which, on reflection, I feel is not only to be explained in terms of one or other of the two witnesses not telling me the truth. I do not make much of the fact that Mr. Cheung gave his evidence in punti and Mr. Mak and his brother in Chiu Chau because I think Mr. Chain fairly makes the point that there has been no evidence as to whether or not Mr. Mak, notwithstanding his preference for the Chiu Chau dialect when giving evidence, understands Cantonese or punti. But nevertheless it could be explained in terms of failure of recollection or as the result of misunderstanding. When I take into account all the other matters in this case it seems to me that it is not enough, nor are any of the other matters mentioned to me by Mr. Chain enough, to make me conclude that my original assessment of Mr. Mak as a witness was wrong. It seems to me very strange that someone who should have been a willing party to a bargain on the 24th, who incurred expense in transporting part of the consignment of goods the next day, should by that very afternoon, having received them at his own premises, ring up and speak to someone to complain that the goods did not conform with sample. True, there could be explanations for Mr. Mak doing what he did other than the one he has offered, namely that in his estimation the goods did not comform with sample. But his explanation seems to me the most likely one. With regard to the evidence of Mr. Cheung; at the time he gave it, I did not think he was a satisfactory a witness. Although I made every allowance for the difficulties in giving evidence and the fact that somthing may always be lost in the translation, it seemed to me that he was a witness who was not ready to grasp the point of the questions being put to him, though I would be very reluctant to find that he was not doing his best within those limits to tell me the truth. It also seems to me to be remarkable that if the contract was as contended for by the plaintiff that having heard Mr. Mak's complaint, well-founded or not, that either Mr. Cheung or someone from the plaintiff did not go with reasonable promptness to inspect the goods where they lay at the defendant's godown to see whether or not he was right. After all, at that time all Mr. Mak was saying was that the goods did not correspond with sample. The question as to whether they should have been all light or partly light and partly dark had not arisen and it does seem to me odd, and nothing Mr. Chain has been able to say to me has persuaded me otherwise, that somebody did not go down to the warehouse to see whether or not there was anything in Mr. Mak's complaint and to resolve any doubt there might be then and there. Allowing that there is force in Mr. Chain's submissions I am still left in a position where I think I must prefer the evidence of Mr. Mak, supported as it is by his brother. To choose between two witnesses is never an easy decision to make. At one time it might have appeared that Mr. Cheung was disinterested in the matter but Mr. Cheung, if I may say so, very fairly concedes that the point really does not stand up. Mr. Cheung, as the broker, has as much interest in this matter as anyone else, not only in furthering the prospects of the sale in the first place but also in seeing this litigation through to a successful conclusion on the part of the plaintiff. Eaving formed the view I have of the witnesses in this case it must follow that the plaintiff's claim fails, and will be dismissed.

4. I come now to the counterclaim. It is said for the defendant that by reason of the breach transportation costs were incurred and I do not think that any answer to that has been put forward. The plaintiff must succeed in recovering transportation costs. But the counterclaim is not limited to that. It will be recalled that the 1,100 bags of peanut were left at the defendant's godown. According to the defendant, when he spoke to an unidentified person at the plaintiff's office the question arose as to what should be done with those 1,100 bags. That person said: "Well, can't you put them in your store for the time being" which the plaintiff did, and they have rested there ever since. By a letter written in April solicitors for the defendant said to the plaintiff solicitors in terms: "Look, these bags are taking up room and we are going to charge you storage for them if you don't take them away." Now out of those facts, which I do not think have been challenged, or if they have I accept as being proved by the evidence, it would be possible to formulate an agreement on the part of the defendant to store the goods and on the part of the plaintiff to pay their reasonable charges. But it is not pleaded in that way. It is pleaded that these storage charges arise as a result or a consequence of the plaintiff's breach of contract in failing to supply goods of the quality contracted. I do not think that they do arise as a consequence of the plaintiff's breach and I do not think that they are recoverable.

5. Consequently, the plaintiff's claim will be dismissed. There will be judgment for the defendant on the counterclaim in the amount of the transportation charges. The only evidence as to the transportation charges comes from the defendant himself. He has not produced any document to support the figure he gives, but I have no reason to disbelieve him that those transportation charges were in excess of $4,000. It is for the defendant to prove the amount of damages, of course, so he can recover no more than $4,000.

6. There is an application for costs. I use the opportunity to make an observation I have made more than once during this hearing. It is the case that these goods were lying at the defendant's godown from 5th February 1984 onwards. It is also the case that solicitors were involved in these proceedings from at the latest April 1984. I am not seeking to place the blame on any particular person's shoulders but it does seem to me a great pity that steps were not taken to dispose of these goods at an early stage, or an earlier stage than new, which might have had the result of much reducing the legal costs involved, if not avoiding them altogether. The defendant will have costs on the claim and on the counterclaim.