REGENT ROSS LTD. t/a PO WAI TRANSPORTATION CO. v. TAM CHI YIU t/a CHI HING CO.

HCA6042/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.6042 OF 2000

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J U D G M E N T

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The plaintiff's claim

1. The plaintiff's claim is for the sum of $163,560, being the charges that the plaintiff agreed with the defendant for transporting six 20 foot containers containing 112.8 tonnes of chemical for the defendant from Hong Kong to a factory in Zhong Shan City in China.

The defence

2. The defendant admits that he still owes the plaintiff $121,964.64. The issue between the parties on the plaintiff's claim is simply that the plaintiff says that the rate of payment for carriage of the goods per tonne is $1,450 whereas the defendant says it is $1,100.

The defendant's counterclaim

3. The defendant's counterclaim is for the sum of $762,008.66. The basis for the counterclaim is that prior to the plaintiff undertaking the first delivery out of five, by an oral agreement made in October 1998, the plaintiff agreed to deliver the goods to a PRC manufacturer in Zhong Shan City with whom the defendant had a contract to supply monthly 1,700 tonnes of a chemical. The defendant avers that the plaintiff, under the verbal agreement, promised to deliver the chemical to the PRC manufacturer within four days from the date of receiving the defendant's order and that it was a condition of the agreement that time would be of the essence. The defendant also avers that at the time of the agreement, the plaintiff was aware of the agreement between the defendant and the PRC manufacturer. The defendant avers that the plaintiff was eight days late in delivering half of the third consignment and 10 days late in delivering the other half of that consignment and that the plaintiff failed to deliver the fourth consignment, as a result of which the PRC manufacturer had to stop production on 12 and 13 November 1998. The defendant avers that as a result of the shortage of supply to the PRC manufacturer, he (the defendant) had to purchase in China similar goods which cost him a higher price, namely $2,100.80 per tonne higher than the original purchase price by the defendant, as a result of which he had to incur $331,737,33. That is the first item of his counterclaim.

4. The second item of his counterclaim is that he suffered a loss of profit of $104,847.60 as a result of the plaintiff's breach. This figure is arrived at by multiplying 60 tonnes per day X 2 days X $873.73 which is the sum that the PRC manufacturer would have paid the defendant minus what the defendant paid his original supplier minus the transportation cost of $1,100 per tonne.

5. The third item of the defendant's counterclaim is based on a clause in his contract with the PRC manufacturer that the defendant would supply 420 tonnes of goods weekly, namely 60 tonnes daily and he shall indemnify the PRC manufacturer against any loss caused by a shortage of the goods. The defendant avers that on 19 September 1999, a compensation agreement was entered into between the PRC manufacturer and him whereby he was to compensate the PRC manufacturer $325,423.73 for the loss and damage sustained by the PRC manufacturer as a result of the defendant's failure to supply the chemical on 12 and 13 November 1998.

The plaintiff's evidence

6. The plaintiff called Mr Hui Po Yuet ("Mr Hui") to give evidence. Mr Hui was a director of the plaintiff company and started his transportation business in 1988. Since 1996 he began his cross border transportation business. His evidence was that if goods had to be conveyed from Hong Kong into China, one of the routes would be to send the goods by ship which would then be offloaded at a Chinese port. The goods would then require clearance by the PRC Customs. He said that his company's practice, when conveying goods into China was to employ a PRC import company which would offload the goods at the PRC port and clear the goods with the PRC customs. The PRC import company would require a PRC import permit. The duty payable on the goods varied according to the classification of the goods in accordance with the discretion of the PRC customs officer concerned. Therefore Mr Hui said that the duty payable on a particular lot varied from lot to lot, depending on the PRC customs officer's judgment of which category the goods belonged to. He said that whenever he received an offer to transport goods into China, he would contact a PRC import company to find out whether that company had the necessary import permit and to find out what the duty would be on the goods in question. He said that some days prior to 27 October 1998, Madam Cheung Kit Har ("Madam Cheung"), the wife of the defendant, contacted him by calling on him at his office. They then discussed the price to carry goods that she wanted him to convey to Zhong Shan City and the duration of the trip. He told Madam Cheung that his costs would be all inclusive and would include the costs of the ship and the costs of the import company and the PRC tax. He said that the duration of the trip could never be predicted and therefore would not be agreed between the parties as it was only an estimate. The duration of the trip depended on what boats were available to take the goods to China, whether those boats had the necessary vacancy for the goods, how long the boat trip would last, how long it would take to offload the goods, how long the PRC customs would require to clear the goods and how long it would take to pay the PRC tax. He told Madam Cheung that the trip to Zhong Shan City would take about a week. He said that Madam Cheung did not tell him of the defendant's contract with the PRC manufacturer and did not tell him about time of delivery being of the essence.

7. For the first consignment of five containers on 27 October 1998, he agreed with the defendant that the price quoted was $1,050 per tonne and that he did not deliver the goods until three days later. He said he was not aware where the goods were delivered to because Madam Cheung only gave him the name and telephone number of the person in China who should be contacted to accept the goods. He said that once the goods were taken by land transport in Hong Kong from the container terminal to the place where the ship departed from Hong Kong to go to China, the rest of the journey would be taken care of by the PRC import company. The person in charge of the PRC import company would only have the name and telephone number of the contact person in China. Mr Hui said that the profit his company made on the first consignment was $300 to $500 per container. For the second delivery on 29 October 1998 of 10 containers, he agreed with the defendant that the charge per tonne was $1,100 because he said the PRC tax was more expensive on this occasion. For the third consignment on 2 November 1998, Mr Hui said that because of the lack of space on the ship, delivery had to be in two lots and he agreed that the first lot was delivered on 14 November 1998 and the second lot 16 November 1998. As regards the fourth consignment, he disagreed that the plaintiff undertook to deliver that. He said that he was handed the bill of lading by Madam Cheung and he then telephoned the import company in the PRC but was told that the company did not have any import permit for the goods, so he told Madam Cheung that he could not deliver that consignment. Madam Cheung had many other transportation companies apart from the plaintiff but on this occasion she could not find another company so she asked Mr Hui to hold on to the bill of lading. On the eighth day of the goods being left at the container port in Hong Kong, he was asked by Madam Cheung to deliver the goods from the container terminal to a temporary storage space in the New Territories for which he charged Madam Cheung $2,100. In respect of the fifth consignment on 24 November 1998 he said that he told Madam Cheung that the price would be $1,450 per container because import permits had become more expensive. Madam Cheung agreed to the price.

8. He said he did go to a hotel in Fu Shan City to meet Madam Cheung's husband, Mr Tam Chi Yiu ("Mr Tam"), but he said the purpose of the meeting was for him and Mr Tam to discuss the possibility of he transporting into China two other types of goods that Mr Tam was thinking of importing into China, namely, silk and painting machines. After discussion with Mr Tam, he concluded that he could not assist Mr Tam because he had no import permits for those goods. He disagreed that he had gone to see Mr Tam just to look at the sales agreement between the defendant and the PRC manufacturer to satisfy himself that the defendant did have a contract with the PRC manufacturer to supply them with 1,700 tonnes of chemical. He denied that on 20 November 1998 he had a telephone conversation with Madam Cheung when he apologised for the late delivery and undertook to compensate the defendant for all loss to be incurred by them. He said he never saw the contract between the defendant and the PRC manufacturer. He said that after the fifth consignment, Madam Cheung never asked him to pay any compensation and the only thing she mentioned was that she was in financial difficulties and she asked for time to pay for the fifth delivery.

The defence evidence

9. The defendant called his wife Madam Cheung. She gave evidence that at the first meeting with Mr Hui, Mr Hui was informed by her of the defendant's contract with the PRC manufacturer and that the defendant was bound by contract to supply 1,700 tonnes of chemical monthly to the PRC manufacturer and to supply 420 tonnes weekly or 60 tonnes daily. She said that Mr Hui quoted the price of $1,050 per tonne and assured her that he would be able to deliver to Zhong Shan City in four days. She promised to let him deliver all the goods to the PRC manufacturer if he could deliver each lot in four days' time. She said that by the time they finished their first meeting, all the terms and conditions had been agreed. However, Mr Hui wanted to see a copy of the sales contract between the defendant and the PRC manufacturer and because she did not have a copy with her, she told him to go to see her husband, Mr Tam in Fu Shan to look at the contract. She then telephoned her husband to let him know of Mr Hui's visit.

10. The defendant was called to give evidence and he basically supported his wife's evidence that he saw Mr and Mrs Hui at Fu Shan City when he showed them the sales contract that he had with the PRC manufacturer and they had discussions on the contract of the plaintiff delivering the goods on his behalf.

Assessment of the evidence

11. Having considered the evidence of both parties, I prefer the evidence of Mr Hui to that of Madam Cheung and her husband, the defendant. I find that there are a number of flaws in the defence evidence which are difficult, if not impossible, to reconcile :

(1) There was no reason why if the defendant was going to contract with the plaintiff for the plaintiff to deliver 1,700 tonnes of chemical monthly to China why that agreement could not have been reduced to writing. There is among the papers, a similar contract of carriage entered into between the defendant and one of his carriers.

(2) If Mr Hui wanted so much to look at the sales contract between the defendant and the PRC manufacturer, there was no reason why a copy of that could not have been faxed to him in Hong Kong thereby saving him and his wife a trip into China just to look at the contract.

(3) The second delivery by the plaintiff took five days, which was one day more than the promised four days. If that was the case and if time was of the essence, why did the defendant continue to give the third lot to the plaintiff to deliver?

(4) The third lot was delivered late by ten days and yet the fourth lot was still given to the plaintiff to deliver.

(5) The fourth lot of 4 November 1998 was contracted to the plaintiff but he failed to deliver that lot at all. Why did Madam Cheung continue to give the plaintiff the fifth lot on 24 November 1998?

(6) In view of all the delays with the earlier lots, why did Madam Cheung give the fifth lot to the plaintiff to deliver on 24 November 1998?

(7) Madam Cheung was aware, as from 7 November 1998 that the lot of 2 November 1998 was not delivered within the four days promised. She said she telephoned him every day from 7 November 1998 until the first half of the third consignment was delivered on 14 November 1998. By the 9 November she should have known that the fourth lot was still not delivered, but she continued to believe the plaintiff that he would deliver on that day or on the following day and took no action.

(8) She said that she knew on the night of 11 November 1998 that the PRC factory would stop work on 12 and 13 November 1998. Even without being told that, because she was the only supplier of the chemical to the PRC manufacturer and because she knew how much chemical the factory required each day, she knew when their chemical supply would all be used up, based on her own calculations and so she could have worked out when their chemical supply would run out and she could have taken some action to look for other sources of supply. One of the sources was her original source in Hong Kong which sold the chemical to her at the price of $3,450 per tonne. She said that they always had supplies in Hong Kong and yet she did not approach them to supply her with more chemicals but instead went to China only on 14 November 1998 to buy in China at a price which was $2,100 per tonne more than what the Hong Kong supplier charged.

(9) She knew as from 14 November 1998 that she would have two claims against the plaintiff, one for the extra cost of purchasing the chemical in China and two for the loss of her two-day profit on the two days when the PRC manufacturer stopped work, and yet commencing on 23 November 1998, and carrying on with four payments culminating in the last one on 15 December 1998, she paid the plaintiff a total of $555,775.39. The date of the first payment, 23 November 1998, was one day before she gave the fifth consignment to the plaintiff to deliver on her behalf.

(10) She never wrote any letters or instructed any lawyers to write any letters on her behalf to claim from the plaintiff the three amounts of her present counterclaim.

(11) The sales contract between the defendant and the PRC manufacturer is dated 8 July 1999 which, if correct, would have been way past the events we are concerned with. When Mr Tam first saw that document in court he said that he had misremembered the date of the contract and that it should have been 1999. Madam Cheung who was then sitting in the public gallery of the court, having completed her evidence, then said loudly that it was a typing error. Mr Tam then changed his evidence and said that it was a typing error and that the contract should have been one year earlier, in 1998. This was such an important contract which was executed by both parties. Could an error in the date have been made and could that error have escaped the attention of both parties to the contract? I find that there is a lot of suspicion surrounding that contract and it may well be that the contract was between those parties which was entered into, as the contract stated, in 1999 and it was relied upon by the defendant to make out a case for his counterclaim.

(12) If the PRC manufacturer had to stop work on 12 and 13 November 1998, why did it take them so long to work out the amount of compensation to be paid by the defendant? The refunding agreement was only signed on 19 September 1999.

12. In addition to all the matters mentioned above I also found Madam Cheung to have been a very evasive witness who gave very long answers to simple questions and who avoided on a number of occasions answering the question until specifically asked by me.

Findings

13. In the light of my findings mentioned above, I give judgment to the plaintiff in the sum of $163,560. There will also be judgment for interest at 1% above prime lending rate from 24 November 1998 to date of judgment and thereafter at judgment rate until payment. I also give judgment to the plaintiff for the costs of the action. The defendant's counterclaim is dismissed.