PAN OCEAN SINGAPORE PTE. LTD v. ROYAL MARINE PRODUCTS LTD

DCCJ2965/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2965 OF 2004

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JUDGMENT

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Introduction

1.  In this action, the Plaintiff was the Singaporean buyer and the Defendant was the Hong Kong seller of half-shell frozen oysters.  The Plaintiff’s claim is for the return of the contract price and damages for the Defendant’s breach of the parties’ contract for the sale and purchase of the oysters.

2.  The Defendant was absent from trial.  However, notice of trial was issued in October 2005 when the Defendant was still legally represented.  The Defendant’s solicitors ceased to act only in December 2005.  According to the affirmation of Chan Shun Shing filed earlier this month, the Plaintiff’s solicitors attempted twice to serve documents for this trial on the Defendant at the latter’s last known address.

3.  I see no reason why the Plaintiff should be prevented from proceeding to prove its case.

Background

4.  The Plaintiff is a company in the business of trading seafood and foodstuff including oysters imported from other countries.

5.  By a sales contract in writing dated 22 November 2003 (“the Sales Contract”), the Plaintiff agreed to buy and the Defendant agreed to sell half-shell frozen oysters.  The parties understood that the oysters would be supplied from China.

6.  The Sales Contract contained the following terms:

Clause 3

“Price: CNF Singapore”

Clause 7

“Payment: 40 days 100% AT SIGHT L/C (Transferable)”

Clause 11

“No payment will be make if buyer produces REJECTED LETTER from AVA (Health Dept. of Singapore) showing that consignment is not fit for human consumption.”

Clause 12

“Seller is responsible to arrange the rejected consignment back to country of origin at their own cost if consignment failed the testing.”

7.  The quantity of oysters supplied (“the Oysters”) was subsequently varied and the contract price was adjusted to USD20,734.00.

8.  The Oysters arrived at Singapore on or about 24 December 2003.

9.  On 4 February 2004, the contract price was paid by way of the letter of credit.

10.  On 26 February 2004, the Agri-food & Veterinary Authority of Singapore (“the AVA”) issued a letter of rejection stating that the Oysters were contaminated with Norovirus and could not be imported.  The Plaintiff was demanded to surrender the Oysters to the AVA for destruction or to return them to China.

11.  On 5 March 2004, the Plaintiff, through its Singaporean lawyers, issued a letter of demand to the Defendant claiming for the refund of the contract price and damages including freight charges, cost of destroying the Oysters and legal costs.

12.  After the commencement of this action, the Oysters were eventually destroyed in Singapore on 7 September 2004.

13.  The above background is either not in dispute according to the pleadings or evidenced by contemporaneous documents before me.

The issues

14.  The Defendant raised the following issues in defence:

(1)   There was a collateral oral agreement, warranty or representation by the Plaintiff that if the Plaintiff was unable to produce the AVA rejection letter before the due date of payment under the letter of credit, the Plaintiff should have no recourse against the Defendant for the contract price or damages.

(2)   The AVA issued the letter of rejection without inspecting or obtaining the results of inspection of the Oysters.

(3)   Besides putting the Plaintiff to proof of its loss, the Defendant avers that the Plaintiff has failed to mitigate its loss.

The collateral agreement, warranty or representation

15.  The Defendant avers that the collateral oral agreement was evidenced by the e-mail dated 20 November 2003 at 14:18 from Desmond Leow (“Leow”), managing director of the Plaintiff, to Amy Lin (“Lin”) of the Defendant’s representative.  However, that e-mail in fact contained Leow’s request that payment under the letter of credit should be 45 days after sight so that payment could be stopped if the AVA rejection certificate was issued during this period.  As Mr. Wong, Counsel for the Plaintiff, pointed out, this e-mail was completely silent on the Plaintiff’s right of recourse in the event that the Oysters were proved to be unsuitable for human consumption.

16.  Neither the Sales Contract nor the subsequent proforma invoice dated 22 November 2003 provided for or reflected such collateral term as to the Plaintiff’s right of recourse in the event of defective quality of the Oysters.  Both documents were prepared by the Defendant and it should have no difficulty in putting the alleged collateral term, if in fact agreed upon, into writing.  The lack of reference to it in these documents is, in the circumstances, a strong indication against the Defendant.

17.  I also agree with Mr. Wong that the alleged oral collateral agreement hardly makes commercial sense from the point of view of the Plaintiff particularly when this was just the first transaction between the parties.

18.  I also fail to find clear, if any, reference to the alleged collateral agreement in the Defendant’s response to the Plaintiff’s e-mail reserving the right of claim or to the letters of demand from the Plaintiff’s solicitors in March and May 2004.

19.  In the circumstances, I have no hesitation in rejecting the Defendant’s allegation of the collateral agreement.

The AVA rejection letter

20.  The news about the AVA’s holding up of the Oysters because of the report of the poisoning of 277 people in Singapore after consuming oysters imported from Dalian, China, came in early January 2004.  By e-mail dated 9 January 2004, the Plaintiff requested the Defendant to extend the payment date under the letter of credit to allow time for the announcement of the AVA’s test results of the Oysters.  Further request was made by the Plaintiff’s e-mail dated 12 January 2004 in which it was also explained that further test in the U.S. would take 2 to 3 months.  The exceptional period of time taken for the test was further explained by the e-mail correspondence between the Plaintiff and the AVA in January and February 2005.

21.  By e-mail dated 2 February 2004, the Plaintiff informed the Defendant that since the test results were not yet available, it had advised the bank to release payment under the letter of credit to the Defendant but would reserve the right to claim if the test results confirmed the contamination of the Oysters.  The Defendant accordingly got paid under the letter of credit on 4 February 2004.

22. On 26 February 2004, the AVA issued the letter stating that the Oysters were contaminated with Norovirus and demanded the surrender of them for destruction or the return of them to China (Note: this letter was subsequently replaced by the AVA’s letter dated 4 June 2004 apparently for correcting the inaccurate reference to the number of cartons involved).  The Defendant took issue by saying that the AVA letter dated 26 February 2004 was issued before the results of the test in the U.S. and was therefore premature or unsubstantiated.

23.  In the absence of any question of the authenticity of the AVA letter and contrary evidence, I have no reason to doubt what was stated in the letter, namely, that inspection of the Oysters by the AVA revealed that they were contaminated with Norovirus.  The matter was no doubt very much in the control of the Singaporean authority which clearly prohibited the importation of the Oysters by reason of the contamination.

24.  Insofar as this is intended to dispute whether the Oysters were contaminated, I reject the Defendant’s allegation.

25.  I find that the Defendant was in breach of the Sales Agreement as well as the implied terms as to quality of the Oysters.

Damages

26.  At the beginning of the trial, the Plaintiff applied, and I allowed it, to amend the items of claim for effectively updating the pleaded amounts since the commencement of action.

27.  The Plaintiff listed the following items of claim:

(1)	Contract price paid to the Defendant	USD20,734.00
(2)	Loss of profit from resale
	(SGD93,582.00-USD20,734.00)	SGD58,334.20
(3)	Bank charges for opening the letter of credit	SGD217.34
(4)	Bank charges for amending the letter of credit	SGD110.00
(5)	Import cargo handling expenses	SGD343.90
(6)	Warehouse charges for 1,125 cartons of the Oyster for AVA inspection	SGD9,009.80
(7)	Warehouse charges for the remaining 95 cartons of the Oysters	SGD475.00
(8)	Cost of destroying the Oysters	SGD1,021.58

28.  The above items of claim are supported by the relevant documents as well as explained by Leow (by his statement).

29.  Upon my query, Mr. Wong accepted that items (3), (4) and (5) would have in any event been incurred by the Plaintiff for the purpose of the resale and their inclusion in the claim would amount to double-recovery.  They have to be taken out of the calculation.

30.  The Plaintiff’s loss was effectively SGD93,582.00 plus the extra expenses incurred as a result of the Defendant’s breach (items (6), (7) and (8)).  The total amount is SGD104,088.38.

Mitigation

31.  The law is trite that the Plaintiff is only expected to act reasonably in mitigation of his loss and damage as a result of the Defendant’s breach.

32.  Soon after learning that the Oysters were held up by the Singaporean authority, the Plaintiff proposed numerous options to the Defendant by its e-mail dated 12 January 2004.  None of them was accepted by the Defendant.

33.  After the AVA’s rejection letter dated 26 February 2004, the Plaintiff requested the AVA in April 2004 to release the Oysters for shipment back to China with a view that they could still be made into dry oysters.  The request was turned down by the AVA and the Defendant was duly notified of the same by the Plaintiff’s e-mail dated 10 April 2004.

34.  In its e-mail dated 8 March 2004, the Defendant itself suggested that the Oysters could not be shipped back to China or Taiwan nor could the Oyster be transshipped to Malaysia for sale.

35.  According to Leow, who gave evidence in court, he verbally informed its sub-buyer in Singapore of the AVA’s rejection in March 2004 but had since then tried to obtain alternative supplies of the required oysters for this sub-buyer.  However, since the oyster harvest season was over in China, the Plaintiff’s effort was in vain.  This led to the letter of cancellation of the sub-sale agreement dated 8 April 2004 which was produced in court.  I accept Leow’s evidence.

36.  Upon repeated demand by the AVA in June 2004, the Oyster were eventually surrendered to the AVA and were destroyed in September 2004.

37.  In the circumstances of this case, I do not find that the Plaintiff could reasonably be criticized for failing to mitigate its loss.

Decision

38.  I order that judgment be entered in the sum of SGD104,088.38 in favour of the Plaintiff.  As Mr. Wong submitted, I allow interest on the judgment sum at the rate of 2% over prime rate from the date of writ to the date of judgment and at the judgment rate thereafter until payment.

39.  I see no reason why costs should not follow the event and I so order with certificate for counsel.

40.  The Plaintiff has previously paid into court a total sum of HK$340,000.00 as security for costs.  The Plaintiff applied for the release of this sum in the event of success of the claim.  In the premises, I order that the sum of HK$340,000.00 be released and paid out to the Plaintiff with interest.