LAU YING WAH t/a YOUNG STYLE TEXTILE CO v. CHANCEFUL LTD

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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The Facts and the Pleadings.

1. The First Contract.

2. Both parties to this action deal in silk.

3. By a written contract, which is numbered CN 6010, dated 3 October 1987, the defendant agreed to sell and deliver to the plaintiff 30,000 yards of `Hong Silk after wash' for a price of US$4.40 per yard (less 5%). Delivery was to be by two shipments of 15,000 yards at `End October 1987 and End November 1987', and payment 'By 30 days Irrevocable Letter of Credit with an allowance of 5% more or less in quantity and amount.'

4. The plaintiff says that the time for delivery was of the essence. The defendant says this was not so, or, alternatively, it ceased to be so.

5. The plaintiff pleads, and the defendant agrees, that the silk was purchased for re-sale.

6. There is no dispute about the first instalment delivered under this contract. Delivery was made in two lots; 12,250 yards on 6 November 1987 and 2;350 yards on 1 December 1987, and payment was duly made.

7. On 4 January 1988, the plaintiff established a letter of credit for payment for the second instalment under this contract.

8. The parties agreed that to postpone the latest date for the delivery of the second instalment under this contract to 31 March 1988.

9. The plaintiff says that on or about 1 April 1988 the defendant delivered only 5,018.80 yards of silk. This was immediately delivered to the plaintiff's customer. Because, the plaintiff says, of the very late delivery, he did not have an opportunity of examining the batch of material.

10. The defendant says that the plaintiff asked for only 5,018.80 yards, after inspecting samples, although more was available, and the defendant agreed to allow the plaintiff to take only this quantity. It was paid for this delivery under the letter of credit. The plaintiff says that he authorised his bank to pay for this delivery after the defendant guaranteed delivery of the balance of the second instalment of about 10,000 yards by mid-May. At this time, the plaintiff says, he was unaware of any defects in the silk in the batch of 5,018.80 yards.

11. The plaintiff alleges that this batch of material was badly damaged in that it contained holes, and was unmerchantable. He rejected these goods. He says that he has suffered damages by reason of this breach of contract.

12. It is agreed that there was a condition and warranty that these goods would be of merchantable quality.

13. The plaintiff also complains that the defendant has failed to deliver the balance of about 10,000 yards of the second instalment due under the first contract, and claims damages in respect of this breach.

14. In this respect, the defendant says, in effect, that, although tendered, the plaintiff refused to take delivery of the 10,000 yards, and told the defendant that he was unwilling to do any further business with the defendant.

15. The Second Contract.

16. By a further contract, numbered CN 8001 and dated 1 March 1988, the defendant agreed to sell and deliver 15,020 yards of 12102 silk and 12,000 yards of 12103 silk. The plaintiff says that a further 20.000 yards of 14101 silk was sold by the defendant. The defendant says that, although there was an oral agreement regarding this 14101 silk, the plaintiff subsequently cancelled this part of the agreement, and the defendant accepted this. The silk was to be delivered in Hong Kong before 20 March 1988.

17. It is agreed that the plaintiff purchased the silk for re-sale.

18. The plaintiff says that the defendant failed to deliver the silk sold and he has suffered damages.

19. The defendant says that the plaintiff, on 9 March 1988, requested delivery of the 12101 and 12103 silk before 15 March 1988 and refused to accept the samples of the 14101 silk. It says that, at some time before 15 March 1988, the plaintiff again requested delivery of the 12101 and 12103 silk before 15 March 1988, and, when he was told this was impossible, proposed that second contract be cancelled. The defendant says that it accepted this proposal, and the contract was thus discharged by mutual consent.

20. The defendant counterclaims for damages for wrongful repudiation of the first contract.

The Evidence.

21. The Plaintiff's Witnesses.

22. Miss Lau So Chun, the Assistant Manager of the plaintiff, gave evidence.

23. She referred to two purchase orders issued by Silver Textile, the plaintiff's American customer. One is dated 13 September 1987 and was an order for 15,000 yards of 'style 4518 100% silk, Hong Kong silk, mud-wash' at a price of $4.60 for shipment on 15 November. The other is dated 28 September 1987 and is an order for the same quantity of the same goods for shipment on 10 December at a price of $4.70.

24. She referred to the first contract dated 3 October 1987 signed by the plaintiff.

25. The letter of credit in respect of the second instalment under the first contract was extended to 31 March 1988 at the request of the defendant because the goods had not arrived in Hong Kong. On 30 March 1988, she was told by a Miss Chan of the defendant that only about 5,000 yards of the silk due under the second instalment had arrived, and she was asked to collect this. At some stage, she is not sure when, she inquired as to the balance of 10,000 yards. She was told to approach Madame Hon directly about this, but when she attempted to do so she could not contact Madame Hon.

26. The 5,000 yards was collected, but the batch was not inspected because it had to be despatched to Silver Textile immediately. The batch was packed in three cartons, but these were badly damaged so the silk was re-packed before it was sent to the United States.

27. As to the balance of 10,000 yards, Miss Lau says she telephoned the defendant and spoke to either Miss Chan or Miss Seto of the defendant. She was told to speak to Madame Hon, but she was not able to locate her. The plaintiff then received a letter from the defendant dated 13 April 1988 guaranteeing delivery of the balance of 10,000 yards by mid-May, and asking that the plaintiff clear the discrepancies under the letter of credit so that payment could be made in respect of the 5,000 yards delivered at the end of March.

28. She says the plaintiff did not form the view that it did not want the 10,000 yards. The price of silk was rising.

29. Although the letter of credit in respect of this batch did not extend to a delivery beyond 31 March 1988, Miss Lau insisted that payment for the balance of 10,000 yards could still be obtained under this letter.

30. The 10,000 yards was never received.

31. Delivery under the second contract was not received either. She chased the defendant for delivery. She spoke to both Miss Chan and Miss Seto. She was told to contact Madame Hon, but she was unable to do so.

32. Madame Hon told me, during the time of the examination of this witness, that the goods alleged to be defective were not those supplied by the defendant. As this allegation did not appear in the defence, I asked Madame Hon to clarify this so that the plaintiff would know what case he had to meet.

33. Madame Hon told me that Mr Lo, a director of the defendant, who was in court, examined the goods at the plaintiff's premises. Initially. Mr Lo told me from the bar that the goods were not defective, they were in perfect condition and that there was nothing wrong with them at all. I was incredulous of this. I had difficulty believing that the plaintiff would proceed with a claim based on defects to goods when it could be readily ascertained that there was nothing wrong with them. Madame Hon and Mr Lo then indicated that, in fact, Mr Lo had not had time to examine the goods sufficiently to know if they were defective or not. It was alleged that the plaintiff had denied Mr Lo this opportunity. She wished to maintain, however, that these goods were not supplied by her.

34. Miss Lau identified an air waybill for the shipment of the defective goods to the United States. This was dated I April 1988 and referred to 5,020.50 yards of 100% silk. This discrepancy in measure was revealed when the silk was re-packed into five cartons for despatch to the American customer. The total according to the yardage label on each roll of silk was 5,020.50 yards. The article number 4518 appearing on this way-bill is the number appearing on the customer's order forms.

35. Part of the defective silk was returned to Hong Kong and the plaintiff paid HK$4,380.90 for doing this. Only part of the shipment was returned because the customer wanted to keep part of the goods as evidence.

36. Madame Hon put to this witness that the balance of 10,000 yards due under the second instalment of the first contract was not brought to Hong Kong because she was awaiting an amended letter of credit before arranging shipment. Miss Lau replied that she was waiting to hear about the date for delivery before instructing a new or amended letter of credit. She said Miss Chan of the defendant said the defendant would not make delivery. Miss Lau pointed out that this conversation was recorded in a letter by the plaintiff's solicitors to the defendant dated 9 May 1988. There was no response to this letter.

37. Madame Hon suggested to Miss Lau that, in the trade, an expiry of a letter of credit meant that dealings were suspended. Miss Lau said they could not prepare a letter of credit until they knew when delivery would be made. In any event, she said, the defendant had already accepted cash on delivery in respect of another consignment.

38. Madame Lau suggested to this witness that someone from the plaintiff had inspected the fabric offered under the second shipment under the first contract. Miss Lau denied this. She said that the yardage of the fabric was taken from labels on the rolls. Madame Hon maintained that there was no yardage label; that one had to measure the rolls to find this out. However, Mr Koo Wai Fung, an expert in textile technology, said that, in his experience, rolls of fabric are labelled on the outside with the yardage of the roll.

39. Miss Lau denied that the silk sent to the United States was not supplied by the defendant, saying that prior to May they had not acquired such goods from any other source - they `surely came from the defendant'.

40. Madame Hon maintained that the defendant's packing list for the fabric delivered to the plaintiff showed that the goods shipped to the United States were not the goods supplied by the defendant. This packing list shows that the rolls supplied were in lengths of about 16 to 24 yards, whereas those examined in Hong Kong for defects were in much longer lengths. However, the list of rolls examined in the United States shows that they were of much the same lengths as those shown in the defendant's packing list. The list of rolls examined in Hong Kong does show rolls of much greater length, but it was shown to me in court that some of the lengths of fabric had been stitched together. I was told by Mr Koo Wai Fung that this would done to facilitate dyeing and rolling during packing.

41. Under re-examination, Miss Lau said that the plaintiff could not open a letter of credit until a date for delivery was given because the issue of a letter of credit reduced the plaintiff's credit capacity.

42. Mr Koo Wai Fung was asked by Madame Hon how the holes in the fabric could come about. He said this was difficult to tell. It was possible that during the manual processing work someone applied an improper method. Some of the fabric he saw in court was not grey, hand-washed silk; it had undergone dyeing. Madame Hon suggested to Mr Koo that the high temperature dyeing process could cause holes, but Mr Koo would not accept that.

43. Mr Yeh Chun Pai gave evidence. He said that in June 1988, Chi Man, the company for which he then worked as a sales clerk sold 47,000 yards of silk to the plaintiff; 15,000 yards of 12102 silk at HK$ 26 per yard, 12,000 yards of 12103 silk at HK$32 per yard and 20,000 yards of 14101 silk at HK$38 per yard, and duly received payment. He identified the invoice and receipts in respect of this transaction.

44. Mr Tse Chi Ming, proprietor of the businesses trading under the names of CT Carson and Carson Barney, was subpoenaed and gave evidence. He told me that, on 20 May 1988, Carson Barney sold to the plaintiff 6,251 yards of CT518 100% Hong silk (washed) at a price of US$5.50 or HK$42.90 (at an exchange rate of US$1 = HK$7.8). On 23 June, 1988, CT Carson sold to the plaintiff 4,315.25 yards of 5023 100% black gauge silk (washed) at a price of US$5.80 per yard and 3,525.50 yards of 11209 100% black gauge silk at US$5.80 per yard. On 24 June 1988, CT Carson sold 1,151.1 yards of 11209 100% Hong silk (washed) at a price of US$5.80 per yard. Payment for these goods was duly made.

45. Madame Hon's reaction to the evidence of these two witnesses was that they were lying, that there were no such transactions to which they deposed, that the invoices and receipts to which they referred were false documents and that they were involved in a conspiracy with the plaintiff to defraud her. She did not, however, adduce any evidence or reason that would form any basis at all for any of these allegations.

46. Mr Lau Ying Wah, the proprietor of the plaintiff gave evidence.

47. He gave evidence of the two contracts entered into with the defendant. The first instalment under the first contract was delivered. The due date for delivery was 31 October 1987. It is common cause that about 12,000 yards was delivered on 6 November and the balance on 1 December. Because of this it was necessary to amend the letter of credit. He was told by the defendant that `the people from China' were unable to make delivery on due date.

48. The second instalment was also late and the letter of credit was extended to 31 March 1988.

49. On 9 March 1988, he sent a fax to the defendant complaining about the delay in the delivery of the second instalment under the first contract. He also said that the delivery of the 12101 and 12103 silk under the second contract ‘must be delivered to our company before 15th March'. In respect of the 14101 silk under the second contract, he said in the fax: `14101 has burls and after dyeing it was found out that it could not be used. Please inform us whether there are other goods. L/C has been issued to you.’

50. He also instructed his solicitor to write to the defendant, which he did on 30 March 1988. This letter complained about the non-delivery of the second instalment under the first contract and the failure to deliver the 47.020 yards (which measure would include the 14101 silk) before 20 March as agreed under the second contract. The defendant did not respond to this letter.

51. After sending the 5,000 odd yards, part of the second instalment under the first contract, to his American customer on 1 April, he received a telephone call from him. This was a few days before he received the fax from his customer dated 21 April 1988. The call and the fax complained that the silk despatched was defective. As a result, he instructed his solicitor to complain to the defendant. which he did on 23 April 1988.

52. The fax from the plaintiff's customer dated 21 April says -

53. On 30 April, 1988, Madame Hon wrote directly to the plaintiff. This letter said: `Please return all the defected goods to us for refund within 3 days from the date of this letter. We will send you a cheque in settlement of the said goods after inspection. Further, due to the inappropriate way of your dealing business all the contracts remain outstanding are therefore cancelled.' Mr Lau said he did not know what was meant by the reference to `inappropriate way'.

54. Nothing further was delivered under the first contract in spite of the fact that on 13 April 1988, Madame Hon wrote to the plaintiff guaranteeing delivery by mid-May. No delivery was tendered and no demand for payment made. Nothing was mentioned of any pre-condition for the delivery of this fabric, other than arranging for payment of the 5,000 yards delivered at the end of March 1988.

55. The written second contract dated 1 March 1988 has the item relating to the 14101 silk deleted. This was because he was not satisfied with its quality; it had burls. However, Miss Madame said that this problem could be resolved and, in any event, she had another batch available, so this item, it was agreed, should be included in the contract. This evidence is supported by the fact that Mr Lau opened a letter of credit in respect of the 14101 silk and his solicitor's letter of 30 March 1988 includes this 14101 silk when complaining about failure to perform. There was no response from the defendant contradicting the allegation that there was an agreement to sell the 14101 silk.

56. Mr Lau says that when he said, in his fax of 9 March 1988, that the 12102 and 12103 silk `must' be delivered before 15 March, his intention was to press for delivery because of the defendant's tendency to deliver late, hoping that, at least, he would get delivery on time. He said nothing to the defendant indicating that if delivery was not made by 15 March, he would not want the silk.

57. None of the silk due under the second contract was delivered. He instructed Miss Lau to chase the defendant and instructed his solicitor to write the letter of 30 March 1988 demanding delivery. There was no response to this letter.

58. When the defendant did not deliver under the first contract, he purchased replacement silk from CT Carson with which to supply his American customer.

59. When he entered into the second contract with the defendant, he did not have a buyer for the silk, but we wished to have the fabric to build up a stock, because prices were rising. When the defendant failed to deliver under the second contract, he purchased substitute silk from Chi Man. He prepaid part of the price to enable Chi Man to buy in China. He also paid the balance of the price after delivery.

60. When part of the defective goods were returned by the American customer, he examined them to check what his customer had said. He agreed with his customer's complaint. He could not have sold the fabric on the market for any purpose.

61. When he purchased other silk to replace that not supplied by the defendant, he shopped around beforehand to obtain the best prices obtainable. The price of silk has continued to rise since May/June 1988.

62. Under cross-examination, Mr Lau said that no quality surveyor was sent by his company to examine the allegedly defective goods. He said the batch was delivered in the lift lobby downstairs from the defendant's premises.

63. Mr Lau agreed that only the fabric he complained of was defective out of the thousands of yards of silk that the defendant had supplied.

64. Mr Lau denied that the transactions with Chi Man and Carson were not genuine transactions.

65. Mr Lau agreed that some of the fabric sent to the United States had been dyed before being returned to him.

66. The Defendant's Witnesses.

67. Mr Lo Chui Kwa, a director of the defendant, gave evidence on its behalf. He joined the defendant in April 1988, but only came to know there was a dispute in September 1988 when he received a letter from the plaintiff's solicitors speaking of customs and freight charges in respect of the fabric returned to the plaintiff. He then instructed solicitors on behalf of the defendant.

68. He was instructed by Madame Hon to attempt to settle the matter, but when he telephoned Mr Lau all he got was `foul language abusing my mother'.

69. He said he had heard gossip that Mr Lau was trying to have the defendant wound up.

70. Mr Lo said he was invited by the plaintiff to inspect the defective goods on 21 February 1990. He went to the plaintiff's premises on 23 February at about 12.30 pm. He started to examine the fabric. He examined about 7 rolls, and decided that, because of the colour of the fabric and the length of the rolls, it was not that supplied by the defendant.

71. He told me that he was not allowed by Miss Lau to leave the warehouse because she wanted him to give an inspection report. He was told that he had entered the warehouse for no reason so the plaintiff could stop him leaving. Miss Lau told him that he must give an inspection report or they would stop him leaving. He was to be imprisoned until he gave the report. He was not taking proceedings for false imprisonment because he was too busy to sue. He was imprisoned from 1 pm until 2.30 pm, then he telephoned his solicitor. His solicitor did not write complaining about this false imprisonment.

72. It was put to Mr Lo that there was no basis on which he could say that the fabric he examined in February 1990 was not the same as that delivered to the plaintiff in March 1988. He replied: `You may put it that way', but, prompted by Madame Hon in re-examination, he said he had inspected the fabric in February 1990 by means of the packing list on which the defendant made delivery.

73. Madame Hon gave evidence herself. She said that she was managing director and principal shareholder of the defendant. She had originated the defendant in 1976, having come to Hong Kong from China in 1975.

74. Madame Hon launched into a very long explanation of the process of manufacturing Hong silk. I had great difficulty extracting from her the relevance of this evidence. Eventually, I was able to ascertain that what she was suggesting was that, because the production process of Hong silk is so complex and difficult, it was impossible to guarantee with accuracy times of delivery. I indicated that I had taken the point on board. Nevertheless, she continued with her detailed description of the process and I again tried to get her to tell me why I should know these details. She said it was not that she was trying to say that the fabric exported by the plaintiff to the United States was not supplied by her because she did not know this. Nor was she saying that the fabric supplied by her could not have been defective because of the long, difficult process of production. Eventually, I ascertained that she was saying that `I can't see anything pertaining to this fabric that shows it as originating from us because the fabric I manufacture has to be leather-like'.

75. She had not examined the silk in court, saying it was not necessary for her to do so. It was sufficient for Mr Lo to tell her that the material was of several colours so it was not manufactured manually, but by means of machines. This is not what Mr Lo had said. She did examine the fabric in court at that stage, and said that it was not hand-washed but brushed by machine. She could not give an acceptable explanation for not having examined the fabric in court until the fourth day of the trial. Having done so she maintained that the silk was certainly not supplied by her.

76. Madame Hon said that, although she talked with Mr Lau about putting the 14101 silk back into the second contract, they did not reach agreement, only that they would talk again.

77. Madame Hon agreed that, at the relevant time, the price of silk was spirally upwards.

78. She told me that, by 30 March 1988, the defendant had sufficient silk to cover the second instalment of the first contract, but the plaintiff did not want the full amount. In any event, she says, there was no letter of credit covering that shipment.

79. She complained that the plaintiff's solicitors told her repeatedly that the defendant had failed to deliver and was late in making delivery. She says that Miss Chan and Miss Seto, who were not called to give evidence, never stopped contacting the plaintiff. Her colleagues told her that they did not want to listen to phone calls from the plaintiff any more because of the abuse. Although she did not say so directly, I gathered that she was explaining to me why she cancelled the contracts by her letter of 30 April.

80. Madame Hon said that she did not reply to any of the letters from the plaintiff's solicitors because she did not know what had happened. The allegations being made, she said, were very clear, and she did not accept them. When asked if she did not think it wise to say so, she said she `just did not know how to voice her opinion because I just did not know whether the quantity of Hong silk was our silk or not.' Asked if she did not think it wise to hand the letters to the defendant's solicitor, she said she thought that matter could be resolved by having contact with the plaintiff. She thought this in spite of the fact that, when the defendant did contact the plaintiff, it was met by a stream of abuse. Pressed, she said that she did not know one could consult a solicitor about such problems. This did not come well from an intelligent, sophisticated women heading a company doing trade on the international market.

81. Under cross-examination, Madame Hon was asked if the defendant had ever been sued by another company. She said she was not that sure. She tried to give the impression that she would not know about such matters. She said it was possible that the defendant had received a writ, but this handled by her secretary. She maintained she was not sure if a writ had been issued against her by another company. She was asked whether she knew that a winding-up petition had been presented against the defendant in May 1985. She prevaricated and then said she did not know. She was asked if she knew that, between 1984 and 1988, there were 19 actions against the defendant, and she again prevaricated before saying that her husband went to her office where he told her that there was a bundle of court documents and told her that there were quite a number of legal proceedings against the defendant and her. Madame Hon did not explain her earlier evidence that she was unaware of the defendant being sued.

82. Madame Hon tried to give the impression that she knew that the silk delivered at the end of March 1988 was not defective because she was standing beside the quality surveyor when he examined the fabric over white paper in China. Other parts of her evidence, and her conduct, is, of course, inconsistent with this knowledge.

Assessment of Witnesses.

83. I have no hesitation at all in finding that the evidence of Madame Hon and Mr Lo is completely unreliable. That part of my decision in this matter is easy.

84. Madame Hon is plainly a very strong-willed, self-assured and competent woman. She is also intelligent and very self-opinionated. She had no difficulty at all in understanding the issues involved in this matter, but she was quite incapable of conveying to me that what she told me was the truth.

85. She made wild allegations about a conspiracy involving the plaintiff, Chi Man and Carson and the fabrication of documents, without a shred of evidence to support such allegations. She knew absolutely nothing about the plaintiff's dealings with these other companies, but she had hesitation in saying that Mr Yeh of Chi Man and Mr Tse of Carson lied to me in describing the transactions and accusing them of conspiring with Mr Lau to defraud the defendant and mislead me. I reject those allegations as being without any foundation at all.

86. She was prevaricating in her evidence. inconsistent in what she did say and I am completely satisfied that she lied to me when she thought it expedient to do so. When faced with her lies, such as when it became quite clear that she had been seeking to mislead me about her knowledge of legal proceedings against the defendant, she continued to fudge her evidence. When it became obvious to everyone in court that her evidence was quite unacceptable, Mr Cheung wisely wasted little more effort, and contented himself with simply putting the plaintiff's case to her. No doubt, he thought, rightly, that there was little point in seeking to show the degree to which Madame Hon was a liar.

87. Quite apart from the manner in which she gave her evidence, the probabilities are strongly against Madame Hon.

88. She now pretends that she is perfectly satisfied that the silk said to be defective did not come from her. She says that she actually stood over the quality surveyor as the silk was examined. This is inconsistent with other parts of her evidence, and is also inconsistent with the way she reacted to the allegation by the plaintiff that the silk was defective.

89. As to the delays and failure to deliver, I find it incredible that a woman of her business experience would stay silent in the face of the clear allegations in the letters by the plaintiff's solicitors, which documented the defendant's failings almost every step of the way, if those allegations were as groundless as she now says they were.

90. The suggestion that Mr Lau would abandon contracts for large quantities of silk at favourable prices, having regard to the agreed fact that the market price was rising day by day, is utterly ridiculous. Why, one must wonder, would he do such a thing, leaving himself exposed to a customer to whom he had agreed to supply the silk, and at the mercy of the market? In fact, I am not sure that Madame Hon maintains the case the defendant advanced on the pleadings as to the plaintiff's cancellation. In evidence, she seemed to be saying, as she said in her letter of 30 April 1988, that Mr Lau did not cancel the deals, but that she did so because of some ill-defined unacceptable behaviour by him.

91. Mr Lo was no better as a witness. He had very little to say about the matters in issue, but he managed to convince me that his evidence was unreliable. When at the bar, he told me at one stage that the silk that he examined at the plaintiff's premises was not defective. In evidence, he said that he did not have the opportunity to examine it properly. Apparently, he had enough opportunity to form an opinion favourable to the defendant that the silk was not that supplied by the defendant, but not sufficient for him to see whether there were any defects in the fabric. He tells me that the plaintiff detained him unlawfully for some one and a half hours to force him to make an inspection report. Not, he says, a report that was false; just an inspection report on what he saw. I cannot accept, on the probabilities that Miss Lau would do such a thing. To what end? Could she have imagined that she could do this without Mr Lo complaining of such outrageous behaviour? And Mr Lo does, he says, nothing about being deprived of his liberty in this way for this substantial period of time. He is too busy to sue, he says. And also, apparently, too busy to instruct his solicitors to write complaining of this behaviour. With a hearing pending, this sort of behaviour by the plaintiff would have been, at least, valuable ammunition in the hands of the defendant in court.

92. I seldom find it easy to make findings on credibility on the basis of demeanour. but I must say that Mr Lo was almost a caricature of shiftiness when giving evidence. This, coupled with the inherent unlikelihood of what he said, convinced me that he was not telling the truth.

93. On the other hand. the witness for the plaintiff, while not, of course, perfect, were, in my view honest and reliable, and their evidence is consistent with, and supported by, the documents and the probabilities.

94. The evidence of Mr Yeh and Mr Tse of their dealings with the plaintiff is supported by the invoices and receipts issued by their companies. I reject as totally incredible that these documents have been created without any underlying transactions, with a deliberate intent to mislead the court.

95. The evidence of Miss Lau and Mr Lau was given in a straight-forward manner, with the usual occasional failings of memory one expects. What they say is consistent with the documentary evidence and the probabilities. When Mr Lau had a complaint, it was backed up by a letter from his solicitors setting out his allegation clearly. These letters produced no denial from Madame Hon for no reason, or for the reasons advanced by her, which were completely unconvincing.

The 'Defective' Silk.

96. Accepting the evidence adduced by the plaintiff, has it been proved on a balance of probabilities that the silk supplied by the defendant on 31 March 1988 was so defective as to be unmerchantable?

97. Although nothing advanced by the defendant helps me on this point, there is no doubt that the plaintiff's own evidence is somewhat skimpy in this area.

98. I am satisfied that the silk sent to the plaintiff's customer in the United States on 1 April 1988 was the silk supplied by the defendant on 31 March. But that silk was not examined before it was sent by the plaintiff to his customer in the United States so we do not know its condition at that time. There is no admissible evidence from anyone who received the silk in the United States and detected the defects, or in respect of the date on which this happened. I accept the evidence of Mr Lau that the silk that he examined in Hong Kong, which was returned by his customer in the United States, was defective and unmerchantable. I accept that this was a sufficient sample to indicate the general condition of the whole consignment. But there is no direct evidence that the silk delivered by the defendant and received by the customer in the United States is the same silk as that returned to Hong Kong and examined by Mr Lau. And, assuming that the silk is the same, there is no direct evidence that the silk was not damaged after it left the defendant's hands.

99. If this were a criminal case, the court would be bound to find that the necessary chain of evidence to establish beyond a reasonable doubt that the silk supplied by the defendant was defective is absent.

100. But this is not a criminal case, and it is sufficient for the plaintiff to show that it is more probable than not -

101. On my findings, the possibilities on the first aspect are -

                and the possibilities on the other aspect are -

102. Having regard to -

I do not think that I can find that the facts necessary for the plaintiff to succeed as more probable than the contrary version. It is possible that the silk was supplied by the defendant in a defective condition, but I do not think that this is more probable than the possibility that somehow batches of silk were mixed up in the United States, or the silk supplied by the defendant was damaged while in that country.

103. The defendant's conduct does not help the plaintiff in this area. No admissions were made by the defendant that the goods were defective. Indeed, the defendant could not have made any such admission, being as much in ignorance of the defects and the cause of any defects as the plaintiff.

104. Accordingly, I find against the plaintiff on this head.

Failure to Deliver.

105. There is no dispute that the plaintiff did not deliver the balance of the silk of the second instalment due under the first contract.

106. I am satisfied, because I accept the plaintiff's evidence and reject that of the defendant. that the 20,000 yards of 14101 silk was included in the second contract. It is not disputed that none of the silk bargained for under the second contract was delivered.

107. It is clear that the plaintiff wanted all silk due under the contracts, and this is not at all surprising in view of the fact that it is accepted on all sides that the market price of silk was rising continually. I am satisfied that, at all times, the plaintiff was willing to take delivery and make payment, and made this perfectly clear to the defendant.

108. The defendant has established nothing in its pleaded case, or in its case as presented to me at the trial, that would have justified its failure to comply with the contracts. I find that the contracts were not cancelled by mutual consent and were not repudiated by the plaintiff.

109. Accordingly. I find that the defendant is in breach of both contracts by failing to deliver the silk due and that the plaintiff is entitled to damages arising out of the breaches.

Damages.

110. The contract price for Hong silk under the first contract with the defendant was US$4.40 per yard, but the plaintiff was entitled to a 5% discount, giving a real cost of US$4.18 per yard.

111. The defendant failed to deliver 9979.50 yards under this contract.

112. The plaintiff had re-sold this silk to its American customer at a price of US$4.70 per yard.

113. Under the second contract, the defendant failed to deliver -

114. The plaintiff purchased 6251 yards of 100% Hong silk at a price US$5.50 from Carson Barney on 26 May 1988. 5020.50 yards of this purchase was to replace the defective silk, leaving a balance of 1230.50 yards.

115. On 23 June 1988, the plaintiff purchased 7840.75 yards of silk at US$5.80 per yard from CT Carson.

116. On 24 June 1988. the plaintiff purchased -

117. On 24 June 1988, the plaintiff purchased 1,151.10 yards of Hong silk at US$5.80 per yard.

118. The damages suffered by the plaintiff under the first contract is the cost to him of obtaining the 9979.50 yards of silk not delivered by the defendant. Of this, he purchased 9071.25 yards at US$5.50 per yard and the balance of 908.25 yards at US5.80 per yard. The damages amount to US$13,445.42 (9071.25 x (US$5.50-US4.18) + 908.25 x (US5.80-US$4.18).

119. Under the second contract, the price to the plaintiff of the silk purchased was HK$1,127,870. The actual cost of this silk, less 20 yards of 12102 silk, was HK$1,534,000. Adding the market value of 20 yards of 12102 silk at HKS26 (HK$520) gives a total figure of HK$1,534,520. Deducting the contract price gives a figure for damages of HK$406,650.

120. Accordingly, I find that the plaintiff is entitled to damages in the sums of US$ 13,445.42 and HK$406,650, together with interest under section 49 of the Supreme Court Ordinance on the sum of US$13,445.42 from 31 March 1988 (the date of intended delivery) and on the sum of HK$406,650 from 20 March 1988.

121. The defendant's counterclaim is dismissed.

Costs

122. On the face of the matter, there seems no reason why costs should not follow the event. Accordingly, I make an order nisi that the defendant pay the plaintiff's costs of suit of the claim and counterclaim.