OKA ELECTRONICS LTD. v. MANOHAR CHUGH t/a ELECTRIC & ELECTRONICS INDUSTRIES

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REASONS FOR JUDGMENT

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Clough, J. A.:

1. The defendant, Mr. Manohar Chugh, who trades as Electric and Electronics Industries, appealed against the judgment of his Honour Judge Pang, given in the District Court on the 23rd November 1990, awarding the plaintiff, OKA Electronics Ltd. the sum of $19,000 (and interest) being the price of goods sold and delivered to the defendant, and dismissing the defendant's counterclaim against the plaintiff for breach of contract in respect of the sale of the goods in question by the plaintiff to the defendant. The crucial issue between the parties concerned the terms of the contract, if any. On the 26th April 1991 this court allowed the appeal and ordered a new trial before another judge. We now give our reasons for our decision.

2. The plaintiff's claim was for the price of 1,000 radios which it claimed to have sold to the defendant for $19.00 each under a contract contained in the defendant's order form dated the 29th September 1989. The defendant had sent the form to the plaintiff. It was a printed form which the defendant had completed (and signed) with a description of the goods and their unit price under a contract "FOB HONG KONG" for delivery "END OCT/EARLY NOV. 89". A number of additional terms were typed on the form, but they are not material.

3. The form contained on its face, in heavy print and underlined, the words:

The form was also expressed to be subject to conditions on its reverse side where 12 special conditions were printed. Special condition 5 was in the following terms:

4. In the plaintiff's office the form was dealt with by Miss Fong, the plaintiff's export manageress, for whose attention it had been addressed. Miss Fong made a number of deletions and additions on the form before she signed it and faxed back the amended copy to the defendant. The material deletion was the reference to the mate's certificate and to the application of the special conditions on the reverse of the form. The material additions were the indorsement on the form of the words:

and the deletion of part of the delivery date, namely "EARLY NOV. 89", leaving the words "END OCT".

5. The goods were evidently of Chinese origin. At some time prior to the 16th October 1989 a Mr. Miu (with whom Miss Fong claimed to have dealt on behalf of the defendant), accompanied by an Indian gentleman inspected and approved the goods at the plaintiff's premises. After this Mr. Miu instructed Miss Fong to deliver the goods to Lloyd Triestino for shipment. They had been sold on by the defendant to a sub-buyer in Greece.

6. On the 16th October, when the goods were delivered to Lloyd Triestino by the plaintiff's carriers for shipment to Greece, the dock receipt issued on behalf of Lloyd Triestino was not clean, but bore an acknowledgment of the receipt of 20 cartons followed by the indorsement of the words "(3) three ctns Burst". This receipt was not acceptable to the defendant who insisted on a clean mate's receipt before payment in accordance with special condition 5 on the reverse side of his order firm.

7. It not having proved possible to resolve the dispute by amicable settlement, the plaintiff, who relied on the terms in the amended order form, issued its writ in the District Court on the 7th December 1989, claiming the price of the goods as having been sold and delivered to the defendant in accordance with the contract between the parties. The pleadings do not fully reflect the true issue between the parties, because the defendant, whose defence and counterclaim, was not professionally drawn, did not plead that (as he subsequently alleged at the trial) he had informed the plaintiff that he was only prepared to contract on the terms of the offer to buy contained in his printed order form as completed and signed by him.

8. This may have been because the defendant seems to have considered that the terms contained in the unamended order form applied unless he countersigned the amended form. Be that as it may, the defendant's pleading was confined to alleging, in substance, that the terms of the contract included special condition 5 (requiring a clean mate's receipt before payment) which had not been complied with by the plaintiff. On this basis liability was denied for the plaintiff's claim and a sum of $5,882.00 was claimed by way of damages for loss of the defendant's sub-sale as a result of the plaintiff's breach of contract. In its Reply and Defence to Counterclaim the plaintiff denied that the defendant was entitled to a clean mate's receipt and relied inter alia on the terms in the order form as amended by Miss Fong. On the 9th March 1990 the plaintiff's particulars of claim were amended to introduce alternative averments which do not seem to have been relied upon at the trial and are not relevant to this appeal.

9. At the trial the plaintiff relied on the evidence of one witness, Miss Fong, after its solicitor had opened the case on the basis that the issue was whether there was a "condition precedent" that there should be a clean mate's receipt before payment. The substance of Miss Fong's evidence was to the following effect. She said she had handled the contract in question and had dealt with the defendant through Mr. Miu. The amendments she had made to the defendant's order form had, she said, reflected what was agreed between herself and Mr. Miu. According to Miss Fong's evidence the defendant had raised no question about the terms of shipment after the amended order form had been faxed to him.

10. The defendant was in person at the trial. He cross-examined Miss Fong. He did not put it to her that (as he was subsequently to say in evidence) he had told her, or anyone else in the plaintiff's office, that he did not agree to contract on the terms contained in his order form as amended by her. He got her to agree that any change in the contract had to be agreed by both sides but she said, in effect, that if he had not agreed to an amendment he could not have inspected the goods and issued a shipping order.

11. The defendant gave evidence and did not call Mr. Miu or any other witness. He described Mr. Miu as a clerk who did not "decide on the prices". The defendant said that he, the defendant, would sign any amendment or alterations. As regards Miss Fong's amendments to his order form he said:

12. Under cross-examination it was put to the defendant that he had not written back to the plaintiff to say that he did not accept the amended terms. He accepted this and added that he "thought it was sufficient indication by not signing on the amendment". The following questions and answers ensued:

13. The record of the concluding submissions of the plaintiff's solicitor indicates that he submitted that the "conduct" of the plaintiff was "consistent with" the fact "that they had accepted the amended terms". The learned judge seems to have accepted this submission and, in effect, founded his judgment on it. In his written judgment, after reviewing the pleaded issues and the evidence of Miss Fong on behalf of the plaintiff, he observed, in what we regarded as the crucial part of his judgment:

14. On appeal the defendant was again unrepresented. He raised a number of grounds at the hearing in which there was no substance. We do not think any useful purpose can be served by mentioning them now. However, at the stage when he was applying for leave to appeal (which I granted on the 23rd January 1991) he relied on proposed grounds of appeal contained in a professionally drawn written application for leave which included a ground alleging that, when evaluating the evidence adduced at the trial, the judge had misdirected himself in the passage in his judgment which is underlined in the above citation. At the hearing of the appeal the defendant accepted the invitation of the court to rely on this ground which we considered to be sound for the following reasons.

15. The situation which arose between the parties in this case is a familiar one in the field of contract law. It is referred to as the "battle of forms" in Chitty on Contracts, 26th edition, vol. 1 para 57 and in Benjamin's Sale of Goods, 3rd edition, para 146 where the relevant authorities are cited. The following passage in Benjamin at para 146 is particularly in point :

16. In the present case the offer by the defendant to buy the goods on the terms contained in his unamended order form was "killed" (see Trollope & Coils Ltd. v. Atomic Power Constructions Ltd. [1963] 1 WLR 333 at p.337 applied by Lord Denning in Butler Machine Tool v. Ex-Cell-O Corporation (England) Ltd. [1979] 1 WLR 401 at p.404B-C) by what amounted to the counter offer constituted by the plaintiff returning the amended copy of the order form to the defendant. If the defendant had not communicated his rejection of the plaintiff's counter offer orally or in writing to the plaintiff, then, applying the objective test applicable in contract law, (see Chitty, vol. 1 para 41) the defendant would have been deemed by his conduct (in inspecting and approving the goods and ordering their shipment) to have accepted the plaintiff's terms contained in its counter offer.

17. If, on the other hand, the defendant did (as he alleged) communicate his rejection of the plaintiff's counter offer to the plaintiff and insist on contracting only on the original terms offered by him, then it could be contended, applying the objective test, that the plaintiff's counter offer had been displaced by the renewal of the defendant's original offer and that the defendant's conduct  in inspecting and approving and ordering the shipment of the goods and the plaintiff's conduct in delivering them was wholly consistent with the implied acceptance by the plaintiff of the defendant's terms.

18. The factors of notification and acceptance (express or implied) are equally vital in this context. It follows that in the present action the crucial question was whether the judge preferred the evidence of Miss Fong or that of the defendant as to whether or not the defendant had notified the plaintiff unequivocally that he would not accept the terms proposed by the plaintiff and insisted on contracting on his own original terms. This question could not be determined by reference to the defendant's conduct in inspecting, approving and ordering the shipment of the goods, because that conduct was equally consistent with the defendant's evidence (that he had, in effect, told the plaintiff, through Miss Fong or some other employee, of the plaintiff, that he would only contract on his terms) as it was consistent with Miss Fong's evidence to the contrary.

19. It was therefore essential for the trial judge to make an unequivocal assessment and determination of the credibility of Miss Fong and the defendant respectively. This, as Mr. Paul Tse for the plaintiff very properly felt constrained to accept, the judge did not do. In the passage underlined in the citation above he clearly misdirected himself by accepting the submission of the solicitor for the defendant and treating the conduct of the defendant as decisive on this question.

20. It was suggested by Mr. Tse that there was plenty of matter that would have justified the judge in rejecting the defendant's evidence and that the implication from the judge's finding was that the judge was really "too nice" to say in terms that he could not accept the defendant's evidence. In the circumstances, where there is to be a new  trial, we say nothing about the possible grounds for rejecting the defendant's evidence or accepting it, but we emphasise that it was the duty of the judge to assess the credibility of the witnesses and make a clear decision one way or the other which witness he preferred on the notification issue. He did not do this but, for the reasons already given, he misdirected himself by rejecting the defendant's evidence by reason of his conduct which could not determine the crucial notification issue. It follows that an order for a new trial was the appropriate relief on appeal.

21. A further matter which requires mention is that the defendant, who was in person, failed to put to Miss Fong in cross examination that he had told her that he did not accept the terms contained in the amended order form. The plaintiff's solicitor did not apply to recall her so that she could be given an opportunity of dealing with this point and the judge did not pursue the matter. With respect to the judge we think that he should have done so as it would have been of assistance to him, in assessing the credibility of Miss Fong and the defendant, to hear her evidence on this matter.