YAU LIENG HUI XIN INDUSTRIALCO LTD v. PC PARTNER LTD

DCCJ 3744/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3744 OF 2014

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J U D G M E N T

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1.  This is a claim of the plaintiff (“Yau Lieng”) against the defendant (“PC Partner”) for the price of goods sold and delivered.

2.  Yau Lieng is a manufacturer and supplier of plastic products including plastic parts, casings and frames.  Between 2008 and 2014, Yau Lieng had sold and delivered plastic products to PC Partner both in PRC China and in Hong Kong. 

3.  The present dispute relates to the following 5 purchase orders placed with Yau Lieng by PC Partner between November 2012 and August 2013 ( “Purchase Orders”) for manufacturing and supply of various plastic products (“Plastic Products”),either before the due dates if specified or a date to be notified, for assembling by PC Partner into final products for onward supply to Archos S A (“Archos”):  

(1) BD12-9203707 (due dates: 26.11.2012 or 3.12.2012 or to be notified)

(2) BD12-9203822 (due dates: 19.11.2012 or 3.12.2012 or to be notified)

(3) BD12-9203909 (due dates not specified)

(4) BD12-9205104 (due dates: Sept-Dec 2012 or Jan-Feb 2013 or to be notified)

(5) BD13-9205443 (due dates: 21.8.2013)

4.  The last two of the Purchase Orders in fact relate to earlier purchase orders placed by PC Partner between February 2011 and August 2012 which were transferred by agreement to become the subject matters of these two Purchase Orders after Yau Lieng changed its former name to the present one in August 2012.  PC Partner does not dispute the placing of the Purchase Orders. 

Yau Lieng’s case

5.  It is Yau Lieng’s case that it had manufactured the Plastic Products in accordance with PC Partner’s specifications and requirements, particularly the specifications of Archos, on or before the due date for delivery specified in each of the Purchase Orders and the same products had been kept in its warehouse pending delivery to PC Partner which took place only on 4 September 2014, with the products having been stored in the warehouse for some 24 to 36 months.  Yau Lieng issued an invoice of even date for the sum of US$33,357.27 (“Invoice”) which PC Partner has refused to pay, hence the present action.

6.  By its delivery note of 27 August 2014 (“Delivery Note”), PC Partner was put on notice that there was fair wear and tear of the Plastic Products such as change in shape and colour because of the passage of time and Yau Lieng attributes such fair wear and tear to PC Partner’s refusal and delay to accept delivery of the same products despite its repeated requests.

PC Partner’s case

7.  PC Partner’s case is that Yau Lieng has failed to deliver the Plastic Products in “good and merchantable quality and correspond with the ProductSpecifications as per the Purchase Orders”.  More specifically, PC Partner avers that the quality of the Plastic Products failed to pass its internal quality control test and the quality control tests of an independent source inspection agent, namely, 4 Axes (Suzhou) Ltd (“4 Axes”). Despite repeated requests, Yau Lieng has refused to replace those items with non-conformity and/or of inferior quality.  PC Partner says this is a material breach of the parties’ agreement as evidenced by the Purchase Orders and it is therefore not liable to make payment under the Invoice.

8.  PC Partner further counterclaims Yau Lieng for the inspection service fee it paid to 4 Axes in the sum of RMB5,444 or the Hong Kong dollar equivalence. 

Issues in dispute

9.  The following issues fall for determination:

(1) Whether PC Partner is in breach of the parties’ agreement for sale and purchase of the Plastic Products under the Purchase Orders in failing to make payment under the Invoice.

(2) Whether PC Partner is entitled not to make payment under the Invoice due to non-conformity and/or inferior quality of the Plastic Products.

(3) Whether PC Partner’s counterclaim discloses any cause of action.

10.  Unless otherwise stated, the evidence of the witnesses called by Yau Lieng, namely, Mr Chan Kwok Choi (“Chan”) and Mr Tan Xiuguo (“Tan”) was largely unchallenged or otherwise unrebutted by Mr Lam Kwok Ling Francis (“Lam”), the only witness called by PC Partner.  In any event, determination of the present dispute does not turn on credibility of witnesses.

Whether PC Partner is in breach of the parties’ agreement under the Purchase Orders

11.  At the core of this issue is whether and when the property in the Plastic Products passed to PC Partner prior to the actual delivery thereof, which in turn requires a detailed examination of the communication between the parties in the course of 2011/2012 to 2014.

12.  One will recall that two of the Purchase Orders relate to products covered by previous purchase orders placed before Yau Lieng assumed its current name.  According to Tan, the products covered by these two Purchase Orders were manufactured between February/March 2011 and August 2012 pending PC Partner’s notification for delivery.  That being so, the products covered by these two Purchase Orders were in fact manufactured well before the due dates specified in the two Purchase Orders.  

13.  According to Chan, in the normal course of dealings with PC Partner, Yau Lieng would issue an invoice to go with delivery of products to PC Partner and a monthly statement would be issued at the beginning of each month to cover all invoices issued in the preceding month for payment by PC Partner.  The payment period allowed to PC Partner was initially 30 days which was subsequently extended to 45 days by oral agreement.  This arrangement, however,does not apply to the Invoice.

14.  Tan says the Plastic Products covered by the 5 Purchase Orders were all manufactured before the relevant due datesbut PC Partner failed to notify Yau Lieng to deliver such productswithin 2 months of completion of manufacture as it did in numerousprevious transactions in relation to similar products.  Meanwhile, the Plastic Products had all along been stored in Yau Lieng’s warehouse in Shenzhen but they did not remain in a static position due to Yau Lieng’s occasional need for adjustment of storage space and as the warehouse had moved once.

15.  It is of note that before all products ordered under the Purchase Orders were manufactured, Lisa Sun of PC Partner (“Lisa”) wrote to Tan on 28 April 2012 listing out around 39 items of products for which PC Partner no longer had a need.  Such products were covered by various purchase orders includingsome of the Purchase Orders which, Lisa said, Yau Lieng had previously refused to cancel.  No evidence, however, has been adduced by either party regarding such refusal.  Lisa asked Tan to advise how much it would cost if Yau Lieng was to arrange for such products to be scrapped (報廢). Tan replied on 9 May 2012 to give a 10% discount off the price for those products.  PC Partner did not follow up on the matter. 

16.  Since10 July 2012, Tan had been chasing PC Partner for delivery of those ofthe Plastic Products ready for deliveryand a series of emails were exchanged with the handling staff of PC Partner including Charles Cheung (“Charles”) and Vicky Lin (“Vicky”).

17.  On 22 February 2013, Charles wrote to Tan to say they no longer had a production need for the Plastic Products due to Archos’ reduction of demand at a time when Yau Lieng had already manufactured the products.  However, they would arrange for Yau Lieng to deliver some of the products for use as spare parts for repair purposes.  Yau Lieng did subsequently deliver some of the products as requested. 

18.  Charles did not follow up on this matter despite Tan’s enquiry in May 2013. There came a meeting between the parties’ representatives at PC Partner’s office in the same month but they failed to resolve the matter.  This was followed by Vicky’s email of 12 July 2013 referring to the previous discussion on the issue of delivery and intimating an intention to cancel certain orders. 

19.  Further exchange of communication between Tan and Vicky took place between December 2013 and February 2014 when Tan again chased for delivery arrangement and Vicky confirmed with Tan the quantity and price of products under the Purchase Orders pending delivery.

20.  On 27 May 2014, however, Vicky sent Tan by email a “Cancellation list” covering the 5 Purchase Orders and a 6^th purchase order.  Tan replied the next day to advise Vicky that other than the 6^th purchase order, the Purchase Orders could not be cancelled as the products had been manufactured.

21.  On 8 August 2014, Yau Lieng formally demanded PC Partner via its solicitors for payment within 7 days as per an invoice copied to PC Partner on 31 July 2014 (which subsequently became the Invoice).

22.  Ms Siu, counsel for Yau Lieng, submits that from the correspondence between the parties one can conclude that property in the Plastic Products had passed to PC Partner before the actual delivery of the Plastic Products. 

23.  I agree. 

24.  In this connection, the following sections of the Sale of Goods Ordinance, Cap 26 (“SOGO”) are applicable:

Section 7:

“(1) The goods which form the subject of a contract of sale may be either existing goods, owned or possessed by the seller, or goods to be manufactured or acquired by the seller after the making of the contract of sale, in this Ordinance called “future goods”.”

Section 20:

“Unless a different intention appears, the following are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer-

Rule 5. (1) Where there is a contract for the sale of unascertained or future goods by description, and goods of that description, and in a deliverable state, are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made.”

Section 51(1):

“Where, under a contract of sale, the property in the goods has passed to the buyer, and the buyer wrongfully neglects or refuses to pay for the goods according to the terms of the contract, the seller may maintain an action against him for the price of the goods.”

25.  The Plastic Products clearly fall within the definition of “unascertained orfuture goods by description” under SOGO and nothing turns on this.

26.  From the chain of emails between the parties whereby Tan chased PC Partner for delivery arrangement for the Plastic Products and the response from the various staff of PC Partner, it is almost indisputable that the Plastic Products are goods of the relevant description and different batches of such products were manufactured and became deliverable between February/March 2011 and February 2013. 

27.  On the facts, one can readily infer an intention on the parties’ part that Yau Lieng should unconditionally appropriate the same products to the contract with PC Partners when they were manufactured solely for PC Partners’ purposes in fulfilling contracts with Archos and could be put to no other use.  By the same token, PC Partner’s assent to such appropriation can readily be implied.  And such unconditional appropriation with assent took place when Yau Lieng completed manufacturing the Plastic Products and made the same available for delivery to PC Partner.

28.  There is no evidence to contradict Yau Lieng’s evidence that completion of manufacture took place on or before the applicable due dates specified in individual Purchase Orders.  Where no due dates were specified in individual Purchase Orders, I am prepared to infer that the products ordered thereunder were all manufactured no later than 22 February 2013 when Charles wrote to Tan as aforesaid. 

29.  As to the timing when individual batches of the Plastic Products were made available for delivery to PC Partner, I find the same to have taken place around 2 months and no more than 6 months after completion of manufacture in light of Yau Lieng’s evidence.  The significance of this finding shall become obvious when the next issue falls to be determined.

30.  Mr Choy, counsel for PC Partner, argues that there is a possible chance of Yau Lieng being able to sell the Plastic Products directly to Archos and thus has not unconditionally appropriated the same to the contract with PC Partner.  He further argues that such appropriation by Yau Lieng did not take place until the Plastic Products were actually delivered.  In support of this argument, he refers this court to an attachment to Vicky’s email of 12 July 2013 (“Attachment”) and highlights the fact that Yau Lieng’s stock in relation to some plastic products was greater than the quantity ordered under some of the Purchase Orders so that one can infer that PC Partner was not the only purchaser of the plastic products manufactured by Yau Lieng and that the same were not unconditionally appropriated by Yau Lieng to the contract with PC Partner.

31.  I see no merits in this argument.   For one thing, there is no evidence whatsoever that Yau Lieng had reserved any right of disposal and could have sold the plastic products falling within the description of the Purchase Orders to any parties other than PC Partner, not to mention the fact that Archos would supposedly require PC Partner’s service in assembling the plastic products manufactured by Yau Lieng into final products.  Nor, in fairness to Yau Lieng, had Chan or Tan been cross-examined on the contents of the Attachment or the reason why Yau Lieng appeared to have maintained a stock greater than the quantity ordered for some of the products covered by the Purchase Orders. 

32.  Of course, no question of mitigation arises in an action for price which is a debt claim.  Had a direct sale to Archos or some other parties been a viable option, however, one would wonder why Yau Lieng had held onto the Plastic Products for so long without being able to mitigate loss by effecting any such sale.

33.  Relying on Kaga (HK) Electronics Ltd v Sun Cupid Technology (HK) Ltd (CACV 154/2014), unrep, 9 January 2015, Mr Choy submits that Yau Lieng has not put forward positive evidence of it having unconditionally appropriated the Plastic Goods to the contract with PC Partner. 

34.  Suffice it to say, I do not share Mr Choy’s observation that the Court of Appeal has based its decision on an affirmation whereby the plaintiff confirmed the time when the goods ordered by the defendant (known as LLTM) were ready for delivery.  In fact, the Court of Appeal had managed to make inferences in favour of the plaintiff before taking on board also the latter’s assertion in the affirmation. Here, I am able to find or otherwise infer the relevant appropriation for various batches of the Plastic Products here even without similar assertion by Chan or Tan.  

35.  Mr Choy refers to the fact that the Court of Appeal accepted in Kaga, supra that the defendant’s refusal to accept delivery of the LLMT would prevent the inference of assent and argues that Lisa’s email of 28 April 2012 negates any implied assent for unconditional appropriation. 

36.  I disagree.  In this email, Lisa was merely asking Tan to quote the discounted price for scrapping certain products rather than refusing to accept delivery of the same products. In any event, in a scrapping arrangement, PC Partner would not take delivery (because the products would be scrapped by Yau Lieng direct) but would still be paying for the products, albeit at a discount to reflect the saving of delivery costs on Yau Lieng’s part.  That being so, this email of Lisa cannot be taken as a refusal to take delivery.

37.  In any event, PC Partner did not follow up on the idea of “scrapping” the products and instead issued further purchase orders until Charles wrote on 22 February 2013 in which he practically acknowledged Yau Lieng’s completion of manufacture of the Plastic Products from which PC Partner’s assent can readily be implied.  Such assent may be given after the making of the appropriation.

38.  As PC Partner has refused to pay, Yau Lieng is therefore entitled to maintain an action for the price of the Plastic Products, the property of which has passed to PC Partner.

39.  In this connection, Mr Choyhas sought to argue that time had yet to expire for PC Partner to make payment under the Invoice at the commencement of the present action on 3 October 2014 so that Yau Lieng’s action is fatally bad as no cause of action had yet to accrue by then.  He relies on the fact that Yau Lieng had previously agreed to allow PC Partner 45 days after a monthly statement to make payment. 

40.  This is not an argument that PC Partner can advance at this late stage when it has all along proceededsolely on the basis that it is not obliged to pay the Invoice by reason of defective quality of the Plastic Products.  In any event, PC Partner has adduced no evidence on the applicable payment term that might remotely support this argument of Mr Choy while in the correspondence adduced in evidence it had never raised issue with the due date for payment under the Invoice (the payment term of which was stated as “COD”, that is, payment on delivery).

41.  At any rate, Yau Lieng had by its solicitors’ letter of 8 August 2014 demanded payment for the Plastic Products.  Even if Yau Lieng were bound by Yau Lieng’s prior oral agreement to allow PC Partner 45 days to pay, that period had lapsed by the time Yau Lieng commenced the present action on 3 October 2014. 

42.  It is true that the payment period as per each of the Purchase Orders was 30 days after Yau Lieng’s monthly statement (which Yau Lieng accepts as having been extended to 45 days by oral agreement).  For the Plastic Products, however, it is beyond argument that no further monthly statement would be issued by Yau Lieng for these last batches of products manufactured for PC Partner and any agreed period for payment, if still applicable, should run from the date of Yau Lieng’s formal demand for payment on 8 August 2014, if not earlier, when the property in the products had passed to PC Partner. 

43.  In conclusion, I find PC Partner to be in breach of the contract with Yau Lieng under the Purchase Orders in failing to pay the price of the Plastic Products, subject to the adjustment below.

Whether PC Partner is entitled not to make payment under the Invoice due to non-conformity and/or inferior quality of the Plastic Products

44.  Notwithstanding her argument on passing of property, Ms Siu does not dispute PC Partner’s entitlement to reject the Plastic Products on grounds of non-conformity and/or inferior quality but otherwise argues that PC Partner has failed to prove its case in this regard.

45.  PC Partner’s case is based on both the results of the quality check conducted internally as reflected in certain material review reports (“Internal Reports”) and the findings of 4 Axes as presented in its source assessment reports (“External Reports”) in respect of 17 items of products covered by the Purchase Orders and delivered on 4 September 2014. 

46.  The findings of the Internal Reports somewhat differ from those of the External Reports because, as Lam explained before me, different samples had been chosen for assessment purposes save one small batch of 12 products.

47.  It should be noted that no leave has been sought to adduce expert evidence by PC Partner who is therefore relying on the findings of the said reports as mere factual evidence.  

48.  It should also be noted that that PC Partner has chosen not to call the makers of either set of reports to give oral evidence at trial.  The findings of the said reports are therefore hearsay evidence.  As Lam was not involved in the process of the making of such reports, his evidence hardly improves the quality of PC Partner’s evidence in support of its case on non-conformity and inferior quality of the Plastic Products.

49.  A major shortcoming of the Internal Reports is that, unlike the External Reports, no photographs are attached either to serve as evidence of the defects or otherwise assist readers’ understanding of the description of the defects purportedly identified by unidentified quality control staff of PC Partner so as to justify the recommended disposition in each of the reports that each batch of the products so inspected had to be rejected in its entirety. 

50.  According to the Internal Reports, “Inspection Level: II” and “AQL Level: 0.65” were the standards for quality inspection adopted by the inspection staff.  No evidence, however, is adduced to explain these standards orthe application thereof to the Plastic Products.  While Lam had during cross-examination attempted to explain generally as to how the application of such standards could have triggered off the rejection of a whole batch of products, there remains no evidence as to how the inspection staff had applied the standards in recommending a wholesale rejection of the Plastic Products.  In the absence of such evidence, I am not prepared to assume proper application of such standards.

51.  In the circumstances, I canhardly attach any weight to the hearsay evidence as contained in the Internal Reports, particularly their conclusion that all the Plastic Products should be rejected.

52.  The External Reports do not fair a lot better than the Internal Reports.  Photographs are exhibited to each of these reports but they are not of such a quality as to present the defects in a readily appreciable manner.  The problem was exemplified when Tan was asked but unable to comment on the defects as shown in a number of the photographs.  Mr Choy had invited me to look at better copies of the photographs in the course of the trial but I declined the invitation without proper discovery of the same beforehand.    

53.  This can be fatal as the authors, whose identity is revealed but whose qualification or experience is unknown, have relied heavily on the photographs in presenting their findings while the description of each defect serves more like a caption of the photograph rather than as a self-contained explanation of the problem identified. 

54.  That being so, a considerable number of the defect descriptions and/or photographs do not readily present a full picture and would definitely require oral evidence of the makers of the reports to clarify the same.

55.  As in the case of the Internal Reports, what really is fatal to PC Partner’s case is the absence of evidence as to how these findings would justify a wholesale rejection of the Plastic Products so as to justify non-payment when the External Reports do not (and probably should not) make recommendation on the disposition of the Plastic Goods.  In his witness statement, Lam merely deposed to the fact of his engagement of 4 Axes to verify the findings of their internal quality control inspection and made an overly simple remark that the conclusion of the independent inspection was nearly identical to the findings of his internal quality control staff, to which I have said I can attach verylittle weight. 

56.  Given his limited involvement in this matter, what Lam said in oral evidence hardly salvages PC Partner’s position, not to mention the fact that the same would be double hearsay insofar as it is meant to supplement what is missing in the documentary evidence on the alleged non-conformity and/or inferior quality of the Plastic Products. 

57.  The reality is that wholesale rejection of a batch of products by PC Partner rarely occurred in the past dealings between the parties. Tan claimed that the plastic goods Yau Lieng manufactured for PC Partner in the past had only a defect rate of around 2%, which Lam could barely challenge other than alleging (without substantiating evidence) in his witness statement that the non-conformity or defect rate of the products manufactured by Yau Lieng had always been high.  In any event,Lam confirmed during cross-examination that due to PC Partner’s operation need in carrying out mass production, it would not strictly apply the relevant standards for quality inspection to reject whole batches of products but would normally resort to less drastic measures such as allowing Yau Lieng to sort out defective products for rectification or replacement while PC Partner would continue with mass production in the meantime.  Where possible, PC Partner would also use products with defects as they were.  The rejection of the Plastic Products this time, however, was a strict application of the standards for quality inspection simply because no sorting could be arranged with Yau Lieng. 

58.  While Yau Lieng has no duty to disprove PC Partner’s allegations, it is worthy to note a number of Tan’s comments on the findings of the Internal Reports as summarized in the table at page 54 of Bundle A (“A54 Table”) and on various findings of the External Reports. 

59.  On the A54 Table, Tan accepted that wrong parts were delivered as per item 6.  This is the only concession Tan made during cross-examination.  His other comments, however, do raise reasonable questions on the findings:  The silk screen printing identified in item 5 could have been done in accordance with an earlier drawing at page 230 instead of page 235 of Bundle B (and PC Partner could offer no evidence in rebuttal).  Poor painting could have been a result of scratching which in turn could have been occasioned during the excessively long period of storage or while in transit.  Incomplete moulding could have been either a production problem or a result of subsequent damage.  Cracking and denting could have been caused by weight pressure developed during the excessively long period of storage. The incorrect dimension could have been correct after all by reference to the approved sample.  Black spots could have been molds.  Paint peeling could have been due to weakening of adhesion of paint over a long period of time. 

60.  Incidentally, it is interesting to note that in relation to item 7 of the A54 Table, Lam admitted that his internal quality control staff could have referred to Archos’ drawings but not the approved sample in concluding that the dimension was wrong (so that the dimension could have been correct after all).

61.  As to the findings of the External Reports, of note are the following comments of Tan: deformation, if minor, would not necessarily prevent plastic parts from being used for assembling.  Some burr, injection marks or black/white spots would be acceptable if found on unexposed parts or otherwise concealed after assembly.  Paint overflow was something unavoidable and accepted by PC Partner or Archos in the past.  The light guides were made of hard plastic and could therefore deform under weight pressure developed over a long period of storage. Pins could break when the plastic hardens over time.  Roughness and gas marks, if minor, would not result in rejection by PC Partner in the past.  The stressmark should be located at the bottom of a stand and therefore invisible when the stand is in use.

62.  PC Partner carries the burden of proving on balance of probabilities the alleged non-conformity and/or inferior quality of the Plastic Products.  In light of the above, it is my ruling that PC Partner has failed to discharge the burden by simply producing the Internal Reports and External Reports without more.

63.  In this connection, Mr Choy relies also on the admission of Chan and/or Tan that the Plastic Products were defective.  It is true that in the Delivery Statement, Tan forewarned PC Partner that there were quality issues with the Plastic Products such as discoloration and deformation due to the long lapse of time in storage.  Before me, Tan also fairly accepted that under normal circumstances the Plastic Products might not even pass Yau Lieng’s own quality control tests.  It was also admitted that the carton boxes for storing the Plastic Products were damaged over the years and had to be replaced before delivery could be arranged.

64.  In my view, Tan’s or Chan’s such admission does not assist PC Partner’s case when it is generally relating to changes that plastic products could undergo after a long lapse of time rather than specifically relating to the defects allegedly identified by PC Partner.  When Tan (but not Chan) was invited to comment on the findings of Internal Reports and External Reports, he hardly made any concession or admission save as identified above. 

65.  In any event, even if the Plastic Products as delivered to PC Partner did have defects, the same have to be considered in light of the fact that the property in them had passed to PC Partner well before the actual delivery thereof.  Prima facie, risk passed with the property under s.22 of SOGO which stipulates that:

“Unless otherwise agreed, the goods remain at the seller's risk until the property therein is transferred to the buyer, but when the property therein is transferred to the buyer the goods are at the buyer's risk, whether delivery has been made or not: Provided that where delivery has been delayed through the fault of either seller or buyer, the goods are at the risk of the party in fault as regards any loss which might not have occurred but for such fault:

Provided, also, that nothing in this section shall affect the duties or liabilities of either seller or buyer as a bailee of the goods of the other party. “

66.  One therefore has to examine the nature of defects as alleged by PC Partner.  Among the defects identified by PC Partner, discoloration and deformation are the most prevalent ones.  It is the unchallenged evidence of Chan and Tan, who respectively claim to have 30 and 20 years experience in the production of plastic products, that it is possible for plastic products to experience change in color after a lapse of 6 months.  In the case of the Plastic Products, as they are spare parts for assembly into final products, change in shape can take place after 6 months without assembly. 

67.  That plastic products would undergo such change was tacitly recognized or otherwise not disputed by PC Partner when its legal manager wrote to Yau Lieng’s solicitor on 18 September 2014 to state that “the Defects have nothing to do with the time duration of storage.  Most of the Defects…are caused by defective materials and/or poor workmanship…” 

68.  As said, apart from discoloration and deformation, Tan further observed that a number of other defects as alleged by PC Partner could also be attributed to an excessively long period of storage and there is no evidence from PC Partner to contradict such observations.   

69.  Insofar as the Plastic Products have undergone such change as might have deprived them of merchantable quality or fitness for the originally intended purposes by reason of the lapse of time in storage, I am prepared to hold that the same took place while the Plastic Products were at PC Partner’s risk as the property therein had passed to PC Partner within 6 months of completion of manufacture and before such change could have taken place.

70.  Even if it was not a contract term for PC Partner to arrange for delivery within 2 months after completion of manufacture, particularly when due dates for delivery were not invariably specified in the Purchase Orders, I would, insofar as is necessary, further hold that there was delay on PC Partner’s part in giving delivery instruction to Yau Lieng.  The correspondence leaves me little doubt that PC Partner had been stalling the matter due to the drop in Archos’ demand.  

71.  As between Yau Lieng and PC Partner, such delay is clearly PC Partner’s fault which could not be justified by the reduction in Archos’ demand for the electronic products concerned.  Such delay had resulted in an excessively long period of storage of the Plastic Products in Yau Lieng’s warehouse and could in turn have resulted in damage that might otherwise not occur, such as damage caused by weight pressure developed while the products were stored in stacking positions even with protection of proper packing.

72.  In this connection, Ms Siu draws attention to s.39 of SOGO which provides that:

“When the seller is ready and willing to deliver the goods and requests the buyer to take delivery, and the buyer does not within a reasonable time after such request take delivery of the goods, he is liable to the seller for any loss occasioned by his neglect or refusal to take delivery, and also for a reasonable charge for the care and custody of the goods:”

and rightly points out that a buyer owes a duty to take delivery within a reasonable time.  The delay in the present case is by no means reasonable. 

73.  For completeness, there is no evidence of the packing of the Plastic Products, which varied according to the different degrees of need for protection against damage, was other than proper.  Yau Lieng fairly admitted that some of the carton boxes for storing the Plastic Goods were damaged after years of storage and had to be replaced before delivery in September 2014.  Such damage would not have occurred if not for the delay in delivery attributable to PC Partner’s fault.

74.  For the present purposes, it is unnecessary for Yau Lieng to rely on the Delivery Note to hold PC Partner liable.

75.  Excepting the wrong delivery of products as conceded by Tan and the doubtful silk screen printing and dimension problems identified in A54 Table as aforesaid and the silk screen misalignment mentioned below, the defects identified by PC Partner, assuming they do exist, could have been attributed to the excessively long period of storage and I find the risk of such damage to have passed to PC Partner, there being no question of Yau Lieng ever acting as a bailee of the Plastic Products in the meantime.

76.  To recap, there are products which Tan accepted as being wrongly delivered (Part no. 230-00045-00AH at US$0.04 x 1,000 = US$4).  Chan also accepted under cross-examination that those products with silk screen misalignment should not chargeable to PC Partner (Part no. 230-00311-00AH at US$5.072 x 120 = US$608.64).  In relation to the latter item, Tan’s evidence suggests that there was something wrong with the silk screen alignment.  Tan said in normal circumstances Archos would be consulted to see if they would accept the same after all.  This was no longer possible in September 2014.       

77.  In her closing submission, however, Ms Siu advises this court that Yau Lieng accepts responsibility for both the wrong delivery as aforesaid as well as a usual 2% defect rate in respect of the Plastic Products and is prepared to reduce its claim to US$32,686.12, which reduction would have absorbed what would otherwise have to be deducted to account for the wrong delivery and silk screen misalignment as aforesaid.  And this sum will be my award to Yau Lieng.

78.  I conclude that PC Partner has failed to prove non-conformity and/or inferiorquality of the Plastic Products and is not discharged from the duty to make payment under the Invoice.

PC Partner’s counterclaim

79.  In light of the above, PC Partner can maintain no counterclaim against Yau Lieng.  At any rate, I see no basis for PC Partner to claim against Yau Lieng the cost of the External Reports incurred after the commencement of this action, which cannot be said to have arisen from any wrongful conduct on Yau Lieng’s part and can at most form part of PC Partner’s litigation costs.

Conclusion

80.  In conclusion, I order that:

(1)  Judgment be entered for Yau Lieng against PC Partner for the sum of US$32,686.12 or the Hong Kong dollar equivalent thereof together with interest thereon at 4% from the date of writ until judgment and thereafter at judgment rate until payment; and

(2)  PC Partner’s counterclaim be dismissed.

81.  I make an order nisi thatPC Partner do pay Yau Liengcosts of this action, to be taxed if not agreed.  The order nisi shall become absolute unless an application is made for variation of the same within 14 days from the date of judgment.

82.  Counsel’s assistance is appreciated.