FRIENDSHIP ALLIANCE METALS & MINERALS CO., LTD. v. BENQUEN TRADING CO., LTD.

1989 No. A3319

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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ASSESSMENT OF DAMAGES

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1. By an agreement in writing dated 1st July 1988 the Defendant agreed to sell to the Plaintiff 200 metric tons of tin concentrates upon the terms and conditions therein contained. A letter of credit was duly opened on 8th July 1988 in favour of the Defendant. No delivery of the goods was made by the Defendant, and these proceedings were taken out by the Plaintiff for damages for the Defendant's breach of the agreement. Pursuant to a consent order made on 12th August 1989, interlocutory judgment for damages to be assessed and costs was entered against the Defendant.

2. The assessment was heard on 24th January 1990 when it was adjourned part-heard by consent. The adjourned hearing took place on 11th and 12th April 1990 when it was further adjourned for reserved judgment.

3. The Plaintiff called a total of 3 witnesses and the Defendant called only 1 witness. A common Bundle of Documents and a Bundle of Invoices were submitted to the Court in evidence.

4. The Agreement of 1st July 1988 provided for delivery of 200 metric tons of tin concentrates of "SN 65% MIN Chinese Origin" at the price of US$60.30 per dry metric ton unit, CIF Hong Kong. Delivery was to be made within 60 days after the opening of the letter of credit i.e. before 6th September 1988. By consent, the delivery date was extended to on or before 22nd October 1988. In the premises, it is common ground that the relevant date for the assessment of damages ought to be 23rd October 1988 or within a reasonable period thereafter.

5. Tin concentrate is a commodity that has its price dependent not merely with reference to the weight of the goods but also to the degree of concentration of the mineral in the goods. Thus the goods in question, which has a concentration of tin at 65%, would have a unit price of US$3,919.50 per metric ton (i.e. US$60.30 x 65). The Plaintiff's case is that the market price of the said goods "in October 1988 to March 1989" was US$65 per dry metric ton unit, or US$4,225 per metric ton (i.e. US$65 x 65). In support, the Plaintiff adduced in evidence transactions for tin concentrates, within the range of SN63.85% to SN68.89% and with price per metric ton unit of between US$60.30 and US$77, for the months of July, August, September, November and December 1988 and February, March and April 1989. There was no transaction for October 1988 adduced in evidence. When asked by the Court on this, P.W.1, the managing director of the Plaintiff, was not sure if the Plaintiff had bought any such goods for that month but concluded that if there were such purchases they would have been included in the bundle.

6. Oral testimony adduced by the Plaintiff, from its managing director and officers of its customers, Zhu Kuan Company of Macao and Philipp Brothers Hong Kong Ltd., supported an upward trend of prices for tin concentrates since middle of 1989 into early 1989. The Plaintiff's witnesses were cross-examined in great detail. Though their evidence cannot be said to be totally impeachable, their evidence as to the price trend are consistent and firm.

7. The only witness called by the Defendant was the "managing director" of Handsome Trading Co. He gave evidence on a contract dated 30th October 1988 between his company and the China R & D International Engineering Technology Corp. for the purchase of 100 metric ton of SN65% tin concentrates at the price of C&F US$60.50 per metric ton unit to be shipped in November 1988. I have noted that the contract did not require a certificate of origin. There was also no mention of the manner of packing and type of container in the contract. The date for the opening of the letter of credit was also not put in. There was also no mention in the contract as to documents to be presented for payment under the letter of credit. There was no invoice or documents evidencing payment produced. That was his company's first and last occasion to deal in tin concentrates. As it was an one-off transaction he was not helpful as to the market trend of tin concentrates. His knowledge of the mineral was confined to the sole transaction.

8. At the close of evidence, I referred both counsel to the extracts from Metal Bulletins for the months between October 1988 and June 1989 in the Common Bundle of Documents. Though the metal Bulletins were quoting prices in other parts of the world and of tin concentrates of very high concentration (over 98%), I was able to detect a link between those prices and the prices as per the contracts adduced by the Plaintiff for the same period in respect of the market trend. However, I was subsecuently asked by both counsel to ignore and disregard those bulletins. In the premises, leave was given by consent to expunge the bulleting from the bundle.

9. There is however, a further document in the Common Bundle of Documents which was not relied on by the Defendant but might have been of relevant to the dispute in issue. That concerned a certificate from a Tai Yuen Lee wan Luen Cheng Development Company in China purporting to verify the price of the company's SN65% tin concentrate for the months of October, November and December 1988 to be CIF Hong Kong US$60.50, US$60.80 and US$61.50 per dry metric ton unit respectively. There is also a certificate from China National metals & minerals Imp. & Exp. Corporation verifying the FOB price of tin concentrates of 65% to have fluctuated between US$60 to US$62 per metric ton unit from October to November 1988. However, no reliance was placed by the Defendant on these and I shall place no weight on them.

10. At the end of the day, the Plaintiff is effectively asking the court to draw inferences from the evidence of the price trend that the price at the time of the breach ought to be not less than US$65 per dry metric ton unit. The Plaintiff having failed to adduce any evidence as to the actual price as at the material time. I have no hesitation in preferring the evidence adduced by the Plaintiff to that of the Defendant. I am not prepared to place any reliance on the Handsome Company transaction. That transaction was totally out of line with the price range evident in the large quantity of transactions in the bundle relating to those four months. I am satisfied that the price for tin concentrates was on a general upward trend before the material time and continued so thereafter until early 1989. I appreciate that there would be obvious minor fluctuations within that period despite the general upward trend. It is in this respect that I find it regrettable that the benefit which the metal bulletins could have offered in identifying these minor fluctuations was taken away from the court by the consent of the parties.

11. There is no evidence to establish a spot market for such commodities in Hong Kong as all the evidence adduced tend to suggest actual deliveries would be made from China though the contract might have stated "ex warehouse". The evidence also suggested delivery could be made reasonably quick i.e. usually in a fortnight after placing of orders. In the premises, I shall accept the prices quoted by Chinese suppliers (which is probably lower than prices quoted by local intermediaries) as being the appropriate market price for the commodity.

12. I also accept the Plaintiff's evidence that usually one price would be fixed for concentrations within certain ranges i.e. one price for tin concentrates of between 65% and 69.9%, though there may be exceptions such as orders for very small quantities.

13. A price of CIF Hong Kong US$64.50 per dry metric ton unit was fixed for 7.2 tons of SN68.89% tin concentrates in an invoice dated 13th September 1988 from a Chinese supplier. A price of CIF Hong Kong US$63.80 per dry metric ton unit was quoted for 10 tons of SN68.49% tin concentrates in an invoice dated 30th November 1988 from a different branch of the same Chinese supplier. There are the transactions closest to the material time of the breach on 23rd October 1988. It would appear, from these 2 figures alone, that price had gone down between mid-September and end of November 1988. I shall adopt the mean figure of US$64.15 (US$64.50 + 63.50 / 2) as the unit price of the commodity in issue as at the time of the breach.

14. It is common ground that as it is a trade custom to allow a margin of 5% in quantity. The claim should thus only be based on a quantity of 190 metric tons and not 200 metric tons as stipulated in the contract. In the premises, damages are assessed in the sum of US$47,547.50 (US$64.15 - 60.30 x 65 x 190). No claim was made for interest and none will be awarded for the period before judgment was entered. There will be an order nisi for costs of the assessment to the Plaintiff with a certificate for counsel.

Dated this 20th day of April 1990.