QUAN WA CHEONG v. MAK KEUNG MAU t/a KIEN TAI HONG

IN THE COURT OF APPEAL

_________

___________

JUDGMENT

___________

Silke, J.A.:

1. On the 23rd January 1985, the plaintiff, who is a wholesale dealer in animal foodstuffs, had his claim for the price of goods sold and delivered dismissed. The defendant, a farmer in the New Territories with a side line in the sale of similar foodstuffs, succeeded on part of his counterclaim and obtained judgment in the sum of $4,000.

2. The plaintiff now appeals against the dismissal of his claim and against the decree in favour of the defendant. The defendant cross appeals against that part of his claim, for storage charges, that was dismissed.

3. The parties had entered into a contract for the sale of peanut cake. This is an animal feed and is the residue of peanuts after they have been processed under heat to extract their oil. If the peanuts are subjected to excessive heat the residue is dark and not as suitable for feed as is the properly processed residue which is light in colour and of higher nutritious value, containing more fats and oils. The light is more valuable than the dark.

4. The plaintiff had purchased a large quantity of the peanut cake, 2,215 bags, which lay on a barge at Tsuen Wan. It had arrived there from North East China. He wished to sell and availed of the services of a Mr. Cheung as a broker to sell, if possible, the whole consignment.

5. On the 24th February 1984 Mr. Cheung approached a Mr. Mak who, with his brother, traded as Kien Tai Hong - "the defendant" - with a view to sale by sample. Mr. Cheung had, prior to this approach, examined some of the bags upon the barge and it was his evidence that of the 24 he examined he found 14 to contain the light form and 10 the darker. He brought samples to the defendant.

6. At trial conflicts arose as to that which occurred from there on. A particular issue was the nature of the samples produced to the Mak brothers. The contract that was entered into between the Maks and Mr. Cheung acting on behalf of the plaintiff did not have its terms reduced to writing.

7. The trial judge was left in the position where his decision rested upon the view he took of the credibility of the witnesses, those being Mr. Cheung and the two Mak brothers. He gave detailed consideration to that issue.

8. He found as a fact that there was a timeous rejection of the bargain by the defendant or the 25th February on the basis that the samples upon which the contract was based did not match with the bulk delivered. He found as a fact that the contract concerned 1,100 bags not the entirety of the 2,215 bags. He found as a fact that there had been no inspection by the plaintiff of the goods after their rejection by the defendant.

9. In coming to those conclusions he preferred, not without some hesitation, the evidence of Mr. Mak senior, supported as it was by that of Mr. Mak junior, to that of Mr. Cheung. In so doing he bore in mind the submissions of Mr. Chain, who appeared for the plaintiff both here and below, and in particular his submissions as to the quantity of bags sold. His first impression of Mr. Mak as a reliable and honest witness was not disturbed by those submissions. On this the trial judge said:

"When I take into account all the other matters in this case it seems to me that it is not enough, nor are any of the other matters mentioned to me by Mr. Chain enough, to make me conclude that my original assessment of Mr. Mak as a witness was wrong." "It" being the quantity issue.

He went on:

"Allowing that there is force in Mr. Chain's submissions I am still left in a position where I think I must prefer the evidence of Mr. Mak, supported as it is by his brother."

The trial judge was fully aware that a choice between witnesses is never an easy decision to make.

10. Mr. Chain is therefore faced with the difficult task, which he fully recognised, of persuading us that the trial judge in his very full and detailed evaluation of the witnesses and their evidence erred in that he was wrong in his findings of specific facts and that he had led himself into error by failing to consider matters that he should and considering matters which he should not.

11. He has advanced six main grounds of appeal. The first and second grounds related to the issue of rejection. It is Mr. Chain's contention that first of all there is no proper evidence of rejection and secondly: that what there is does not amount, in law, to a rejection. He has referred us to the passages in the evidence of Mr. Cheung and Mr. Mak which differed in detail or this issue. It is correct that Mr. Mak denied that he had approached Mr. Cheung himself with the complaint that the goods delivered were not up to sample. It is correct that Mr. Cheung said Mr. Mak did approach him with that very complaint. It is common between the two that the complaint was made on the day of delivery, the 25th February.

12. The trial judge professed himself a little surprised that Mr. Mak did not seek to support the evidence of Mr. Cheung. While the defence pleaded had made reference to rejection being communicated to Mr. Cheung, the Particulars asked for, and received, did not go so far for it stated that Mr. Mak had contacted "the plaintiff" and that he was unaware of the exact identity of the person to whom he had spoken.

13. The trial judge sought to resolve the conflict in this way :

"I think, however, that up to a point it may be possible to reconcile those two versions of the evidence. It may very well be that Mr. Mak, after this interval of time, believes that he was speaking to some person whose name he didn't know at the plaintiff's office whereas in fact and in truth it was Mr. Cheung who was responding to his telephone call and in answer to a bleep on his pager, but it matters not."

And I would emphasize the next following words:

"If the rejection came and it were well-founded on the 25th then I am satisfied that the rejection was in sufficient time for the defendant now to be able to claim the advantage of it."

14. On the pleadings, the only issue raised was not the fact of the rejection but the date upon which it took place.

15. Paragraph 3 of the defence alleges the rejection. Paragraph 4 of the Reply, while denying that the goods contained the defects alleged by Mr. Mak, averred that the defendant did not:-

"intimate to the Plaintiff that he had rejected them until on or about 3rd March 1984 which was more than a reasonable time after the said goods had been delivered to the Defendant, by reason whereof he ceased to be entitled to reject the said goods."

Paragraph 5 of the Reply denies paragraph 3 of the defence, repeats the averment that the information as to rejection was made on the 3rd March and alleges a counter offer by the defendant.

16. Mr. Chain has sought to argue, as I have said, that there was no evidence of rejection, and further that there was not sufficient communication of any rejection there might have been to enable the defendant to take advantage of it.

17. With respect, there is no substance in either of those submissions. There is no doubt that Mr. Cheung was the agent of the plaintiff. There is a prima facie inference that a responsible agent does what duty to his principal may seem to require - here communication of the rejection. That presumption can be rebutted by evidence of failure so to act or the part of the agent. There is none existing here.

18. Mr. Mak, in his evidence, made it quite clear that he had a detailed conversation with a member of the plaintiff's staff who gave all the appearance of being someone authorised to act on behalf of the plaintiff and there has been no attempt to show that this did not take place. Clearly the prima facie case erected by the evidence, whether one looks to that of Mr. Cheung or of Mr. Mak, has not been rebutted.

19. Another of Mr. Chain's grounds was the issue of the quantity - that were 1,100 bags or 2,215 bags - the subject of the contract for sale by sample. The trial judge was fully aware of this conflict. Having borne in mind very much the same arguments advanced to him as were advanced to us by Mr. Chain, it was a matter which caused him to pause. He went on to say that if it were all it perhaps would lead him:

".... to revise my original impression which I formed when Mr. Mak was giving evidence in the witness box that he was a reliable and honest witness. But it is not the only indication in this case and it is something which, on reflection, I fee is not only to be explained in terms of one or other of the two witnesses not telling the truth."

20. Mr. Chain complains that the trial judge, in not making a specific finding as to which piece of evidence he believed, led himself into the error of wrongly preferring the evidence of the defendant. Again, with respect, I do not agree. The trial judge had considered this matter and had come to an overall conclusion on the whole of the evidence without allowing that particular piece to be the only piece which he did consider. He was entitled to take that view.

21. Two further grounds were argued to show that the trial judge took the wrong view in his evaluation and both related to one of his basic reasons for finding the evidence of Mr. Mak preferable: that is that he thought it "strange" that after the rejection had been communicated to the plaintiff, no ore from the plaintiff, and that included Mr. Cheung, saw fit to inspect the goods then lying in Mr. Mak's godown.

22. Mr. Chain's submissions seem to be predicated on the supposition that the goods once delivered to Mr. Mak became unidentifiable as the plaintiff's goods because of mixing with some similar type of goods which Mr. Mak had already stored in his godown. This is really wishful thinking because there is no evidence of any kind to show an incapability of identification and it lies ill in the mouth of one who saw fit not to make any inspection to advance a theory such as this without any evidential grounds whatsoever.

23. Mr. Chain's final point is that the trial judge had failed to give the weight he should to the evidence of the re-sale price of goods. This referred to the bags remaining on the barge which were sold some few days after the purported sale to Mr. Mak at a price of $100 per picul. The contract price between Mr. Mak and the plaintiff was $102 per picul. It had been Mr. Cheung's evidence that this was a median price to cover both those of dark and light hue. Mr. Mak on the other hand had said this was a price bargained down from that originally named and was for the white only.

24. Mr. Chain submits that, if Mr. Cheung's evidence is accepted that the bags on the barge consisted of a mixed quantity - and there is nothing to contradict this - then the fact that it was sold at almost the same price as were the goods sold to Mr. Mak leads to the inference that the goods sold to Mr. Mak were also of a mixed variety. But this begs the question of the sale by sample and there is no contest that this was such a sale. Mr. Mak's evidence that the samples shown to him were of the light variety was evidence accepted by the trial judge.

25. What, if any, weight the re-sale price would have was for the judge and I am not persuaded that he was in any way in error in coming to the conclusions which he did.

26. Accordingly, the plaintiff's appeal is dismissed.

27. The defendant's cross appeal is purely a pleading point. On the amended counterclaim the defendant succeeded in respect of the charges for the transportation of the bulk to his godown. It is not contested that, if the defendant were entitled to succeed, this item is recoverable.

28. The second portion of his counterclaim was for storage charges and I think it is relevant to set out the manner in which this was pleaded. In paragraph 3 of the defence, having recited the rejection, the pleader went on:

"Whereupon the Plaintiff through the said Tai Lee Transportation Company asked if the Defendant could allow the said goods to be kept in the Defendant's godown for the time being and upon the said Tai Lee Transportation Company verbally agreeing on behalf of the Plaintiff to pay reasonable godown charges for the storage of the said goods to the Defendant, the Defendant acknowledged receipt of the said goods for storage only."

Paragraph  4  is pleaded thus:

"Despite repeated requests of the Defendant, the Plaintiff has failed to take back the said goods which are still being stored at the Defendant's godown. The Plaintiff has further failed to pay any storage charges therefor; and a reasonable storage charge for the said good s now stored with the Defendant is $2,200.00 per month."

29. The amended counterclaim repeated paragraphs 1 to 4 of the Defence and in its paragraph 12 - and this is the material paragraph - stated:

"        By reason of the Plaintiff's breaches of contract aforesaid, the Defendant has suffered loss and damage.

PARTICULARS

30. Having dealt with the issue of transport charges, the trial judge went on:

"It will be recalled that the 1,100 bags of peanut were left at the defendant's godown. According to the defendant, when he spoke to an unidentified person at the plaintiff's office the question arose as to what should be done with those 1,100 bags. That person said: 'Well, can't you put them in your store for the time being' which the plaintiff (sic) did and they have rested there ever since. By a letter written in April solicitors for the defendant said to the plaintiff's solicitors in terms: Look, those bags are taking up room and we are going to charge you storage for them if you don't take them away.'  Now out of those facts, which I do not think have been challenged, or if they have I accept as being proved by the evidence, it would be possible to formulate an agreement or the part of the defendant to store the goods and or the part of the plaintiff to pay their reasonable charges. But it is not pleaded in that way. It is pleaded that those storage charges arose as a result or a consequence of the plaintiff's breach of contract in failing to supply goods of the quality contracted. I do not think that they do arise as a consequence of the plaintiff's breach and I do not think that they are recoverable." (Emphasis supplied)

31. As a proposition of law, with respect, I would entirely agree with that which the trial judge has said. Mr. Eddis, who appears for the defendant in this court, advanced the proposition that the pleadings which I have recited combined with the plural of the word "breach" in paragraph 12 of the amended counterclaim does give rise to an extra, if I may use the word, breach of an oral agreement - that is the oral agreement pleaded in paragraph 5 - the breaches being the failure to remove and the non payment of the storage charges. As to the actual quantum of those charges he suggests, there being no sum agreed at the time, they should be reasonable and that $2 per bag per month is reasonable. In a claim no longer pursued the plaintiff saw fit to claim the sum of $1,500 per day as storage of the remaining bags on the barge.

32. Mr. Chain has sought to persuade us that first of all there was no evidence of the oral agreement and secondly that Mr. Eddis' reading is incorrect. Again, I do not agree. There was clear evidence from Mr. Mak, if believed, as to the question of storage and the $2 per bag charge came directly from him.

33. It does not seem to me that the trial judge had the benefit of the arguments advanced to us by Mr. Eddis nor do I think his attention to have been drawn to the word "breaches" and the significance attached to it.

34. The pleading is a clumsy one and can easily mislead. It would have been preferable had the two particulars of damage been separated and clearly identified as being attached to the different causes of action.

35. But having said that, I think, with respect, the trial judge to have been wrong in rejecting the storage claim and I would allow the cross appeal.

36. I would therefore propose an order that the appeal of the plaintiff be dismissed; that the cross appeal of the defendant be allowed and that the plaintiff to pay to the defendant storage charges at the rate of $2,200 per month as from the 25th February 1984 until such time as the plaintiff removes the goods from the defendant's godown.

McMullin, V.-P.:

37. I am in full agreement with that which my Lord has said and with the order he proposes.

Li, V.-P.:

38. I also concur. I have nothing useful to add.