REAL MAX DEVELOPMENT LTD v. HING ON LING ENTERPRISES LTD

IN THE SUPREME COURT OF HONG KONG

(Appellate Jurisdiction)

CIVIL APPEAL NO. 40 OF 1990

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JUDGMENT

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Nazareth, J.:

1. This is the judgment of the Court.

2. The Defendant appeals against the judgment of Deputy Judge Gall, as he then was, awarding the Plaintiff US$39,000 on the 5th of February 1990. Both the Defendant and the Plaintiff are Hong Kong companies carrying on the business of buying and selling commodities.

3. By its Statement of Claim, the Plaintiff claimed that between 23rd March 1989 and 28th March 1989, by an exchange of faxes between them, the Defendant accepted an offer by the Plaintiff to sell at a price and upon certain conditions, 3,000 metric tonnes of palm stearin, which is said to be a form of palm oil used in the manufacture of soap. That, the Plaintiff claimed, constituted a contract between the Plaintiff and Defendant, which the Defendant by subsequent faxes evinced an intention not to perform, and wrongfully repudiated.

4. The Plaintiff claimed that it suffered a loss in that it had contracted to purchase 3,000 metric tonnes of palm stearin from a supplier consequent upon the contract with the Defendant, and that when the Defendant repudiated the contract the Plaintiff became liable to pay US$30,000 to the supplier, and further that it lost the US$9,000 profit that it would have made on the contract. The Plaintiff claimed these amounts together with interest and costs.

5. The Defendant pleaded that no contract subsisted between the parties because while offers and counter-offers were made, the price was never agreed nor were the terms of payment and that both of these were fundamental to the contract.

6. The Defendant now appeals upon grounds that fall within 2 heads. First, that the parties were not ad idem as to four material items, i.e. price, timing of the payment mechanism, shipment date and quantity. And second, that in the light of the subsequent negotiations, no concluded agreement could have been reached.

7. Since the other evidence does not materially assist, the first ground falls to be decided upon the faxes exchanged, of which the material parts of those most relevant were in the following terms

The specification and packing details remained identical in the exchanges.

8. The Plaintiff relies primarily upon faxes C & D as being the offer and acceptance respectively constituting the contract upon which it claims. Turning then first to the price, this can be seen to have been specified as "USD360MT CNF Dalian" in fax C and as "USD360MT (C1) CNF Dalian" in the claimed acceptance in fax D. It is common ground that "C1" refers to commission and that this was to be paid to the Defendant as a rebate. However, it was disputed whether the commission was to be USD1 per metric tonne, as contended by the Plaintiff or 1% of the contract as contended by the Defendant. The dispute was resolved by the trial judge's acceptance of the evidence of the Plaintiff's 1st witness, and he disposed of the possible effect of the reference to commission in only the acceptance, by taking the view that the brackets around "C1" indicated inclusion of the commission in the price.

9. Mr. Joseph Fok for the Defendant submitted that view was untenable since it would mean that no further discount was due and yet the Plaintiff calculated its loss on the basis of a price of USD359 per ton which embodies a further discount of USD1. We do not agree that is necessarily so. But however that may be, there appears to us implicit in the last line of fax D, i.e. "We have promised to accept your offer" viewed in a realistic light and with due allowance for a lack of fluency in the language used, a clear acceptance of the price of USD360 MT in fax C. That view, and not the contrary, seems to s to be consistent with the evidence and the faxed exchanges taken as a whole.

10. Turning to the timing of the payment mechanism, the complaint here is that there was no agreement as to the time by which the letter of credit was to be opened. There is no dispute that the mutual intention all along was that payment was to be effected by a letter of credit. As to when, as a matter of law, credit should be provided, the "correct view is that, if nothing is said about time in the contract, the buyer must provide the letter of credit within a reasonable time before the first date of shipment" (per Denning, L.J. in Sinason-Teicher v. Oilcakes, etc. [1954] 1 WLR 1394, 1400.) That being so, in our view the absence of agreement as to the date of opening of the letter of credit was, in the circumstances before us, not a material item or fundamental term of the contract.

11. We proceed then to the matter of the shipping date, which turns upon the different periods specified, in the offer "APR/EARLY MAY 1989" and in the acceptance "EARLY MAY". The impact this has upon the date of the provision of credit tends to give it additional importance. And in any case, it is generally a vital term of a contract (see Milhem v. Fuerst [1954] 2 Lloyd's Rep. 559 563). However, it is the seller here that is prepared to give earlier delivery, and there is no evidence that prior to acceptance the buyer attached any particular importance to the later date. On the contrary, only a week before the acceptance, as can be seen from fax B, the Defendant found shipment in "APR/EARLY MAY 1989" entirely acceptable. Accordingly, it does not seem to us in the particular circumstances that the term should be regarded as fundamental to the contract, and for the reasons already given in relation to price, a fortiori given the Defendant's willingness to accept "APRIL/EARLY MAY" only a week before, it seems to us that the Defendant's acceptance in fax D equally embraced the shipment period.

12. In any case, while the Defendant indicated in its draft amended Defence that the contract was not concluded with reference to price and payment terms, it made no reference to the shipping date. Clearly this should have been pleaded as a material fact under O. 18, r. 1 of the Rules of the Supreme Court. Moreover only an oblique reference to it was made in submissions of the Defendant's counsel below, and understandably neither the trial judge nor Plaintiff's counsel addressed the matter. Mr. Fok did not apply for leave to include it by amendment. It cannot be right to permit the Defendant to rely upon it at this late stage.

13. Finally, turning to the fourth item, i.e. quantity, this was raised in the context of the tolerance of "+-2%" which appears in the acceptance in fax D but not in the offer in fax C. In our view, this clearly is neither a material item nor fundamental to the contract. To be fair to Mr. Fok, he did not press it as such, but rather as an item that adds weight to the others.

14. We proceed then to the Defendant's second ground, which is that the parties continued to negotiate after the 28th March; that the trial judge wrongly failed to take those negotiations into account and that they show that no contract was concluded. Although it is necessary, where a contract has to be found from correspondence, to take into consideration the whole of that which passed between the parties, "once there is offer and acceptance, the complete contract cannot be affected by subsequent negotiation" (Harmony Shipping v. Saudi-Europe Line Ltd. [1981] 1 Lloyd's Rep. 377, 409). Furthermore, it must be said, that we are not persuaded that the absence of any reference to the subsequent negotiations necessarily means that the learned judge failed to take them into account, or indeed that they point to no contract having been concluded.

15. The foregoing grounds of appeal accordingly fail However, the Defendant also appeals against the judge's assessment of damages on the ground that it was based upon the full amount of 3,000 metric tonnes. Mr. Fok points to the rule expounded in Cockburn v. Alexander (1848) 6 CB 791, 814 that "generally speaking, where there are several ways in which the contract might be performed, that mode is adopted which is the least profitable to the plaintiff, and the least burdensome to the defendant", and to Lord Diplock's dictum in a related context in Lavarak v. Woods of Colchester Ltd [1967] 1 QB 278, 294 that "if the contract is broken or wrongly repudiated, the first task of the assessor of damages is to estimate as best he can what the plaintiff would have gained in money or money's worth if the defendant had fulfilled his legal obligations and had done no more."  He submits that the Plaintiff would not have exercised the option he had under the 2% tolerance because in effect that would have been pre-empted by the quantity the supplier in Singapore actually shipped, and that therefore any doubts about the quantity should be resolved in favour of the Defendant. We are not persuaded that would be right. The burden of proving the circumstances which gave rise to the Plaintiff's loss, lay of course upon it. The trial judge found that the Plaintiff suffered loss by way of compensation payable to its supplier. On the evidence that loss arose in respect of USD10 for each of 3,000 metric tonnes. In the circumstances it seems to us that that afford the trial judge a sufficient indication that 3,000 metric tonnes would have been shipped front Singapore and ultimately delivered to the Defendant or its purchasers in China. Again it is upon that quantity that the trial judge assessed his award of USD9,000 for loss of profit. The obligation on the Defendant was to deliver 3,000 metric tonnes. As always is she case in bulk shipments of this sort delivery could not be made of exactly that amount. The parties had sensibly agreed that delivery which was within 2% of the 3,000 metric tonnes would constitute compliance of its obligation by the Plaintiff but that does not affect the primary duty of the Plaintiff to deliver 3,000 metric tonnes and of the Defendant to accept such amount. We do not consider the general rule in Cockburn is applicable here.

16. Furthermore, no submissions on the point were made to the trial judge; indeed the point was not taken before him. Had it been the evidence may well have been examined. We therefore see no reason to depart from the quantity of 3,000 metric tonnes accepted by the trial judge as a basis for assessing damages

17. Finally, Mr. Fok submitted in the context of section 3 of the Civil Liability (Contribution) Ordinance Cap. 377 that the Plaintiff's right to relief is one of indemnity and that the judge's order should be amended to reflect this, particularly as the evidence shows that the Plaintiff has not yet made any payment or compensation. That is conceded impliedly by the Plaintiff in its Respondent's notice, and expressly by Mr. Leo Remedios for the Plaintiff who also informed the court that he had, towards the end of his submission, been told that the suppliers had been awarded damages of US$40,500 against the Plaintiff. In the latter regard, he also rightly conceded that Since the Plaintiff had only claimed US$39,000 the indemnity should be limited to that amount.

18. We accordingly allow the appeal to the extent only of limiting the relief in the manner conceded. Since it is nonetheless the Plaintiff that has succeeded, we will make an order nisi that the Plaintiff is to have its costs of the appeal.