HA WAI TRADING AS WAI YIP IMPORT AND EXPORT TRADING (HK) CO. v. SANYEI CORPORATION HONG KONG LTD.

1985, No. A5927

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The dispute in this action relates to a contract for the supply of 300,000 type "838" calculators by the defendant to the plaintiff. In substance, the plaintiff claims damages on the ground that the defendant failed to deliver the goods. The defendant says the contract was mutually terminated. Subsidiary issues need not to be mentioned at this stage, though it must be said in this regard that the pleadings tend to confuse rather than identify the issues. Even counsel have felt constrained to volunteer, not without commendable restraint, that the pleadings are not of the best.

2. The business of the plaintiff firm is the import and export of goods, particularly the export of electronic goods to China. On 4th January 1985, after some negotiations the defendant entered into three contracts with the Shenzhen Import and Export Service Company (the Shenzhen Company) which, not withstanding some minor degree of variation in the several name's by which it has been referred to, is a department of the Shenzhen Municipal Government.

3. The first contract (No. 518A-1010-CK) was for the supply of 300,000 EL838 calculators to be delivered before 31st March 1985 to Hainan Island.

4. The second contract (No. 5184A-1010-CK<1>) was for the supply of the essentially electronic parts for 300,000 calculators to be delivered on 20th May 1985 to Shenzhen.

5. The third contract (No. 5184A-1010-CK<2>) was for the supply of the housing and remaining parts of the 300,000 calculators, also to be delivered on 20th May 1985 to Shenzhen.

6. The second and third contracts together provide 300,000 complete calculators. The plaintiff prior to 4th January 1985 had been making enquiries about the availability of calculators, but had not contracted for their purchase. This it did on the 21st January 1985 when it entered into a written "Order Contract" with the defendant company. That contract provided for the supply of 300,000 complete EL838 calculators on the following terms:-

"Unit price :   US$2.70/set CIF Hainan Island"

"Destination :    Hainan Island"

7. It is not disputed that a letter of credit was in fact opened on 13th February 1985, and that accordingly the 35 day deadline was the 20th March and the 50 day deadline was the 4th April 1985. However the letter of credit specified the latest date of shipment as the 25th March 1985.

8. Meanwhile, between the signing of the contract on 21st January and the issue of the letter of credit on 13th February, there had been some exchanges between the plaintiff and the defendant. At this point it is necessary to note that the sole proprietor of the plaintiff firm is Mr. Ha Wai, who had other businesses and who accordingly left the running of the plaintiff firm to his secretary Miss Winnie Cheung, apart from important decisions. As for the defendant company, its involvement in the subject matter of this action was, in substance, conducted by Mr. Murakami Yakashi, the Sales Manager of its Electronics Department. These two dealt with each other direct, as Mr. Ha has no English, while the former two apparently had enough, although they chose to give evidence not in the English in which they conversed with each other, but in Chinese and Japanese respectively.

9. To revert to the exchanges between the plaintiff and the defendant, on 23rd January the defendant delivered to the plaintiff a sample of the calculators to be supplied. On 29th January the defendant wrote to the plaintiff pointing out that the supply situation of integrated circuits ("I.C.s. ") had become complicated and higher prices were being demanded. It said more time was needed. It had found ICs for 80,000 sets and suggested delivery of 30,000 sets ex Taiwan on 20th February and 50,000 sets ex Taiwan on 31st March. The plaintiff did not reply to that letter. Mr. Ha and Miss Cheung had gone off to Hainan. Miss Cheung returned at the beginning of February. She says she had a discussion with Mr. Murakami on the 8th and 9th February with a view to making three variations to the contract. First, to alter the date of shipment of the entire order to 25th March 1985. Second, for the calculators to be supplied in semi knock down ("SKD") as opposed to complete form. Third for reduction of the price from US$2.70 to US$2.65 per set. She claims Mr. Murakami agreed.

10. Mr. Murakami for his part says he went to see Miss Cheung on 2nd February to ask her to extend the delivery date to 30th April and that she agreed. Miss Cheung denies that. Mr. Murakami claims that about 11th February, after returning from a trip to China, Miss Cheung made a telephoned request for the three variations mentioned, to one of which, i.e. that the date of delivery be changed to 31st March, he was not able to agree. Miss Cheung, however, he says, insisted and so there was no end result.

11. It is clear from the documentary evidence that on the 11th February the defendant wrote to the plaintiff referring to a meeting on the 2nd February and a telephone conversation on the 7th February, seeking confirmation of delivery by 30th April; and further that by 25th February the defendant had sent the plaintiff one or probably 2 copies of a new draft contract incorporating the latter 2 of the plaintiff's variations and provision for delivery by 30th April. Miss Cheung was less than convincing, to put it mildly, about her failure to refute or react to those assertions of agreement as to the 30th April deferred date of delivery, which provide strong support of Mr. Murakami's claim.

12. That leads to the first and major issue between the parties. Was the contract of 21st January varied as to the date of delivery? The documents I have referred to tend to confirm Mr. Murakami's claim that it was. When it was put to Miss Cheung that she was asked to defer shipment to 30th April at a face to face meeting with Mr. Murakami, she categorically denied it but became uncharacteristically vague and less than confident about exactly how and when she was told of the defendant's wish to defer shipment to 30th April. Her unease caused me to aobserve her demeanour carefully and to conclude that her evidence on that matter could not be relied upon. I do not say she was necessarily being untruthful, but she was at least confused or uncertain.

13. Nevertheless I believe her evidence that while she would have expected the Shenzhen Company to agree to a few days delay in delivery (i.e. from 31st March to about 5th April), a long delay was a very different matter and the Shenzhen Company was quite likely not to agree as it had downstream customers. While I am prepared to accept that she undertook to sound the Shenzhen Company about the prospects, I do not believe that Miss Cheung would have agreed without securing clearance from the latter. Further, as will be seen, there was a degree of ambivalence on Mr. Murakami's part as to the date of delivery he regarded as agreed and that he was aiming to achieve. I find therefore that the defendant has failed to establish that the delivery date was deferred to the 30th April.

14. As to variation in the 3 respects, which it is not disputed were in fact sought by Miss Cheung (though the date on which she sought such variation is disputed) it is clear from the evidence that the defendant only had reservations as to the advanced date of delivery. Now I carefully observed Mr. Murakami while he gave evidence and he appeared to be a truthful witness notwithstanding his seeming ambivalence as to the target and contracted dates of delivery. The documentary evidence to which I have already adverted indicates that he believed Miss Cheung had agreed to the deferment of delivery to 30th April and to the preparation of a new contract incorporating the agreed variations. On the other hand Mr. Murakami's curiously restrained reaction to the advancement in the letter of credit of what he believed to be the agreed date of deferred delivery, his attempts to get his supplier (Tak Hing) to expedite delivery so that this could apparently be effected about the 25th of March as sought by Miss Cheung, and his admission that throughout he was working to delivery by the 31st March, suggest that he might have agreed to the advanced date of delivery. But an alternative explanation which he himself suggested, might have been his desire to obtain the profits of the deal for his employers, or he might have simply been trying to assist his customer so far as that was possible without actually committing the defendant to an advanced date of delivery.

15. However that may be I think it improbable that Mr. Murakami agreed to advance the date of delivery to 31st March, particularly as the documentary evidence I have already adverted to so strongly suggests otherwise. I have also already recorded my doubts as to the reliability of Miss Cheung's evidence on the point. In that context I have not had the opportunity to mention also her damaging reluctance to admit knowledge of the PRC Government's action against importation through Hainan. There is finally the factor of negotiation through an alien tongue, with its scope for confusion and misunderstanding. All in all I am therefore unable to accept Miss Cheung's version on the specific point of variation of the 21st January contract delivery date, which is also against the weight of evidence. In my view the probability is that Mr. Murakami did not agree to the advanced date of delivery. I am not satisfied the 2 were ad idem. At the very least therefor the plaintiff has failed to discharge the onus of proving the variation of the original contract it contends for. The onus is, of course, upon each party to prove the variation of the originally agreed delivery dates that it contends for. In my finding, neither has discharged that onus.

16. I come then to the position that the Amended Statement of Claim relies upon a variation of the original delivery dates and in that respect it was never amended, nor would amendment necessarily have made any difference. Mr. Chain, in his final address, conceded that if the plaintiff were not able to establish the variation, its claim must fail. Clearly upon the pleadings, that must be so; in any case it is difficult to see how the plaintiff's pleadings could be amended to overcome that difficulty. In my judgment, the claim therefore fails and it is, regrettably perhaps, unnecessary to proceed to the legally far more interesting and nice questions of what the quantum of damages would have been, with all the implications of damages sustained in a foreign jurisdiction and the impact of the foreign law and practice applicable. The claim is accordingly dismissed.

17. I can see no reason why costs should not follow the event nor why they should not be certified for two counsel considering the complexities of the issues and law pertaining to the quantum of damages in this particular case, which perhaps only in hindsight could be discounted. However, I recognise that, a fortiori, in the particular circumstances of this case the parties should be heard if they so desire. I accordingly make an order nisi that the costs be the defendant's, certified for two counsel. By consent that order will become absolute 21 days from today if neither party shows cause.