YIM HOI t/a YIN KWONG TRADING COMPANY v. TSE SIU HA t/a TAI HING DIGITAL CO

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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JUDGMENT

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Background

1. It is not in dispute that on the 29th of November 1984, the Plaintiff and the Defendant entered into two contracts for the supply by the Defendant to the Plaintiff of parts for electronic calculators. The total amount payable under these contracts was US$75,000. Delivery was to be made in Hong Kong on or before the 22nd of December 1984.

2. Prior to entering into the contracts, the Plaintiff had already sold these parts to the Guangdong Foreign Trade Corporation in China for the sum of US$81,000, at the time of entering into the contracts the Plaintiff paid the Defendant a deposit of 30% of the contract price i.e. US$22,500.

3. The Defendant failed to deliver the parts by the agreed date and as a result the Guangdong Foreign Trade Corporation has threatened to recover from the Plaintiff 15% of the price agreed between them as damages for non-delivery. No proceedings have, however, been commenced.

The Plaintiff's case

4. It is the case for the Plaintiff that following the signing of the contracts, the Defendant's manager, a Mr. Addy Koo, came to the Plaintiff's office and offered to vary the terms of the contracts whereby the balance of 70% of the contract price would be paid by the Plaintiff in cash on delivery of the goods instead of by means of a letter of credit. In exchange for that the Defendant would give a discount of approximately 8%. The Plaintiff says that he agreed to that and as a result the letter of credit called for in the written contracts was never opened. However he did obtain a cashier order from his bank for HK$140,000 so as to pay for the goods when they were delivered. Despite repeated requests, however, the goods were in fact never so delivered and eventually the cashier order was returned to the bank.

The case for the defendant

5. It is the case for the Defendant, who was unrepresented, that while she was aware of the contracts and had in fact authorised her manager, Mr. Koo, to enter into them, she had never authorised him to vary the contract and she would have delivered the goods if a letter of credit had been opened as called for in the written contract. As the Plaintiff had failed to comply with a fundamental term of the contract, she was under no liability for her failure to deliver.

6. There was also evidence that Mr. Koo had come to the Plaintiff's office on the 12th of January 1985 and had acknowledged that the Defendant was in breach of its obligations under the contract and had offered to refund the deposit in instalments. He paid HK$10,000 in cash but had failed to pay the balance. The Defendant says that while she was aware of this payment, she had not authorised it or his acknowledgment that she was in breach of the terms of the contract.

The Evidence

7. Evidence was given by the Plaintiff, by his wife Madam Lam and his secretary Miss Cheung. This evidence was to the effect that the Plaintiff had entered into a contract with the Guangdong Foreign Trade Corporation on the 22nd of November 1984 for the sale of certain electronic spare parts. Following this, contracts were entered into between the Plaintiff and the Defendant for the supply of those parts and they were signed on behalf of the Defendant by her manager, Mr. Addy Koo, who is also the Defendant's husband. When the deposit was paid by the Plaintiff, the form of a bank is drafted for US$22,500 and Mr. Koo was at that time aware of the goods had been resold to the firm in China.

8. Following telephone conversation, Mr. Koo came to the Plaintiff's office and said that it was not necessary to open the letter of credit called for in the contracts but he would be prepared to accept cash on delivery of the goods in exchange for a discount of 8%. The Plaintiff agreed to that and then awaited delivery. On the 10th of December 1984 the Plaintiff asked his secretary to draw up shipping documents and to obtain from the Defendant relevant information as to the size of the cartons that would be delivered. She accordingly obtained that information and the shipping documents were drawn up. The Plaintiff continued to request delivery, but each time the Defendant said that the goods were not yet ready. In fact they were never delivered and eventually the Guangdong Foreign Trade Corporation, by a telex, threatened to recover damages of 15% of each contract price from the Plaintiff for his failure to deliver. The Plaintiff then asked for the return of its deposit from the Defendant and on the 12th of January 1985, Mr. Koo came to the Plaintiff's office. He said that he would repay the deposit but in instalments as he was short of money. This was agreed and Mr. Koo paid the sum of HK$10,000 in cash and he signed a document, which was produced, which was an acknowledgment that the Defendant had failed to supply the goods and agreeing to repay the deposit in instalments. This acknowledgment is on the letterhead of the Da Sing Development Company which is also owed by the Plaintiff but I do not think anything turns on that. No further payment was made by the Defendant to the Plaintiff as refund of the deposit and the goods have never been delivered.

Defendant's evidence

9. The Defendant gave evidence and said that she had not delivered the goods simply because the Plaintiff had not opened the letter of credit called for by the contract. She said that she had purchased some of the parts but did not buy them all as she had only received part payment. She was still willing to go ahead with the contract if the letter of credit was opened. She said that she knew nothing about the oral variation of the contract and regarded the written terms as still binding. She said that her manager, Mr. Koo, was not authorised to vary the contract in the manner in which he was alleged to have done, but that he was authorised to enter into the contracts and indeed she had specifically authorised him to do so. She was also said that he was not authorised by her to sign the acknowledgment on the 12th of January 1985 and that the HK$10,000 he paid over was not from her company. She agreed that the Plaintiff did telephone her on several occasions asking for delivery of the goods and had been told or each occasion that they would be delivered if a letter of credit was opened. She said that the parts that were purchased were in a godown and she produced godown warrant. Later on in her evidence, however, she said that in fact the goods had been taken out of the godown and were now in her factory. She was unable to produce any invoices or other documents showing that the goods purchased were the ones to be supplied under the contract.

Decision

10. I accept the evidence given by the Plaintiff, by his wife and his secretary. I am quite satisfied that Mr. Koo did come to the Plaintiff's office on the 3rd of December 1984 and that he offered to vary the contracts whereby the balance would be paid in cash on delivery not by letter of credit and that a discount would be given. A contract could be so varied provided it was not one which was by law required to be in writing. This was not the rescission of the contract and the bringing into being of a new contract, that was a variation merely as to the manner in which the balance payable was to be paid. I am also satisfied that the Defendant had held out Mr. Koo as her manager, that he was authorised to enter in to the inital contract on her behalf and had ostensible authority to vary those contracts in the manner in which he did. I am satisfied that the Defendant cannot at this stage deny his authority to do so. I am also satisfied that again acting in his capacity as the Defendant's manager, Mr. Koo executed the acknowledgment which has been produced dated the 12th of January 1985 which is evidence of the variation.

11. I am therefore satisfied that the contract which existed between the parties after the 3rd of December 1984 was that payment for the goods would be made in cash on delivery, that such delivery had to be made on or before the 22nd of December and the time was, under circumstances of this contract, of the essence. Delivery was not so made and I am satisfied that the Defendant is liable firstly for the return of the deposit paid, secondly for the loss of profit occurred by the Plaintiff and thirdly to indemnify the Plaintiff against any claim made against him by the ultimate purchaser.

12. There will therefore be judgment for the Plaintiff for the sum of US$21,221.20 being the balance of the deposit not returned and for the sum of US$6,000 being the loss of profit. There will be interest on such sums at 12% from the 22nd of December 1984. There will also be a declaration that the Defendant is liable to indemnify the Plaintiff in respect of any amount recovered from the Plaintiff by the Guangdong Foreign Trade Corporation in respect of the Plaintiff's default in delivering the goods to that Corporation there being liberty to apply for directions in respect of the assessment of such amount. The Plaintiff is entitled to his costs.