MODERN SEAS LTD v. SHUN TAT LEE LTD

DCCJ6804/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6804 OF 2003

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J U D G M E N T

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1.  The plaintiff’s claim is for goods sold and delivered.  The defendant had paid for part of the goods sold and all the goods were received by the defendant.  The defendant also returned some of the yarns sold to them by the plaintiff claiming that they were defective.  The return was done after the seven day stipulation in the implied term of the contract between the plaintiff and defendant.

2.  The plaintiff accepted this return for reasons of goodwill.  The plaintiff did not acknowledge that the returned yarns were defective.  Mr Lee for the plaintiff testified that the returned yarns were sold to another buyer who knitted them into garments and sold them to the same buyer of the defendant, a company by the name of Home View.

3.  After the defendant received the goods, that is the yarns, from the plaintiff they had every opportunity to examine them.  From the course of dealings between the plaintiff and the defendant, the plaintiff had provided a dye sample of the yarn to the defendant for the examination and approval and only after examination and approval did the dyeing process proceed and ultimately the yarns were delivered to the defendant in lots and under different lot numbers.

4.  The defendant had accepted the goods.  They accepted the yarn delivered and no complaint was made during the seven days stipulated for complaint in the contract.

5.  The plaintiff’s case was that it is a trade practice and also in the previous dealings with the defendant it was stipulated in all the delivery notes that any defect or complaint of the goods sold and delivered must be raised within seven days or after the seven days the goods or the yarns delivered were deemed to be good and accepted in good condition.

6.  The contract between the plaintiff and defendant were evident, inter alia, in the order notes and delivery notes and these terms contained in these notes were incorporated into the contract.  In the plaintiff’s delivery notes it was expressly stipulated that the yarns delivered in different lots under different lot  numbers must not be used and mixed to use or to manufacture garments.  The end result, as this court understood from Mr Lee’s evidence in this court today, is that if yarns of different lots were used to manufacture the same garments, different shades of colour may appear in the garment made and because of this colour difference in the same piece of garment the garment might appear to look defective.  This is a colour defect.

7.  When the plaintiff demanded payment for the balance of the price for goods sold and delivered from the defendant, it was only then that the defendant alleged that 25,862 pieces of knitted and washed garments have colour defect.  Hence they sought to set off the value of this 25,862 pieces of garment as against the price for the balance of goods sold and delivered by the plaintiff to them.

8.  The defendant also claimed that they had to make up for the defective garments for their client and they had to send the made up goods by air to their client and therefore incurred extra expenses in the form of air freight and this amounted to HK$279,064.68.  In total the defendant sought to set off a total of HK$934,020.40 as against the plaintiff’s claim herein. 

9.  The defendant’s defence was that the colour difference in the yarns supplied by the plaintiff was only discoverable after knitting and washing.  The defendant did not explain why this was so and how it happened.  The defendant did not show either why they had to pay for air freight in sending out the garments after they had to make up for the part of the goods that they claimed to be defective after washing.

10.  The air freight charges was evidenced in Home View’s invoice.  No further detail was available.

11.  The defendant is absent in today’s hearing.  They were represented by a firm of solicitors until the solicitors were granted leave to cease to act and the notice of ceasing to act was filed this week.  The defendant was aware of today’s trial date, today’s hearing.  They have chosen not to appear today, nor did they send a representative.

12.  The plaintiff’s case is clear that it was a case of goods sold and delivered.  The defendant received the goods.  They had examined the goods and they had accepted it.  There was a stipulated seven day period for complaint.  No complaint was made within the stipulated seven day period and after the seven day period the defendant did return a batch of yarns to the plaintiff alleging defects in its colour.  This was stipulated in paragraph 4 of the plaintiff’s statement of claim.  The plaintiff accepted this return.  The plaintiff’s witness testified in court that this acceptance was not an acknowledgment of defect but just a gesture of goodwill.  The returned yarns was some 19,483.5 pounds of yarns.

13.  After this return and after the seven day period there were no further claims or complaint of any defect in the yarns sold and delivered to the defendant by the plaintiff.  The plaintiff’s claim is for the balance of the price of goods sold and delivered and this is an amount of RMB992,863.69.  This was an outstanding amount and when the defendant was pressed for payment the defendant then made the allegation of defect in colour in the goods they had knitted into garments and washed after the knitting and they also claimed for the value of the costs in air freight.

14.  I am satisfied after considering the whole of the evidence that the defendant had accepted the goods.   They accepted the colour samples, accepted the ultimate colour of the yarns which were dyed by the plaintiff and which were delivered to them.   After acceptance they had dealt with the goods.  They knitted the goods into garments and they had it washed.  They made no complaint until they were pressed for payment.

15.  When pressed for payment they came up wit this allegation that there was a defect in the colour of the  yarn.  There is no basis for the defendant to claim that the plaintiff’s yarn was defective in any way.  It was a colour dyed to the satisfaction, dyed to the requirement.  The sample was delivered to them.  It was accepted.  They had the goods delivered.  They  had seven days to look into the goods.  They had seven days to raise a complaint.  No complaint was ever made and they had dealt with the goods by making them into knitted garments and washing them.

16.  The seven days as mentioned was a trade practice.  Mr Lo for the defendant submitted and filed a defence witness statement and in this statement he claimed that he was in the yarn trade for 30 years.  I am sure he was very well learned in this trade and knew the practice.  I do not find any truth in the contention raised in Mr Lo’s witness statement that the yarn had a latent defect.  It is latent in the form that the colour difference or the shade in colour difference was only discoverable after washing.  I do not find any truth in this contention.

17.  No defect was actually shown to the court.  It was only the defendant’s contention as seen in its witness statement.  There was no explanation as to how this happened and why it occurred.  It could occur as could be seen from the plaintiff’s evidence for a number of reasons and one of them is that when a manufacturer used different lots of yarn, each lot of yarn was dyed on a different occasion or in a different tank and when different lots were used to make the same garments different colour shadings of the same colour might occur.

18.  The plaintiff has proved its case.  I find in the plaintiff’s favour that the plaintiff is entitled to the claim for the balance of money for goods sold and delivered and that is in the sum of RMB992,869.69.

19.  The defendant is not entitled to any set off for the reason they allege.  By the same token the defendant is not entitled to claim any set off for air freight.  The plaintiff’s claim is proved and justified.  I enter judgment in the plaintiff’s favour as against the defendant in full as claimed and as set out in the plaintiff’s statement of claim in the amount of RMB992,863.69.  Interest is also awarded on this judgment sum at judgment rate from the date of the writ to the date of this judgment and thereafter interest at judgment rate until the date of full satisfaction of the judgment amount.

20.  I also order costs be in the plaintiff’s favour as against the defendant and costs is ordered  be to the plaintiff to be taxed if not agreed.