KWONG WAH ELECTRICAL MATERIALS v. BICC (HK) LTD

1990, No. A4144

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 plaintiff sues the defendant for breach of an agreement dated 9 May 1990, contained in a letter from the plaintiff to the defendant, the terms of which were accepted, confirmed and signed by Mr. Raymond Ng (Ng) on behalf of the plaintiff, and Mr. Bosco Lau (Lau), on behalf of the defendant.

The letter reads as follows:

"Dear Sirs

Re: Return of BICC Cables

We refer to our meeting today concerning the missing of embossment marks on your products and it is agreed that you will take back all BICC cables which are still remained in our possession including cables which may be rejected by our customers.

We are willing to settle the above matter based on the following terms:-

    a)     You shall within 30 days, at your costs, take back all BICC cables including the alleged defective cables) which are now in our possession and you shall within 7 days upon notice in writing take back the cables which are rejected by our customers.

    b)     You shall within 7 days after taking back of the said BICC cables credit us the cost of the said cables based on the original respective invoiced price after deduction of the outstanding payment owed to you but such deduction must be confirmed and agreed by the 2 parties.

    c)     You shall upon production of the relevant receipt of the storage charges cables pay all storage charges for the said cables up to the date of taking delivery of the same.

    d)     You shall be responsible for all justifiable losses and damages suffered by us in respect of the said cables.

    Accepted and confirmed by

Sgd.	Sgd.
Raymond Ng	Bosco Lau
Kwong Wah Electrical	BICC (HK) Ltd.
Materials Co. Ltd. "

2. It will be apparent that prior to 9 May 1990, the defendant had sold cable to the plaintiff, and the parties had agreed that all cable in the plaintiff's possession on 9 May would be returned to the defendant, and that the plaintiff's account with the defendant would be credited accordingly.

3. The plaintiff claims that it was a term of this agreement that the defendant would be responsible for all justifiable losses and damage suffered by the plaintiff as a result of the plaintiff's customers cancelling their contracts with the plaintiff, or rejecting the cables supplied under such contracts, by reason of the said cables not bearing the appropriate embossment marks, and that it was a further term of the agreement that the defendant would be responsible for the loss of profits sustained by the plaintiff as the result of its inability to sell some of the cable which had been delivered to the plaintiff.

4. The plaintiff pleads that seven contracts with its customers were cancelled by reason of the rejection of cable which was not appropriately embossed. The plaintiff claims that it thereby suffered loss of profit for which it claims damages.

5. The plaintiff also claims loss of profit in relation to cable which it had purchased but not yet sold, but which it anticipated selling at a profit.

6. The plaintiff says that whilst the defendant took back a quantity of cable pursuant to the said agreement, further cable was not taken back, for which it should now be given credit.

7. The plaintiff, therefore, claims in respect of the following financial relief:

(1)    £659,358.25 in respect of cable taken back by the defendant.

(2)    $2,238,280.00 loss of profit in respect of the said 7 cancelled contracts.

(3)    £93,034.68 and $36,027.40 being loss of profit in relation to cable purchased from the defendant, but not yet sold.

(4)     £51,421.44 and $570,397.00 in respect of cable still in the possession of the plaintiff.

8. The defendant claims that on 9 May 1990, the plaintiff was indebted to it in the sum of  £549,002.06 in respect of cable sold and delivered by the defendant to the plaintiff.

9. The defendant maintains that it became extremely concerned about the plaintiff's financial ability to repay the defendant. It therefore agreed to take back all cable which it had supplied directly to the plaintiff. The defendant denies that it agreed to be responsible for losses arising from the plaintiff's cancellation of contracts with its customers, or for any loss of profit.

10. The defendant denies that all the cable specified by the plaintiff was not embossed, and it says that in any event, the presence of such embossment was never a term of any contract between the defendant and the plaintiff. The defendant says that every contract between the parties contained a clause to the effect that "this contract shall constitute the sole contract between the Sellers and Buyers and shall not be in any manner controlled or affected by any other contract or any previous course of dealings between the aforesaid parties in respect of goods of a like description or otherwise whatsoever.".

11. The defendant says that, pursuant to the 9 May agreement, it collected cable from the plaintiff to the value of £597,235.76, and is, therefore, prepared to credit the plaintiff with £48,233.16, being the difference between the plaintiff's indebtedness and the value of the cable collected.

12. In addition, the defendant admits that it inadvertently collected some cable from the plaintiff which it cannot now identify as cable which it had ever sold to the plaintiff, and says that it is prepared to forthwith return such cable to the plaintiff.

13. The defendant pleads that it has taken back all cable from the plaintiff that it was obliged to take back, and that insofar as it failed to do so within 30 days from 9 May 1990, such failure was due to the plaintiff's failure to identify the whereabouts of the cable and to reimburse the godowns at which it was stored.

14. The first main issue in this case is whether the cable referred to in the agreement of 9 May, included all BICC cable in the plaintiff's possession, or only BICC cable which the defendant had sold to the plaintiff. The second main issue is whether the defendant's undertaking to "be responsible for all justifiable losses and damages suffered by us in respect of the said cables", included an agreement to compensate the plaintiff for loss of profit arising from cancellation of agreements with its customers, and from loss of profit arising from the sale of cable which it had already purchased from the defendant, and expected to sell in due course.

15. The 9 May letter is silent on these matters, and both counsel have conducted the trial on the basis that extrinsic evidence would be necessary to demonstrate its true meaning, not by usurping the written document, but by "assigning a definite meaning to terms capable of such explanation or by pointing out and connecting them with the proper subject matter" (Chitty on Contracts, Twenty-sixth Edition, 867).

16. The approach taken by counsel is that stated by Tindal C.J. in Shore v. Wilson (1842) 9 d. & Fin. 355 and appearing in Chitty (Supra) at 868:

"The general rule I take to be, that where the words of any written instrument are free from ambiguity in themselves, and where external circumstances do not create any doubt or difficulty as to the proper application of those words to claimants under the instrument, or the subject matter to which the instrument relates, such instrument is always to be construed according to the strict, plain, common meaning of the words themselves, and in such case evidence dehors the instrument, for the purpose of explaining it according to the surmised or alleged intention of the parties to the instrument, is utterly inadmissible ... The true interpretation, however, of every instrument being manifestly that which will make the instrument speak the intention of the party at the time it was made, it has always been considered an exception, or perhaps, to speak more precisely, not so much an exception from, as a corollary to, the general rule above stated, that where any doubt arises upon the true sense and meaning of the words themselves, or any difficulty as to their application under the surrounding circumstances the sense and meaning of the language may be investigated and ascertained by evidence dehors the instrument itself; for both reason and common sense agree that by no other means can the language of the instrument be made to speak the real mind of the party."

17. As to the document itself, it was pointed out by counsel for the defendant that it is headed "Return of BICC cables", and that there are four references in it to "take back" or "taking back". It was submitted that this suggests that the cable referred to could only be cable supplied by the defendant to the plaintiff, since only that which has been supplied can be taken back! At this point, I should explain that the defendant is the Hong Kong subsidiary of a U.K. parent. Previously, BICC cable was distributed in Hong Kong by Hutchison Boag (H-B), and the plaintiff had been one of its customers. There came a time when H-B no longer supplied BICC cable in Hong Kong, and the defendant took over. Thus it was that the defendant came to sell cable to the plaintiff, a trading company, who "on-sold" to its customers for profit.

18. As I have indicated, one of the main issues in this case, is whether the cable referred to in the agreement of 9 May, included all the BICC cable in the possession of the plaintiff including cable which it had purchased from H-B, or merely cable sold by the defendant to the plaintiff, and it is in this context that counsel for the defendant suggests that the use of "take back", and "taking back", and "return of BICC cable" all strongly suggest that the agreement is limited to BICC cable sold by the defendant to the plaintiff.

19. At first blush, there appears to be some substance in this submission, but in the last resort, I have concluded that it is of no significance. The signatories to this agreement, which was drafted in haste, are both Chinese businessmen. Lau's English is good, although when it came to making fine distinctions, and dealing with precise propositions, shortcomings were revealed. Ng gave evidence in Cantonese and described his English standard as "Form five, roughly". It is by no means uncommon in Hong Kong to hear a secretary say, early in the morning "Sorry, he's not in, he's not yet back," in relation to a person who has not yet arrived for the day! It may be confusing insofar as a person who is "not yet back" can be assumed to have already arrived. In short, there may be an idiomatic ambiguity in the use of the words "taking back".

20. The agreement does not mention H-B cable, but it does refer to "all BICC cables (including the alleged defective cables) which are now in our possession....".

21. It is, therefore, necessary to look at the circumstances in which the agreement was made and to closely examine the motives of the parties in order to ascertain what "all BICC cable" means.

22. Ng is the majority shareholder and managing director of the plaintiff, a trader in electrical materials, including electrical cables for installation in high rise buildings. For about 8 years up to April 1989, the plaintiff purchased BICC cable from H-B, then the sole agent in Hong Kong for this cable. In April 1989, the defendant terminated its relationship with H-B and appointed the plaintiff a non exclusive agent from September 1989.

23. In general, contracts were prepared by the defendant, which Ng signed on behalf of the plaintiff, but he never read the small print, because he "believed it was only some superficial writings". Ng went on to say that the plaintiff only purchased BS cable, i.e. cable of British Standard, and not IEC cable, another international standard. One of the contracts which he signed provided for cable of IEC Standard, and he would not have signed it had he noticed. All cable on Hong Kong construction sites had to be of British Standard. The plaintiff sold BS cable to its customers, using a form of contract which was copied from "a contract given to us by someone else", and which he had never read.

24. Prior to 9 May 1990, the plaintiff had signed contracts with seven customers to supply them with BICC cable.

25. In March 1990, one of the plaintiff's customers, New Star, complained that cable supplied by the plaintiff had been rejected at the site because it was not embossed with "BS" or "BASEC". Then another customer, whose name he could not recall, also complained about the absence of such embossment, "so I refunded the deposit to him". In the event, he asked Andy Au, an employee of the defendant, "to fix the cables with missing embossment as soon as possible and I said I would withold payments until he did it, i.e. I would not pay him for the cable, for that invoice, since most of cables on that invoice had been rejected". (56R) Finally, the defendant communicated with the plaintiff in a manner which did not satisfy him. (173R) The catalogue supplied by the defendant stated that the BICC cable would have a BASEC or BS embossment. There had been an occasion when such embossment was missing, and a certificate had been obtained from AEI, another British manufacturer, which satisfied the customer, but such a certificate had never been obtained from the defendant.

26. Ng said he never achieved any satisfaction regarding this matter, and whenever he asked about it, he was told that the defendant was waiting for its U.K. parent to do something. He therefore spoke to Lau, who said that the defendant would take all the cable back. A short time later, he received a letter from Mr. J.S. Overton (Overton), the Deputy Chairman of the defendant, (180R) in which he was assured that all cable supplied by the defendant was of British Standard, unless it was "outside the range covered by the prevailing standards". This letter made Ng very angry, "because he didn't suggest a way to solve my problem. He couldn't even give us a certificate. That is all we asked for.".

27. The defendant continued to press for payment but Ng refused, saying he "would pay after he had fixed all the cables" Lau suggested he would be dishonouring a document of acceptance, and Ng told him that the cable did not accord with the description and "we didn't want it".

28. On 7 May, he asked Lau "for his suggestion if cables had to be removed from construction sites", and later Lau faxed him a reply, (184R) but without the writing now seen on that document. They met later on 7 May, and agreed that all BICC cable would be returned to the defendant. Ng said that he asked Lau what should be done about the contracts he had signed to deliver BICC cable to his customers, and showed Lau some of these contracts. Lau read the contracts, and said nothing. Lau asked how much stock Ng had, and Ng showed him stock lists of the cable in three public godowns. On 8 May, Andy Au went to the plaintiff's godown at Shatin to inspect the stock which was stored there.

29. Later on 8 May, Au asked him to sign a letter of agreement. (222B) He refused and drew a line through it. It was "completely different from the reason why the goods had to be returned" insofar as it suggested that the return of the cable was "the best solution to balance off the settlement of the outstanding payments owed to us". In fact, the reason for the return was the rejection of cable by the plaintiff's customers, because of the defendant's failure to provide a certificate assuring British Standard. Ng phoned Lau, telling him that it was "senseless and not what we had talked about", and Lau said he would speak to his superior.

30. They met after 4 p.m. on 9 May and Ng agreed to return all cable. He showed Lau all stock lists of cable in public godowns. He didn't discuss the letter of 8 May. Au made calculations asked about prices, and said that "no more than £600,000" was involved. It was agreed that the defendant would pick up the cable pursuant to delivery orders issued on behalf of the plaintiff, and that credit would be given based on original invoice prices. Ng said that he asked Lau about cable which had been "sold to us by Hutchison Boag, and what should be the price, and he said they would take the price of Hutchison Boag Ltd.". According to Ng, this was the first time that the matter of H-B cable was raised, and he said that Lau did not query it. Ng said that it was agreed to return all cable within 30 days at the defendant's expense. They also discussed the loss and damage, and "Lau said that would be decided in court and they would pay the loss and damages decided by the judge", to which Ng said he responded: "It's alright to be decided in Court". Lau said that after all cable had been returned, if the sum was more than plaintiff owed, the balance would be paid to the plaintiff'. Ng telephoned a friend who was a solicitors clerk, and a letter was drafted. (256B) Lau faxed it to his superior, who faxed it back with the various alterations and deletions now seen on it. These were discussed and he agreed to include the words "based on the respective invoiced price", in relation to crediting the plaintiff. Ng suggested that one of the words added, namely "arbitration", be replaced by "justifiable losses and damages", which he understood to mean loss of profit suffered on contracts which would be cancelled with his customers. He was asked if there was any discussion about the meaning of "justifiable losses and damages", and he replied: "Mr. Lau said justifiable would do, because later the court would justify how much it would be and I said it was OK". He believed the word "arbitration" would cause bad feeling, and they both thought "justifiable losses" would be better. It was all based on the understanding they would have to go to court.

31. Thus it was that the agreement came into existence. (219R) There are changes between the legal clerk's draft (256B) and the final agreement (219R). In the draft, the words "all BICC cables which have been sold to our client", have been replaced in the final agreement by "all BICC cables (including' the alleged defective cables)" NG said that Lau wanted to take back all cable, "and I also suggested to include the Hutchison Boag cable. Lau said there was no need as it was very late. He said it was already included because of all."

32. Ng went to Canda on 10 May, for 10 days, but before he left he signed delivery orders so that the defendant could collect cable from public godowns. He also faxed a copy of the agreement to Mr. Lai, the legal clerk. He wanted Mr. Lai "to see if more details could be made, i.e. if we could save any future arguments by elaborating". Lai drafted an agreement, (270B) and it was faxed to him in Canada, but he did not intend to change the existing agreement. However, the new draft was rejected by the defendant, and Lau was aggrieved because of alleged breaches of the 9th May agreement. (223R).

33. Ng confirmed that the cable listed in paragraph 4 of the amended statement of claim was still in the plaintiff's possession, and had not been collected by the defendant, despite being stored in the plaintiff's Shatin godown. He said that the defendant did not collect all the cable that it should have collected, but it did collect some H-B cable.

34. After the 9 May agreement, Ng said that he cancelled all contracts with customers for the future supply of BICC cable. Finally, he described the nature of the plaintiff's business. Gross sales were about $100 million, with a profit margin of about 20%, after taking into consideration overheads of 2-3%. Ng emphatically disagreed that the defendant's reason for making the 9th May agreement was the plaintiff's financial position. Ng relied upon a letter from the Daiwa Bank Limited to support his evidence of the financial soundness of the plaintiff. (469B)

35. In cross-examination, Ng maintained that it was a term of every contract between the plaintiff and the defendant that cable supplied required BS or BASEC embossment, or certification, but after being referred to the standard conditions of sale in all the defendant's contracts, he then conceded that there was no such term! "However, all cable we purchased had embossment." He confirmed that he regarded such conditions as "superficial writings". He was referred to clauses 15 and 16 of the standard conditions:

"15. All previous communications between the Sellers or their agents and the Buyers either verbal or written with reference to the subject matter of the contract are hereby superseded. Any variation or modification must be in writing signed by or on behalf of the Sellers and the Buyers. No other form of variation or modification shall be binding on either party.

16. This contract shall constitute the sole contract between the Sellers and Buyers and shall not be in any manner controlled or affected by any other contract or any previous course of dealings between the aforesaid parties in respect of goods of a like description or otherwise whatsoever."

36. He agreed that these conditions were part of every contract between the plaintiff and the defendant, but he maintained he couldn't understand them and had never consulted solicitors abut them, despite seeking legal assistance in relation to the 9 May agreement.

37. In the event, Ng could point to no requirement in any contract whereby certification regarding BS or BASEL had to be provided by the defendant. Neither could be point to any letter in which certification had been requested. It was put to him that he did not seek any certification, and that he had done nothing rational to obtain it. He denied it.

38. He was forced to admit that there was nothing in the plaintiff's contracts with its customers which required the plaintiff to supply cable embossed with BS or BASEL; nor to provide certification to that effect. But Ng continued to insist that the cable had to be BS.

39. He maintained that the plaintiff cancelled contracts with its customers, "because I had no cable to sell them"; it would all be returned. He insisted that the 9 May agreement contemplated the breaking of the plaintiff's existing contracts and compensation for loss of profits. Ng denied that the agreement was restricted to the return of cable to the defendant which was still in the plaintiff's possession. He was asked what he thought the defendant might gain from the agreement and he replied: "In my opinion, it was to keep their reputation in the market, by not selling cable without embossment." Ng admitted again that there was no requirement for embossed cable in the plaintiff's contracts with its customers, but he said: "Although there was no such term, we always supplied cable with embossment." (124B)

40. NG was asked about clause 10 of the plaintiff's standard conditions, which is as follows:

"10. The Buyer shall not be entitled to reject the goods on the ground that the quality or description is not as stipulated in the contract. The Buyer shall take delivery and pay for the goods in the manner stipulated overleaf and any dispute as to quality or description shall be dealt with as a claim for damages only."

41. Ng then agreed that his customers could not cancel contracts, even if there had been an embossment provision. He went on to say that "We Chinese seldom adopt conditions on the back of the contract. If the goods are defective, we have to fix up things to preserve the relationship."

42. Ng was asked about the likelihood of the defendant taking back H-B cable, when the quantity, quality and type of cable involved could not have been known to the defendant at the time of the agreement. Ng said it would have been "roughly" known, because someone from the defendant went to the plaintiff's Shatin godown on 8 May. Moreover, "an experienced man could tell" which of the cable in the said godown had been sold to the plaintiff by. H-B, and which had been sold by the defendant. Ng was, however, forced to concede that part of the H-B cable was in various public godowns, and that no inspection of that cable could have taken place before 9 May 1990.

43. Ng was asked about the letter, drafted by the plaintiff's solicitors, on Ng's instructions and sent to him in Canada, before being sent to the defendant on 15 May. (270B) Ng said he only read paragraph (a)(1) and (11). He appeared to say that he did this because he only understood simple English. The letter was faxed to him for his signature and his approval, but he trusted the solicitors. The purpose of the letter was to avoid unnecessary confusion, and he denied that it was an attempt to completely replace the 9 May agreement, although he admitted that it referred to replacement and substitution. In fact, it was merely to clarify and elaborate.

44. Ng was extensively cross-examined about the plaintiff's financial relationship with the defendant and I do not propose to go into the details. He said that on 9 May 1990, the plaintiff only owed the defendant £6,560.00.

45. Ng was recalled after various other witnesses had been called by the plaintiff. It was revealed by another witness for the plaintiff that the plaintiff was in possession of much less cable than had been pleaded. Asked what had happened to it, Ng said that he had instructed his colleagues "to sell part of the stock". The selling started in December 1990 and ended "one day before the beginning of this trial". Since the defendant stopped collecting the cable it had agreed to collect in early  June 1990, he ordered that the cable he sold. The defendant was given notice of this on 11 June 1990. (245R)

46. Ng was cross-examined about this revelation. He agreed that he was responsible on behalf of the plaintiff for instructing its lawyers and that he knew that a large proportion of the cable had been sold, and that some of the rest had been opened and cut. He said it was his error and did not occur to him. He was not familiar with "legal procedures".

47. Ng was asked about the plaintiff's claim for accessories. He admitted that accessories were not mentioned in the 9 May agreement. He said that it "didn't occur to me to put accessories in. It only formed a small part."

48. Ng was recalled yet again, after the close of the defendant's case, as a result of Overton's evidence that the plaintiff had no stock with which to supply its customers, and could not have done so. Ng said that there were four other dealers apart from the plaintiff, with whom he had a good relationship in May 1990. He said that he could have obtained sufficient stock from them to supply the seven customers whose contracts had been cancelled. In addition, the plaintiff had some stock available. The other dealers would have accommodated him, and supplied the necessary cable, restricting their own profit to 3-5%, but enabling the plaintiff to make a profit of 15-17%.

49. Ng first disagreed that he had not yet signed contracts to supply goods which the plaintiff did not have, but finally he admitted that the plaintiff was short of 806m of a certain type of cable and had no contract for the supply of such cable. He admitted, therefore, that he had contracted to sell cable which he did not have.

50. If he could still have made a profit of 15-17%, he was asked why he had not gone ahead with the contracts, and he said: "Other dealers were in the same position. They could not furnish certificates."

51. The second witness for the plaintiff was Martin Fong, the Managing Director of Junefair, a company which had entered into a contract with the plaintiff for the supply of cable on 25 January 1990. (450R) Part of the cable had been delivered in April 1990, but it was not embossed and he rejected it. Ng told him that he was trying to obtain a certificate. However, this contract was cancelled. He could not remember on whose initiative it was cancelled, but he did not want cable which was not embossed.

52. In cross-examination, he agreed that it was not a term of the contract that the cable be embossed with BS or BASEC. He, also, had not read the standard conditions, and was forced to admit that he would not have been entitled to reject the cable for want of embossment.

53. He was asked why the whole contract was cancelled when only some of the cable was not embossed and he said it was "because we had no trust in BICC". Nevertheless, he admitted that a subsidiary company, Wing Fai, was currently purchasing BICC cable. He found it necessary to change his evidence, therefore, by saying that "we had no confidence in cables which had no BASEC embossment".

54. The third witness was Tam Ngai Lai, the plaintiff's sales manager. He said that around March 1990, Ching Fai Ching of New Star told Au that the Housing Authority had rejected cable because it was not embossed with BS. Au was contacted and he arranged an inspection with Francis Ho. Three drums were found to have no BS embossment and Francis Ho promised to look into the matter, which was thereafter handled by Ng.

55. The fourth witness was Yu Man Wai, the storekeeper of the plaintiff's warehouse in Shatin. In May 1990, Au and Fung, of the defendant, inspected BICC cable stored there, and it was later collected. Sometime in June, six vehicles arrived to collect it. He gave Fung various delivery orders, and Fung said he would not collect part of the goods. He thought the selection was based on quality.

56. In cross-examination, he said that much of the cable listed in the statement of claim had been sold, and he provided details. As a result of his evidence, the plaintiff withdrew its claim for specific performance generally, and for loss of profits in relation to such cable as had been sold.

57. The fifth witness was Ching Fat Ching, the proprietor of New Star Trading Company, who said that the plaintiff delivered cable to him in March 1990 without BS or BASEC embossment. Since the Housing Authority would not accept such cables, he complained to the plaintiff, and later returned the goods. The plaintiff accepted the rejection. He said that New Star's contract with the plaintiff was an oral one, but that he specifically required cable with a BASEC marking. He said that Ng agreed.

58. Finally, evidence was given by Cheung Shun Wo, the proprietor of JECO Engineering, which entered a written contract with the Plaintiff in March 1990. Later, Mr. Tam of the plaintiff contacted him and said that there would be no BASEC embossment. He considered this embossment to be part of the contract, although there was nothing about it in the contract itself. He said that cable without BASEC embossment was much cheaper and could be purchased anywhere. Tam told him that he could not supply cable with BASEC markings and the matter was resolved by cancelling the contract.

59. Bosco Lau was the first witness on behalf of the defendant. An engineer by profession, he was a divisional manager of the defendant in early 1989. He confirmed that H-B had been the local agent for BICC cable; but in February 1989, the defendant began selling to the market through appointed distributors, the plaintiff being one of them. Generally Ng telephoned Au and ordered cable, and after price negotiations, orders were placed with the UK factory, and delivery was made to the plaintiff in Hong Kong. Depending on the type of product, delivery normally took 4-8 months. There were two methods of payment; documents against acceptance 60 days, and open credit 60 days, and Lau described them. The first delivery to the plaintiff was in August 1989, and the first few invoices were paid somewhat late, "but not too bad". Thereafter, the situation deteriorated and payment was always late. The accounts department had to chase the plaintiff to pay overdue invoices and he and Au "also visited the plaintiff and chased for payment. This was happening generally, but we treated it with the greatest patience.".

60. By May 1990, the plaintiff owed the defendant more than half a million pounds, and the defendant experienced difficulty with its cash flow, since it had to settle with its UK parent. Thus, £250,000.00 was borrowed from the defendant's bank in February 1990, and a further £250,000.00 in June 1990, as a direct result of plaintiff's indebtedness. Interest had to be paid and financial pressure on the defendant increased. The plaintiff was "chased" for payment, but patience was displayed because it was viewed as a long term partner. However, the "plaintiff was the only customer to whom I had to take my financial comptroller."

61. He said that a BS number in a contract meant "the number of the British Standard that stipulated the production and testing requirements of the cable", whilst BASEL was "British approval services for electric cables. It is an independent authority in the UK" which certifies, in effect, the the "manufacturing process is in accordance with product specification under relevant British Standards and they also test and certify the product itself". A factory can seek BASEL certification at its option, but BASEL does not approve every type of cable. A product is of British Standard if the factory says it is. In doing so, it is guided by an organisation called BSI, which establishes so called "British Standards". Thereafter, a factory can stipulate if it has complied with those standards in manufacturing any cable. IEC is the international Electric Commission, a European organisation which performs asimilar function as BSI. A factory might manufacture cable to that standard, and if so, it will so certify. A customer can ask for BASEC embossment, and if so, the factory will seek it. Hong Kong Electric is a customer of the defendant. It requires no embossment. Neither does China Light, another customer. The plaintiff never asked for a BS or BASEC, embossment, nor for certification to that effect. BASEC does not approve every type of cable, and 800 mm² cannot, for the moment, be approved by BASEC. [800 mm² was part of the cable in the plaintiff's contract with JECCO.] No BASEC approval was possible in relation to some of the cable in some of the contracts between the plaintiff and the defendant e.g. sections B & D contract 2372. (8-10B) and section A(11). (44B).

62. When New Star, a customer of the plaintiff, complained in March 1990, he sent his assistant Francis Ho to inspect, and he asked Ng if it was possible to talk to someone at New Star. He did not want to bypass the plaintiff. However, Ng did not respond. Lau denied that he was asked for a certificate for New Star, and he said that a certificate from the factory would have been no problem, i.e. a certificate that the cable had been manufactured in accordance with British Standards. In fact, he was never made aware of another complaint and was never asked for another certificate. If he had been, there would have been no difficulty in obtaining it. His superior, Overton, made it clear on 4 May that BICC cables were "manufactured in strict accordance with the relevant British Standards." (2158).

63. On 7 May, Lau wrote to Ng, seeking to visit sites to evaluate the costs of removing cables already installed, to see end-users "to explain the situation with an aim to get him to approve the cable rather than taking it back" and to be given "the drum numbers of the cable involved and our invoice numbers to establish the actual. cost of reimbursement". They met on 7 May and discussed the matter, but the main discussion was about taking back cable to cancel indebtedness. Lau prepared a draft agreement based on this discussion, (222B) but Ng later rejected it. This letter accurately reflected the discussion and refers to "the BICC cables we sold to you". Lau said it was "absolutely" made clear to Ng that the reason for taking back the cable was to clear the plaintiff's indebtedness. The matter of embossment or lack of it was not related to the taking back of the cable.

64. On 9 May, the rejected draft of 7 May (222B) was used as a starting point. Ng was in a hurry to leave for Canada. Ng faxed the 7 May letter to his solicitor, and spoke to his solicitor several times on the phone and a response was received (256B), which he then sent to Overton. Someone underlined and/or crossed out a few lines, and Lau wrote in the margin. Finally, Ng prepared the final 9 May agreement in his office. (257B) Lau consulted Overton, and the agreement was signed and Ng signed various delivery notes. Lau denied that "all BICC cables" in the agreement included H-B cable. Whereas he roughly knew from a list which Ng had given him (438R & 536B) what cable the defendant had sold to the plaintiff, he had no idea on 9th May what cable H-B had sold to the plaintiff, which the plaintiff still retained. He knew nothing of the type, or quality or quantity of cable involved. He could not have made an open-ended agreement of this sort. He assumed the said list only referred to cable sold by the defendant and it only listed cable in three public godowns but not in the plaintiff's Shatin godown. On 9 May, he had no idea what was stored at Shatin. It was only on 13 June that Ng faxed Au details of H-B cable. He had no previous knowledge of it.

65. On 15 May, the plaintiff sent the defendant another agreement suggesting various replacements and substitution in relation to the 9 May agreement. (270B) The defendant had never agreed to the proposed terms and made it known to the plaintiff on 16 May (274B). In addition, the defendant complained about the difficulties it was having in collecting the cable pursuant to the 9 May agreement. There were problems with storage charges and delivery notes. The defendant's sole aim was to take back sufficient cable to balance the plaintiff's indebtedness. (274B)

66. Lau said that he only glanced at one of the plaintiff's contracts with its customers, the Junefair contract (123B). He denied agreeing that the plaintiff could cancel its contracts with its customers, or that the defendant would compensate it for loss of profits. He would never have made such an agreement. He dial not know what was involved; the quantity, the type, the price, the extent of the profit lost. Lau said that "justifiable loss" referred only to the cost of extracting installed cable which had been rejected. There is a reference to this in the defendant's fax of 7 May (221B).

67. Lau said that the defendant finally took back more cable than was required to balance the indebtedness, and has always been ready to return it. However, the writ was received on 24 June, thereby forestalling the defendant. Lau conceded that more than £48,000.00 was owing by the defendant to the plaintiff. In addition, he admitted that the defendant had also collected some H-B cable which it was ready to return. Some of the delivery notes signed by Ng included H-B cable. Thus some H-B cable was inadvertently collected. About 100 drums and a great deal of documentation were involved in what was a "big exercise".

68. Conita Lee was the next witness on behalf of the defendant. She had been the financial comptroller since 1986. She said that the plaintiff did not generally pay its debts on time. She produced exhibit D1, which purported to set out the extent of the plaintiff's late payments. She explained that two kinds of credit were extended to the plaintiff, the first being 60 days open account, or 60 days credit from the date of the invoice, and the second DA/60 days, or draft against acceptance, in which the payment was handled by banks.

69. There was no dispute concerning her evidence that the plaintiff either did not, pay or was consistently late in relation to its 60 days open account. However, she finally admitted that while the plaintiff was mostly late in paying by DA/60 days, it was not nearly so late as was stated in D1, since she finally admitted that credit time begins to run from the date of acceptance by the purchaser's bank, and not from the invoice date, as she had earlier maintained.

70. In any event, as head of the accounts department, she was "very unhappy" about the plaintiff's account. The defendant had to pay its parent in the UK, and late payment caused problems and difficulties with cash flow. Money had to be borrowed, namely £250,000.00 on each of two occasions in February and June 1990, specifically because of this cash flow problem. Interest had to be paid and there were problems with the rescheduling of shipments. Penalties were levied by the UK parent on its HK subsidiary amounting to almost £18,000.00

71. She said that she kept "chasing" Lau to get him to "chase" the plaintiff and she even visited Ng herself on 8 May and demanded payment. "The money owed had become so large and we had repeatedly pressed for payment."

72. She was asked about invoice 5850 dated 24 January 1990 for more than £227,000.00. The cable under that invoice had been delivered to the plaintiff. Yet the cable ultimately returned under the same invoice, pursuant to the 9 May agreement, amounted only to some £185,000.00. She did not know why that was so. The same applied in relation to invoice 6390.

73. In cross-examination, she finally admitted that in a DA/60 day credit situation, credit time begins to run from the acceptance by the purchasers bank of the draft. Her calculations were based on the invoice date and were therefore incorrect. Nevertheless, most payments were late, but much less late than she had calculated in exhibit D1.

74. The third witness for the defendant was Pun Yu Wing, a sales co-ordinator employed by it. He said that Lau asked him to collect cable from the plaintiff on 10 May and he was given delivery notes signed by Ng. He went to various godowns with lorries to collect cable. He said that a delivery note was an instruction from the plaintiff to the keeper of a godown. He checked to see if the cable he picked up corresponded to the cable in the delivery notes.

75. He admitted that some of the cable he picked up had originally been sold to the plaintiff by H-B, but he said that he did not know it at the time. He was told about it later by Andy Au.

76. The final witness for the defendant was John Stuart Overton. He has been the Deputy Chairman of the defendant since 1982. He said that in May 1990, he was very concerned about the plaintiff's account, and on 7 May, after discussions with the Chairman, it was decided to instruct Lau to take the cable back to settle the account. He telephoned Lau from Kuala Lumpur and told him that if did not get the cable back, they would both lose their jobs. He was in his office on 9 May when Lau was negotiating with Ng, and he wanted to agree a draft before Lau could sign anything. "Lau was acting under my instructions. My instruction was to agree to take back cable equivalent to the outstanding amount owing and to conclude the agreement that day because Ng was leaving Hong Kong." The cable to be taken back was cable supplied and sold by the defendant to the plaintiff. There was absolutely no reason to take back any other cable. He was anxious to get an agreement signed quickly, because Ng was going away and there was reason to believe that no payments would be made after he left Hong Kong.

77. He confirmed that large loans had to be made as a result of the plaintiff's indebtedness. He was a party to arranging them. There was no possibility of taking back H-B cable. There was no knowledge of the quantity, quality, age, description and all this information would have been required before even considering such an agreement. It was totally untrue that there was agreement that the plaintiff could proceed to break existing contracts with its customers, and claim compensation. It would have been impossible in the circumstances to have entered such an agreement. There was no knowledge as to what might be involved in terms of quantity, profits, etc.

78. He went on to say that the plaintiff did not have the stock to supply its customers under the 7 contracts, and could not have obtained the BICC cable elsewhere. The manufacturing cycle was 3-6 months and no orders had been placed with the plaintiff by 9 May, whereby those contracts could be honoured. In addition, further orders would only have been taken from the plaintiff if its indebtedness had been resolved.

79. He said he was never asked for certification. He could have provided it at any time, as well as sending representatives to reassure customers.

80. He thought it possible, but very unlikely, that other BICC distributors could have supplied the plaintiff. He repeated that there was serious worry about the financial viability of the plaintiff. Half a million pounds worth of stock was more valuable than a bad debt. When it was suggested to him that there was no basis to suspect the financial viability of the plaintiff, he said: "That is a matter of opinion based on all our research. I, my staff and senior colleagues in the U.K. do not share your view. We carried out regular credit checks through credit agencies, but 1 cannot say the company was insolvent."

81. He admitted not hearing what Lau and Ng had discussed, but he believed that "Lau told me everything which had been discussed".

82. That concludes my summary of the evidence. Having carefully considered it all, together with all the submissions, I am more than satisfied on the balance of probabilities that the 9 May agreement was, firstly, restricted to all the cable which the defendant had sold to the plaintiff, and secondly, did not cover any loss of profit which the plaintiff might suffer.

83. I am persuaded that the question of embossment of the cable with BS or BASEL was a matter of little or no concern to the defendant, and played no part whatsoever in its decision to make the 9 May agreement, despite the reference to the matter in the letter. The indisputable fact is that the defendant was not contractually bound to deliver cable embossed in this way, and the plaintiff was not contractually bound to deliver such cable to its customers. The defendant is the Hong Kong subsidiary of a large UK company which manufactures an internationally known product. I am satisfied that there never was a problem for the defendant to certify that any cable was manufactured to a British Standard and was, therefore, BS cable. That is clear both from the evidence of Overton and from his letter of 4 May (215B). The fact that one contract related to IEC cable is hardly to the point, and it was, in any event, signed by Ng on behalf of the plaintiff.'

84. I could find no reason for the defendant signing the 9 May agreement other than its anxious concern about the financial viability of the plaintiff. It was submitted on behalf of the plaintiff that the defendant may have felt that it had a duty to provide cables with embossment. There is no evidence to support that view. As I have pointed out, there was no contractual obligation to do so, and certification could in any event have been provided. There is no basis for even suspecting that the defendant may have felt that it had a duty to provide cables with embossment.

85. I am satisfied in any event that Ng did not seriously seek certification. There was no response to Overton's overture of 4 May.

86. The fact that the defendant made enquiries of its parent in the UK as to the absence of BASEL embossment on certain cable does not cause me to alter my views. It has no bearing on the defendant's obligations under its contracts, nor its ability to provide a BS certification As to BASEL, it is an independent authority which certifies cable, if the same is sought by the factory. A BASEL certification is not available in respect of all cable manufactured by BICC (UK). If a customer wants BASEL embossment or certification, it must request it.

87. It was submitted that the defendant was pleased to enter such an agreement because it was realised that if the problem of embossment was not quickly solved, rumours about BICC cables not having such embossment and not being up to standard would spread and serious trade repercussions would follow.

88. In my view, there is no evidence to support that submission, and I find little merit in it. Certification was readily available as to British Standard, and if BASEL certification was required, and considered so important, then I would have expected it to have been a standard clause in every contract, to ensure that the necessary certification and/or embossment could be obtained before shipment of the cable to Hong Kong.

89. It was submitted that the reason Overton mentioned to Lau that their jobs were on the line, was because of the possibility of the defendant losing its reputation as aforesaid. Once again, I see no justification for seriously considering such a proposition. Overton's evidence was quite compelling. The remark was made to Lau in the context of his concern about the financial viability of the plaintiff. It had nothing to do with the loss of the defendant's reputation.

90. The evidence of Ng and the plaintiff's customers about the so-called vital importance of embossment was conspicuously unimpressive. These experienced and competent businessmen did not even know or care about standard conditions of contracts which their companies were regularly entering into. Ng summed up his and their attitudes by describing such conditions as "superficial writings". What they were in effect saying in relation to standard written contracts was that what was written therein was totally unimportant, and what was not written was vital!

91. Neither Ng nor his witnesses impressed me as witnesses of truth or reliability. I repeat that if BS or BASEC embossment was so important to them, I find it difficult to understand why some reference to it was not included in standard contracts. I also find it difficult to understand why Hong Kong Electric and China Light do not require embossment/certification.

92. I reached the conclusion, as I have said, that the so-called embossment problem was not an important factor so far as the defendant was concerned. I have not ignored the mention of "missing of embossment marks" in the 9 May agreement, suggesting that it was the problem which gave rise to the agreement. In my view, it was not, and it was merely left there by the defendant, either inadvertently, or deliberately, because of Ng's firm rejection of the 7 May letter, in which the defendant sought to highlight the real reason for the agreement, namely the indebtedness of the plaintiff.

93. Lau said that embossment was a matter of the specific requirements of a client and not a legal obligation. It was submitted by counsel for the plaintiff that if this was a genuine view, the defendant would not have agreed to take back cable, thereby losing profit. Once again, I cannot accept that. On the evidence, I am satisfied that the defendant was so concerned about payment, that it was pleased to get its cable back, and quite willing to forego its profit, which it still had the chance to make by sale elsewhere.

94. I am persuaded on the evidence that the sole reason for the defendant making the 9 May agreement was to eliminate the plaintiff's indebtedness, which by 9 May was over £549,000.00 or approximately HK$7 million. Overton gave convincing evidence that this was, so far as the defendant was concerned, a matter of the utmost significance and gravity.

95. Much time was denoted to this indebtedness, and on the plaintiff's financial viability and how late it actually was in its payments. I have concluded that it would serve no good purpose to analyse these matters in detail. The fact is that goods had been delivered, money was owing, many payments were late, Ng refused to pay a major part of the plaintiff's indebtedness, when he was clearly not entitled to withhold payment under the relevant contracts. Ng said he rejected the cable under invoices 5850 and 6390, involving over £237,000.00. It turned out that far from rejecting this cable, he actually sold some of it! It would appear, therefore, that damages for loss of profits are being claimed in respect of cable which was accepted by the plaintiff, and partly sold. In addition, invoice 5587 for £114,886.15 was not paid even though it had been accepted for payment.

96. The fact is that the defendant was facing a situation in early May where the plaintiff owed it some $7 million, and was refusing to pay well over half of it, without any justification whatsoever. In these circumstances, the defendant's case that it entered the 9 May agreement because it was concerned about getting its money is far more probable than the plaintiff's suggestion that the defendant made the agreement to save its reputation. The notion that the defendant was so anxious to preserve its reputation as to be willing to reward the plaintiff with millions of dollars of compensation is, in my view, little short of absurd.

97. Mr. Cheung submitted with some vigour that there was no justification for the defendant being concerned about the financial viability of the plaintiff, that the plaintiff's indebtedness was far smaller than claimed, and that the plaintiff was entitled to withhold payment for some cable. I was not attracted to these submissions. I am satisfied that the defendant was justifiably concerned about the plaintiff's indebtedness, that such indebtedness was substantial, and that the plaintiff was not entitled to withhold payment for any cable.

98. It was submitted that if the indebtedness of the plaintiff was the only concern of the defendant, it would have taken legal action and sought summary judgment on the accepted but unpaid bill of exchange. It was further submitted that Lau's evidence that this was never considered, suggests that the plaintiff's indebtedness was not the defendant's main concern. Once again, this was not a submission which I found attractive, implying as it did that legal action was the only logical solution. But I am satisfied that the defendant was quite content to simply take its cable back. It is not difficult to understand why it would have wished to avoid litigation with all, its disadvantages. It seems to me that if a company is confident about its product, the return thereof is likely, in general, to be a far more satisfactory outcome than legal action. I see nothing untoward in the manner in which the defendant approached its problem and in the manner which it sought to solve it. I regard the suggestion that the defendant was not, and could not have been concerned about the financial viability of the plaintiff, as being without foundation, having regard to the evidence. It was further submitted that taking back BICC cable from the plaintiff would not have improved the defendant's financial position. That submission requires no comment beyond the obvious: cable in the hand is better than a worrisome debt!

99. Having decided why the defendant signed the 9 May agreement, I now proceed to determine the true nature of that agreement. The plaintiff claims that the words "all BICC cable" in the agreement includes BICC cable which the plaintiff had purchased from H-B, but not yet sold. I have no hesitation in stating at the outset that I have been unable to envisage any circumstances in which the defendant might have agreed to take back H-B cable. Ng gave no rational explanation why the defendant might do that. In the 7 May document submitted by the defendant, and rejected by Ng, the defendant referred to the "BICC cables we sold to you...."(my underlining). In the 9 May agreement, the words are "all BICC cable". It was submitted on behalf of the plaintiff that the change is significant, and points to an agreement to include H-B cable. Having regard to all the evidence, I am not satisfied that the defendant agreed to include H-B cable. I do not accept Ng's evidence that when he raised the matter, Lau then and there, simply accepted that it should be included. Lau was under instruction from Overton and I am satisfied that he was not authorised to agree to such a term, and would not in any event have done so, given the defendant's then state of knowledge about what quantity, quality, and type was involved. Lau denied this conversation, and I prefer his version to that of Ng. The defendant clearly intended on 7 May to only take back the cable which it had sold to the plaintiff. (222B) Why would it change its mind on 9 May, only two days later, and without even any resistance from Lau? According to Ng, all he did was mention the matter and Lau agreed. What might have prompted this extraordinary concession? In my view it simply did not happen this way. I note that Lau said that he did not remember in what circumstances those words were left out of the 9 May agreement, but he agreed that the amendment must have been made as a result of negotiations between Au and Ng on 9 May. Mr. Cheung submitted that I should not easily assume that amendments and changes made to an earlier draft could be ignored or assigned little or no importance. He submitted that the only reasonable inference to be drawn from the change is that the cable in question was intended to refer to all BICC cable in the plaintiff's possession, irrespective of its origin, as opposed to BICC cable merely sold to the plaintiff by the defendant. Moveover, he submitted that it supports Ng's evidence that he mentioned the matter to Lau and that Lau agreed to accept the invoice values of the H-B cables.

100. I have given these submissions very careful consideration, and I am perfectly satisfied that if Ng had really sought to include H-B cable, and really mentioned the matter to Lau, Lau would immediately have consulted Overton, whereupon furious and heated disagreement would have ensued.

101. I do not believe that Lau simply agreed to take back H-B cable without even mentioning the matter to Overton. The letter faxed to Overton, dated 9 May, and drafted by the plaintiff's solicitors, refers to taking back "all the BICC cable which have been sold to our client....".

102. So even on 9 May, the BICC cable was to be limited to cable sold by the plaintiff to the defendant. This letter was received by Ng from his solicitors during the meeting on 9 May between himu and Lau. Finally, Ng himself drafted the 9 May agreement, amending his own solicitors draft.

103. In these circumstances, I consider that the most likely explanation is that Ng deliberately or inadvertently altered the words, and that the significance of the alteration was missed by both Lau and Overton. The letter of 16 May from the plaintiff to the defendant, which was based on legal advice, shows clearly that by that time, the plaintiff had decided that BICC cable meant cable manufactured by BICC, i.e. all BICC cable, whatever its source. This draft was sent to the defendant "with a view to avoid future or unnecessary confusion", and sought to "replace" paragraphs and to "substitute" other paragraphs.

104. It was submitted on behalf of the plaintiff that this is not significant, and on behalf of the defendant that it is, insofar as it suggests that the matters contained therein were not agreed on 9 May, and that "replace" and " substitute" suggest a conscious and deliberate attempt to alter that which had already been agreed.

105. Lau responded to this letter on 16 May, but-appears to have had other things on his mind. He simply said that "we cannot agree to the contents" and immediately went on to complain about matters relating to taking back cable. Because Lau did not specify the precise nature of his disagreement, it is submitted that this is significant.

106. In my view, neither the letter of 16 May, (270B) nor the response of Lau, (274B) cast much light on the problems under consideration.

107. It was finally submitted on behalf of the plaintiff that since "BICC." was not only a company name, but also the brand name of cable, the expression "BICC cable" is more likely to refer to all BICC cable, irrespective of its source. To take that view would be to completely ignore the entire matrix of circumstances surrounding the 9 May agreement. I consider such an approach to be quite artificial and unrealistic.

108. I am satisfied that the meaning of the expression "all BICC cables..." in the 9 May agreement is all BICC cables sold by the defendant to the plaintiff. There never was any agreement about H-B cable, and I consider it highly unlikely that it was ever mentioned prior to 9 May 1990.

109. I turn to the other main issue in this case and that is whether there was any agreement as to loss of profit. Did the defendant agree to reimburse the plaintiff for loss of profit arising from the return of cable? The agreement provides that "you shall be responsible for all justifiable losses and damages suffered by us in respect of the said cables", and further "We hereby reserve our right to claim against you for all loss and damages suffered by, US in respect of the said cables".

110. It was submitted on behalf of the plaintiff that Lau knew, before the 9 May agreement, of the plaintiff's intention to claim for loss of profits, and that he knew about the cancellation of contracts. It was, therefore, clearly within the defendant's contemplation that cable might be rejected by the plaintiff's customers, that the plaintiff could not supply its customers under contracts because customers would reject cable for lack of embossment, and that in both cases, the plaintiff would suffer loss of profit. It was perfectly viable commercially for the defendant to accept that the plaintiff would lose profits. Full details were not included in the agreement only because it was hastily concluded and drafted.

111. It was submitted on behalf of the defendant that the plaintiff's claims for loss of profits are "outrageous, commercially illogical, and as such never the true intention of the parties".

112. It is relevant to bear in mind that on 9 May, no breach of contract had been committed by the plaintiff because there was no condition in any of its contracts with its customers that the cable supplied be embossed in any way, or that a certificate to that effect be provided. Even if there had been such a condition, customers were not entitled to reject cable, because of clause 10 of the Standard Conditions (197B), and were contractually bound to accept and pay for it.

113. In these circumstances, I am satisfied that the defendant was not and need not have been concerned about the possibility of the plaintiff having difficulty with its contracts. Ng said that he told Lau that he had signed contracts with customers, and even showed him some of them, and that Lau did not say anything. Lau said that Ng mentioned contracts with customers, not in the context of loss of profits, but in the context of what to do about them, whereupon Lau pointed out that the defendants only concern was with its own contracts with the plaintiff, and that its liability was confined to those contracts. I am satisfied that Lau did not agree that the defendant would pay any loss of profit sustained by the plaintiff. He was certainly not authorised to do so. I am further satisfied that loss of profit was never even discussed, and that the defendant did not, and could not reasonably have foreseen that the matter would arise in the future. In the context of the arrangement which was being entered into, it seems to me that the very last thing which the defendant might reasonably have foreseen was the plaintiff's loss of profit. The defendant was trying to solve what it saw as a serious financial problem on the best terms that it could. This was not a problem of its making. This was a problem of the plaintiff's making. The plaintiff was in breach of contracts, not the defendant. The defendant must have believed that it was doing the plaintiff a favour, albeit that it was also solving its own problem. In those circumstances, I consider it unreasonable to expect the defendant to have foreseen that a likely or possible consequence of the agreement might have been a claim for loss of profit. As to the words "justifiable losses and damages", Lau understood these words to refer to such losses as might arise from the removal and collection of cable which had already been installed. Lau said that this notion is supported by his fax of 7 May 1990, (221B) where he says:

"The followings are the proposed terms we would like to impose when collecting the goods back from your customers:

1) We would need a chance to visit the site to evaluate the amount of work involved, if necessary, may send the contractor to inspect the site to help him to work out the cost of taking down the cables already installed."

114. I accept that it was this type of possibility which was envisaged by "justifiable losses", and not loss of profit, which at the time of the 9 May agreement were entirely incapable of being assessed by the defendant. I agree with the submission on behalf of the defendant that before undertaking any such liability, painstaking care would have been taken to assess all the implications. It is clear that the defendant was carefully and conservatively managed, that it was fiscally prudent and that it was strictly controlled by its UK parent. I am unable to accept that Lau and Ovorton simply agreed to be responsible for the plaintiff's loss of profit on all returned cable without knowing the details. In my view, loss of profit was never contemplated by the defendant, and could not, in the existing circumstances, have reasonably been foreseen by it as likely to arise from the 9 May agreement.

115. The same considerations apply, so far as loss of profit is concerned, to those contracts which the plaintiff cancelled, and to cable which was simply to be taken back by the defendant.

116. Once again, I am satisfied that the defendant never agreed to compensate the plaintiff for any loss of profit, and that the question of loss of profit could not reasonably have been foreseen by the defendant as a "justifiable loss".

117. Whatever Ng thought was meant by "justifiable loss", I am satisfied that it certainly never occurred to Lau or Overton that it included loss of profit. There is merit in the submission that such agreement would have defeated the defendant's purpose entirely. It would have ended up owing the plaintiff a great deal of money, when its only wish was to settle the plaintiff's indebtedness. I have already indicated that I assessed Lau and Overton to be careful and prudent executives. There is no possibility of their having entered an open-ended agreement of the sort alleged, without knowing all the details, including, of course, details of the loss of profit likely to be claimed by the plaintiff. There is no evidence that any of these matters was ever discussed. I reject any suggestion of such an agreement.

118. I do not propose to discuss this matter further, except to say that the plaintiff claimed a loss of profit of 20% of invoice prices. However, Ng did not even begin to prove such a loss.

119. I am satisfied on the evidence that the plaintiff owed the defendant £549,002.06 on 9 May 1990. I reject the submission on behalf of the plaintiff that no liability arose under invoice 5850 because of late delivery. In the first instance, the plaintiff was contractually obliged to accept late delivery, but in any event, the plaintiff clearly accepted this cable because it sold part of it. The matter is not worthy of further discussion, especially as it would appear that it has been admitted by the plaintiff's solicitors that the amount under invoice 5850 is owing. (264R). The same argument applies to invoice 6390. Since there is no dispute that the defendant has collected cable to the value of £597,235.76, the defendant owes the plaintiff £48,2.33.16.

120. In addition, the defendant inadvertently collected cable from the plaintiff which it cannot identify as cable which it sold to the plaintiff. I have already decided that such cable was not included in the 9 May agreement. Therefore, it should be returned to the plaintiff and the defendant is willing, ready and able to return it. The plaintiff alleges that the collection of such cable is evidence that the defendant intended to take back all BICC cable, but since I have decided that this was not the case, I am satisfied that it was inadvertent.

121. I am satisfied that most of the blame for this must be laid at the door of Ng. He provided and signed delivery notes. PUN YU WING, a BICC employee, said that he was asked by Lau to collect cable from the plaintiff and was given delivery notes signed by Ng, whereupon he went with lorries to various godowns. He didn't know whether he was picking up cable which had been supplied to the plaintiff by H-B. He was asked all sorts of questions in cross-examination, but I am satisfied that there was no good reason for him not to pick up H-B cable if it was included in the delivery notes. In the circumstances, the defendant could not reasonably have avoided picking up H-B cable, and I am satisfied that it was inadvertent, and that the primary responsibility is that of Ng. The defendant could not reasonably have foreseen that H-B cable would be included in the delivery notes, and there was no reason to alert Pun to carefully examine the cable so as to leave H-B cable behind.

122. The plaintiff's claim includes a claim for accessories. Ng said that it did not occur to him to put accessories into the agreement because it formed a small part of what had been sold. It was submitted that this simply means that it did not occur to him that accessories should be expressly stated on the face of the agreement. It seems to me probable that the agreement to return cable, necessarily implied an agreement to return accessories. But since there is no claim for specific performance, the plaintiff is restricted to proving damages. This it has not done. There is no evidence about the value of the accessories. The plaintiff's claim in relation to accessories must fail.

123. There is still a quantity of cable in the plaintiff's possession which was sold to it by the defendant. Under the 9 May agreement, the defendant was obliged to take it back. However, the plaintiff's claim for specific performance has now been abandoned, and it can therefore only claim damages from the defendant in relation to this cable. Such damages would arise if, for example, it had been unable to sell the cable at the price for which it would have been credited by the defendant under the 9 May agreement. Loss of profit does not arise here. Under the agreement, the plaintiff would only have been credited with the invoice price. Insofar as the defendant is in breach of the agreement by failing to take back some cable and therewith crediting the plaintiff, the plaintiff may actually be better off, insofar as it can sell the cable at a higher price than the invoice price for which it would have been credited. There has been no evidence about the value of this cable, or the price at which it could be sold. The fact that it remains unsold is irrelevant. The plaintiff has it, and the loss can only be the difference between its value and the amount for which the plaintiff would have been credited if the defendant had taken it back.

124. There is no evidence of any actual loss to the plaintiff, and its claim in relation to this cable must fail.

125. I believe I have dealt with all the issues in this dispute, and it only remains for me to say a few final words about the credibility of the witnesses.

126. In general, I much preferred the evidence of Lau and Overton to that of Ng. Ng is an experienced businessman, and I was not impressed with his description of written conditions in contracts as "superficial writings". It was disclosed during the trial that, much of the cable for which loss of profit was being claimed had been sold by the plaintiff, and some of the balance cut, all on Ng's instructions. I found this extraordinary, having regard to the fact that the plaintiff is for all practical purposes his own company. In addition, he was present in court throughout the proceedings, and obviously taking a detailed interest therein. I was not disposed to accept his explanation that it did not occur to him.

127. Likewise I found his evidence about rejecting the goods under invoices 5850 and 6390, and then selling part of them, quite inexplicable. I found the impression that he was not a reliable or truthful witness.

128. On the other hand, I found Lau to be a very honest witness, although in May and July of 1992, his memory about the specific conversations and sequence of events of May 1990 were not particularly good. But I have no doubt that he neither agreed nor intended to agree that the defendant would take back H-B cable, and that he neither agreed nor intended to agree that the defendant would compensate the plaintiff for any loss of profit. He was subject to instructions from Overton, and I am confident that he would have acted in accordance with those instructions.

129. Overton gave by far the most impressive evidence in the trial. He was particularly persuasive. He made it clear that the defendant was very concerned about the plaintiff's indebtedness, and simply wanted to get back its cable. Nothing else was agreed or contemplated, and nothing else was reasonably foreseeable in the context of the discussions and negotiations.

130. Had he been more legally sophisticated, or less pressed for time, I have no doubt that he would not have permitted Lau to sign the 9 May letter insofar as it suggested on its face that the missing embossment was a matter of significance, and insofar as the words "all BICC cables ...." could be interpreted to include H-B cable.

131. There will be judgment for the plaintiff in the sum of £48,233.16, and I order that the cable referred to in paragraph 9 of the Re-amended Defence be returned to the plaintiff.

132. I will hear counsel on costs.