GREAT TIME INDUSTRIAL (HONG KONG) LTD v. TANHOUSE LTD

DCCJ 2862/2010

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2408 OF 2010

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JUDGMENT

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Background

1.  This is a sale of goods case.  By a purchase order no. TANPO-090102 (REV-1) dated 16 September 2009 (“the Purchase Order”), the defendant ordered 7605 pieces of ladies’ woven blouse (“the Garments”) from the plaintiff.  The unit price of the Garments was subsequently changed from US $9.00 to US $9.43 by mutual agreement of the parties.  The payment term was “FOB/Hong Kong”, and the Garments were to be delivered to the defendant or its designated agent for shipment to the defendant’s customer, namely Bonita GmbH & Co KG (“Bonita”), in Hamminkeln, Germany.

2.  On 18 December 2009, the plaintiff delivered 7,466 pieces of the Garments to the defendant’s designated agent for shipment.  A commercial invoice dated the same day was presented to the defendant for payment of US $70,404.38 being the price of the Garments delivered.  However, the defendant refused to pay the price alleging that the Garments were defective.  Thus, the plaintiff commenced the present proceedings to claim against the defendant for the said sum of US $70,404.38 together with interest and costs.

3.  The defendant contends that 7,476 pieces (not 7,466 pieces as alleged by the plaintiff) of the Garments were delivered on 18 December 2009, but the bulk of the Garments delivered were found to be defective in that they were with either holes, fabric defaults, threads or dirt marks.  In fact, before delivery, it was discovered that the majority of the Garments were defective and could not be delivered, but the parties agreed that delivery could still take place subject to Bonita’s acceptance of the Garments.

4.  However, upon delivery, the Garments were rejected by Bonita due to defective quality. In order to save the deal, the defendant persuaded Bonita to take 4,357 pieces of the Garments, which were of better quality, to try to sell them in the retail market, but no sale was concluded by Bonita.  All the Garments were therefore rejected by Bonita, and the defendant had to destroy them subsequently.

5.  The defendant pleads that it is an express condition of the contract that the Garments should conform with the specifications provided by it to the plaintiff and there is an implied condition of the contract that the Garments should be reasonably fit for the purpose for which they have been ordered and supplied.  The defendant also relies on the aforesaid agreement with the plaintiff that the delivery was subject to Bonita’s acceptance of the Garments.  As Bonita refused to accept the Garments, the defendant contends that it is entitled to reject the Garments and refuse to pay the price to the plaintiff.

6.  By the same token, the defendant counterclaims against the plaintiff for damages for breach of contract together with interest and costs.  The amount of damages counterclaimed by the defendant is particularized as follows:-

7.  In addition, the defendant contends that if the plaintiff is entitled to the price of the Garments, it is entitled to set off such liability with the amount counterclaimed.

Issues

8.  The following are the main issues in this case:-

(1)How many pieces of the Garments were delivered by the plaintiff?

(2)Were the Garments delivered by the plaintiff defective?

(3)Was there an agreement between the parties that the delivery of the Garments was subject to Bonita’s acceptance?

(4)If there was no such agreement, had the defendant accepted the Garments and hence lost its right to reject?

(5)Were the Garments rejected by Bonita?

(6)Was the defendant entitled to destroy the Garments?

(7)Is the defendant entitled to counterclaim damages and use it to set off the price of the Garments, and if so, what is the amount of damages?

The plaintiff’s case

9.  The plaintiff called only one witness to give evidence, namely Mr Pang Kit, Jacky, who is the plaintiff’s director.  According to Mr Pang’s evidence, the Purchase Order did not allow over 5% in the increment of the quantity and the plaintiff produced altogether 8,060 pieces of the Garments.  On or before 16 December 2009 (which was confirmed to be 15 December 2009 by Mr Pang’s oral evidence), 4 representatives of the defendant, namely, Andrew, Robert, Leo and Joanne, attended the plaintiff’s factory in China to have a preliminary examination of the Garments.  600 pieces of the Garments needed to be fixed and were taken out.  The factory workers tried to fix them before the pre-delivery inspection by Bonita’s agent, namely Specialized Technology Resources (H.K.) Limited (“STR”). At last, 7,748 pieces were ready for inspection by STR on 17 December 2009.

10.  According to STR’s report (Report No. #S1), STR inspected a total of 16 carton boxes of the Garments on random basis.  The carton numbers were 2, 5, 16, 20, 33, 48, 65, 71, 80, 89, 100, 112, 122, 134, 155 and 160.  Altogether, 125 pieces of the Garments were inspected and out of which, there were only 2 major defects and 3 minor defects being reported.  The inspection result was that the Garments were “ACCEPTED due to WORKMANSHIP WITHIN AQL ALLOWANCE”.  After the inspection by STR, the defendant had its own final inspection with a higher standard and the Garments were inspected piece by piece.  As a result, 282 pieces of Garments were taken out because of slight and minimal defects.  After the final inspection by the defendant, the plaintiff finally delivered 7,466 pieces of the Garments to the defendant’s designated agent on 18 December 2009.  However, there was no agreement that the delivery was subject to Bonita’s acceptance.

The defendant’s case

11.  The defendant called its managing director, Mr Nicolaus Reusch, and its director, Ms Christiane Tan, to give evidence.  According to Mr Reusch’s evidence, after the plaintiff’s production began, the defendant’s QC team had several inspections on the production and had all along given comments to the production.  When production of the order was completed, arrangement was made for inspection by STR.  STR’s final inspection was done on 17 December 2009 and the inspection result given was “ACCEPTED”.  However, when the defendant’s QC team conducted final inspection on 18 December 2009, there were still lots of problems discovered, including stain, broken stitches, holes, missing button, uncut thread ends and so on.  The defendant’s QC team demanded Mr Pang to repair the Garments.  Mr Reusch also asked the defendant’s merchandising manager, Mr Andrew Cheung, to inform Mr Pang to repair the defects piece by piece and if the plaintiff could not meet the delivery time, the plaintiff had to deliver the Garments by air freight on the plaintiff’s account.  Mr Reusch was duly informed by Mr Cheung that Mr Pang had agreed to repair the Garments and to take out those with defects.

12.  Mr Reusch also gave evidence that the plaintiff could not repair the Garments piece by piece and did not wish to deliver the Garments by air freight.  The defendant’s QC inspector, Robert, told Mr Pang that if he wished to send out the Garments with defects, the plaintiff had to accept delivery of the Garments under guarantee, ie no payment of the Garments unless the Garments were accepted by Bonita, and if rejected, the plaintiff had to take care of the Garments itself.  Another QC inspector, Leo, then reported to Mr Reusch that Mr Pang agreed to deliver the Garments under the aforesaid condition.  As a result, the Garments were delivered by the plaintiff.

13.  After the Garments had arrived in Germany, in or about January 2010, Mr Reusch was asked by Bonita to look at the Garments.  He was shown about 250 pieces of the Garments from different boxes and in different sizes with major defects, which included holes, colour threads and fabric defects.  He agreed with Bonita that the whole shipment of the Garments was to be sent to an independent inspection house for piece by piece control inspection.  Theussen GmbH (“Theussen”) was appointed for that purpose.

14.  After about 3 days, the director of Theussen, Ms Margit Karrenbauer, reported to Mr Reusch that almost every piece of the Garments had defects one way or the other.  There were about 2,400 pieces with major defects such as holes, coloured threads on obvious parts of the Garments and fabric defects which definitely could not be acceptable.  Of the remaining 5,074 pieces, she considered that they were of relatively minor defects and she would try to repair those repairable, such as cutting thread ends and removal of dirty marks and to return the same to Bonita.

15.  Theussen returned 5,074 pieces of the Garments to Bonita on or about 5 February 2010, and Mr Reusch was asked by Bonita to attend their office to view the Garments returned.  Mr Reusch agreed with Bonita that the result of the improvement was still not satisfactory as the Garments were still having major defects such as dirty marks and coloured threads at different positions.  Their decision was to send back the Garments to Theussen for a second round of inspection with a more stringent standard, and if the quality was considered as acceptable, Bonita would consider taking them at a discount.

16.  Theussen took back the Garments and re-delivered 4,357 pieces to Bonita on 16 February 2010 after a second round inspection.  Thereafter, Mr Reusch attended the office of Bonita again to view the Garments.  The 4,357 pieces so returned were still not acceptable by Bonita as they would not be regarded as of merchantable quality and the quality as presented would definitely destroy Bonita’s reputation and business.

17.  Mr Pang was then informed of the rejection of the Garments by Bonita and Mr Reusch had a meeting with Mr Pang on or about 5 March 2010.  Ms Tan, was also present.  During the meeting, Mr Reusch again told Mr Pang that the whole lot of the Garments was rejected and Mr Pang asked if he might have half of the price of the Garments.  Mr Reusch told Mr Pang that as the Garments were delivered under guarantee and they were rejected, the plaintiff could not get any payment.  Mr Reusch also asked Mr Pang to decide whether he would take the Garments back by air or by sea or to try to find buyers in Germany.  Mr Pang replied that he would consider it, but he never informed Mr Reusch or the defendant of his decision, despite several reminders.

18.  According to Ms Tan’s evidence, she was given to understand that because of the defective quality of the Garments delivered by the plaintiff, the whole lot of the Garments was rejected by Bonita.  As a result, she had attended a meeting with Mr Reusch and Mr Pang on or about 5 March 2010 to discuss how the problem was to be resolved.  In the meeting, she and Mr Reusch told Mr Pang that the quality of the Garments so delivered was not acceptable and there had never been any acceptance of the Garments at any stage at all.  They told Mr Pang that he had to take responsibility of the problem and that he had to take the Garments back on his own account.  They had also shown Mr Pang the rejected Garments during the meeting.  Mr Pang indicated that he understood the problem especially when he looked at the rejected Garments, and said that he would take care of the claim.

19.  By agreement of the parties, Ms Karrenbauer’s witness statement was produced as evidence without calling her.  Her evidence is that on or about 20 January 2010, Theussen picked up a lot of about 7,500 pieces of the Garments from Bonita.  Upon collection of the Garments, she and her team of inspectors conducted inspection of the Garments piece by piece.  They discovered that almost 100% of the Garments had minor defects such as dirty marks, open threads, red and blue colour spots on the side seam, on the bottom hem and on the cuff opening.  They then categorized the Garments by the nature of defects. Further, there were about 2,500 in number having major defects such as holes, fabric defects, colour threads on the front and back panel.

20.  Ms Karrenbauer reported the findings to Mr Reusch on or about 23 January 2010.  Mr Reusch asked her to pick out those with minor defects only and to try to rectify those defects if possible.  She was able to pick out about 5,000 pieces which she considered to be of minor defects, and out of those 5,000 pieces, she had tried to remove dirt marks and cut off the open threads from 1391 pieces. Upon Mr Reusch’s instructions, she sent back 5,074 pieces of the Garments with minor defects to Bonita on or about 5 February 2010.

21.  After several days, she was asked by Mr Reusch to pick up the Garments from Bonita again and to adopt a more stringent standard in sorting out the Garments with minute defects only so that those might be acceptable to Bonita.  She then had a second round of inspection of the 5,074 pieces returned from Bonita piece by piece.  She screened out about 700 pieces and returned 4,357 pieces to Bonita on or about 16 February 2010.  After about 2 weeks, she was instructed by Mr Reusch to pick up the Garments again as the 4,357 pieces were still not acceptable by Bonita.  She did so as instructed and the Garments were stored in the storage of Theussen until March 2011 when Mr Reusch instructed her to destroy the Garments.

Quantity of the Garments delivered

22.  First of all, I accept the plaintiff’s version that the quantity of the Garments delivered was 7,466 pieces and not 7,476 pieces as alleged by the defendant.  The plaintiff gave a very detailed account of how many pieces of the Garments were produced, inspected and delivered at different stages.  The number of 7,466 is well supported by the documents produced.  The packing list dated 18 December 2009 shows clearly that the total number of the Garments packed for delivery was 7,466 and there was a clear detailed breakdown.  The cargo receipt dated 22 December 2009 confirms that the defendant received a total of 7,466 pieces of the Garments on 18 December 2009.  This cargo receipt was issued by the defendant with its letterhead and had the defendant’s company chop affixed to it.  There is no reason for the defendant to issue this cargo receipt if the total number was incorrect.  On the other hand, there is also no reason for the plaintiff to state a smaller quantity in its commercial invoice to the defendant dated 18 December 2009 and charge the defendant a lesser amount.

23.  Moreover, the defendant’s version on the total number of the Garments delivered is very incoherent. Although the defendant alleges that 7,476 pieces of the Garments were delivered, in its formal notification and claim of problem dated 18 December 2009 to the plaintiff, it gave a total number of 7,748, not 7,476.  According to the bill of lading dated 23 December 2009, the number of the Garments shipped by the defendant to Bonita was stated to be 7,980, again not 7,476. The figure of 7,476 appeared only in the invoice dated 6 February 2010 from Theussen to the defendant for collection of the Garments from Bonita.

24.  However, the number of the Garments collected by Theussen may well not be the same as those delivered by the plaintiff.  The defendant produced 5 samples of the Garments (exhibits “D1” to “D5”) at the trial to illustrate the defects of the Garments delivered.  Two of them are without Bonita’s label attached to them.  If the 5 samples were delivered by the plaintiff as finished products on 18 December 2009, there is no reason why they do not carry any Bonita’s label.

25.  Mr Reusch explained that the labels were probably removed by Bonita; whereas Ms Tan explained that the labels might have fallen off.  I do not find these explanations plausible.  There is absolutely no reason why Bonita would have taken the trouble to remove the labels, and if it did take the trouble to do that, there is no reason why 3 of the samples still have Bonita’s labels attached to them.  Bonita’s labels were stitched to the Garments.  It is extremely unlikely that they could have fallen off so easily when they were still new and unused. This shows that the 5 samples may not have come from those delivered by the plaintiff on 18 December 2009 as finished products, but are possibly part of the pre-production samples.

26.  Thus, the possibility is that some of the pieces collected by Theussen were pre-production samples, and hence the number is higher than the number delivered by the plaintiff on 18 December 2009.  In fact, in the email dated 5 April 2012 from Bonita to the defendant, it is stated that Bonita had returned 7,496 pieces of the Garments to the defendant.  This figure is even higher than the figure alleged by the defendant.  Bonita could not have more of the Garments than what the defendant received from the plaintiff unless pre-production samples were included.

Quality of the Garments delivered

27.  According to Mr Reusch’s evidence, the plaintiff had to submit pre-production samples for the defendant’s approval and the plaintiff was not supposed to start production unless and until the pre-production samples were approved.  However, the plaintiff had started production before the pre-production samples were finally approved by the defendant.  Consequently, the fabrics were not cut in accordance with the pre-production samples and the plaintiff requested the defendant to accept variation of the specifications provided by Bonita.  Thus, the defendant had to persuade Bonita to accept the mistakes resulting in its agreement to give a discount of €1.10 per piece to Bonita.

28.  With such evidence, it is clear that the defendant, as well as Bonita, had accepted the variation of the specifications and hence the defendant cannot rely on any breach of the alleged express term of the contract that the Garments should conform with the specifications provided by the defendant to the plaintiff.  In fact, the defendant has not elaborated on this particular breach in its evidence and submissions at all.  I am therefore not satisfied that the defendant can rely on the alleged express term as pleaded.

29.  On the other hand, it is admitted by Mr Pang that before the placement of the Purchase Order, the defendant verbally informed the plaintiff that the Garments were purchased for the purpose of re-sale to the defendant’s customer in Germany, and that the plaintiff did know that the end-buyer of the Garments was called Bonita.  Thus, the plaintiff cannot dispute that there is an implied condition of the contract that the Garments should be reasonably fit for the purpose for which they have been ordered and supplied, namely re-sale to Bonita, and I do find that there was such an implied condition of the contract.  What the plaintiff challenges is that the Garments were not defective and hence it was not in breach of this implied condition.

30.  The burden of proof that the Garments were defective lies with the defendant and the defendant must produce credible evidence about the alleged defects (see Mak Ping Kui trading as Yet Hing Knitting Garment Factory v Millionice Limited trading as Blessings Trading Company, HCA 940 of 1998).  Having considered all the evidence and submissions, I am not satisfied that the defendant has produced credible evidence to discharge this burden.

31.  First of all, the defendant’s case is that almost every piece of the Garments had defects one way or the other, and Bonita rejected the Garments on that basis.  However, out of 7,466 pieces of the Garments delivered, the defendant produced only 5 samples and 8 photos of the Garments which were defective.  As aforesaid, some of the samples could even be pre-production samples.  This can hardly be proof that almost all the Garments were defective.

32.  There was no inspection report produced by the defendant which could substantiate the allegation that almost all of the Garments were defective.  During the cross-examination of Ms Tan, she said that there was such a report from Bonita, but she changed her evidence subsequently by saying that she did not know if there was such a report.  Even though Theussen was engaged to inspect the Garments, there was no inspection report from them either.  The defendant only relies on an invoice from Theussen as their report, but there were no detailed records of the inspection and the findings in the invoice, such as how many pieces were with holes, how many with colour threads, and how many with dirt marks etc.

33.  Although Ms Karrenbauer’s witness statement was produced by consent without any challenge from the plaintiff and she stated that almost 100% of the Garments had minor defects, she also mentioned that she was able to send 5,074 pieces of the Garments with minor defects to Bonita after she had tried to remove dirt marks and to cut off open threads from 1,391 pieces.  On the second round of inspection after a more stringent standard was applied, she was also able to return 4,357 pieces to Bonita.  This shows that the majority of the Garments were at least acceptable to Theussen and the defendant, if not Bonita.

34.  Moreover, the plaintiff’s evidence shows that the Garments could not be as bad as what the defendant alleges.  The inspection by STR shows that the Garments were “ACCEPTED”. Even though it was not a piece by piece inspection, the defective rate was less than 5 %.  If the Garments were almost 100% defective, there was no reason for STR to give the acceptance in their report.  After all, STR was the defendant’s agent and they should be acting in the interests of the defendant.

35.  There were also 2 inspections by the defendant’s QC team members on a much wider scale, if not full scale, before delivery.  Those defective ones were either picked out for repair or not for shipment at all.  As said by Mr Pang, the standard applied was beyond the market standard.  However, if the Garments were still almost 100% defective as alleged, it is difficult to imagine why the defendant’s QC team members did not see fit to stop the delivery at all.  Of course, the defendant’s case is that the plaintiff had given its guarantee, but even assuming that was the case, why would the defendant take the risk when almost 100% were defective?  It might be more comprehensible for the defendant to take the risk if only a small portion of the Garments were defective, but not when the Garments were almost 100% defective.

36.  The defendant challenges the plaintiff that it could not undertake the final inspection and repair the Garments within 10 to 12 hours before delivery. However, I accepted that the plaintiff had 70 to 80 workers attending the inspection and repair works, and that it is possible for each of the workers to deal with about 10 pieces of the Garments per hour.  Thus, there should be sufficient time for the workers to unpack, inspect, repair if necessary and repack the Garments before delivery.

37.  Moreover, from Bonita’s Quality assurance/damage report and debit note No. BA 8717 dated 23 February 2010, it shows that Bonita claimed 3,105 pieces of the Garments at full price and 4,361 pieces at €2.15 each.  This report does not give the details of what caused the damage or state that the Garments were defective. However, from the amounts claimed, it shows that Bonita had not rejected all the Garments as alleged by the defendant.

38.  With the above evidence, I am not satisfied that the defendant has discharged its burden in proving the alleged defective quality of the Garments.  It cannot really be the case that almost all of the Garments were not merchantable.  If it was indeed the case, I do not think that defendant would accept the alleged agreement for delivery under guarantee as the risk was really too high, or that the defendant would even bother to send the Garments to Bonita upon two rounds of inspection and repair by Theussen.  Thus, I do not find that the plaintiff was in breach of the implied condition of the contract in not supplying the defendant with goods that are reasonably fit for the resale purpose.

Delivery under guarantee

39.  The alleged agreement that the delivery was under the plaintiff’s guarantee is raised by the defendant.  Again, the burden lies on the defendant to prove that there was such an agreement.  However, having considered all the evidence, I am not satisfied that the defendant has discharged this burden.

40.  None of the defendant’s witnesses has first-hand knowledge of the alleged agreement.  Mr Reusch said in his witness statement that it was Leo who reported to him that Mr Pang had agreed to deliver the Garments under guarantee, but during cross-examination, he said it was another staff, Andrew, who conveyed this message to him.  In any event, Mr Reusch’s evidence in this regard is just hearsay evidence and carries no weight.

41.  Both Mr Reusch and Ms Tan gave evidence at the hearing that there were such agreements with the plaintiff in their previous dealings.  However, no evidence was produced to prove such agreements in the previous dealings.  They did not mention such previous dealings in their respective witness statements either.

42.  More importantly, in the email dated 18 December 2009 from Robert of the defendant to Steven and Mr Pang of the plaintiff, the defendant was asking the plaintiff to confirm whether the delivery was under L/G, ie letter of guarantee.  If there was already an agreement made between Robert and Mr Pang for delivery under guarantee as reported by either Leo or Andrew to Mr Reusch, there was absolutely no reason for Robert to request for the confirmation in the email.

43.  If the defendant contends that the agreement for delivery under guarantee was reached after the said email was sent, then it will also be inconsistent with another piece of evidence produced by the defendant, namely the Formal Notification and Claim of Problem dated 18 December 2009, which was allegedly sent by the defendant to the plaintiff.  There is no reason for the defendant to send out such a formal notice and reserve its right to claim if they had already reached the agreement and yet not mentioning the agreement in this formal notice.  There is also no reason for the defendant to send out this formal notice before the plaintiff could respond to the email.

44.  Thus, I accept Mr Pang’s evidence that he only read the email dated 18 December 2009 a few days later after delivery, and he had a telephone conversation with Joanne of the defendant whereby Joanne told him to wait and see what the end buyer’s decision would be.  He, however, did not agree that the delivery was under the alleged guarantee and he did not receive the formal notice at all.

45.  The defendant contends that the plaintiff did not take active steps to pursue payment until March 2010 because there had been an agreement for delivery under guarantee.  I do not agree with this contention.  I do not think that giving 2 to 3 month’s time for the defendant to pay was really unreasonable in the circumstances especially when Mr Pang was asked by Joanne to wait and see.  It does not give any support that there must be an agreement for delivery under guarantee.

46.  I also accept Mr Pang’s evidence that the plaintiff first had business with the defendant only in mid 2009 for some samples and small orders, but the Purchase Order was the first big order the plaintiff received from the defendant.  Thus, I do not accept that the plaintiff and the defendant had established some kind of understanding for delivery under guarantee from their previous dealings.

47.  In the circumstances, I do not find that the defendant has discharged the burden in proving that the delivery was subject to acceptance by Bonita.

Acceptance of the Garments and right to reject

48.  Since I do not find that there was such an agreement for the delivery to be subject to Bonita’s acceptance, there can be no doubt that the defendant had accepted the Garments.  The defendant had in fact 3 inspections of the Garments before delivery as aforesaid.  It had more than reasonable chances to examine the Garments and yet still proceeded to delivery despite its allegation of defects in the Garments.  If the defendant did not want to accept the Garment, it had plenty opportunity to stop the delivery.  Thus, the defendant cannot turn around now and say that they had not accepted the Garments.

49.  With the acceptance of the Garments and also my finding that the Garments were not defective as alleged by the defendant, the defendant has clearly lost its right to reject the Garments.

Rejection by Bonita

50.  It is contended by the plaintiff that Bonita had in fact paid for the Garments as evidenced by Bonita’s email to the plaintiff dated 15 June 2011, and hence there is no proof that Bonita had rejected the Garments.  However, there is another email from Bonita to the defendant dated 5 April 2012 stating that Bonita had refused to take over the Garments.  The latter email came into existence at a much later stage.  It is still not clear whether Bonita had accepted the Garments at some stage and hence paid for the Garments.  There was discrepancy in the defendant’s evidence about whether Bonita had stopped the letter of credit, or whether Bonita had paid the letter of credit and deducted the amount from the defendant’s account later.  Thus, it is still not very clear whether Bonita had actually rejected the Garments.

51.  However, even when Bonita had rejected the Garments, it does not mean that the defendant could also reject the Garments.  As aforesaid, I do not find that the defendant could substantiate its claim that the Garments were almost all defective, and I find that there was no agreement for the delivery subject to Bonita’s acceptance. Bonita’s rejection of the Garments could be due to the fact that it had a much higher standard of quality, but the Garments could still be of normal merchantable quality as approved by STR.  Even if a small portion of the Garments were defective, the defendant has not put forward a case that it was entitled to reject the whole lot when there was short delivery.

Destruction of the Garments

52.  According to the defendant, it had to destroy the Garments in order to mitigate its loss.  The plaintiff did not follow up with the return of the Garments after the meeting on 5 March 2010, and the defendant did not want to incur further cost on the storage of the Garments.  However, I accept Mr Pang’s evidence that he had offered to go to Germany to inspect the Garments but it was not agreed by the defendant.  The defendant contends that Mr Pang could still go to inspect the Garments on his own.  I do not accept this argument, as Mr Pang would not know the whereabouts of the Garments.  So without the defendant’s agreement, it was meaningless for Mr Pang to go to Germany on his own.

53.  I also find it strange that the Garments were destroyed only after about a year. If the defendant had wanted to mitigate its loss, it should have destroyed the Garments much earlier.  I do not think that the defendant would need about a year to see if it could find another buyer for the Garments.  In fact, the storage charge for about a year is about the same as the cost for returning the Garments to Hong Kong.  The defendant would not save much money by storing the Garments for such a long time and then destroying them.

54.  In any event, I find that the defendant in destroying the Garments in the circumstances of this case had assumed ownership of the Garments and should pay for the price of the Garments.

Counterclaim

55.  In view of my findings above, the defendant cannot counterclaim against the plaintiff for any of the items listed above or to set off any of the amount claimed by the plaintiff.  Thus, the counterclaim should be dismissed accordingly.

Conclusion

56.  I therefore find that the plaintiff is entitled to judgment as claimed, and I order as follows:-

(1) The defendant do pay the plaintiff the price of the Garments in the sum of USD70,404.38 together with interest thereon at judgment rate from 19 August 2010 until judgment and thereafter on all judgment sums at judgment rate from the date of judgment until satisfaction.

(2) The counterclaim be dismissed.

(3) Costs order nisi: the defendant do pay the plaintiff costs of the action (including the costs of the counterclaim) to be taxed if not agreed.