J.A. MOELLER (HK) LTD v. OPALBOND LTD

________________

__________________________

ASSESSMENT OF DAMAGES

__________________________

1. This was an action in contract where the Plaintiff agreed to sell 1,000 kgs of the chemical - Inositol and the Defendant agreed to purchase same at a price of US$39.00 per kg. In breach of the terms of the contract the Defendant failed to deliver a letter of credit so that the Plaintiff could effect delivery by sea at Hamburg in West Germany. The original writ was issued on 15th November 1989 and a concurrent writ issued on 22nd November 1989 to effect service on the Defendant in England on 18th December 1989. The Defendant filed an acknowledgement of service by post on 3rd January 1990 but has taken no other steps in this action since.

2. Interlocutory judgment was entered for the Plaintiff on 1st February 1990 in default of a defence being served with damages to be assessed and costs to be taxed. In the writ and at this assessment of damages the Plaintiff claimed damages for the Defendant's repudiatory breaches of contract as follows:

(a)    Contract price CIF sea Hamburg

(b) Purchase price FOB Shenzhen

(c) Sea freight Shenzhen to Hamburg

3. The Plaintiff produced a list of 14 documents for the assessment of damages to prove the terms of the contract and the various communications with the Defendant over this matter. Appropriate notice was given to the Defendant for these documents to be adduced in accordance with Section 47 of the Evidence Ordinance and Order 38 Rule 21 R.S.C. The only witness called at this assessment was CHEUNG Kam Kong on behalf of the Plaintiff. This witness formally produced the Plaintiff's Bundle of 14 documents. Mr. Cheung gave evidence that he had been employed by the Plaintiff for 8 years and that his employer was in the business of buying and selling chemicals. He referred to Documents 1 and 3 of the Bundle and explained that these documents provided for the sale by the Plaintiff to the Defendant of 1,000 kgs of Inositol at US$39.00 per kg. The Plaintiff's letter dated 23rd June 1989 (being Document 3 of the Bundle) provided for the terms of payment to be a letter of credit at sight 30 days prior to shipment of the goods. The Defendant in its letter dated 23rd June 1989 (being Document 4 of the Bundle) confirmed the terms of sale except the terms of payment which were to be payment against document at sight through Natwest Bank in London. The Plaintiff never agreed to any change in its terms of payment and the Defendant never opened a Letter of Credit in the Plaintiff's favour. The documents produced in the Bundle show that the Plaintiff never agreed to alter the terms of payment for the goods and the goods were never delivered.

4. This witness referred to Document 14 in the Bundle to confirm the purchase by the Plaintiff of 1,000 kgs of Inositol from its supplier in Shenzhen, China at the price of US$28.50 per kg. These were the goods the Plaintiff intended to ship to the Defendant. The shipping and insurance costs at US50¢ per kg (US$500) would have been met by the Plaintiff in terms of the contract with the Defendant. The Plaintiff took delivery of the goods from its Chinese supolier but at the first hearing of this assessment did not think it was relevant to provide details of the resale of these goods to another customer. The witness confirmed there was a ready market for this chemical when the Plaintiff resold same. The assessment was adjourned for the Plaintiff to adduce evidence relating to the resale of these goods as being pertinent to the question of mitigation of damages.

5. At the adjourned assessment on 7th June last the same witness, Mr. Cheung Kam Kong produced as Exhibit P.1 the contract relating to the resale of the chemical, Inositol. This contract shows that this chemical was resold to a buyer in Sydney with 500 kgs sent by air at a price of US$32.00 per kg and the balance of 500 kgs by sea at a price of US$30.00 per kg. The witness confirmed that the shipping and freight charges to sent these goods by sea from Hong Kong to Sydney were equivalent to such charges from Wong Kong to Hamburg. Mr. Cheung gave evidence that the air freight charges would be US$2.50 cents per kg, whereas the sea freight charges were only US50¢ per kg. The Plaintiff claimed that the additional cost of US$2.00 per kg for the 500 kgs of the chemical sent to the Australian buyer by air (US$1,000.00) should be met by the Defendant. Although this additional cost or difference from the sea freight cost is already reflected in the resale price of the 500 kgs sent by air, that is, @ US$32.00 per kg, as against the 500 kgs sent by sea @ US$30.00 per kg the Plaintiff is entitled to be reimbursed for the additional air freight cost of US$1,000.00.

6. Despite the Plaintiff's claim to US$10,000.00 for full loss of profit under the original contract with the Defendant, the Plaintiff is under a duty to mitigate its loss which it did in the resale of the goods to another buyer. The submission on behalf of of the Plaintiff that this resale was in turn a further loss of a potential sale to another customer is too remote in the light of evidence from its own witness that there was a ready market at the relevant time in the sale of this chemical. In such circumstances this submission does not warrant serious consideration. The Plaintiff's loss in this case is found to be US$9,000.00 being the difference between the original sale price, US$39,000.00 and the resale price, US$30,000.00 (after deduction of the air freight charge).

7. The Plaintiff also claimed interest @ 11% per annum on its loss of profit from 1st August 1989 to 1st September 1989 when the goods were resold. The basis of the interest claim is to equate with the bank lending rate over this period as the Plaintiff had borrowed money from the bank to finance this transaction. Interest was also claimed at the same rate on the loss of profit from 1st September 1990 to the date of this assessment. Interest will be allowed @11% per annum on the $9,000.00 loss of profit from the 1st August 1989 to the date of the decision on this assessment. The costs on this assessment are to be met by the Defendant to be taxed if not agreed.