LUEN YAU CO v. MAXSON RESOURCES LTD

HCA 3267/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3267 OF 2002

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J U D G M E N T

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1. This is a sale of goods claim. The background facts are not in serious dispute: the Defendant is an electrical contractor engaging in construction and dismantling works. In about May 2002, the Defendant through tender obtained a project from the Hong Kong Airport Authority ("HKAA") - Contract 405, for the dismantling and removal of various temporary facilities at Chek Lap Kok. The contract gave the Defendant the right to sell all the used metals that were to be derived from the demolition project. The contract had a completion date in September 2002, by which time the Defendant would have to complete all the demolition work and, among other things, remove all the used metals from the site. The Plaintiff, on the other hand, is a partnership, of Mr Law Chi Biu and another person. It trades in used metals.

2. There is no dispute between the parties that in early May 2002, Mr Law on behalf of the Plaintiff entered into negotiations with Mr Joe Mullen through his interpreter, Mr Mak Yui Woon, for the sale and purchase of the used metals to be derived from the demolition project. Both Mr Mullen and Mr Mak are (and were at the time) the directors and shareholders of the Defendant. Mr Mullen was more responsible for the business side of the Defendant, whereas Mr Mak, apart from acting as Mr Mullen's interpreter, worked as the foreman in the demolition project.

3. It is not in dispute that resulting from these negotiations, which included three site inspections by Mr Law, the parties reached an agreement for the sale and purchase of the used metals - @ $550 per metric ton for scrap metal, $3,800 per metric ton for stainless steel and $7,000 per metric ton for aluminium. Further, on 14 May 2002, the Plaintiff gave the Defendant a sum of $200,000 in respect of the agreed purchase.

4. The crucial difference that divides the parties lies in the quantity of used metals agreed to be sold: it is the Plaintiff's case, and the evidence of Mr Law, that he had agreed with the Defendant for the sale and purchase of all the used metals (i.e. the scrap metal, stainless steel and aluminium) to be derived from the demolition project at the above unit prices, and the sum of $200,000 was paid as a deposit. Given the nature of the demolition work, he would take delivery from the Defendant by instalments. The Plaintiff would pay for each delivery by cash in accordance with the agreed unit prices. The deposit would simply act as a security money, and be dealt with at the end of the contract. Mr Law said in evidence that according to his estimation, there were about 4,500 metric tons of scrap metal, 50 metric tons of stainless steel and 25 metric tons of aluminium to be derived from the demolition project. He also said that so far as delivery of the scrap metal was concerned, he had agreed with the Defendant to take delivery of the scrap metal by vessel at the Chek Lap Kok heavy goods pier. As the capacity of the vessel would be about 300 metric tons, he had agreed with Mr Mak that whenever about 300 metric tons of scrap metal were accumulated, Mr Mak would so inform him and he would arrange for taking delivery of the accumulated scrap metal. (According to Mr Law, as it turned out, the Defendant accumulated the scrap metal at an open space next to the heavy goods pier, and that was where he took delivery of the scrap metal.) As for the stainless steel and aluminium, Mr Law agreed that it was for the Plaintiff to take delivery of the same at those places at the site where they were to be derived.

5. Both Mr Mullen and Mr Law denied in the witness box that there was a general agreement between the parties for the sale and purchase of all the used metals to be derived from the demolition project. They insisted that the May negotiations only resulted in an agreement for the sale and purchase of $200,000 worth of used metals. In other words, the $200,000 paid was a full advance payment of the agreed purchase. It should be noted that when the sum of $200,000 was paid, the contract documents with HKAA were yet to be finalised, and actual demolition work did not commence until late May or early June. According to the Defendant, pursuant to the agreement reached between the parties, the Plaintiff had the right to choose the used metals from amongst the used metals to be derived from the demolition project. This was an advantage because used metals of different qualities would be derived from the demolition work.

6. What is not in dispute between the parties is that in early June 2002, the Plaintiff took delivery of a quantity of stainless steel from the Defendant that was derived from the demolition project. At that time, no weighing scale was available at the site, and the parties simply agreed that the quantity of stainless steel in question was worth $50,000 in value, based on the agreed price of $3,800 per metric ton. Again there is no dispute that in relation to this lot of stainless steel, the Plaintiff paid the Defendant cash of $50,000 for the delivery. This accords with the Plaintiff's case that notwithstanding the payment of the deposit, each delivery would have to be paid for by cash. Mr Mullen, on the other hand, explained that the delivery of this lot of stainless steel was the result of a separate and free standing agreement between the parties. It was not related to the May agreement. The parties simply agreed that this lot of stainless steel would not be regarded as part of the delivery under the May agreement for the purchase of $200,000 worth of used metals (including stainless steel), but be regarded as a separate contract.

7. It is again not in dispute that on 9 June 2000, a further sum of $200,000 was paid by the Plaintiff to the Defendant. According to Mr Law, this was paid as a further deposit for the purchase of all the used metals. At that time, Mr Mullen told Mr Law that he was in urgent need of money and Mr Law acceded to his request.

8. Like the first "deposit", Mr Mullen gave the Plaintiff a receipt. The two receipts are in the following terms:

1st Receipt

"Mr. Kenny Law [Mr Law's son]
Luen Yau Company
14th May 2002

Please find detailed our receipt for the sum of HK$200,000 as deposit for the purchase of the following items from Contract 405 at Chek Lap Kok.

Agreed prices	Scrap Metal	HK$550 per ton
	Stainless Steel	HK$3,800 per ton
	Aluminium	HK$7,000 per ton

All unit rates are based on having access to the heavy goods pier access at C. L. K. for shipping purposes.

Yours sincerely

(Signature)

Joe Mullen"

2nd Receipt

"Mr. Kenny Law
Luen Yau Company
10th June 2002

Please find detailed our receipt for the second payment of HK$200,000 as deposit for the purchase of the following items from Contract 405 at Chek Lap Kok.

Agreed prices	Scrap Metal	HK$550 per ton
	Stainless Steel	HK$3,800 per ton
	Aluminium	HK$7,000 per ton

All unit rates are based on having access to the heavy goods pier access at C. L. K. for shipping purposes.

Yours sincerely

(Signature)

Joe Mullen"

9. On the other hand, Mr Mullen and Mr Mak both said in evidence that the payment of this second sum of $200,000 was quite unrelated to the May agreement. This was in fact yet another separate and free standing agreement between the parties for the sale and purchase of another $200,000 worth of used metals at the same agreed unit prices.

10. According to Mr Law, he entered into a sub-sale agreement with a long-term customer, Mr Lee Kin Chun, for the resale of 4,000 metric tons of scrap metal to be derived from the demolition project at $650 per metric ton on 21 June 2002. According to the evidence of Mr Lee, who confirmed the making of the resale agreement, he in turn entered into a further resale agreement with a Yat Fu (HK) Cycle Co. in respect of the 4,000 metric tons of scrap metal at $750 per metric ton.

11. In any event, it is not in dispute that on 2 July 2002, Mr Lee, as a representative of the Plaintiff, went to the site to take delivery of 147.104 metric tons of scrap metal of a value of $80,907.20, from the Defendant. According to Mr Law and Mr Lee, the delivery was done pursuant to the agreement to sell all the used metals between the Plaintiff and the Defendant, as well as the sub-sale agreement between the Plaintiff and Mr Lee for the resale of 4,000 metric tons of scrap metal. Cash payment was made by Mr Lee (on behalf of the Plaintiff) to the Defendant, which constituted also the (partial) payment of the sub-sale price of the lot of scrap metal by Mr Lee to the Plaintiff under the sub-sale agreement.

12. On the other hand, Mr Mullen said in evidence that this delivery again constituted a separate and free standing sale and purchase agreement between the Plaintiff and the Defendant. For his part, he knew nothing about Mr Lee's role and involvement, and simply thought that he was a mere employee of the Plaintiff. He said that both parties agreed not to treat the delivery of scrap metal in question as part of the delivery under either the May agreement or the June agreement, each for the sale of $200,000 worth of used metals. While Mr Mullen agreed in evidence that in June and July the market prices for the used metals had been going up, he said that for the sale and purchase of this lot of scrap metal on 2 July, he was happy to sell at the old unit price of $550 per metric ton.

13. Mr Mak, in his witness statement, basically said the same thing in relation to the 2 July delivery. However, in the box, he was more confused, and said during cross-examination that the delivery was made pursuant to either the May agreement or June agreement of $200,000 each.

14. In any event, the parties agreed that soon after the 2 July delivery, there was a discussion amongst them regarding a further sum of $1 million. According to Mr Law, soon after the 2 July delivery, Mr Mullen through Mr Mak demanded him to pay yet another further deposit of $1 million to the Defendant (which was apparently having difficulty with cashflow relating to the project), threatening to sell the used metals to others if his demand was not acceded to. Mr Law found the request unreasonable and did not agree to it. Mr Law said thereafter Mr Mullen's attitude towards him changed and he (Mr Mullen) became hostile to him.

15. Both Mr Mullen and Mr Mak said there was no demand for the payment of $1 million as such. They said in evidence that after the 2 July delivery, Mr Law called Mr Mak asking for the further purchase of another lot of scrap metal at the old price ($550 per metric ton). Mr Mullen was reluctant to sell at the old unit price because the market price had gone up. Through Mr Mak, he indicated that the Defendant would only be prepared to sell at the old unit price if the Plaintiff would agree to buy $1 million worth of scrap metal. Mr Law refused and the discussion broke off. Mr Mullen said in cross-examination that Mr Law did not in the negotiations indicate how much scrap metal he wanted to purchase. On the other hand, Mr Mak said in cross-examination that Mr Law had wanted to purchase $200,000 worth of scrap metal at the old unit price, which information he had duly related to Mr Mullen.

16. In any event, there is no dispute that following the so-called $1 million discussion, there were three deliveries on 10 July, 28 July and 3 August of 202 tons, 268.22 tons and 233.32 tons of scrap metal, of $111,100, $147,521 and $128,326 in value respectively. There is no dispute that in relation to these three deliveries, no payment was made.

17. According to Mr Law and Mr Lee, on 10 July, when Mr Lee gestured to Mr Mullen upon taking delivery of the scrap metal with the intention of making payment to Mr Mullen, Mr Mullen refused to accept payment. When this was related to Mr Law, Mr Law immediately realized, given what had happened in relation to the demand for $1 million, that Mr Mullen was starting to renege on the agreement between the parties and refusing to sell him more of the used metals. In other words, Mr Mullen was beginning to use the deposits to set off against the price of the delivery. As a result, on the second and third occasions, no payment was offered to Mr Mullen and Mr Mullen did not demand for payment. Furthermore, after the 3 August delivery, the total deposit of $400,000 had been substantially set off by the last three deliveries, and thereafter Mr Mullen refused to sell or deliver any more used metals to the Plaintiff.

18. On the other hand, Mr Mullen and Mr Mak said in evidence that the three deliveries in question were done in respect of the May agreement and June agreement for $200,000 worth of used metals each. Apart from a small balance of 23 metric tons of scrap metal which the Plaintiff refused to take delivery of, the Defendant had fully delivered the used metals contracted to be sold under the May agreement and June agreement to the Plaintiff by these three deliveries. Indeed, the Plaintiff was in the wrong in refusing to take delivery of the remaining 23 metric tons of scrap metal.

19. According to Mr Law's evidence and the documentary evidence, the Plaintiff through solicitors wrote on 8 August 2002 to the Defendant claiming that the Defendant had, in breach of the agreement reached between the parties, refused to deliver further used metals to the Plaintiff. By letter dated the following day, the Defendant said that it had fulfilled all agreements between the parties, and in fact it was the Plaintiff who failed to take delivery of the balance quantity of 23 metric tons of scrap metal. On 13 August 2002, the Plaintiff's solicitors replied that the contract between the parties was for the sale of all the used metals to be derived from the demolition project. On 19 August 2002, the Defendant replied and insisted that it was the Plaintiff who had failed to take delivery of the remaining 23 metric tons of scrap metal.

20. On 21 August 2002, Mr Lee, with the assistance of a friend (as per his evidence), wrote a letter in English to the Plaintiff regarding the non-delivery of the remainder of the agreed 4,000 metric tons of scrap metal, and claimed for his loss of profit. (On the other hand, apparently Yat Fu was prepared to simply drop the balance of the resale contract without any claim for compensation against Mr Lee.)

21. On 26 August 2002, i.e. less than one month after the last delivery on 3 August, the present action was commenced, in which the Plaintiff sues the Defendant for non-delivery of the used metals that were to be derived from the demolition project, apart from those that had been delivered.

22. The central issue in the present case is a factual one: whether the parties had agreed in their May discussion to the sale and purchase of all the used metals to be derived from the demolition project, or whether the parties had merely in the course of May to July entered into several separate and free standing agreements for the sale and purchase of various quantities of used metals. On this issue, I have, as indicated above, heard quite some evidence from Mr Law, Mr Lee, Mr Mullen and Mr Mak. Further, I have before me various documents and correspondence relating to the dispute between the parties. Apart from all this, I must also bear in mind the general circumstances of the case. The burden of proof is certainly on the Plaintiff to establish, on a balance of probabilities, the alleged agreement to buy all the used metals. In arriving at a factual finding, I bear in mind all this, and in particular the demeanour of the witnesses as well as the inherent probabilities (or improbabilities) of the parties' competing versions of event. Neither side suggests that there is any single conclusive or decisive factor in its favour. In arriving at my factual conclusion, I bear in mind the totality of the evidence.

23. So far as demeanour is concerned, I prefer the evidence of both Mr Law and Mr Lee to that of Mr Mullen and Mr Mak. Both Mr Law and Mr Lee appeared to me to be straightforward and honest witnesses, who tried their best to tell the Court what had happened. By comparison, Mr Mullen was more guarded in his evidence, whereas Mr Mak's evidence was confusing at times.

24. There were in respect of all the witnesses, some inconsistencies between what they said in the box and what they said in their witness statements, what the pleadings said, or what the other witness (on the same side) had said. In my judgment, most of these discrepancies were mere mistakes due to understandable misunderstandings that occurred in the process of preparing pleadings/witness statements (which were written in English) or due to a lapse of memory. Whilst I have borne them in mind, I do not think they by themselves entitle me to reject a particular witness' evidence.

25. Counsel on both sides have in their written final submissions referred to a number of "inconsistencies" in their opponent's witnesses' evidence. I do not intend to recite them here. I have considered and borne in mind what they said.

26. As a whole, so far as demeanour is concerned, I prefer the witnesses of the Plaintiff than the witnesses of the Defendant.

27. But, as I said, apart from demeanour, I must, amongst other things, consider the inherent probabilities or improbabilities of the competing versions, and examine the objective and surrounding circumstances, as well as the documentary evidence, before I can, based on the totality of the evidence, come to any factual findings. Here, again counsel on both sides have very helpfully in their written final submissions referred to a number of points, circumstances or factors that they said are in their client's favour, in support of their respective cases. Neither counsel has argued that any of them is a conclusive or decisive factor in itself. I agree that, in varying degrees, most of these points raised by counsel are indeed valid points in their client's favour. I bear them all in mind. I do not intend to repeat all of them here. I would simply discuss below some of the more obvious or material considerations.

28. The Plaintiff relies on the May negotiations in support of its case - the detailed discussions that took place even prior to the finalisation of the contract documents with HKAA and the commencement of the demolition work; the three site visits paid by Mr Law; the demolition list and drawing plans that were supplied by the Defendant to the Plaintiff during the negotiations - all this would tend to suggest that Mr Law was a special buyer. Securing in advance the commitment of a buyer for all the used metals in the project would obviously bring benefits to the Defendant. It would guarantee that all the used metals to be derived from the demolition project would be sold. It would remove the possible risk of not being able to sell all the used metals by the end of the demolition contract, and the potentially disastrous consequences of delaying the vacating of the site because of unsold used metals. The deal would fit well with the relatively tight schedule that the Defendant was working under, and would ease its cashflow problem in the project. On the other hand, I fully bear in mind that all these benefits would be premised on the Plaintiff duly and faithfully performing its part of the contract. But I think Mr Mullen went a bit too far in the box when he insisted that even if somebody had offered to buy all the used metals from him, he would not have accepted the offer, because he would not put "all eggs in one basket". His refusal to even acknowledge the (hypothetical) benefits from such an offer (assuming that the offeror was good for his word) betrayed an over-defensive attitude on his part in the box. After all, the bottomline of his case was simply that Mr Law never made such an offer.

29. The wordings of the two receipts are quite obviously in favour of the Plaintiff. They both referred to the payments as a "deposit". The second receipt actually referred to the second sum of $200,000 as the "second payment", thereby suggesting a connection with the first sum of $200,000 (at least on one reading). In a previous receipt issued by the Defendant to the Plaintiff in an earlier transaction in November 2001, Mr Mullen described the payment then made by the Plaintiff to the Defendant, in advance of taking delivery, as "payment". This provides some contrast with the use of the word "deposit" in the two receipts involved in the present case. While I accept that a deposit may be equal in amount to the full purchase price, the more normal usage of the word is where the deposit is less than the purchase price. It is true that the two receipts did not specifically say that all the used metals were to be sold by the Defendant to the Plaintiff, yet equally they did not say that the sale was restricted to $200,000 worth of used metals under each receipt.

30. On the amount of the deposit, the Defendant argues that the amount would be too small if it was meant to be a deposit for the sale and purchase of all used metals, given the parties' respective estimates of the quantities of used metals to be derived. (Mr Mullen estimated the scrap metal to be derived to be between 4,000 to 6,000 metric tons.) The Defendant's counsel points out particularly that in May when the agreement was allegedly concluded, only a "deposit" of $200,000 was paid. That would be less than 10% of the total value of the estimated quantities. I fully bear in mind the force of the Defendant's argument. But to some extent, it is neutralized by the fact that delivery was to be taken by instalments. According to Mr Law, whenever about 300 metric tons of scrap metal were accumulated on site, the Defendant would notify him and he would arrange for taking delivery. Given that agreement or understanding, if the Plaintiff should refuse or fail to take delivery of the accumulated metal within a reasonable time, the Defendant would know that the Plaintiff was breaching the contract. Now it should be remembered that the sum of $200,000 was more than sufficient to cover a lot of 300 metric tons of scrap metal (given its unit price), and if, as in my above example, the Plaintiff should unreasonably fail to take delivery of an accumulated quantity of about 300 metric tons of scrap metal within a reasonable time, thereby evincing an intention to breach the contract, the Defendant would no doubt immediately start looking for an alternative buyer for the accumulated metal, and the deposit in hand would be quite sufficient to cover the price of the accumulated metal if there should be any problem with finding a purchaser immediately for the 300 metric tons of metal so accumulated. This, I recognize, is not a water-tight answer, but is nonetheless something that would typically go through the minds of businessmen when they went into negotiations of this type, and negotiated on the amount of the deposit to be paid. As I said, I bear in mind the parties' respective arguments on the deposit.

31. Whilst the second payment of $200,000 came only in June, it would go, to some extent, toward addressing the deficiency, if there was any, in the original agreed deposit amount. The fact (as per the Plaintiff's case) is that Mr Law found the request reasonable, and did agree to pay the further deposit.

32. I find the deliveries made in early June (in respect of the stainless steel) and 2 July (in respect of the scrap metal), in which cash payments were made for the deliveries, to be in favour of the Plaintiff's case. I find the Defendant's explanation for receiving cash payments in respect of these deliveries rather artificial. Moreover, according to the evidence, the prices had been going up in June and July, and I do not see any real justification for the Defendant agreeing to enter into new agreements for the sale of the stainless steel and scrap metal in question at the old prices.

33. This latter point becomes more apparent when one considers together the 2 July delivery of scrap metal and the $1 million discussion between the parties a few days later. According to the Defendant's case, on the one hand the Defendant was willing to sell over $80,000 worth of scrap metal at the old price to the Plaintiff on 2 July (as a new agreement separate from the May agreement and June agreement which were based on the old price), yet on the other when only a few days later the Plaintiff asked for the supply of another $200,000 worth of scrap metal at the old price, the Defendant adopted a rather firm and aggressive stance of demanding a commitment for $1 million before agreeing to sell at the old price. The rather brief explanation given by Mr Mullen in the box that he agreed to sell at the old price in respect of the 2 July delivery because he and Mr Law were friends is, in my judgment, rather insufficient. Moreover, I find Mr Mullen's denial of knowledge of how much quantity of scrap metal Mr Law had wanted to buy at the old price, which prompted the $1 million commitment discussion in the first place, rather surprising. It is difficult to understand why without knowing how much Mr Law would want to buy this time, Mr Mullen would suddenly impose a $1 million commitment as a condition. In this respect, as noted above, his evidence differed from that of Mr Mak's: according to Mr Mak, Mr Law had indicated an intention to buy yet another $200,000 worth of scrap metal at the old price.

34. I am also slightly troubled by the way the discussion broke off between the parties, as per the Defendant's story. According to the Defendant's story, the discussion simply broke off when Mr Law refused to make a commitment for $1 million. I find it rather surprising that the Defendant, in that event, did not try to rescue the potential deal by suggesting to sell to Mr Law the quantity of scrap metal that he wanted (i.e. $200,000 worth of scrap metal) at a higher unit price - after all that would not be unreasonable given the rise in the market price. Yet there was no such discussion at all. Mr Mullen was, in effect, driving an old and established customer away by his insistence on a $1 million commitment. Yet according to his evidence, by then about 1,500 metric tons of scrap metal had been derived from the demolition project available for sale. Unless Mr Law somehow unreasonably wanted to stick to the old price, there was no apparent reason why the parties could not, by further negotiations, come to an agreement for the sale and purchase of the quantity of scrap metal that Mr Law wanted at a mutually acceptable price that was more reflective of the then market price than the old price, based on the Defendant's story.

35. Mr Mullen said in evidence that apart from Mr Law, he had other customers to sell the used metals at all material times, including in particular May and June. But there was very little documentary evidence to back his claim up regarding the earlier sales to others. No details were given in evidence. Essentially no documents were disclosed. Mr Mullen said in evidence that most customers did not require a receipt and therefore he could produce none. I bear in mind his explanation, but I also have to consider the inherent probabilities or improbabilities of his oral assertion. I also take into account his evidence that he did manage to sell all used metals that were derived from the project by the time the project was completed.

36. If the sub-sale of 4,000 metric tons of scrap metal by the Plaintiff to Mr Lee is accepted by this Court, it would be a very important if not an overwhelming factor in favour of the Plaintiff. In this regard, as I say, I bear in mind the demeanour of Mr Law and Mr Lee in the witness box. I take into account that the alleged sub-sale and the further resale by Mr Lee in favour of Yat Fu do have some documentary support. I bear in mind the criticisms raised by counsel for the Defendant regarding the alleged sub-sale and further resale, and the documentary proof thereof. That Mr Lee was a sub-buyer, in my judgment, cannot be disputed. He took part in the various deliveries as the Plaintiff's representative. But that, of course, does not necessarily mean that there was an agreement between the Plaintiff and Mr Lee for the sub-sale of 4,000 metric tons of scrap metal. Whether there really was a sub-sale can only be decided by reference to the totality of the evidence. The same considerations apply to the claimed resale between Mr Lee and Yat Fu. All I would note here is that Mr Lee was not seriously challenged during cross-examination about the sub-sale and the resale (to Yat Fu), and in any event, he maintained his stance throughout his evidence. I also note that no representative from Yat Fu was called to give evidence, which, as noted above, was apparently prepared to simply drop the remainder of the resale contract without making any claim for compensation against Mr Lee - an assertion from Mr Lee which I must bear in mind in evaluating the competing probabilities. One possible explanation is that the resale price of $750 per metric ton was around the market price at the time and thus no actual loss was caused to Yat Fu by the premature termination of the resale contract. There are other possibilities.

37. The fact that the Plaintiff went to such length that it purchased a weighing scale (costing $10,000) for use by the Defendant at site to weigh the used metals to be delivered would seem to suggest, at the very least, that the Plaintiff was a special buyer of the used metals to be derived from the project.

38. The prompt action taken by the Plaintiff in August - first in writing solicitors' letters and subsequently by the commencement of legal action - would tend to suggest that the Plaintiff did really have a genuine grievance which it was prepared to go to litigation almost immediately to vindicate. No doubt, the response of the Defendant to the solicitors' letters was equally swift, but the more important point here is that the Plaintiff acted rather quickly in making its claim.

39. Pausing here, it should be emphasized that in the present case, there is no possible half-way house. By that I mean the disagreement between Mr Law and Mr Mullen in this litigation as to what they had actually agreed cannot be explained away by any possible misunderstanding or mistake in the interpretation process involving Mr Mak (who apparently does not really speak much English himself). The Defendant has not suggested any such misunderstanding or mistake in the interpretation process, and indeed both Mr Mullen and Mr Mak told essentially the same story in the witness box. In other words, there are only two options: either the Plaintiff was from the outset (and still is) deliberately and knowingly making a false claim against the Defendant, or the Defendant has actually, as the Plaintiff has been claiming, gone back on an agreement for the sale of all the used metals to the Plaintiff. The possible motive behind in either case, on the evidence, would be the rather substantial rise in the market prices of the used metals in June and July. The rather prompt action taken by the Plaintiff to assert its claim must be viewed and evaluated in such a context.

40. As regards the quantity agreed to be purchased, it is said that the Plaintiff, on its story, would be purchasing a very substantial quantity of used metals from the project, given the parties' estimates of the used metals, and given that the yearly turnover of the Plaintiff's business in used metals was $15-16 million. Mr Law said in evidence that his company was fully capable of absorbing the estimated quantity, which was not to be delivered in one go but only by instalments spread out in several months time. I bear in mind the point made by the Defendant and I bear in mind Mr Law's explanation.

41. I take in account also the point that according to the evidence, the transaction in question was only the second time Mr Mullen dealt with Mr Law and his company. I bear in mind whether in those circumstances, the Defendant would be prepared to risk agreeing to only sell the used metals from the project to the Plaintiff.

42. I also note the point made by counsel for the Defendant that in fact even according to the Plaintiff's case, there was really no definite plan for taking delivery in the sense that there was no definite time table for delivery. This was rather surprising given the substantial quantities of metals involved. I can see the force of the argument and I bear that in mind. On the other hand, as I said, Mr Law has indeed alluded to the understanding or agreement for the Plaintiff to take delivery once a quantity of 300 metric tons has been accumulated on site.

43. I also fully consider the point raised by the Defendant's counsel that the alleged agreement to buy all the used metals from the project would be a very important agreement, and it would be most surprising if the parties did not see fit to reduce their agreement to writing. Again, I can see the full force of this argument. To some extent, the deposit receipts provided an answer. But I agree that it would have been much more preferable to have a written contract. This is no doubt a point in favour of the Defendant, and I give it due weight in my deliberation process.

44. As I said, both counsel have made various points in their oral as well as written submissions. I have borne all of them in mind.

45. Having considered the parties' witnesses' demeanour, the contents of their evidence, the documentary evidence as well as surrounding circumstances, the inherent probabilities or improbabilities of the competing versions, and all relevant matters and arguments, I come to the conclusion that on a balance of probabilities, the parties did in their May negotiations reach an agreement for the sale and purchase of all the used metals to be derived from the demolition project. The sum of $200,000 was paid as a deposit accordingly. The second sum of $200,000 constituted a further deposit paid in respect of the same sale and purchase agreement. All the deliveries in June, July and early August were made pursuant to the agreement. The Defendant, most likely because of the rising market prices, unreasonably demanded for yet another further deposit payment of $1 million in July as a condition for its continuing with the agreement, and thereafter reneged on the agreement reached between the parties given the Plaintiff's refusal to accede to its demand. This culminated in the refusal of the Defendant to deliver further used metals to the Plaintiff after the 3 August delivery (apart from the 23 metric tons which the Plaintiff simply found too insubstantial and cost-inefficient to take delivery of). I also find that the sub-sale between the Plaintiff and Mr Lee and the resale between Mr Lee and Yat Fu were genuine transactions. Put shortly, on the totality of the evidence, I accept the Plaintiff's case.

46. Based on my findings, the Defendant was in breach of contract.

47. As regards relief, I accept the Plaintiff's case and evidence on the market prices. In any event, the Defendant has not seriously challenged the Plaintiff's witnesses on their evidence about the market prices as well as the documentary evidence that they relied on. The Defendant's witnesses did not give any evidence on what the market prices were (if they differed from those suggested by the Plaintiff).

48. As I said, I accept Mr Law's and Mr Lee's evidence on the sub-sale. I also accept Mr Lee's evidence that he had lost the profits on his resale of the scrap metal to Yat Fu as a result of the Plaintiff's failure to perform the contract of sub-sale (which was in turn caused by the Defendant's breach of contract), and he (Mr Lee) held the Plaintiff liable for his loss.

49. Furthermore, Mr Mullen accepted in cross-examination that he well knew that the purpose of the Plaintiff's purchase of used metals from him was for resale at a profit.

50. As regards the quantities of the used metals that were actually derived from the project, I only have the parties' respective estimates. Although the project had been completed, Mr Mullen did not tell the Court in evidence what actual quantities had been derived from the project. I would only assume that if the actual quantities that were derived from the project were substantially less than what Mr Law had estimated, based on which the Plaintiff's claim is formulated, Mr Mullen would have told this Court so (so as to reduce the amount of damages payable). In any event, in my view (based on the evidence), Mr Law's estimates were reasonable and accorded well with Mr Mullen's own estimates. I accept Mr Law's estimates, particularly bearing in mind his experience in the trade.

51. In all these circumstances, I have no difficulty in concluding, as per the calculations set out in paragraph 19 of the Amended Statement of Claim, that the Plaintiff's loss of profit regarding the sub-sale of (the balance of) 4,000 metric tons of scrap metal was $314,935.60. Furthermore, the Plaintiff has also incurred a liability towards Mr Lee in respect of the non-delivery of 3,149.356 metric tons of scrap metal under the sub-sale contract, and is liable to compensate Mr Lee for the sum of $314,935.60.

52. Further, for the respective remainders of the scrap metal and stainless steel, and the aluminium, the Plaintiff's losses, calculated in accordance with the normal measure of damages set out in section 53(3) of the Sale of Goods Ordinance (Cap. 26) (i.e. market price less contract price), are respectively $100,000, $29,474.40 and $30,000.

53. I would also note that if I had not been satisfied with the sub-sale, the Plaintiff's loss in respect of the balance of the 4,000 metric tons of scrap metal, calculated in accordance with the normal measure of damages, would be $629,871.20, as per paragraph 19(f)(vi) of the Amended Statement of Claim, which numerically speaking, happens to be equivalent to the total of the Plaintiff's own loss of profit on sub-sale of the balance of the 4,000 metric tons of scrap metal ($314,935.60) and the compensation payable by the Plaintiff to Mr Lee under the sub-sale ($314,935.60).

54. In the circumstances, in my judgment, damages payable by the Defendant to the Plaintiff amount to $789,345.60 in total ($314,935.60 + $314,935.60 + $100,000 + $29,474.40 + $30,000). In respect of the compensation payable by the Plaintiff to Mr Lee under the sub-sale contract between the two, although it has not yet been paid, damages are nonetheless payable in respect of it: Total Liban SA v Vitol Energy SA [2001] QB 643; Center Optical (Hong Kong) Ltd v Jardine Transport Services (China) Ltd [2001] 2 Lloyd's Rep. 678.

55. I give judgment for the Plaintiff against the Defendant accordingly. I also award pre-judgment interest on part of the judgment sum, i.e. the sum of $474,410.00¹, at the rate of 8% per annum from 14 September 2002² to the date of judgment, and thereafter post-judgment interest on the whole of the judgment sum ($789,345.60) at the judgment rate until full payment.

56. As to the Defendant's counterclaim for transportation charges, given the rather damaging evidence of Mr Mak regarding the Defendant's responsibility to transport the scrap metal to the open space near the pier or to any place at the site required by the Plaintiff for the purpose of making delivery to the Plaintiff, the Defendant's counterclaim must fail. Indeed, to be fair to counsel, she did not press the counterclaim at all in her final submission on behalf of the Defendant.

57. I order that the counterclaim be dismissed.

58. Counsel agree that costs should follow the event. Moreover they agree that costs should be payable on the High Court scale. In those circumstances, I order that the costs of the action and counterclaim be paid by the Defendant to the Plaintiff; such costs are to be taxed on the High Court scale if not agreed.

59. I thank counsel for their assistance.