FONG YIU TAO HA KUN FAT HONG v. LINPO INTERNATIONAL LTD

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JUDGMENT

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Mortimer J.:     This is a Defendant's appeal against a decision of Barnett J. in which he awarded the Plaintiffs US$27,000 for breach of contract in a sale of goods action for failure to deliver 1 million C-Mos which are components for digital watches. The background is that on the 24th December 1987 the Defendant agreed to sell 1 million of these components to the Plaintiff at 3.6 cents each. A letter of credit was to be issued and delivery was to be on or before the 31st December. Both parties were in Hong Kong and delivery was to be in Hong Kong. The letter of credit was issued on the 28th December but no delivery took place. The learned judge found that as a result of further negotiations, a further agreement about delivery was made, an amended letter of credit was issued and the further agreement allowed partial delivery with delivery to be completed by the 2nd February. In fact no delivery was made. The learned judge found that this was a breach and assessed the damages on the basis of the market price of those components on the 2nd February at 6.6 cents less 10%.

2. The basis of the decision was that the Defendant's seller failed to fulfil its obligations on a rising market. All the contemporaneous documents which had come into existence during the latter part of December and the early part of January supported the Plaintiff's account and did not support the Defendant's account (even those that came from the Defendant) and the Defendant's reaction to the amended letter of credit was to ignore it. In the pleadings every conceivable point was taken by the Defendant but each failed.

3. The findings of the learned judge were originally challenged on 3 grounds but the first ground of appeal has been abandoned by Mr. Shum. There are two matters which remain. Both these have been said by Mr. Shum to go to the measure of damages.

4. The first ground upon which he relies is that the learned judge erred in holding that there was an agreement to extend the delivery date to the 2nd February; the basis is that undue weight was placed by the learned judge upon the amendment to the letter of credit and that there was no supporting evidence from which he could draw the inference which he drew.

5. The argument was raised before the learned judge that there was no positive evidence of an amendment to the agreement which led to the amended letter of credit. He dealt with this matter with some care. He first reviewed the evidence he had heard from Miss Lee, the manager of the Plaintiff. She said that after the 31st December when there had been no shipment she managed to speak to the Defendant's manager, Mr. Ho on about the 5th January who asked for delivery to be extended. There was an agreement with him that it should be and that there should be an amended letter of credit. In cross-examination however she conceded that she could not remember whether the conversation which she had described was one between herself and Mr. Ho or one which had been related to her by her husband.

6. It was on that basis that Mr. Shum contends that there was no admissible evidence upon which the judge could rely from Miss Lee. He further points out that nowhere in her evidence did she ever say that there had been an agreement for delivery to be extended to the 2nd February. Mr. Shum also relies upon the officer from the bank who had spoken to a Miss Tang of the Defendants and who had told him (for some reason which is not clear) that the amended letter of credit would not be accepted.

7. The evidence for the Defendant was chiefly from Mr. Ho. He said there was no deal initially but that he was being pressed in early January to make a delivery. He had said that he would do so but only if a new price was agreed. The amended letter of credit was received by the Defendant but he ignored it because there had been no deal or agreement upon which it was based. The learned judge considered the evidence and having reviewed it said this about Mrs. Lee:

"Mrs. Lee spent a day in the witness box. I had ample opportunity to observe her as a witness. I was impressed by her, especially by the candour with which she admitted being mistaken or unsure and by the straightforward manner with which she dealt generally with cross-examination. I came to the conclusion therefore that she was essentially an honest witness doing her best to remember events and particularly conversations that took place nearly 2 years ago and not surprisingly becoming muddled about the details."

The background of that was that Miss Lee had affirmed in Order 14 proceedings and in an enormously lengthy cross-examination Mr. Shum demonstrated that some of the detail which she had placed in that affirmation did not accord with her evidence, particularly in chief but also in cross-examination.

8. The learned judge dealt with Mr. Ho's evidence and he said this about him:

"In contrast Mr. Ho struck me as over-confident and over-assertive and as a witness who was telling a story rather than trying to recall past events."

9. In dealing with the inference Which Mr. Shum challenges about the making of the further agreement in early January to postpone the date of delivery the learned judge on pare 8 of his judgment dealt first with the amendment to the letter of credit in a preliminary way. He said this about it; "The trouble and cost involved would appear explicable only on the basis that the Plaintiff was carrying out his part of an agreement," but he went oh to say that the matter could not rest there because of the cross-examination of Miss Lee and the way in which her credibility had been damaged in the course of that cross-examination.

10. He returned on page 14 to make his finding upon the amended agreement. He said this:

"The Defendant then argued that although an amendment to the LC was issued there is no positive evidence that this was by agreement with the Defendant. It is correct that in cross-examination Miss Lee agreed that she could not remember whether she or her husband spoke to Mr. Ho on or about the 6th January when it is alleged that an extension of a time for delivery was agreed. In my judgment however, having regard to the background of the case and the facts which I have found and having regard to the undoubted issue of the amendment I may and do draw the inference that the amendment to the LC was issued because of a prior agreement between the parties, the terms of which are contained in the amendment."

11. The background upon which the learned judge relied was that there had been some negotiation according to Mrs. Lee, whether by herself or her husband about the matter once delivery had not been made on the 31st December and, not taking into account her evidence but that fact, the learned judge inferred that consequent on further negotiations the amended letter of credit was issued and that it contained the result of those negotiations.

12. That is attacked by Mr. Shum on the basis that there were other alternative inferences which were open. He suggests that the alternative inferences were, that the Plaintiff was pushing or inviting the Defendant to remedy its breach of failure to deliver, or, that the Plaintiff was unilaterally allowing time to the Defendant to deliver.

13. With the greatest respect to Mr. Shum's argument when the Defendant received the amended letter of credit it chose, even on its account, to ignore it and not to raise any question upon it, it was clearly open to the learned judge to draw the inference that the further agreement was contained in the letter of credit. Indeed for my part, looking at the whole background not only do I think that the inference was open to the learned judge but it was an obvious inference for him to draw considering the way in which commercial men and women are expected to act. For my part I would reject the submissions by Mr. Shum on this ground. It follows that there was a breach of the contract on the 2nd of February and that damages fall to be assessed on that date.

14. The second matter which Mr. Shum raises in his attack upon the learned judge's decision is that he erred in relying upon the sales invoices in finding that the market price on the 2nd February was 6.6 cents. The basis of this submission is that invoices of any particular date do not reflect anywhere the relevant dates of the contracts to which they refer. The evidence was in fact silent upon the dates of contract and so Mr Shum argues that there was no evidence before the learned judge for him to make the initial assessment that the market price was 6.6 cents.

15. The evidence came from Mr. Hung. He first gave evidence as to the market price at about this time. On page 96 of the transcript he says:

"..... In 87 summer price of these goods not too sure. I believe price lower than 6.5 cents. Towards end of 1987 price also very low. At end or 1987 it was about 3.7 cents. Towards end 1987 demand very weak. February 88 went up to 6.5 cents. Price of C-Mos could change several times in a week and it was an upward change."

I digress for a moment to say that the evidence of both parties was that the price was rising from the time when the contract was originally made on the 24th December until February and continued to rise until June when according to Mr. Hung on page 97 the price was 7.8 cents. Mr Hung supported his evidence with invoices of sales of similar goods at about the relevant time, the 29th January and the 1st February. Those invoices show 6.6 cents per piece and 6.5 cents per piece. The argument goes that not only was there no evidence of when the contract was made but there was no evidence that pinpoints the market price on the very day, the 2nd February.

16. For my part I think there is nothing in this argument. Mr. Hung was not cross-examined as to the dates when the contracts were made. It was open to the learned judge to infer that the dates of the invoices reflected the market price at that time in the absence of other evidence, to take into account the dates of those invoices, to conclude that that was the market price and that it did not differ substantially between then and the 2nd of February.

17. In fact the learned judge acceded to Mr. Shum's argument that the true market price must have been somewhat less than the 6.6 cents because it could be expected that the Plaintiff had purchased for rather less and was making a profit. In this respect it is my view that the learned judge was kind to the Defendant but in any event his assessment took into account that there was a possibility of a 10% variation in price within 2 or 3 days as had been said by Mr. Hung in his evidence. I reject this ground of appeal.

18. It seems to me that the learned judge considered this case with great care and his findings and decision were entirely based upon the evidence he accepted. In those circumstances for my part I would reject this appeal.

19. Sir Derek Cons V-P: I too would dismiss the appeal for the reasons given by my Lord.

20. Kempster J.A. :      Also being satisfied that on the materials before him Mr. Barnett J. was entitled to draw the inferences and to award at least the damages he did I too would dismiss this appeal.