HANG TUNG TRADING CO v. CHINA BUILD DEVELOPMENT LTD AND ANOTHER

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JUDGMENT

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Kempster, JA :

1. By Civil Appeal No. 180 of 1989 the plaintiffs in an action of which the distinctive number is A8415 of 1987 seek to set aside the judgment and order of Bokhary J given and made on 6 July 1989 whereby he dismissed their claim against the defendants with consequential orders as to costs. In the event of the plaintiffs' appeal succeeding the defendants seek an indemnity from the third parties, while the third parties ask for an order dismissing any such claim. This contingent relief is sought in Civil Appeal No. 19 of 1990.

2. By an agreement in writing dated 15 January 1987 the third parties agreed to sell to the defendants 25,000 lbs of 1/2.2 mm (a measure of weight) hundred per cent acrylic pop corn yarn, raw white in hank of Taiwan origin at a price of US$2.32 per pound, CIF Hong Kong. These goods, consisting of  156 bales, formed part of a consignment of 40,000 lbs of yarn of Taiwan origin delivered to the plaintiffs by the defendants on 16 February pursuant to an agreement for the sale and purchase of 80,000 lbs of like yarn which had been concluded between those parties on or about 10 December 1986. The balance of 15,000 lbs derived from another Hong Kong supplier.

3. The plaintiffs accepted the goods on the basis of the shipping marks on the bales and certifies that they complied with contract description and were in good order and condition. The defendants were paid. Thus the plaintiffs forfeited their right to reject and prejudiced their right to claim damages for breach of warranty. Sale of Goods Ordinance sections 13 (3), 37 and 53. It is not suggested by the defendants that they acted to their detriment in reliance on the plaintiffs' certificate or that any estoppel arises.

4. Following complaint by buyers in Shanghai to whom they had resold the plaintiffs alleged that 25,000 lbs of the 40,000 lbs delivered to and accepted by them in February 1987 did not correspond with description in that the yarn count was 1/1.9 rather than 1/2.2 mm. In the action they sought damages from the defendants.

5. By telex of 3 April 1987 the defendants had stated to the plaintiffs in relation to the yarn complained of : -

"... have above said goods returned to us in sound condition and we will refund the invoice amount here."

They had not offered to pay damages or conceded a revived right of rejection but, as the trial judge found, had orally agreed with the plaintiffs that the goods should be returned within two weeks of 3 April. In the event the plaintiffs were unable to make arrangements allowing the goods in question to reach Hong Kong from Shanghai until about 21 June. Their solicitors invited those acting for the defendants to take them back on the 30th.

6. Had the plaintiffs satisfied the trial judge that 156 bales lying in a Chaiwan godown were indeed a part of the consignment of 40,000 lbs of yarn delivered to them by the defendants they would have been entitled, having furnished consideration, to enforce the promise made by the defendants and to recover from then the invoice price of US$51,250 - but for the stipulation as to time. Alternatively, if it had been shown that these bales contained yarn with a count of 1/1.9 mm, they would have been able to recover damages regardless of the date of redelivery to Hong Kong. The measure of such damages is : -

 

"the estimated loss directly and naturally resulting, in the ordinary course of events, from the breach of warranty."

And, since the breach alleged was one of warranty of quality : -

 

"the loss is prima facie the difference between the value of the goods at the time of delivery to the buyer and the value they would have had if they had answered to the warranty."

Sale of Goods Ordinance section 55(2) and (3). But that matter is not our immediate concern. Indeed, there is no appeal against the judge's findings in this regard made obiter, but very helpfully, in case he should be found wrong by this court on the issue of liability.

7. Since the plaintiffs failed to satisfy the judge that the goods returned to Hong Kong were provably part of the 40,000-lb consignment originally sold to them by the defendants and resold to the buyers in Shanghai he did not go on to consider whether such goods had been sold to the defendants by the third parties in the first place. The plaintiffs fell at the first hurdle. They contend that the judge's critical finding of fact can be faulted on the footing that he erred in failing to give any or any sufficient weight to certain factors and in giving weight or undue weight to others.

8. Certainly all of the nine of the 156 bales from the Chaiwan godown which were examined bore the shipping mark "HT ST1229/87 Hong Kong" showing shipment by the third parties from Taiwan to Hong Kong under a specific contract with the defendants. The other 75 bales of the 40,000-lb consignment bore different shipping marks. However, as the relevant shipping documents show, each should also have borne, in juxtaposition, a further number between 1 and 156. As was common ground only one did so. Be that as it may there was no suggestion of any other goods reaching the Shanghai buyers bearing the shipping marks in question. It was also common ground that all 156 bales bore shipping marks demonstrating transit from Shanghai back to Hong Kong and, as the judge accordingly found, that only two of the nine bales bore shipping marks evidencing carriage by rail from Hong Kong to Shanghai. However, there was no firm evidence that such marks had been applied to all the bales when in Hong Kong awaiting carriage to China. The judge also pointed to discrepancies between the descriptions of lots and marks found in the godown warrant No. 007739, the godown demand notes and the survey report dated 24 July 1967 which appears to have been included in an agreed bundle but not proved. He did not remark upon the consistency of the references to account and, in particular, to wagon numbers.

9. All in all on the largely undisputed and mostly documentary evidence I an satisfied that this court is in as a good position as was the trial judge to assess the probabilities whether in relation of the identity of the 156 bales or as to the quality of the yarn therein comprised. Having so concluded I find myself satisfied in all the circumstances outlined and by reason of the consistent weights shown in the bill of lading covering shipment from Taiwan, the invoice of Shanghai buyers to the plaintiffs and the lighterage receipt in Hong Kong that the goods in Chaiwan constituted a part of the goods delivered by the defendants to the plaintiffs and by the plaintiffs to buyers in China which had, in due course, been returned to Hong Kong by those buyers.

10. The judge stated that the plaintiffs had led evidence that samples drawn by their surveyors showed that yarn from the 156 bales had a count of 1/1.9 mm and that these results were not challenged. I cannot discern in the rather unusual record kept, with the judge's blessing, by the solicitors for the parties anything to show that the contents either of the report prepared by Richards Brooks McLaren and dated 24 July 1987 or of the test report made by Labtest Hong Kong Ltd on 17 July were proved or admitted. Such documents do not become evidence because they are included in an agreed bundle in which no contradictory document is to be found. Further, the fact that in an undated facsimile message, to which Mr Sze of the plaintiffs referred, the Shanghai buyers stated that the goods complained of were ostensibly of 1/1.9 mm count as described at the ends of the packing of the 156 bales and on tags inside such packing, was not evidence upon which the judge was entitled to rely without invoking order 38 rule 29 of the Rules of the Supreme Court. He could have relied, and I do rely, on the Shanghai buyers' telex dated 3 April 1987 which read : -

"Goods returned by our company involved in contract ref. 86WS264 are 1/1.9 smm (sic) 156 packs weighted 25,000 lbs on your company's original invoice ref. HT189652 of which 40 lbs in pack no. 76231 has been unpacked and used as trial products ... Our factory is at present in urgent need of raw materials."

In respect of that document the plaintiffs had given an uncountered nearsay notice.

11. The plaintiffs were satisfied that their buyers' complaints were genuine and replaced the 156 bales.

12. In the absence of any evidential challenge on this issue by the defendants and, again, in all the circumstances I am also satisfied that, as between the plaintiffs and the defendants, the 156 bales did not conform with contract description and, in consequence, that the defedants are liable to the plaintiffs in damages for breach of warranty. I would allow Appeal No. 180 of 1989 accordingly.

Sir Derek Cons, Ag CJ :

13. I agree with my Lord that the appeal should be allowed and judgment entered for the plaintiffs on the claim in action A8415 of 1987. The line of reasoning which has led me to that conclusion is in substance not significantly different from that which my Lord has adopted.

Nazareth, J :

14. I also agree and for the reasons given by my Lord Kempster JA, I, too, would allow the appeal.