H.W. TEXTILES CO LTD v. WORLD TEXTILE PRINTING CO LTD

HCA 1511/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1511 OF 2001

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J U D G M E N T

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Background

1.  This is an action for breach of contract for provision of services.  The Plaintiff is a supplier of textile fabrics and the Defendant is a specialist contractor in textile printing. They had previous business dealings.

2.  In early September 2000, the Plaintiff obtained a purchase order from its client, Tarrant Company Limited (“Tarrant”) for the supply of 23,440 yards of indigo denim fabric with lace printing at $35.70 per yard.  Mr Choi of the Plaintiff liaised with Mr Sit Hoi Sing of the Defendant for printing the Plaintiff’s denim fabric by a printing process known as colour discharge printing and issued a printing order to the Defendant dated 12 September 2000.  The Defendant produced two sets of samples, which were rejected by the Plaintiff.  On 21 September 2000, the Defendant produced another set of six un-rinsed samples for the Plaintiff’s confirmation.  On 29 September 2000, the Plaintiff accepted a sample with a reference number B5 (the “Sample B5”) and contracted with the Defendant for printing 24,500 yards of denim fabric with effect corresponding to that of Sample B5.  The contract was partly evidenced in writing in the Plaintiff’s printing order dated 12 September 2000 and fax confirmation to the Defendant dated 29 September 2000. 

3.  On 17 October 2000, Tarrant’s quality control supervisor inspected the printed denim fabric at the Defendant’s factory.  He inspected twelve rolls of printed denim fabric from end to end.  He found joint marks; serious colour shading between the centre and the edge of the fabric and uneven printing on the denim fabric.  He carried out the inspection without comparing the printed denim fabric with Sample B5.  On the same evening, Mr Choi informed Mr Sit that the printed denim fabric had been rejected by Tarrant.  Mr Sit suggested that the defect could be cured by washing for ten minutes with cold water and then mild-washing with a light bleach.  Mr Choi passed on the washing method to Tarrant.  Rinsing is a mild process of removing dye or other chemicals from the printed fabric with water only.  Washing is a more rigorous washing with water and detergent such as bleaching agent.

4.  On the following day, Mr Choi informed the Defendant by fax that the printed denim fabric had been rejected by Tarrant and requested for two sets of samples from nine rolls of the printed denim fabric for further inspection.  He also inspected the printed denim fabric in the Defendant’s factory later that day.  Mr Choi confirmed the observation of Tarrant’s quality control supervisor.  He discussed the problem with Mr Sit who replied that the defect could be removed by washing.

5.  On 20 October 2000, upon receipt of Tarrant’s complaint that the defect could not be removed by washing, Mr Choi contacted Mr Sit again.  Mr Sit then advised two other washing methods.  More samples were obtained from the Defendant for Tarrant for washing.  On 25 October 2000, Tarrant complained again to Mr Choi that the defect could not be rectified by washing.  As the delivery date for the finished garments was pressing, Tarrant and its manufacturer agreed to try dodge-tailoring to avoid using the denim fabric with defective printing. 

6.  On 26 October 2000, Mr Choi arranged with the Defendant for delivery of the printed denim fabric to Tarrant’s manufacturer in China for dodge-tailoring to see if the defective fabric could be avoided by tailoring process.  On 16 November 2000, Tarrant informed the Plaintiff that the defect could not be avoided by dodge-tailoring or remedied by washing the finished garments.  Having failed to reach agreement on compensation, the Plaintiff instituted the present action on 3 April 2001 and claimed damages for breach of contract.  The Defendant counterclaimed for outstanding printing charges in the amount of $128,638.72.  In the meantime, the printed denim fabric were resold by the Plaintiff for $142,131.90.

The issues

7.  There is no dispute that the printed denim fabric exhibited different colour shading between the centre and the edge of the fabric and uneven colouring.  The Defendant’s primary case is that these are acceptable inherent risks in colour discharge printing accepted by the Plaintiff and that the problem could be cured by a process of washing after the printed denim fabric had been turned into garments.  The Defendant’s secondary case is that the uneven colouring was caused by the presence of starch on the denim fabric provided by the Plaintiff for printing, i.e. the fabric had not been fully desized or de-starched.  Thus, the central issues in dispute are (1) what are the express and implied terms of the contract between the parties; (2) which party was in breach of the express or implied terms of the contract; and (3) what was the loss and damage suffered by the injured party.

8.  On the first issue, it is common ground that the contract between the parties contained the following express terms:

(1)    that the Defendant should carry out the printing order properly;

(2)    that printed denim fabric should correspond to the colour and pattern of Sample B5; and

(3)    that the Plaintiff should provide to the Defendant fully desized indigo denim fabric for the purposes of performing the contract;

and the following implied term:

(4)    that the Plaintiff would not for the purposes of the contract supply to the Defendant indigo denim fabrics of which the quality and/or their previous treatment would affect or distort the result of printing by the Defendant. 

The parties have no dispute that the Defendant has no duty or obligation to produce the printed denim fabric with a quality that after washing the printed denim fabric would produce the effects and pattern as desired by the Plaintiff or Tarrant.

9.  The parties are in dispute as to whether the contract contained the following four terms.  The Plaintiff asserts but the Defendant denies:

(5)    that it was an express term of the contract that the printed denim fabric should correspond to the effect of Sample B5;

(6)    that it was an implied term of the contract that the printed denim fabric would correspond in quality with Sample B5; and 

(7)    that it was an implied term of the contract that the printed denim fabric would be free from any defects rendering its quality unsatisfactory which would not be apparent on a reasonable examination of the sample.

On the other hand, the Defendant asserts but the Plaintiff denies:

(8)    that it was an implied term of the contract that the printed denim fabric should be deemed in conformity with Sample B5 notwithstanding existence of colour shading or uneven colouring thereon which would normally result from colour discharge printing.

10.  Though terms No (6) and (7) have been pleaded by the Plaintiff and denied by the Defendant, the Plaintiff never pleaded what quality and inherent defect in Sample B5 were being relied on in the Plaintiff’s case and what damage was caused by the Defendant’s breach of those implied terms.  In the circumstances, I do not find it necessary to make any finding whether there were such implied terms and whether they were breached by the Defendant.  Thus, on the first issue, the Plaintiff relies on the express term No (5) that the printed denim fabric should correspond to the effect of Sample B5, while the Defendant relies on the implied term No (8) that the printed denim fabric were deemed to have conformed to Sample B5.

11.  On the second issue, if the Plaintiff is successful in establishing express term No (5), the Defendant relies on terms No (3) and (4) for its defence that the colour shading and unevenness was caused by the quality of and the presence of starch in the denim fabric supplied by the Plaintiff.  Further and in the alternative, if the Defendant is successful in establishing implied term No (8), the Defendant has a complete defence.

12.  Depending on how the first and second issues are resolved, the third issue is a question of the quantum of damages which the Plaintiff is entitled on the claim if the Plaintiff is successful or damages which the Defendant is entitled on the counterclaim if the Defendant is successful. 

13.  Before considering these issues, I shall first review the expert evidence of the parties and the processes involved in colour discharge printing.  It is only in the light of those facts in the entire factual matrix that the first and second issues could be properly resolved.

The experts’ evidence

The reliability of the experts’ evidence

14.  The parties have no dispute that the expert witness called by the other side is an expert qualified to give expert evidence in Court.

15.  The Plaintiff’s expert witness, Mr Cheng, is a technical consultant of the Textiles and Footwear Services Department of SGS Hong Kong Limited (“SGS (HK)”).  He obtained a Higher Certificate in Dyeing, Printing and Finishing from the Hong Kong Polytechnic College in 1978.  He started his career in the textile printing industry as a junior trainee in January 1972 and worked his way up to the position of a senior chief technician.  Between May 1977 and October 1997, he worked as a technical sales manager selling dyestuffs and textile related products.  Though he gave advice on technical matter, his work was apparently in a managerial capacity.  From August 1999 to September 2000, he worked as a washing and fabric technician with an American garment manufacturer.  Then he worked for two years as a technical and laboratory manager before joining SGS (HK).  He admitted that he did not have much working experience in colour discharge printing.  He had given expert evidence in court before, but not on colour discharge printing.

16.  It is common ground between the two experts that colour discharge printing could be performed by oxidation process or reduction process.  Under cross-examination, Mr Cheng admitted that he had not ascertained what printing recipe had been used by the Defendant in the printing process.  He agreed that the recipe allegedly used by the Defendant is consistent with the oxidation process.  However, based on the Defendant’s assertion that steaming process had been used in the course of the colour discharge printing, Mr Cheng opined that the colour discharge printing could not have been carried out by oxidation process using sodium hypochlorite (NaClO).  In fact, it is not the Defendant case that it used sodium hypochlorite in the printing process.  Mr Cheng had no knowledge of another oxidizing agent known as sodium chlorite (NaClO₂) allegedly used by the Defendant in the printing process and other oxidizing agents in the chlorate family, such as sodium chlorate (NaClO₃), sodium perchlorate (NaClO₄).  Mr Cheng’s opinion that steaming is inconsistent with oxidation process is inconsistent with the chlorate discharge process described by the authors of The Principles and Practice of Textile Printing, 4^th ed, at page 590.  While I have no doubt that Mr Cheng has a good general knowledge about textile printing, his working knowledge about colour discharge printing is rather flimsy.  However, the important part of his expert evidence so far as this case is concerned is not in dispute and the results of the tests conducted on the fabric samples upon which he based his opinion are incontrovertible and on which inferences could reasonably be drawn without the assistance of experts.  Subject to the above limitation, I think Mr Cheng gave evidence in a fair and expert-like manner. 

17.  The Defendant’s expert witness, Mr Cheung Mun Lim is a managing director of a company which carries on business in the textile printing and colouring industry.  He had been involved in the industry as a technician since 1962 and became a member of the American Association of Textile Chemist and Colourist in 1964.  He also qualified as a Chartered Textile Technologist of the United Kingdom Textile Institute in 1980 and was awarded a fellowship by the Institute in 1995.  He had also taught Mr Cheng physical chemistry while Mr Cheng was studying in the Hong Kong Polytechnic College in 1978.  Physical chemistry is a different branch of chemistry from dye chemistry, which is part of the branch of inorganic chemistry.  His qualification is much stronger than Mr Cheng’s and he appeared to have been more actively involved in the textile printing industry than Mr Cheng.  However, he also admitted that he did not have much working experience on colour discharge printing. He has never given evidence as an expert before.  I am not satisfied with his expertise in colour discharge printing.  He is personally known to Mr Sit of the Defendant and gave evidence on a pro-bono basis.  In that respect, he is different from Mr Cheng, whose profession was to investigate and give evidence. Furthermore, while Mr Cheung recognised as an expert that he owed duty to the Court and not to the Defendant, he demonstrated some bias in favour of the Defendant.  I place little weight on his evidence.

The colour discharge printing process - whether it is an accepted industrial practice not to rinse the printed denim fabric before delivery

18.  Despite that both experts are inadequate in some respects, they are broadly in agreement on the general process involved in colour discharge printing, which fortunately is what is needed of their expertise in view of the nature of the dispute in the present case.  The only bone of contention between the two experts is whether the printed denim fabric should be rinsed before delivery and whether it is an accepted industrial practice not to rinse the printed denim fabric before delivery.

19.  In white discharge printing, the original colour in the fabric to be printed is discharged or bleached by a discharging agent which is either an oxidising agent or a reducing agent.  In colour discharge printing, a colouring agent or pigment which will not react with the discharging agent is added to dye the bleached fabric.  In both printing processes, the print paste, which is essentially composed of the discharge agent, thickener and colouring agent in the case of colour discharge printing, is applied onto the fabric by printing and the fabric was allowed to dry.

20.  According to Mr Cheng, in the oxidation process, after the printed fabric has dried, it will be rinsed in hot dilute sulphuric acid solution to activate the chemical reaction of the print paste on the fabric.  When the desired effect is achieved, the fabric will be put in a hot bath of oxalic acid to terminate the chemical reaction and thereafter rinsed with cold water.  The printed fabric will then be washed in a hot alkali bath so as to remove the residual print paste, after which the fabric will be dried and packed for delivery.  This is only a general description of the process involved.  He insisted that the denim fabric will not be steamed because with the use of sodium hypochloride in the print paste, the hydrochloric acid produced in the chemical reaction will damage the fabric.  However, I note from The Principles and Practice of Textile Printing that the process varies with the print paste used.  As already mentioned above, steaming was used with chlorate discharge, which is an oxidation process.  It appears that Mr Cheng’s opinion in this respect is misconceived.  Unfortunately, the authors did not describe the process of chlorite discharge or hypochlorite discharge.  In the reduction method, after the print paste applied to the fabric has dried, the fabric will be steamed to activate the chemical reaction of the print paste.  When the desired effect is obtained, the fabric will go through three to four cold baths and then rinsed in a chemical solution to neutralise the reducing agent and to stop the chemical reaction.  Then the fabric will go through hot and cold rinsing before it is dried and packed for delivery.  The important and relevant part of his evidence so far as the dispute in this case is concerned is that whatever the printing processes, the printed denim fabric must be thoroughly rinsed with suitable reagent to stop the chemical reaction and then rinsed adequately with water to remove any residual print paste before it is dried and packed for delivery.  Thus, according to Mr Cheng, rinsing is an integral part of the colour discharge printing process.

21.  Mr Cheung did not seek to dispute the general procedures described by Mr Cheng.  His opinion is that the oxidation process is usually adopted for discharge printing on indigo denim fabric.  He said with chlorite discharge, in order to achieve and maintain a consistent rate of chemical reaction between the discharging and/or colouring agent with the denim fabric, the denim fabric will be steam heated.  This is consistent with what the authors described in The Principles and Practice of Textile Printing for chlorate discharge printing.  I assume Mr Cheung must be right about the steaming process.  The printed denim fabric will then be oven dried.  According to Mr Cheung, the printing process is basically completed and it is an accepted industrial practice that the printed denim fabric may then be packed without rinsing or washing.  He said that washing would be performed after the printed denim fabric had been turned into garments.  Especially for denim fabric garments, one of the main reasons for the practice is to ensure that the garments would acquire the required “fashion look”, such as faded colour or worn stone washed effect, which could only be achieved after washing the finished garments.  Thus, rinsing the fabric before it is turned into garments is unnecessary.  The important and relevant part of his evidence so far as the dispute in this case is concerned is that it is an acceptable industrial practice that the printed fabric is not rinsed after the printing processes, especially in the case of denim fabric.

22.  Mr Cheung does not shy away from the fact that after the steaming and oven process, the discharging agent and/or colouring agent in the residual print paste will continue to react with the colouring on the fabric unless and until the residual print paste is washed off.  He even explained that if sodium chlorite is used as the bleaching agent, it is normal to see a light yellow, golden yellow or lemon yellow colour on the printed fabric which will turn light green or dark green as oxidation is being completed.  He said this is normal and the colour can be removed by a process of washing after the printed denim fabric has been turned into garments.

23.  Mr Mak, counsel for the Defendant, submits that the fault in Mr Cheng’s logic is that if not all the chemical reactions had been completed, a rinsing would only serve to freeze the printed denim fabric in an intermediate stage, locking up unevenness instead of removing such unevenness.  He submits that Mr Cheung’s logic of allowing the chemical process to continue is preferred.

24.  According to Tarrant’s quality control supervisor, he saw yellow and green colour in the denim fabric when he inspected the fabric on 17 October 2000 in the Defendant’s factory.  He also saw the same in the printed denim fabric produced in Court but the colour unevenness had improved over the past six years.  It is also common ground that the colour shading difference between the centre and the edge of the printed denim fabric was because the chemical reaction of the residual print paste with the colouring of the denim fabric has been continuing at a faster rate at the edge of the rolled up fabric which was more exposed to light and air than the centre part.  However, on the evidence, the unevenness could not be washed away.  This amply demonstrates that Mr Mak’s and Mr Cheung’s logic of allowing the chemical process to continue to exhaustion of the dye or of the colouring of the denim fabric does not work in practice.  Of the two choices, the better one must be to have the chemical process arrested at such a stage as the skill and care of the technician considers at the time of the printing process as having achieved the desired effect than to allow the chemical reaction to continue uncontrolled yielding an unknown effect involving over-dyeing, for example, which accounts for uneven colouring.

25.  Mr Cheung’s evidence about this accepted industrial practice of not rinsing the printed fabric was based on what he heard from among the textile printers in the trade.  This practice is inconsistent with what the authors wrote in The Principles and Practice of Textile Printing.  The authors repeatedly emphasised the importance of washing away the residual print paste in any of the printing processes whatever the discharging agents used.  This makes common sense and business sense.  If the residual print paste is not removed, it will continue to react with the colouring on the denim fabric.  This will result in a piece of fabric with areas at different stages or degrees of chemical reaction, which accounts for uneven colouring.  Depending on the pattern to be printed, the unevenness may be unimportant for large patterns especially with fading colour, stone wash or worn out effect.  But for small patterns, such as lace pattern in the present case, I think consistency is of utmost importance.  Fabric is very expensive compared with the costs of rinsing.  A printing factory has all the facilitates such as water tanks for dyeing or rinsing fabric and drying facilities.  Rinsing could be conveniently carried out by the dyeing factory and at much lower cost than if it is to be carried out by the garment manufacturer.  If the residual print paste is not rinsed away before the fabric is turned into garments, it continues to react with the colouring in the fabric in a totally uncontrolled manner producing finished garments with uneven colouring.  The fabric and the workmanship in making the garments would be wasted.  The industry practice suggested by Mr Cheung is devoid common sense, let alone business sense, except, perhaps for the fabric with large patterns and intended for low quality garments.  It is also contrary to the views of the authors in The Principles and Practice of Textile Printing. If there were such a practice, it would be a recipe for disaster.  I reject that evidence of accepted industrial practice.   On the contrary and despite the reservation I have of Mr Cheng’s expertise in colour discharge printing, I accept his evidence that rinsing is an integral part of the printing process which is only to be excluded in exceptional cases.  The present case is not exceptional.

Presence of starch in the denim fabric supplied by the Plaintiff

26.  Another aspect of the dispute for which assistance of experts is required is whether the denim fabric supplied to the Defendant had been fully desized.  Two tests have been used for detecting the presence of starch on the denim fabric: the iodine test and the enzyme test.  Mr Cheng adopted the iodine test.  It is elementary chemistry that iodine contained in a solution of potassium iodide reacts with starch to yield a dark purple colour.  Not only that this is just a qualitative test, it is a very crude test.  Potassium iodide is light brown in colour.  If the concentration of starch is very low, the dark purple colour may be masked by the colour of the potassium iodide solution or may not show up against the background colour of the denim fabric to which the iodine solution is applied.  I think this is the furthest I can call upon my knowledge of chemistry as part of the common knowledge which I am entitled to take judicial notice of.  This is the limitation of the iodine test.  There is no evidence as to quantitative aspect of the test, i.e. the minimum concentration of starch required to yield a positive result. 

27.  The enzyme test is a more quantitative test.  The fabric to be tested is first oven dried to ascertain its oven dry weight.  Then it is treated with an enzyme, amylase.  The enzyme digests the starch in the fabric and converts it into soluble glucose, which is then washed away.  The fabric is then oven dried and weighed again.  The weight loss represents the weight of the starch in the fabric.  Usually, a control test using water instead of enzyme would be conducted under identical conditions so as to ascertain the weight loss due to non-enzymatic factors, such as residual printing paste or other chemical and lose fibre, which will then be subtracted from the weight loss obtained from the test using enzyme. 

28.  Both experts are in agreement that the warp (lengthwise) yarn is usually starched before it is woven with the weft (widthwise) yarn to make up the denim fabric.  Therefore the denim fabric has to be desized before it may be printed, otherwise the starch in the warp yarn would affect the effectiveness of the print paste and result in colour unevenness.  Indeed the Plaintiff also admitted that it was its obligation to supply the Defendant with fully desized denim fabric for printing.  It is the Defendant’s defence that the denim fabric supplied by the Plaintiff had not been fully desized which caused the colour unevenness.

29.  According to Mr Cheng, he conducted the iodine tests on the underside of the washed and unwashed samples from the unprinted denim fabric and the printed denim fabric.  The underside was chosen as it was lighter in colour and the result of the test could be better observed.  The tests yielded negative results with the washed and unwashed samples of the unprinted denim fabric; and also with the washed samples of the printed denim fabric, but positive results on all unwashed samples of the printed denim fabric.  Mr Cheng therefore opined that the unprinted denim fabric was starch free and the starch on the printed denim fabric must have been derived from the printing process. 

30.  Mr Cheung sought to challenge the negative results of the iodine test by arguing on the question of sensitivity of the iodine test and on the question of how representative such spot tests could be of the entire roll of denim fabric.  Mr Dawes, counsel for the Plaintiff, criticised Mr Cheung for raising this point which had not been disclosed in his statements, which made it impossible for Mr Cheng to respond.  Anyway, on this issue, Mr Cheung could not give me any evidence on the sensitive level of the iodine test and cannot provide evidence whether the presence of starch at just below that level was sufficient to affect the printing process. 

31.  Mr Cheung caused the enzyme test to be performed on Sample B5 and on the printed denim fabric by Intertek Testing Services Hong Kong Ltd (“Intertek”) on 22 February 2006.  Mr Dawes, criticised Mr Cheung’s motives in producing the test results six years after the dispute and eight months before the trial.  I think such criticism serves no purpose as the Intertek results are consistent with Mr Cheng’s iodine test on the printed denim fabric. 

32.  The Intertek tests show a weight loss of 4% on Sample B5 and between 4.4% and 5% on the printed denim fabric.  Mr Cheung opined that the presence of this quantity of starch would significantly affect the effectiveness of the print paste and cause unevenness.  There are two flaws in that opinion.  Firstly, the Intertek results did not indicate if any control tests had been performed to cancel out the weight loss caused by non-enzymatic factors.  This is a minor point because the presence of starch on the printed denim fabric was also detected by Mr Cheng’s iodine tests.  Secondly and more importantly, Mr Cheung’s opinion is based on the assumption that the print paste used by the Defendant was free of starch or starch derivative.  However, the result of Mr Cheng’s iodine test on the unprinted denim fabric was negative but that on the printed denim fabric was positive.  Even assuming in favour of the Defendant that there were traces of starch in the unprinted denim fabric undetectable by the iodine test, the starch detected on the printed denim fabric by the iodine test or by the enzyme test must have derived from either the print paste or as a by-product of the printing process.  This is what I find difficult with Mr Cheung’s opinion.  Mr Cheung’s opinion is that starch is not a by-product of the printing process.  This leaves one and only one possibility, i.e. that starch or starch derivatives had been used by the Defendant in the printing process.  According to the Defendant’s printing recipe, emulsifier was one of the additives.  According to Mr Cheng, starch or its derivatives are common emulsifying agents or thickeners.  On the totality of the evidence, I find it more likely than not that the denim fabric supplied by the Plaintiff was not impregnated with any detectable quantity of starch and the starch detected by Mr Cheng’s iodine test or Mr Cheung’s enzyme test on the printed denim fabric must have derived from the print paste used by the Defendant.  Accordingly, I find that the denim fabric supplied by the Plaintiff was properly desized or at the least that the Defendant has failed to show that the denim fabric supplied by the Plaintiff had not been properly desized.  Had the enzyme test result been obtained from an unprinted denim fabric sample and adjusted by the result of a properly conducted control test, I would have found Mr Cheung’s opinion acceptable.

The first issue: terms of the contract

Whether the Defendant was expected to rinse the printed denim fabric before delivery

33.  Though not pleaded as a defence as such and not listed as a disputed issue by me, the thrust of Mr Mak’s argument in the whole case is that the Defendant was not expected to rinse the printed denim fabric before delivery.  He does not seek to argue on an absence of contractual duty to rinse the printed denim fabric but on an expectation not to do so in order to advance his argument on the implied terms he seeks to rely on.  I am not at all convinced that this is a relevant issue.  However, I shall deal with that argument for what it is worth.

34.  Mr Mak’s argument is premised on the assumption that it was an accepted industrial practice not to rinse the printed fabric before delivery and the Defendant had never rinsed the printed fabric in its previous dealings with the Plaintiff.  I have rejected Mr Cheung’s evidence that there was such an accepted industrial practice.  But I am not saying that rinsing is an invariable practice.  All depends on the quality of the garment to be made from the fabric, the printing pattern and, most important of all, the terms of the particular printing contract.   

35.  Mr Mak advanced six arguments in support of his contention.  Firstly, he argues that Mr Cheng’s opinion that rinsing would serve to stabilise the condition of the printed denim fabric is faulted in that if not all the chemical reactions had been completed, rinsing would only serve to freeze the printed denim fabric in an intermediate stage and lock the state of unevenness instead of removing such unevenness.   I have rejected such argument based on Mr Cheng’s expert opinion and The Principles and Practice of Textile Printing: see paragraphs 20 to 25 above.

36.  Mr Mak’s second argument is that Sample B5 was not a rinsed sample and if rinsing is something that should have been done by the Defendant before delivery, there is no reason why the Plaintiff would have accepted an unrinsed sample.  I think the sole purpose of the Defendant showing the samples was to represent to the Plaintiff what it was capable of producing and the sole purpose of the Plaintiff approving Sample B5 was to inform the Defendant it was the effect, colour and pattern as shown in Sample B5 that it was contracting for.  That Sample B5 was unrinsed is neither here nor there: see paragraphs 45 to 47 below.

37.  Mr Mak’s third argument is that the Plaintiff amended Tarrant’s purchase order by deleting three tests as to colourfastness to light, crocking and bleaching.  He argues that the amendments reflect that the Plaintiff foresaw that the colour of the printed denim fabric would be unstable and hence no rinsing was expected under the contract between the Plaintiff and the Defendant.  I think colourfastness and rinsing are wholly unrelated.  The Defendant’s obligation was to print the denim fabric so as to produce a certain effect.  Not until that desired effect is achieved, would the question of colourfastness arise: see paragraphs 46 to 47 below.

38.  Fourthly, Mr Mak argues that the same printing process had been adopted in the Defendant’s previous dealings with the Plaintiff and the Plaintiff never complained of colour shading or unevenness.  Hence, the common intention of the parties must be to apply the usual colour discharge method adopted by the Defendant, i.e. without rinsing.  As I have already indicated when considering the experts’ evidence, rinsing may not be necessary depending on the quality of the denim fabric, the pattern and the quality of the garment intended to be made from the denim fabric.  It is all a matter of the individual contract.  The present contract is for lace printing involving small patterns.  The Plaintiff contracted with the Defendant for its skill and expertise in printing the denim fabric to the contracted standard.  The Plaintiff did not specify the discharging agent, the colouring agent or the individual printing processes to be used.  It is all a matter for the Defendant.  What the Defendant did in relation to past printing orders was not a guide to the present one, let alone that there is no evidence that the past orders were for lace printing.

39.  Mr Mak also argues that the Defendant is one of the most reputable fabric printing factories in Hong Kong with more than ten years of experience on colour discharge printing on indigo denim fabric and it would make no business sense at all that given its abundance of experience it would have continued printing all three lots of 24,500 yards of denim fabric right after the first lot was printed yielding unacceptable colour unevenness.  He therefore submits that the propensity of the parties, given the previous dealings, the Defendant’s reputation and prudence, shows that no rinsing was expected by both parties.  I just dismiss this argument as a dangerous and wide assumption.

40.   Mr Mak’s fifth argument is that Mr Choi’s reaction between 18 and 26 October 2000 is inconsistent with the Plaintiff’s evidence that it rejected the printed denim fabric on 18 October 2000 along with Tarrant’s rejection.  It is true that apart from informing the Defendant that Tarrant rejected the printed denim fabric, Mr Choi did not inform the Defendant that the Plaintiff also rejected the fabric.  He also did not request the Defendant to rinse the printed denim fabric but instead sought advice from Mr Sit as to how to remedy the defect as if the Plaintiff had affirmed the contract.  On 26 October 2000, Mr Choi wrote to Mr Sit in his first fax message as follows:

“The client in respect of this order complained that the entire lot of fabric exhibited centre/edge colour shading problem.  During inspection, it was discovered that batch #105-56y exhibited unevenness problem and cannot be used.  After consulting our client and its manufacturer, it was decided to deliver the fabric to the factory first.  The factory would assess the quantity of additional fabric needed as a result of dodge-tailoring within ten days after delivery.  We will inform you later.  We will arrange weaving 3-4,000 yards “standby for” supplement.  Grateful if you will supply the necessary fabric to the factory within three days upon [your receipt of] confirmation by our client of the quantity of supplemental fabric required.”

In his second fax message to the Defendant, Mr Choi gave instruction as to the separation of the printed denim fabric into four lot colours for delivery.  He specified that batch #105-56y should not be delivered.  The tone of the two fax messages was amicable.  Apparently, only batch $105-56y was unequivocally rejected, while the other batches were accepted.  Mr Choi was also seeking the Defendant’s co-operation to print supplemental fabric within three days of confirmation of the quantity required.  There was no complaint that the fabric had not been rinsed. 

41.  Mr Choi’s reaction in taking delivery knowing of the defects supports the Defendant’s case that it had warned the Plaintiff of the risk of unevenness and colour shading.  Mr Choi denied having ever been told of the alleged inherent risk when the order was placed.  His explanation was that he had not examined all the printed fabric.  He had only examined the first six inches at the end of each roll.  His concern then was the urgency of the delivery to meet the Plaintiff’s obligation to Tarrant.  His acceptance of the printed denim fabric must be conditional on the defect being rectifiable by washing as suggested by the Defendant or avoidable by dodge-tailoring as offered by way of mitigation by Tarrant.  What he did was a pragmatic solution to the problem as he perceived it at the time and should not be taken as having unconditionally accepted the printed denim fabric.

42.  The Defendant’s pleaded case is that it had reminded the Plaintiff through Mr Choi that uneven colouring and/or shading resulting from colour discharge printing was unavoidable but would be cured by the process of washing.  In his evidence, Mr Sit said that he had told Mr Choi of the inherent risk of colour shading.  However, under cross-examination, he said that he had told Mr Choi of the possible colour change from yellow to green and then to blue and had reminded Mr Choi of the possibility of the printed denim fabric having colours such as deep green, light green and lemon yellow.  According to the Defendant’s own expert, those intermediate colours would result in different shades of blue.  Then, when further cross-examined as to whether he had told Mr Choi that the colour discrepancies could be rectified by washing, Mr Sit replied that “it depends”.  Mr Sit was obviously retracting from the pleaded case that the defect would be cured by washing.  If the Defendant’s own evidence on this very important aspect is inconsistent with its own case, there must be a doubt whether its allegation that Mr Sit had told Mr Choi of the inherent risk of colour unevenness is true.  Mr Sit also exaggerated himself when he said in his evidence that there were also yellow and green colours in Sample B5 when it was produced to the Plaintiff for confirmation, a point which was never pleaded or disclosed in his witness statement.  Having weighed the evidence of Mr Choi against that of Mr Sit, I reject Mr Sit’s evidence that he had told Mr Choi of the inherent risk of colour shading and unevenness in colour discharge printing and that Mr Choi had accepted the risk.

43.  Lastly, Mr Mak argues that despite Mr Choi came up with an idea that the Defendant failed to rinse the printed denim fabric, Mr Choi had never requested the Defendant to rinse the printed denim fabric but instead he sought advice from Mr Sit as to possible methods of removing the yellow and green colour on the printed denim fabric.  Mr Choi’s failure to demand the Defendant to rinse the printed denim fabric before taking delivery supports the Defendant’s contention that the Defendant was not expected to rinse the fabric.  However, that does not relieve the Defendant of its contractual obligation to supply the printed denim fabric which had the effect corresponding to Sample B5.

44.  The obligation of the Defendant was simply to print the denim fabric with an effect which corresponded to that of Sample B5.  If the printed denim fabric achieved such effect without rinsing, it has discharged its obligation.  If the printed denim fabric loses such effect after washing, the question of implied term as to quality such as colour fastness to water and light arises.  But that is not what this case is about.  In the present case, the Defendant produced the printed denim fabric without undergoing the rinsing process which exhibited colour shading and unevenness.  The washing process was performed to salvage the fabric, in other words, to mitigate the Defendant’s breach of its contractual obligation.  Thus that the Defendant was not expected to rinse the printed denim fabric is neither here nor there.  I also reject the Defendant’s case that it had informed the Plaintiff of the inherent risk of colour shading and unevenness and that the Plaintiff had accepted the risk.

Term No (5): whether the printed denim fabric should correspond to the effect of Sample B5

45.  The terms of the contract were partly agreed in writing and partly agreed orally during subsequent conversations.  On 29 September 2000, Mr Choi confirmed with Mr Sit the Plaintiff’s approval of Sample B5.  Mr Choi sent a confirmation by fax to the Defendant along the following line:    

「*跟 貴廠22/9 給本公司之	#4/0	之(效果+ 花型OK)」
	B5

Likewise, Mr Sit noted down in his copy of the printing order as follows:       

「*跟 貴廠22/9	#4/0	之(效果+ 花型)做貨!」
	B5

I think it can hardly be argued that the parties were not ad idem that the effect of the printed denim fabric should correspond to that of Sample B5.  The only issue is what interpretation should be given to the word “effect”.

46.  Mr Mak submits that Sample B5 was not rinsed before it was sent to the Plaintiff for approval and hence Sample B5 cannot be used as a reference point at all because the Plaintiff did not know what would be the resultant effect of Sample B5 after washing by the Defendant.  I think Mr Mak is introducing an unnecessary and uninvited element into the contract.  The question of rinsing was not in the contemplation of the parties when this term was negotiated.  The effect of rinsing or washing to give the finished garments the fashion look desired by Tarrant is irrelevant.  The Plaintiff was simply asking the Defendant to print the denim fabric such that it had the pattern and the effect as shown in Sample B5.  The word “effect” is an ordinary word, which must be understood in its ordinary and meaning.  In the context the word was used, it must mean the effect to the eye and possibly to the feel of the hand as well.  So far as effect to the eye is concerned, it matters not whether the sample was a rinsed sample or a more rigorously washed sample or even a photograph of a sample showing the desired colour effect to the eye, such as colour, consistency and evenness.  This is the meaning the word “effect” as used in the term would be understood by a reasonable reader having knowledge of the surrounding factual matrix.  Not until Mr Sit gave evidence on the second day of the trial did he suggest that there was colour shading and uneven colouring on the samples produced by the Defendant.  I reject that evidence.  If Sample B5 exhibited colour shading and unevenness, the Plaintiff would not have approved it. 

Term No (8): whether the printed denim fabric should be deemed in conformity with the unwashed Sample B5 notwithstanding unevenness

47.  Mr Mak submits that in order to give business efficacy to the contract, the printed denim fabric should be deemed in conformity with the unwashed Sample B5 notwithstanding existence of uneven colouring or shading thereon which would normally result from colour discharge.  This term would only be implied if on the fact the Plaintiff knew that unevenness and colour shading would normally result from colour discharge printing and that it is efficacious for this term to be implied.  In my analysis above, I have rejected the Defendant’s evidence that it had informed the Plaintiff of the inherent risk of colour shading and unevenness.  In the absence of this factual basis, there was no room for this term to be implied.  A term may not be implied into a contract which is inconsistent with an express term.  As it is an express term of the contract to print the denim fabric to produce an effect corresponding to the effect of Sample B5, it is impossible to imply a term that the printed denim fabric is deemed to be inconformity with the sample when in fact it is not.

The second issue - whether the defendant was in breach of THE contract: whether colour shading or unevenness was caused by the quality of the denim fabric supplied by the Plaintiff

48.  Having found that it was an express term of the contract that the Defendant should produce printed denim fabric corresponding to the effect of Sample B5 and having rejected the Defendant’s argument for the implied term of deemed conformity, the second issue is whether the Defendant was in breach of the contract.  There is no dispute that the printed denim fabric exhibited colour shading and colour unevenness.  On the face, the Plaintiff has proved the Defendant was in breach of the contract.  The Defendant seeks to attribute the defect to the quality of the denim fabric supplied by the Plaintiff for printing.  It was four years after the commencement of this action that the Defendant put in this amended defence that the defect was caused by the fact that the denim fabric supplied by the Plaintiff was not fully desized and that the starch remaining on the fabric was unevenly distributed.  The Defendant bears the burden of proof.  This is a matter which has to be resolved on the basis of the experts’ evidence.

Whether the Plaintiff’s denim fabric was not fully desized

49.  The Plaintiff admits that it was under an obligation to supply the Defendant with fully desized denim fabric for printing.  In a number of its correspondence with the Defendant, it indicated that the Plaintiff would be supplying desized fabric for the Defendant to print.  Presumably, accepting the Plaintiff’s words, the Defendant never tested the fabric before printing. 

50.  The Plaintiff has shown by the iodine test that the unprinted denim fabric it supplied to the Defendant was starch free.  The Defendant relies on the enzyme test performed by Intertek as evidence that the denim fabric supplied by the Plaintiff was not fully desized.  Six years after the commencement of this action, the Defendant argues that the iodine test performed by the Plaintiff on the unprinted denim fabric was unreliable.  I have carefully analysed the experts’ evidence in paragraphs 26 to 32 above.  The enzyme test indicated the presence of starch on the printed denim fabric, a finding which is not disputed by the Plaintiff.  But the Defendant was unable to produce any test results on the denim fabric before printing.  I have therefore rejected Mr Cheung’s evidence that the starch found on the printed denim fabric were present in the fabric before printing.  In fact the evidence suggests that the starch originated from the print paste used by the Defendant.  I find that the Defendant failed to prove that the denim fabric supplied by the Plaintiff had not been fully desized. 

Uneven starch distribution on the denim fabric supplied by the Plaintiff

51.  Mr Mak argues that as the enzyme tests showed that the starch found on five different locations of a piece of printed denim fabric varied between 4.4% and 5% by weight of the fabric sample and hence the presence of starch on the denim fabric was uneven.  As I have found that the starch came from the Defendant’s print paste, this result must be disregarded.

Unevenness of the colour of the denim fabric

52.  It was suggested in evidence that the unevenness of the colour of the denim fabric supplied by the Plaintiff may account for the colour shading and unevenness.  This is a bald assertion not supported by any evidence.  On the contrary, Mr Cheng de-constructed samples of the printed denim fabric.  He isolated the surface part of the warp yarn which had been subjected to the discharge printing process from the submerged part which had not.  He found that there was no unevenness on the submerged part of the warp yarn suggesting therefore that the colour unevenness was not due to the denim fabric itself.  Though Mr Cheng’s examination may not be very representative of the entire lot of denim fabric, the Defendant simply failed to adduce any evidence of unevenness in the indigo base colour of the denim fabric supplied by the Plaintiff.

Conclusion

53.  The Defendant was in breach of the express term of the contract to print the denim fabric supplied by the Plaintiff with an effect corresponding to that in Sample B5.  The Defendant has failed to discharge the burden of proving that the defect was caused by the quality of the denim fabric supplied by the Plaintiff for printing. The Defendant is therefore liable to the Plaintiff for breach of the contract and its counterclaim against the Plaintiff must be dismissed.

The third issue - quantum of damages

54.  There is no dispute that had the contract been performed, the Plaintiff would have sold the 24,272 yards of printed denim fabric at $35.70 per yard, totalling $866,510.40.  In mitigation, the Plaintiff has sold the printed denim fabric in its possession for $142,131.90, resulting in a loss of $724,378.50.  In addition, the Plaintiff claims $1,240 as cost incurred in washing the samples, $80,393.95 as storage charge and $10,000 as cost of transportation.  I disallow the storage charge as the printed denim fabric was stored in the Plaintiff’s own warehouse, and there is no evidence that but for the need to store the printed denim fabric that the Plaintiff could have rented out the space or had to rent other space for its own goods and hence suffered loss in rental.  I also disallow the transportation cost as it must have been part of the business expenses of the Plaintiff in earning its profit from Tarrant.  The Defendant claimed a set off of the outstanding printing charge in the sum of $128,638.72 in its Re-re-amended Defence and Counterclaim.  In his submission, Mr Mak asked for a sum of $131,264.  However, on my own assessment, at the contracted printing charge of $5.6 per yard, the appropriate amount to be set off should be $135,923.20 (i.e. 24,272 x $5.60).  I therefore allow this amount to be set off.  Accordingly, I assess the Plaintiff’s damages as $589,695.30 (i.e. $724,378.50 + $1,240 - $135,923.20), which is just within the jurisdiction of the District Court at the time of issue of the writ.  

Conclusion

55.  The Defendant was in breach of the contract with the Plaintiff.  I award the Plaintiff damages in the sum of $589,695.30 with interest from the date of the writ.  I also make a costs order nisi that the Plaintiff shall have the costs of the action at District Court scale, to be taxed if not agreed.  The Defendant’s counterclaim against the Plaintiff is dismissed.