SELF STRONG LTD v. KEYTEX GARMENT MANUFACTURING CO LTD

1987 No. A5965

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The plaintiff claims against the defendant for the price of goods sold and delivered under a contract dated the 11th May 1987 in the sum of $95,040 together with interest and costs.

2. Goods were delivered to the defendant in purported performance of the contract of sale. They were cotton corduroy, 6 wales, black and charcoal in equal quantity. When samples of the bulk so delivered were put through an acid wash, the after-wash colour of the charcoal corduroy was found by the defendant to be unsatisfactory. In essence, the defence is : the charcoal half of the bulk so delivered, did not meet with the specified after-wash colour standard, hence the defendant rejected the entire delivery earmarked for the manufacturing of garments under one contract to D.A.C. Limited. The plaintiff was called upon to repossess the same.

3. There is no dispute that if half of the delivered quantity did fail to match the required colour standard, the defendant should be entitled to reject the entire bulk. The controversy revolved around three issues. First, by what was the contract evidenced? Secondly, what were its terms? Thirdly, in the absence of any leave or consent to call expert evidence, which part of the evidence of PW2, Wong Wun Wing, a major shareholder of the Win City Garment Dyeing Slashing Washing Limited, is inadmissible as expert evidence?

4. By agreement, the defendant began. The evidence led in support of its Counterclaim was hardly challenged. The disagreement lay in whether the defendant had a right to reject on account of the alleged sub-standard colour of the charcoal corduroy after acid wash. The defendant counterclaim is for loss of profit with D.A.C. Limited in the sum of $40,680, interest and costs.

5. The defendant caused to be called two witnesses, its Sales Manager, Mr Peter Lo and Miss Bonnie Leung, the Merchandising Officer of D.A.C. Limited. I shall call it "D.A.C.".

6. D.A.C. was to supply 3,600 pieces acid-washed men's corduroy trousers to its overseas principal. The defendant was contracted by D.A.C. to manufacture the consignment in Hong Kong. The plaintiff furnished D.A.C. with swatches from two pieces of its material. According to Miss Leung, parts of these two swatches were then put through the process of acid wash by a washing company, Tai Tung, for a special effect demanded by D.A.C.'s overseas principal. Mr Peter Lo of the defendant was approached by Miss Leung with a view to manufacturing the 300 dozen acid-washed corduroy trousers. Mr Lo was specifically directed to the plaintiff for corduroy material. A meeting was set up by Miss Leung, at which she introduced Peter Lo to Gibbs Wong of the plaintiff. The meeting took place last May.

7. Mr Gibbs Wong agreed that swatches or lab dips were important for colour specification in the garment industry. He also agreed that stored fabrics should not be re-dyed as its prime colour would reveal after acid wash. It was accepted by all that acid wash was a common process. Mr Gibbs Wong further conceded that acid wash would produce a special effect, but he emphatically denied that he had ever been forewarned by Miss Leung or Peter Lo that the ordered corduroy would be put to an acid wash in this case. He maintained that Miss Leung simply instructed him to go ahead in accordance with the lab dips supplied, pointing to two small lab dips on a small piece of paper. In the course of his evidence, Mr Gibbs Wong remarked that at this meeting "may be (Miss Leung) had talked to Peter about acid wash".

8. Miss Leung was adamant that long before the meeting she drew Gibbs Wong's attention to the fact that the lab dips were to undergo acid washing and she asked for particular care to be exercised in dyeing. The lab dips were acid washed by Tai Tung. To the meeting, Miss Leung claimed to have brought the D.A.C. preliminary information sheet. On that sheet, "D1", there were affixed samples of the plaintiff's lab dips before wash and after wash. At the meeting, according to her, Miss Leung stressed the importance of the desired colour end result, both before-wash and after-wash, which must correspond with the lab dips. Mr Lo's version is that he distinctly discussed with Mr Gibbs Wong on the swatches as approved colour standards. Mr Gibbs Wong denied having seen the after-wash samples or "D1". All he was shown was said to be just the two lab dips, earlier supplied by him, on a piece of paper. Mr Peter Lo corroborated Miss Leung's evidence as to what transpired at the meeting. He explained to the court that he had samples cut off from the lab dips attached to "Dl" and put on a memorandum which set out the terms agreed with the plaintiff at the meeting. At his invitation, Gibbs Wong allegedly came and collected the memorandum in person. Mr Peter Lo produced another copy of that memorandum with the same before-wash and after-wash lab dips kept for his own record, that is "D2". Mr Gibbs Wong also denied that he had ever been given or collected the memorandum.

9. After the delivery of the corduroy, Mr Peter Lo had sample garments acid-washed and found the results well below the approved colour standard. The end product after acid wash showed a yellowish undertone as in "D5". He complained to Mr Gibbs Wong who also had sample material acid-washed allegedly by Win City Garment Dyeing Washing Limited. Win City was said to have made three attempts. On two earlier occasions, so Gibbs Wong claimed, the result was unsatisfactory. on the third occasion, "P1" was produced, which was quite close to the standard after-wash colour in charcoal, but it is common ground that "P1" still has a noticeable yellowish appearance. Mr Lo tried three factories, and the end result after acid wash was similar to the pair of trousers produced as "D5". Miss Leung acid-washed samples in the factory of D.A.C. and by Tai Tung, the same factory which originally produced the after-wash swatches attached to the memorandum, "D2", and the D.A.C. information sheet, "D1". The first factory Mr Peter Lo approached was also Tai Tung. Therefore, there were at least eight attempts, all of which were unsatisfactory with the last trial by Mr Gibbs Wong with Win City producing an end result close to but still not quite acceptable by the specified after-wash colour standard.

10. Mr Wong, the major shareholder of Win City, testified that "P1" appeared to be the one which his factory acid-washed at the request of Mr Gibbs Wong last year. He recalled that he had attempted more than once. He claimed that his factory could manage to wash it more white. As a matter of fact, he claimed that acid-washing by his factory could match any desired white colour if only the approved colour standard was given him. He further explained that both his factory and the other washing companies in Hong Kong could achieve any specified result today as well as in May last year.

11. An expert is one who gives, inter alia, "expert assistance to the court, for example, as to .….. the working of a technical process ......". See 1988 White Book Vol. l p. 600, marginal reference 38/4/2. Prior disclosure of an expert's opinion, oral or written, would at least put litigants "on a fairer basis in the light, rather than in the dark", "avoid surprise " and "enable experts to prepare their evidence" in rebuttal. See marginal reference 38/35/2, Vol. 1, 1988 White Book. Counsel were aware of all these and other pitfalls. It was accepted that insofar as Mr Wong's evidence was such expert assistance to the court, it could not be adduced without leave or consent at this stage. Insofar as it is relevant, the evidence of Mr Wong of Win City relates to the performance of his and other washing factories in working the acid-wash process. Evidently, that is expert evidence. Miss Lam specifically objected to its introduction. Her objection is, in my view, well founded. I shall return to Mr Wong's expert evidence later.

12. Next I turn to the memorandum, "D2", and the signed contract between the plaintiff and the defendant, "D3". On the evidence led on behalf of the defendant, colour for the corduroy before-wash and after-wash was specified. The defendant's case is that the contract, "D3", was invited and accepted on the very basis of the recorded terms in the memorandum "D2", including the approved colour standard. The plaintiff itself in paragraph 4 of the Re-Amended Reply and Defence to Counterclaim admitted the agreement between the parties to this action as "a contract of sale by sample, namely swatches which were provided to the defendant by the plaintiff." Mr Chan, Counsel for the plaintiff, contended that the contract, "D3", was complete in itself and that the necessary reference made to swatches was merely for identification of shade of colour. Such inevitable matching reference, so ran Counsel's argument, was to explain the ambiguous bare provision for black and charcoal assortments in the written "D3" contract. In Mr Chan's premise, there would still appear to be no justification for limiting colour shade reference to that before wash. If it be a sheer question of identification, full identification in terms of pre-wash and after-wash colour standard must be allowed. Moreover, why is it that extrinsic evidence on pre-wash colour standard can be accepted for identification and that on after-wash standard must be condemned as variation? In my view, the contract, "D3", was not a document evidencing the complete agreement between the plaintiff and the defendant. If the evidence of the defendant is to be acted upon, the sale was clearly to be evidenced by the memorandum "D2" as well as the contract, "D3", the latter being dispatched and accepted on the basis of the former.

13. No point was taken on the back conditions of "D3", one of which reads :

 

"4.         The sellers do not warrant or guarantee the exact shade or colour description, dimensions, packing, weight or quality of the goods and shall be under no liability for compensation allowance or otherwise, if the goods are not of the exact shade or colour, description, dimensions, packing, weight or quality stipulated for."

In the evidence of Miss Leung and Mr Lo, the express inclusion of the terms in the memorandum at the invitation of the defendant would have overridden this particular printed back condition. The standard back conditions could not have advanced the plaintiff's agreement.

14. Mr Gibbs Wong categorically denied receipt of this memorandum together with the alleged approved swatches. He also disputed the specific instructions said to have been given him by Miss Leung and Mr Lo for processing the corduroy with caution to produce the special after-wash effect. The special effect must be an important feature in the manufacturing of the men's corduroy trousers for D.A.C's overseas principal. It is inconceivable that a crucial term such as this could have been overlooked in the instructions to Mr Gibbs Wong. Mr Gibbs Wong was only willing to admit the possibility of a discussion on acid wash in his presence between Miss Leung and Mr Lo. It was a first transaction between the plaintiff and the defendant. It would be highly unlikely that in their first business encounter at this meeting, the defendant and D.A.C. could have failed to impress Gibbs Wong with their critical after-wash colour standard. Moreover, it is difficult to understand why Mr Chan, Counsel for the plaintiff, put the following to Miss Leung before Mr Gibbs Wong gave evidence :

 

"I put it to you : you merely told Mr Wong that the fabrics had to undergo acid wash without going further. "

15. If in fact this basic term was conveyed to Mr Gibbs Wong, then the alleged difficulties in and the plaintiff's lack of control of the acid-wash process would be quite irrelevant.

16. I was not impressed by the demeanour of Mr Gibbs Wong. It would be fair to admit that at one time I was much troubled by the evidence of the major shareholder of Win City. As between Mr Gibbs Wong and Miss Leung and Mr Lo, I prefer, in every respect, the evidence of the witnesses for the defendant, which definitely ties in much better with the scenario I have endeavoured to analyse. I find that at the meeting Mr Gibbs Wong was shown all the lab dips samples inclusive of those for after-wash and that he agreed to sell the corduroy on the terms in the memorandum which he personally collected. There is little doubt in my mind that before and at the meeting, he was clearly instructed to exercise care in dyeing for the special effect in acid wash.

17. By a late amendment, the plaintiff raised the allegation that Miss Leung had accepted the colour on the last acid-washed swatch of Win City, "P1". If indeed the agreement had been to deliver corduroy merely of the colour in the plaintiff's two lab dips before acid wash, why would Mr Gibbs Wong have had to take pains to demonstrate the quality of the product by himself causing sample materials to be acid washed? I find his explanations unconvincing, including that of he giving a helping hand. He was very enthusiatic. According to him, he tried Win City three times and offered more assistance by volunteering to take Mr Lo to the factory. Even so, why would he have had to wait for or secure Miss Leung's and Mr Lo's alleged ultimate approval of colour? At the end, he merely "insisted that it was the responsibility of the washing company and not the responsibility of the dyeing factory like (his)". Why should he not have simply said, right from the beginning, that he had discharged all obligations by supplying the correct agreed colour according to the two lab dips?

18. Mr Gibbs Clang would have this court believe that Miss Leung found the colour on "P1" acceptable with the remark that "it would be all the better if whiter results could be achieved. " He conceded that both Miss Leung and Peter Lo asked for a whiter result. Miss Leung maintained that she found "P1" "still not acceptable" although "P1" appeared to be much better in after-wash colour. She explained that "P1" "was still quite different from the colour of the original lab dip" and that she "would like (Gibbs Wong) to have the fabric washed to produce the result of (her) lab dip". In Miss Leung's last answer in cross-examination, she said :

 

"I repeat my previous answer ............... And both I and Peter had cut samples of the fabrics to be washed by my own washing factory and other regular patronized washing companies. The result achieved was all the same unsatisfactory, that is to say the result was worse than the colour of 'P1'. So Peter wanted some sort of guarantee if the bulk of his fabrics had to be acid washed, the result would be something similar to or better than 'P1' because we did not know if 'P1' was just a piece of cloth particularly treated or acid-washed. "

19. It was suggested by Mr Chan, Counsel for the plaintiff, that such was a fatal slip of the tongue which betrayed her in the sense that Miss Leung unwittingly corroborated Gibbs Wong's allegation of her acceptance of "P1". That is an answer not easy to understand, but Miss Leung immediately in re-examination made it clear that there remained a colour difference between "P1" and the approved standard. The answer I have quoted in extenso was the second attempted response to a repeated question as to whether the plaintiff's company had any control in the acid-washing process. It would be a sad day if justice were to be dispensed with on the force of a single oblique adverse inference. Moreover, Miss Leung's concession could not have bound Mr Lo or the defendant.

20. It is common ground that Mr Lo asked for a guarantee. It was, however, suggested that Mr Lo sought a guarantee for the bulk of only an after-wash colour similar to that of "P1". If Mr Lo had demanded such a guarantee, Counsel's argument on the allegation that he did approve and accept "P1" could have been made more attractive. But it was not so even according to Mr Gibbs Wong : Miss Leung accepted "P1" and immediately brought him over to Peter Lo in the next seat. After an exchange of "social words" in "a short while", so Mr Gibbs Wong recalled, Mr Lo produced a letter of guarantee. The letter of guarantee must have been ready. There would have been little opportunity for a document to be prepared with reference to "P1". Mr Gibbs Wong admitted that "P1" was yellowish and that Mr Lo enquired if "P1" could be improved, coupled with a request for the bulk to be washed whiter by the factory. Mr Peter Lo told the Court that he asked for a letter of guarantee to the desired colour standard and at a different time. Mr Gibbs Wong never once suggested himself that the letter of guarantee was for a colour similar to that of "P1". If the letter of guarantee, whenever requested, was for the standard colour, as I find it was, it would be ludicrous for Peter Lo to require a contract colour guarantee after he had given into an inferior colour standard. It is an almost inescapable conclusion that Miss Leung and Mr Lo did not accept "P1".

21. Another insinuation was that Mr Lo rejected the goods solely on account of Mr Gibbs Wong's refusal to give a letter of guarantee. Capital was sought to be made of Mr Lo's admission that he was still unsure if "P1" could be washed to standard. However, on a fair reading of Mr Lo's evidence : the samples had been attempted for at least eight time in various factories including Tai Tung, the plaintiff's "P1" was found to be still unacceptable, before "P1" Mr Gibbs Wong had told him that he had "found a washing company" but the telephone number supplied proved to be incorrect, Mr Gibbs Wong, when paged, spoke empty comforting words, Mr Lo became suspicious and sceptical, hence he demanded a guarantee although he did not know if "P1" could really be improved. Evidently, with a letter of guarantee to have the defendant "properly protected", he would have kept the goods, but Mr Peter Lo rejected the goods for their sub-standard after-wash colour after making a last unsuccessful appeal for a guarantee. Mr Gibbs Wong agreed that Mr Peter Lo complained of an incorrect telephone number, but there was no evidence as to why he did not immediately offer or repeat the correct one.

22. I said I would return to the evidence of Mr Wong Wun Wing, the major shareholder of Win City Garment Dyeing Washing Limited. A few concluding reflections may be appropriate. Miss Leung and Mr Peter Lo had each gone back to Tai Tung who was initially responsible for the approved afterwash swatches, but their efforts were in vain. A bald assertion of Mr Wong Wun Wing that all washing factories can to-day and could then achieve the specified standard, must be received with caution even if his evidence could be led.  Furthermore, Mr Wong claimed that his shortfalls in acid wash on more than one, if not three occasion was merely because he had not been supplied with the colour specification. Mr Wong did not elaborate as to why his previous failure in meeting the degree of whiteness had not prompted him to ask for sight of the required standard colour. It would not be unreasonable to assume that at the material time last year, all were seeking the whitest possible appearance in the corduroy in their separate approaches to various washing companies. It is difficult to believe that Mr Gibbs Wong had not also urged Mr Wong Wun Wing of Win City to do the same. If the relevant evidence of Mr Wong were admissible, a great many facets of this case would have to be examined with care and circumspection, possibly also against expert evidence from the defendant. I disallowed the expert evidence offered to the court by Mr Wong Wun Wing, and these matters consequently did not arise for my consideration.

23. I have said that the defendant has established its counterclaim. I do not propose to repeat the evidence given by Mr Peter Lo which was hardly put to test. The accessories, threads and buttons, were part of the CMT charges. No allowance was explicitly sought by Counsel or given. It would not be unreasonable for me to conclude that the accessories were insignificant.

24. I find that the defendant was entitled to reject and did reject the goods delivered by the plaintiff. The claim of the plaintiff therefore fails. The defendant has been and still is willing, ready and able, so I was told, to return the plaintiff's goods except for the few yardage used for acid-washing tests. The defendant must be given its counterclaim.

25. I order that the plaintiff's claim be dismissed with costs and judgment be entered for the defendant against the plaintiff as claimed in the counterclaim with costs. I make an order nisi that interest on the counterclaim of $40,680 be at the rate of 8% per annum to be calculated from the date of the defendant's telex dated 1st July 1987 to the date of judgment. Interests after judgment would be regulated by the Chief Justice's directions given pursuant to the Rules of Supreme Court. I assume that the defendant will not pursue the declaration sought in prayer (2) of its Counterclaim.

26. This court finds the plaintiff's conduct in these proceedings highly contrived and devious. Subject to what counsel have to say, costs be ordered to be taxed on a common fund basis.