CHI CHOI COMPANY LTD v. HONG KONG ASSOCIATION OF YOUTH DEVELOPMENT LTD

HCSA 21/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAIMS TRIBUNAL APPEAL NO. 21 OF 2013

(ON APPEAL FROM SCTC No 34725 OF 2012)

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D E C I S I O N

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1.  This is an application by the claimant brought pursuant to section 28 (1) (a) of the Small Claims Tribunal Ordinance Cap. 338 (“Ordinance”) which provides as follows:

“Any party who is aggrieved by a decision of the tribunal ... on any ground involving a question of law alone ... may apply to the Court of First Instance for leave to appeal and the Court of First Instance may grant such leave if it thinks fit.” (my emphasis)

2.  The applicant is the claimant in SCTC34725/2012 which proceedings concerned the sale and purchase of garments whereby the claimant seller was a garment manufacturer and the defendant buyer was a voluntary organisation.

3.  On 6 October 2011, the defendant by email invited the claimant to submit a quotation for the manufacture and sale of 450 pieces of long-sleeved polo T-shirts (334 red and 116 green pieces) (“Invitation”). The Invitation set out the “基本資料” of the goods together with a photograph of a polo T-shirt with “備註” that included “請提供同樣型產品之相關相片、樣板以作本會參考”.

4.  On 7 October 2011, the claimant submitted its first quotation no.Q11/001306 (“Quotation”) for 450 pieces of polo T-shirts at a unit price of HK$50.50 with “Art & Mould Fee” and “Transportation” waived. The Quotation contained inter alia the following terms and conditions:

“Sample : 7-10 days after order confirmation

Lead time : 3-4 Weeks after sample approval

Delivery : F.O.B. Hong Kong (One delivery)

Payment : Deposit 50%, Balance C.O.D. 50%

……”

5.  On 28 October 2011, the defendant by email requested for further discount. On 2 November 2011, the claimant emailed its revised quotation and invoice to the defendant.

6.  In respect of revised quotation no.Q11/001306 dated 1 November 2011 (“Revised Quotation”), the terms and conditions remained the same as those in the Quotation save and except the quantity of the goods was increased to 550 pieces and the unit price was reduced to HK$50.30. This was reflected in invoice no.CCC100000223 of the same date (“Contract”) which was accepted and counter-confirmed by the defendant.

7.  There is no dispute that the claimant’s representative Mr Leung Hon Wing (“Mr Leung”) collected a polo T-shirt from the defendant in the course of negotiations (“D’s Sample”).

8.  By the Contract, the defendant placed an order with the claimant for the purchase of 550 pieces of polo T-shirts (“Goods”) comprising 400 red pieces (“Red Goods”) and 150 green pieces (“Green Goods”) at the unit price of HK$50.30 and the total price of HK$27,665.00 (“Contract”). It was expressly provided that the payment terms were “50% Deposit, Balance C.O.D.”, and both “Art & Mould Fee (絲網)” of HK$500.00 and “Transportation Fee” of HK$150.00 were waived.

9.  On 4 November 2011, the defendant paid 50% of the price (ie HK$13,832.00) as deposit to the claimant.

10.  The claimant delivered the Goods to the defendant’s office on 22 November 2011. The defendant took delivery and accepted the Red Goods, but refused to take delivery of or pay the balance price for the Green Goods due to colour discrepancy between the collar (羅紋領) and the body of the garment. On 22 November 2011, the defendant by email requested the claimant to make proposal for resolving the problem. On 12 December 2011, the defendant wrote to the claimant to cancel the order for the Green Goods.

11.  On 18 September 2012, the claimant commenced proceedings at the Small Claims Tribunal against the defendant to recover the balance price in respect of the Green Goods in the sum of HK$7,545.00 (“Balance Price”). On 1 March 2013, the claimant amended its claim to include a further claim for “搬運樓梯費” being “搬運11箱貨上120拾樓梯 = 11箱 x 50元 x 120拾樓梯 = $8,250” (“Staircase Delivery Charges”). Hence, the claimant’s total claim against the defendant was HK$15,795.00.

12.  On 21 March 2013, the learned Adjudicator dismissed the plaintiff’s claim and granted costs in the sum of HK$1,544.80 with interest in favour of the defendant. The plaintiff applied for review, but on 2 May 2013 the learned Adjudicator dismissed the review and granted no order as to costs.

13.  As explained in her Reasons for Decision dated 21 June 2013 (“Reasons”), the learned Adjudicator dismissed the claimant’s claim for the Balance Price on the following grounds:

(a) the sale and purchase of the Goods was a sale by sample pursuant to section 17 of the Sale of Goods Ordinance Cap 26 (“SOGO”), and the relevant sample was D’s Sample;

(b) when Mr Leung collected D’s Sample, both parties agreed that for the Contract, apart from “因布匹批次而衍生的色差”, the colour for the whole garment must be consistent;

(c) the colour discrepancy between the body and the collar of the Green Goods was unacceptable and in breach of the requirement in section 17 (2) (a) of the SOGO, which provides that in the case of a contract for sale by sample there is an implied condition that the bulk shall correspond with the sample in quality;

(d) upon the delivery of the Goods, the defendant was entitled to reject the Green Goods after inspection pursuant to section 17 (2) (b) of the SOGO, which provides that in the case of a contract for sale by sample there is an implied condition that the buyer shall have a reasonable opportunity of comparing the bulk with the sample.

14.  The learned Adjudicator also rejected the claim for the Staircase Delivery Charges. She noted that the “Transportation Fee” specified in the Contract was HK$150.00 and not HK$8,250.00, and it had been expressly waived. The learned Adjudicator further concluded that it was unreasonable for the plaintiff to raise such claim for the first time after the defendant had rejected the Green Goods.

15.  In making the present application for leave to appeal against the order by the learned Adjudicator and her decision on review, the claimant set out various grounds in a 10-page document with annexures. However, some of the grounds put forward were attempts to challenge the factual findings by or to revisit the factual matters canvassed before the learned Adjudicator. In my view, those matters fall foul of the requirement in section 28 (1) (a) of the Ordinance that any ground of appeal should involve a question of law alone, and they will not be further considered.

16.  Having carefully considered the claimant’s proposed grounds of appeal and Mr Leung’s oral submissions before me, I am persuaded that leave should be granted for the claimant to appeal on the following two grounds in respect of the claim for the Balance Price:

(a) whether the Contract was a divisible or severable contract as found by the learned Adjudicator or whether it was an entire contract, and if it was an entire contract, whether the defendant having accepted partial delivery of the Goods (ie the Red Goods) had lost the right to reject the Green Goods pursuant to section 13 of the SOGO and/or was bound to accept the Green Goods and pay the Balance Price (“Ground A”);

(b) whether the Contract was a sale by sample within the meaning of section 17 of the SOGO, and if it was, whether D’s Sample constituted a sample within the meaning of section 17 of the SOGO as found by the learned Adjudicator or whether the photographs of the Green Goods supplied by the claimant to the defendant on 18 November 2011 (“Photos”) were such samples (“Ground B”).

17.  For Ground A, the learned Adjudicator rejected the claimant’s contention that the Contract was an entire contract. She found that the Contract specified the price for the Red Goods and the Green Goods, and there was no reason for the defendant to also reject the Red Goods which had no defect. The learned Adjudicator noted that the defendant was entitled to inspect the Green Goods upon delivery before exercising any right of rejection. She also found support for her conclusions from the admission in the claimant’s email to the defendant dated 23 November 2011 that “它們配色的員工對顏色敏感不強烈, 所以引致綠色團衣錯配顏色”, and by the plaintiff’s offer of a discount of HK$5.00 per piece for the Green Goods in the hope that the defendant would accept the same.

18.  In my view, the question whether a contractual obligation is entire or divisible/severable is a question of construction in the light of all the circumstances,[1] and it is a question of law such that an appellate court may review the construction of the contract.[2] Here, if the Contract on its true construction was an entire/indivisible contract for the delivery of the whole quantity of the Goods therein, it is arguable that the defendant would have been able to treat a partial breach as a total breach, and would have been prima facie entitled to reject the whole of the Goods for any breach of condition. Likewise, the mirror argument that if part of the Goods under an entire contract had been accepted the right to reject would have been lost (as bolstered by section 13(3) of the SOGO) is also plainly arguable.[3] For ease of reference, section 13(3) of the SOGO provides as follows:

“Where a contract of sale is not severable, and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty, and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect.”

19.  Hence, the question here is whether there is reasonably arguable basis to suggest that the Contract was entire and not severable to justify granting leave to appeal. The SOGO does not define such contracts, but as explained above, whether a contract is entire or severable can be implied from its terms and conditions or from the circumstances. Here, the following considerations suggest there is arguable basis for granting leave to appeal on this point:

(a) The Quotation and Revised Quotation specified there would be one delivery only for the Goods. Although there was no express provision to such effect in the Contract, there appeared to be little dispute that the parties envisaged there would be one delivery of the Goods with payment of the balance of the total price to be made upon such delivery.

(b) The Quotation, Revised Quotation and the Contract only specified the unit price and total price for the Goods, and not any sub-total price for each of the Red Goods and/or the Green Goods.

20.  For Ground B, a sale by sample is a sale whereby the seller expressly or impliedly promises “that the goods sold should answer the description of a small parcel exhibited at the time of sale”,[4] but the mere fact that a sample is exhibited during negotiation for a sale does not necessarily mean that the sale is by sample.[5]

21.  Here, the Quotation and Revised Quotation (the latter of which the claimant submitted to the defendant on the same day as the Contract) both specified that “lead time” would be 3-4 weeks “after sample approval”. But contrary to what was stated in paragraph 9(1) of the Reasons to be an agreed fact (ie Mr Leung collected D’s Sample on 10 November 2011), the witness statement of the defendant’s witness Mr Hins Lau dated 22 November 2012 stated that the defendant provided D’s Sample to the claimant in mid-October 2011, and Mr Leung’s witness statement dated 5 February 2013 also stated that he received D’s Sample before the Contract dated 1 November 2011. There is therefore a question whether the agreed fact as noted by the learned Adjudicator is correct, and further, whether the sample envisaged by the Quotation and later by the Revised Quotation on which the Contract was premised might not be D’s Sample but a sample to be provided to the claimant as seller. Indeed, on 8 November 2011 the defendant by email asked the claimant “有否樣板實物提供參考”, and on 18 November 2011 the defendant supplied photographs of inter alia the Green Goods.

22.  There is also a further question as to whether D’s Sample made of fabrics different from those chosen by the defendant for bulk manufacture of the Goods could amount to a sample within the meaning of section 17 of the SOGO to render the Contract as a sale by such sample. There is likewise a question whether, as the claimant alleged, the Photos could amount to samples within the meaning of section 17 of the SOGO to constitute the Contract as a sale by sample.

23.  I am satisfied there is sufficient basis for this court to grant leave to appeal on Grounds A and B.

24.  Turning to the Staircase Delivery Charges, having carefully considered the grounds put forward by the claimant, I am not convinced there is any merit in respect of the intended appeal. The claimant tried to draw a distinction between the “Transportation Fee” in the Contract (which had been waived) and “labour costs in delivery”. However, I am unable to accept such distinction since the plain and ordinary meaning (or indeed, the reasonable and objective construction) of “Transportation Fee” in the context of the Contract could only be that such fee covered all charges associated with the transportation of the Goods for delivery to the defendant. The learned Adjudicator is correct in finding that all such charges had been waived as agreed between the parties.

25.  The claimant argued that the learned Adjudicator had failed to consider the accepted trade practice of charging extra labour costs for delivery of goods up staircases, and also the particular circumstances of this case, ie that until the time of delivery the claimant was unaware there was no other goods entrance and the Goods had to be carried up a long flight of staircase to reach the defendant’s office. The claimant complained that the defendant failed to make prior disclosure of such fact.

26.  The short answer is that it is impermissible to imply a term from usage and custom if it would be inconsistent with the express wording of the contract.[6] It is the express terms of the contract and not the custom or usage that prevail. Further, according to the intended grounds of appeal put forward by the claimant there was no dispute that Mr Leung himself negotiated the staircase when he visited the defendant’s office for contract negotiations, so the complaint was not the claimant’s unawareness of the existence of the staircase but the defendant’s failure to inform the claimant about the absence of any other more accessible entrance for delivery of goods. The short answer to such argument is that there is no obligation or duty of good faith under law in respect of a contract for the sale and purchase of goods that required the defendant to volunteer the information that the claimant now complained in respect of the access route for delivery of the Goods.

27.  In my view, the learned Adjudicator did not err in concluding that the claim for the Staircase Delivery Charges in the sum of HK$8,250.00 fell foul of the Contract. There is no merit to this intended ground of appeal.

28.  In such circumstances, I dismiss the claimant’s application for leave to appeal against the learned Adjudicator’s dismissal of the plaintiff’s claim for HK$8,250.00 for the Staircase Delivery Charges, and grant leave for the claimant to appeal against the learned Adjudicator’s dismissal of the claim for the Balance Price in the sum of HK$7,545.00 limited to the Grounds A and B set out in paragraph 16 above. I also order that the costs of this leave application be costs in the cause of the appeal.