BOLD EAGLE LTD v. EASTERN INTERNATIONAL SILK CO LTD

DCCJ2810/2003

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2810 OF 2003

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JUDGMENT

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1. This is an application for the balance of purchase money in respect of goods sold and delivered. Pursuant to a purchase order placed by the Defendant with the Plaintiff on 15th November 2002, the Defendant agreed to buy and the Plaintiff agreed to sell 70,200 yards of dyed lace to the Defendant at a price of HK$6.20 per yard. On or about 4th December, the Defendant forwarded a revised purchase order to the Plaintiff, reducing the quantity of dyed lace from 70,200 yards to about 59,500 yards.

2. As at 31st December 2002, the Plaintiff had delivered about 59,508 yards of dyed lace to the Defendant, the selling price for which is $411,109.60. The Defendant only settled $358,774.20, leaving a balance of $52,335.40. The Defendant sought to set off this amount by claiming against the Plaintiff two amounts, namely, air freight charge caused by the delay in the deliveries of lace in the sum of $54,078.57 and cleaning charge caused by the defects of the lace delivered in the sum of $25,295.40, and counterclaim for the balance of $27,038.57. The issues to be determined are (1) who caused the delay in the deliveries of the lace? and (2) were the laces delivered defective?

Who caused the delay in the delivery of the lace?

3. The Plaintiff stated that the delay was caused by Tillsonburg Resources Asia Limited ("Tillsonburg"), whereas the Defendant contended that it was caused by the Plaintiff. Tillsonburg is a garment buyer which agreed to purchase ladies' blouses from the Defendant, and a company in the United States of America named Express was the ultimate purchaser of these ladies' blouses, onto which the laces were to be sewn. Under the revised purchase order, different quantities of black colour lace had to be delivered to the Defendant on 5th December 2002 and 15th December 2002 respectively.

3.1 The Defendant's role in the said transaction is reflected in the statement of Miss Ida Yip of the Defendant. She said in her first witness statement, "...... The Defendant is not involved in the approval of colour stage but merely receives the final approval lace pursuant to purchase order issued by the Plaintiff to the Defendant, however if any of the parties run into problems they should notify us immediately as circumstances and terms of contracts may be affected due to the knock on effects." Clearly the matter related to the colour of the lace is to be dealt with by the Plaintiff and Tillsonburg. On 16th November 2002, the Plaintiff collected the colour standard from Tillsonburg. On 28th November 2002, it submitted the colour samples to Tillsonburg. On 4th December 2002, it sent the quality sample to Tillsonburg. On 4th December 2002, Tillsonburg approved the colour samples. On 6th December 2002, it submitted the 1st bulk sample of the first dye lot to Tillsonburg, and on 10th December 2002, Tillsonburg approved this submission. On 11th November 2002, an extra 15 samples of the bulk sample of the first dye lot were submitted to Tillsonburg for approval. On 18th December 2002, Tillsonburg approved the second submission of bulk samples of the first dye lot. On 20th December 2002, Tillsonburg revoked 1/3 of the approval of the second submission of the first dye lot. On 24th December 2002, the Plaintiff submitted to Tillsonburg the bulk sample of the second dye lot and obtained approval on the same day.

3.2 The Defendant averred that the 15 said extra samples were submitted to Tillsonburg on the Plaintiff's own volition. It is illogical that Tillsonburg would approve the bulk sample on the 10th December and then on 11th December 2002 asked for another 15 samples to be approved as there would be no reason to doubt the colouring of the lace.

3.3 It further submitted that there is a letter from Fiona of Tillsonburg implying that the Plaintiff had submitted the 15 pieces by his own volition. The letter states, "12/11 further submitted additional 15 pieces cutting for approval." It also submitted that according to Mr. Chan the normal procedure for approving the bulk was for the Plaintiff to cut 2 samples of lace and send them for approval in accordance with the sample already sent to Tillsonburg. If Tillsonburg wanted to approve the bulk again, why would it ask for 15 samples instead of 2 samples to be approved in accordance with normal procedure?

3.4 If it is illogical that Tillsonburg approved the bulk sample on 10th December 2002 and on the very next day asked for 15 samples to be approved, then it is equally illogical for Tillsonburg to have acceded to the Plaintiff's request to submit 15 samples on its own volition, knowing that it had just approved the bulk sample on the previous day.

3.5 A e-mail issued by Tillsonburg on the 20th March 2002 also refers to "12/24 further submitted additional 4 pieces". The Defendant submitted that this shows that the Plaintiff submitted the 4 pieces through their own volition. The said e-mail further states, "There should not have been further submission after 12/20, thus shade band has already been set up". The Defendant submitted that that shows that the 4 pieces were submitted by the Plaintiff through its own volition and not with the consent of Tillsonburg as the black colour had already been decided and approved. But the e-mail does not say anything to the effect that the 15 samples and the 4 samples were submitted by the Plaintiff on its own volition. Tillsonburg knew of the importance of on-time delivery, as it stated in the same e-mail:-

"You are Express designated vendor who should be aware the importance of ON-TIME delivery and Quality standard."

3.6 Tillsonburg had approved the sample on the previous day, and if these 15 samples were submitted by the Plaintiff on its own volition, it should have refused to accept the 15 samples because Tillsonburg knew that it would take some time to approve the 15 samples and it would have a knock-on effect on the transaction. But instead it proceeded to approve the 15 samples on 18th December, and on 20th December revoked 1/3 of the same. Matter did not stop here. Again on 24th December, the Plaintiff submitted another 4 samples, and Tillsonburg again accepted these 4 samples, approved 3 samples and rejected one sample on the same day. If the Plaintiff submitted the 15 samples and 4 samples respectively on its own volition, then it is difficult to explain Tillsonburg's behaviour.

3.7 The mere word "additional" in relation to the samples as contained in the e-mail of 20th March 2003 cannot be stretched to mean that the samples in question were submitted by the Plaintiff on its own volition. Apart from the evidence of Miss Yip, there is no other evidence to support the Defendant's allegation that the samples were submitted by the Plaintiff's own volition. Miss Yip of the Defendant said that she was told by Eddie of Tillsonburg by telephone that the Plaintiff requested the approval of the 15 pieces of lace by his own volition. But Eddie did not testify in court. I attach no weight to this piece of hearsay evidence. As a result, the Defendant's allegation in this respect is not substantiated by evidence. There is no evidence to refute the Plaintiff's evidence, and I find that the samples in question were submitted at Tillsonburg's request. Therefore Tillsonburg was responsible for the delay of the delivery of the laces. Without the approval by Tillsonburg the Plaintiff could not produce and deliver the lace to the Defendant on time.

3.8 The Plaintiff correctly showed in this submission how the Defendant and Tillsonburg waived the original deadlines for deliveries:-

15.11.2002	the Defendant set the deadlines:
	45,000 yards before 5/12; 25,200 yards before 15/12;
4.12.2002	the Defendant varied the deadlines:
	30,450 yards before 10/12; 29,058 yards before 15/12;
10.12.2002	the Defendant again amended the deadlines to:
	59,508 yards before 15/12
16.12.2002	Tillsonburg varied the deadline to 20/12;
19.12.2002	the Defendant varied the deadline for deliveries to before 21/12;
19.12.2002	Tillsonburg amended the deadline to before 24/12;
24.12.2002	Tillsonburg extended the deadline to 26/12;

3.9. There is no evidence to show that the Defendant objected to the extension of time by Tillsonburg from 24th December to 26th December. The fax issued by the Defendant to the Plaintiff on 17th January 2003 states:-

"1.	As per Tillsonburg's request, the date of goods departure from Shanghai is 1/20, but all laces had to be delivered on 12/26.
2.	However, your laces were only delivered in full on 12/31 ......"

The contents of the fax shows that the Defendant also adopted the date of 26/12 as the deadline.

4. At 7.40 p.m. on 24th December 2002 Tillsonburg sent a e-mail to the Plaintiff, asking the Plaintiff to send the balance of lace by 26th December the latest. The approval of the colouring of the lace being only given on 24th December, it is simply not reasonable for Tillsonburg to impose 26th December as the last day to deliver all the laces. Practically the Plaintiff only had one day, namely 25th December, to deliver the lace. In conclusion the Plaintiff should not be responsible for the air-freight charge.

Quality of the laces

5. The question to be asked is: were the laces delivered defective? The Defendant bears the burden of proof to substantiate its allegation. On 2nd January 2003, Ida Yip of the Defendant sent a e-mail to the Plaintiff, with the following remarks:- "we find that the defect of broken and unclean. So we are arrange the people to cleaning. And all liability will be borne by your company." On the same day, it sent another e-mail to the Plaintiff making a claim of $25,295.40 of lace cleaning. On 17th January 2003, the Defendant faxed a message to the Plaintiff, saying that the Plaintiff's laces have been found not clean.

5.1 On 24th January 2003, the Plaintiff by e-mail asked Ida Yip to detail all the reasons and send all supporting documents for the claim. On 19th March 2003, the Plaintiff sent a letter to the Defendant asking for details of the claim in respect of the cleaning charge. The relevant part of the letter says:-

"This is the most controversial issue, as there is a lack of evidence and information supporting your claim. Therefore, for further discussion, could you please send us the details of your claim on cleaning charges of HKD25,295.40 such as the nature, reason, remedial work, quantity and cost breakdown. We are willing to discuss further upon the receipt of the relevant information and evidence."

The Defendant did not provide the information as requested.

5.2 According to Ida Yip, the laces were trimmed because of its defective quality in a factory in Mainland China, the Defendant's contractor. She did not have any personal knowledge as to the trimmings. She only repeated what she was told by the others. There is an invoice produced (p. 68 of Exhibit P3) during the trial. But the maker of this invoice is not a witness in court. It bears the following contents:-

Without direct evidence from the maker of this invoice, it is difficult to know how the figure of 32,430 was arrived at.

5.3 Ida Yip said that she knew on 22nd December 2002 that the lace delivered by the Plaintiff on the 21st December 2002 required trimming. She also said that the balance of the lace deliveries had the same defect and the last batch was delivered on 31st December 2002. She said she told the factory to start doing the trimming work on 31st December 2003. But the lace was not trimmed from 22nd to 31st December.

5.4 She said that she had couriered to the Plaintiff a copy of the Defendant's factory report of the lace (Ex. D4 and Ex. D5) and a short strip of the defective lace to the Plaintiff on 30th December 2002. However her 2 statements do not refer to this matter, and the fax dated 30th December 2003 does not contain any reference to this matter.

5.5 Against this background it is apparent that it is important to have direct evidence on the defect of the lace. Exhibit D5 contains 2 handwritten remarks, one of which is“橡筋扭曲” (twisting of the rubber band). I do not know which part of the lace it refers to, and how it is connected with the alleged trimming work. This demonstrates the importance of having direct evidence from the maker of the said report. Without direct evidence from the staff of the factory which alleged to have done the trimming work, it would be difficult for me to make a finding that the lace delivered to the Defendant had the defects as alleged. It is unsafe to rely on hearsay evidence to arrive at a finding that the laces delivered were of defective quality, and that the correct quantity of defective laces is 32,430 pieces. As there is insufficient evidence to support the Defendant's allegation I dismiss the claim relating to the cleaning charges.

6. By reason of the matters aforesaid I dismiss the Defendant's counterclaim and I enter judgment in favour of the Plaintiff in the sum of 52,335.40, with interest thereon at judgment rate, commencing from the date of the service of the Writ of Summons until the date of satisfaction.

Costs

7. I make an order nisi, to be made absolute within 14 days' time, that the Defendant is to pay costs of these proceedings to the Plaintiff, to be taxed, if not agreed.