GLORY ELECTRICAL MANUFACTURING (HK) CO LTD v. DAYS IMPEX LTD

DCCJ13613/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 13613 OF 2000

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JUDGMENT

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Introduction

1. This case started off by the plaintiff, a supplier of electrical stand fans, as a simple claim for recovery of proceeds of goods sold and delivered. The claim amounted to HK$315,700 and the plaintiff also claims interest calculated at the rate of P(9.5%) + 2% per annum for this outstanding sum.

2. The defendant, a trading company, denied its liability to pay interest on the defaulted sum and counter claims the plaintiff for having committed a breach of their other contracts causing damages suffered by the defendant as a result of claims lodged by its sub-buyers. In particular, under contract number CT 9920727R, the defendant alleged that the fans delivered failed to be of merchantability of this kind of goods in that they turned too slow. The amount of this claimed is US$10,400 or HK$ 81,120. The defendant also claims damages for non-delivery or late delivery of fans under contracts number CT 9920773RR, CT2020022R, CT2020023R, CT2020057, CT2020058 and CT2020112. In calculating the quantum of its claims under these contracts, the defendant adopted two alternative approaches. Firstly, it relies on clause 11 of those contracts and claims 25% of the contract values of goods involved and this amounted to HK$599,881.25. In the alternative, the defendant calculates its actual loss by getting the would-be profits under its sub-sales contracts with the subsequent buyers plus the compensation they have actually paid out to such clients because of the non-delivery. The amount of actual loss so calculated by the defendant is HK$581,535.

3. The plaintiff in its reply denied its goods to be of inferior quality and claimed that all goods under CT2020058 had been delivered. As for the remaining contracts, the plaintiff alleged that they were cancelled by mutual consents between the parties.

Case for the Plaintiff

4. The plaintiff has called 2 witnesses in the trial. They were Mr. Robert YEUNG Wai-cheong (PW1) a director of the plaintiff and Mr. CHUNG Wah-fuk (PW2) an expert of Specialized Technology Company Ltd.

5. PW1 has given two witness statements and they could be seen in bundle A2 from pages 41 to 52. His evidence was that the plaintiff was a manufacturer and exporter of fans and heating plates. It has its factories in China and the defendant first placed contract with his company on 16th October, 1998. However, the next order only came from the defendant in late 1999. Then the defendant had entered into some 29 purchase contracts including those forming the subject matter of the present litigation. These contracts have standard terms printed on their back but the particular terms such as prices, contract numbers, dates, quantity of goods and delivery dates were all typed on the front page of the same. For those general clauses on the back, PW1 said in evidence that he did not read them and paid little attention to them. The general practice between the plaintiff and the defendant was that the defendant would place an order by first sending a contract to the plaintiff through fax. Then, after PW1 had checked with the factory and found that the plaintiff could handle the order, he would sign and fax the contract back to the defendant. Then the defendant would send the original contract by post to him for his formal signature. All the contracts including the first faxed copy would have already got the signatures of the defendant on it. If the plaintiff found the terms to be acceptable, PW1 would sign sent that copy and send it back to the defendant. If he found that the terms were not right, he would amend it, sign it and fax it back to the defendant.

6. It was also PW1's evidence that he had all along been dealing with DW2 Mr. Anil Dayaram, son of DW1 Mr. Nanik Dayarm. Before July, 2000, the plaintiff had been in good terms with the defendant even the latter had been in arrears on paying up their contracts. PW1 and DW2 often had telephone conversations with each other in working out the shipping schedules for all the pending contracts at the time. Although each contact specified the months and in some the weeks of the months that a delivery was supposed to be made, PW1 was in the practice of discussing with DW2 to finalize the actual shipment date for a particular contract. PW1 would then from time to time faxed the shipping schedules to DW2 telling him the positions of various contracts. According to PW1, sometimes DW2 would ask to defer delivery because of special circumstances such as social unrest of the shipment destination or difficulties in appointing surveyor for a particular lot of goods. There were also times that during the peak season such as May and June, PW1 would ask the DW2 to defer shipment because the plaintiff would have to satisfy other customers' orders as well. Finally, it was also in PW1's mind that he did not want to meet the defendant's order so quickly because the defendant had not been paying up punctually. By 12th June, 2000, PW1 said in his statement that the Defendant was owing the Plaintiff HK$1,110,200. In all the contracts between the plaintiff and the defendant, no payments of deposits were required and the plaintiff would not get payment until 7 days after shipments were made. PW1 did not want to expose plaintiff to too much risk by allowing the defendant's debt to grow bigger. Hence, he slowed down his delivery on the pending orders. Also because the plaintiff was running its business on bank overdraft facilities, PW1 had asked the DW2 to pay plaintiff interest by sending two schedules, first on 18th July, 2000 and then on 12th August, 2000 (see respectively pages 55 and 84 of plaintiff's bundle(PB) P1) to the defendant. The first schedule related to 7 contracts and asked for an interest calculated at the rate of prime rate (P) + 2% per annum on the late payments made by the defendant. The total interest of $7211.83 under the first schedule was duly paid by the defendant by means of a cheque dated 31st July, 2000 (see page 56 of PBP1) but the defendant did not pay for the interest under the second schedule.

7. Concerning the cancelled contracts, PW1 gave evidence saying that on 9th June, 2000, he received a facsimile message from the defendant. The message was signed by DW2 (exhibit D1) telling the plaintiff that shipment of the remaining 3 containers of fans under the 5-container-contract CT 2020058 and the 2-container-contract CT 2020057 were cancelled. The same message chased for delivery of fans under contracts CT 2020105 and CT2020112. The message asked for the shipment schedule for contract CT2020122 and CT2020182. CT2020182 was a new contract. On receiving this message, PW1 went up to the defendant's office on that same day and met DW2. In the meeting, they had reached certain agreement and had their respective handwritings appended to exhibit D1. PW1 had also initialed against the hand written words appearing on the top right hand corner of the exhibit. According to PW1, the agreement reached in the meeting was that the plaintiff shall ship the remaining 3 containers under CT2020058, 2 containers under CT2020057 and 2 containers under CT2020105 on 15th June, 2000. Despite this agreement, the DW2 faxed a letter (see PBP1 pages 34&35) to the plaintiff on 12th June, 2000 retracting from his position of accepting delivery of the 2 containers under CT2020057 on 15th June, 2000. Hence, PW1 sent a letter dated 13th June, 2000 (see PBP1 page 36&37) to DW2 protesting on the defendant's decision on this contract and raised the request of charging interest at P+2% for late payments. DW2 sent a reply also on the 13th June, 2000. DW2 replied (see PDP1 page 38) signifying his positions on the various contracts. In particular, DW2 said he would call back to discuss CT2020057 with PW1. He never did. Any way, the 5 containers under CT2020058 and 2 under CT2020105 were delivered on 16th June, 2000. The plaintiff had received payment in full for the 3 containers under CT2020058 but payment for the 2 containers under CT2020105 (invoice at page 43 of PDP1) was still outstanding. PW1 denied the suggestion by the defence that the agreement reached on the 9th June, 2000 meeting was that the 3 outstanding containers under CT2020058 were to be treated as 3 containers under CT2020105.

8. On contracts CT9920773RR, CT2020022R and CT2020023R, PW1 when giving evidence in chief said that these contracts were cancelled because DW2 told him that the defendant no longer wanted the goods. Hence, in a facsimile message in the form of a shipping schedule he sent to the defendant on 31st May, 2000, he affixed the chop impressions of "CANCELLED" against these 3 contracts. PW1 emphasized that these contracts were cancelled by mutual consents of the parties and that no one from the defendant had ever told him that the defendant would be invoking the provisions on the back of the contracts to sue for damages for non-delivery. It was only after the plaintiff had instituted the present proceedings, then he knew the defendant was making such claims. In fact, at the end of his evidence in chief, he had given evidence in that it was common in his course of dealing with the defendant for shipping dates to be postponed. He named contracts CT2020022RR and CT2020023R appearing in pages 75 and 73 respectively of PBP1 as examples showing the shipping date of the respective contracts were amended from May to June, 2000. When PW1 was under cross-examination, only contracts CT2020022R and CT2020023R appearing in pages 36 and 42 respectively in the defence's bundle (DB) was referred. When PW1 was re-examined, he compared the two sets of contracts appearing in the plaintiff's bundle and the defence's bundle and pointed out that after the first sets of contract appearing in the defence's bundle were made, he explained saying that he received a call from DW2 asking him to change the colours of the fans at a later date. He then received a new sets of contracts with different contract dates and different colour descriptions. As works would have to done to change the colours of the fans, he crossed out the shipping months "May" and amended it to "June" before he returned the same to the defendant. As these contracts were cancelled on 31st May, 2000, PW1 denied that they were cancelled by the defendant because of late shipment. PW1 denied the suggestion that the amended contracts were only meant to be sent to him as record of amendment and that he was not required to sign on the same and have them sent back to the defendant. Both sets of contracts were produced by the plaintiff for my reference as exhibits P.2 and P.3

9. As for the defective goods claim under contract CT 9920727R, it was PW1's evidence that the defendant seldom asked for samples or prior inspection before shipment was to be made. However, if the defendant so requested, the plaintiff would comply. For goods under contract CT9920727R, the goods were shipped and the contract price was settled by the defendant on 26th April, 2000. The first time that PW1 had ever heard from the defendant that there were defective goods was when he went up to the defendant's office on 13th July, 2000 to meet DW2 to chase for outstanding payment. DW2 asked him to reduce the contract price because the defendant's customer raised complaint on this lot of goods. PW1 asked for a surveyor's report to be furnished on the goods and asked for a sample. As no report or sample was so furnished, the plaintiff did not follow up this further. In this first meeting, DW2 did not mention any figure for compensation. Then in another meeting in September, 2000, PW1 went to the office of the defendant to chase for payment again. This time, he was not sure if his father went along as well but he remembered meeting DW1 and DW2. In that meeting, DW1 told him that his customer was asking US$2 for each of the defective fans and he told PW1 to fly to the United State to inspect those fans. PW1 refused saying that he would not go all the way to the United States to handle 1 lot of defective goods. Instead, he asked for proof of defects from the defendant by way of reports and/or samples. None was furnished before the present proceedings.

10. On the defendant's claim of non-delivery of goods under contract CT2020112, PW1 said in evidence that he received a call from DW2 on 9th May, 2000. DW2 told him that the defendant got a client who wanted to buy 4 blades fans. As this was a new product to the plaintiff, PW1 asked DW2 to provide him with a customer's sample from which PW1 could tell his factory to develop the product. DW2 then agreed. The sample was not received until early June, 2000. That was the reason why when PW1 faxed a shipping schedule to the defendant on 31st May, 2000, he put down "wait for samples" against contract CT2020112 on the "shipment date" column (see DB at page 49). The contract CT2020112 produced by the defendant at page 86 of DB bore no signature of the plaintiff. PW1 explained that it was because he could not work out a mould in the absence of the defendant's sample. Hence, he could not tell when he could ship the goods. Given the fact that he had only received the sample from DW2 in early June, there was not way that he could meet any shipment date for it took time to develop the product. This was the reason why he had never signed the contract and fax it back to the defendant as he would otherwise did for the other accepted contracts. Then came the series of communications between the plaintiff and the defendant between 9th and 13th of June, 2000. No further action under this proposed contract was taken after DW2 had indicated in his fax message on 13th June, 2000 that this contract "is definitely cancelled".

11. The second witness for the plaintiff was Mr. CHUNG Wah-fuk (PW2) of Specialized Technology Resources (HK) Ltd. He was a Ph. D in Physic and had been responsible for testing consumer products driven by electrical power. The one electrical fan was provided by the plaintiff and got a blade diameter of 14 inches and was driven by 110 volts of 60Hz alternate current. The test report was from pages 62 to 70 of PDP1. The conclusion reached by this expert was that the tested fan performed the basic function of a fan. I notice that the tested fan was 2 inches shorten in diameter than that of the fans in question.

Case for the Defence

12. Three witnesses were called by the defence and they were Mr. Nanik Dayaram (DW1), Mr. Anil Dayaram (DW2) and Ms. Pitty KWOK (DW3). DW1 was the managing director and DW2 and DW3 were respectively the marketing executive and the director of the defendant company.

13. DW1 had given 3 statements and they could be seen from pages 54 to 89 of Bundle A2. After adopting what he had said in his statements, DW1 first give evidence on the 3 contracts cancelled on 31st May, 2000. They respectively bore the numbers CT9920773RR, CT2020022R and CT2020023R (see pages 30, 36 and 42 of the DB). DW1 explained that the letter "R" and "RR" appearing at the end of the contract numbers signified that they were revised or re-revised versions of the original contracts. DW1 said these 3 contracts were cancelled by the defendant because the plaintiff had not been able to make delivery within the time frame prescribed by the contracts. DW1 said the communication of cancellation to the plaintiff was made by phone sometime between 29th and 31st May, 2000. He had also in his own hand writings marked on the confirmation notes (see pages 33, 39 and 47 of DB) relating to the sub-sales of the goods involved in those contracts 1 or 2 days after 31st May, 2000. Those hand written words were "Cancelled with Supplier on 31/5/00 as shipment not effected during May. Suppliers' confirmation of cancellation served on 31/5/00 (see attached schedule)".

14. On contracts CT2020022R and CT2020023R, DW1 said even though they bore an "R" at their numbers, they were not revised contracts and that it was just the staff typing out the contracts made a mistake by inserting the "R" on these two un-revised contracts. Both contracts were dated 11th April, 2000 and designating shipment to be made in May, 2000. The defendant then received a request from the buyer to change the colour of the fans in those contracts. The defendant rang the plaintiff to see if the request could be entertained. The plaintiff agreed and hence the defendant sent the two contracts appearing on pages 73 and 75 of the plaintiff's bundle P1. The two contract so sent bore the numbers "2020023R and 2020022RR and both were dated 18th May, 2000. According to DW1, the only changes made on the contracts should only be the change of colours. DW1 rejected the suggestion that change of colours require additional works and hence more time to complete the contracts. He also said that those copies appearing in the plaintiff's bundle were sent by the defendant as confirmation of their agreement on changes of colours and need not be signed by the plaintiff nor were they required to be sent back to the defendant. In fact, he had never received any signed copy of those contracts and never had notice of the amendment of the shipment month from May to June thereon. He first said that shipment date on the contract need not be affected at all. However, after it was pointed out to him by his own counsel in that the revised version of CT2020022RR dated 18th May, 2000 said in the remark column that shipment should be made in the second week of May, 2000, he admitted that that requirement should be changed for otherwise it would be impossible for the plaintiff to perform.

15. On the shipment schedules appearing in pages 129, 130 and 102 of the defence bundle, DW1 denied that they were records of agreements through prior discussions between the plaintiff and the defendant. Instead, they only served as requests on the part of the plaintiff for fixing a shipping date and approvals of the same would have to be given by the defendant. Such approval or disapproval would be given over the phone after the schedules were received by the defendant.

16. On contracts CT2020057 (see page 65 of DB), DW1 said that goods under the contract was supposed to be shipped in May, 2000 but the defendant agreed to grant indulgence up to 8th June, 2000 (see shipment schedule by the plaintiff at page 49 of DB). However, as the plaintiff failed to deliver on that day, the defendant cancelled this contract on 9th June, 2000 by a letter faxed to the plaintiff (see page 103 of DB for the unmarked version of exhibit D1). As for contract CT 2020058 (see page 82 of DB), there were altogether 5 containers under this contract. Two were shipped on 3rd June, 2000 and were accepted but the remaining three were cancelled on 9th June, 2000 by means of the same letter which cancelled CT2020057. DW1 claimed that he had also marked in his own hand on the relevant confirmation notes to signify the cancellation. DW1 had also referred to the relevant bill of lading and confirmation notes to prove that the remaining 3 containers under CT2020058 in fact had been shipped to satisfy the confirmation note between the defendant and its buyer under CT 2020105.

17. On the 3 letters that the defendant faxed to the plaintiff on 9th, 12th and 13th June, 2000 (page 103 of DB, page 34 of PBP1 and page 38 of PBD1) and the plaintiff's letter faxed to the defendant on 13th June, 2000 (page 36 of PBP1), DW1 explained them in the following manner. First the defendant faxed out the letter on 9th June, 2000. PW1 came to meet him and DW2 at the office asking them to help the plaintiff by not canceling the relevant contracts. DW1 said he had tried to contact his own clients to see if they would accept delivery again but his clients could not be reached. Hence the defendant agreed if the clients consented, the defendant would accept delivery of 7 containers of fans on 15th June, 2000; namely, 2 under CT2020057, 3 under CT2020058 would be accepted as delivery under CT 2020105 and 2 under CT2020105 (CT2020105 originally provided for 5 containers to be delivered). DW1 said that the handwritings on Exhibit D1 in fact recorded this understanding but such understanding was only subject to the consents to be secured from his clients. Later on, the defendant could secure the consent from his client for the 3 containers of goods under CT2020058 to be delivered under CT2020105 but the client for goods under CT2020057 insisted to cancel the contract. Hence, a letter dated 12th June, 2000 was faxed to the plaintiff. DW1 also explained that in the fax message dated 13th June, 2000, DW2 said that he will call PW1 and discuss with PW1 on the phone about CT2020057. DW1 said that DW2 in fact had called PW1 intending to tell PW1 that the defendant's client refused to give consent but DW2 could not reach PW1 over the phone. As for the plaintiff's case in that the proceeds of goods for the 3 containers under CT2020058 were paid under an invoice issued by the plaintiff dated 16th June, 2000 (see page 153 of DB), DW1 said that the payment was handled by DW3 and that she had crossed out the CT2020058 and amended it to CT2020105 to reflect the original agreement.

18. On contract CT2020112, DW1 said that this was the only contract that the defendant had with the plaintiff involving the production of 4-blade-fans. In May, 2000, the defendant received request from its overseas buyer Aksee for such product to be shipped in that same month. DW1 had a telephone conversation personally with PW1 on 9th May, 2000 and PW1 agreed to accept such order. Although DW1 thought that the production of a 4-blade-fan would not be much different from that for the 3-blade ones, he agreed with PW1's proposal in that a sample should be produced first for the defendant's approval before shipment was to be effected. DW1 thought that he "got nothing to lose" under such arrangement. A contract was drawn up and faxed to the plaintiff on 10th May, 2000 (see page 86). On explaining why the contract did not bear the plaintiff's signature, DW1 said that this contract was supposed to be served as a confirmation of the verbal agreement that he and PW1 reached on 9th May, 2000. Hence, PW1 was not required to sign and return it. DW1 said that because the plaintiff showed no sign that they could deliver this shipment even at the extended deadline to June, 2000, the defendant cancelled this contract on 13th June, 2000 by the fax message mentioned in the foregoing.

19. In relation to contract CT9920727R (see page 1 of DB), DW1 said that because the plaintiff refused to have inspections carried out at the factory, it would not be practicable or even possible to have the fans checked before they were shipped. As such, PW1 had given the defendant a guarantee that the goods would have no problem. This contract related to 2 containers of fans to be shipped to Los Angeles, USA. The parties knew that they were not for end users in the USA but for other less developed countries. The fans so required were 16 inches fans to be run on 110 volts 60 Hz electricity power supply. The goods were not examined before shipment and payment by the defendant was duly made. However, the defendant received complaints from their client on this lot of goods on or about 13th July, 2000 in that the fans were turning very slowly. This message was related to the plaintiff. Then in mid-July, 2000, PW1 and his father visited defendant's office and held a meeting with DW1 and DW3 to resolve the problem. However, PW1 refused to accede to his request of going to the United States to inspect the fans nor was he willing to nominate an independent surveyor to test the fans. Later on, in another meeting which took place in the last quarter of 2000, the PW1's father and brother counter proposed that the plaintiff would be responsible for $30,000 for the compensation to the sub-buyer of the defendant. Such request was found by the defendant to be unacceptable. DW1 said that the defendant was in possession of a sample for this lot of fans in Hong Kong but it was wrongfully discarded by his staff by mistake. Furthermore, the sample on which a test was run by SGS who prepared the report in exhibit D16 was thrown away because the defendant had failed to collect them in 1 month.

20. DW1 had also referred to a number of e-mail communications and letters in the defence bundle to show that the sub-buyers of the goods in the involved contracts had asked for compensation and that the defendant had eventually paid the same after negotiations.

21. DW2 Mr. Anil Dayaram was the son of DW1 and a marketing executive of the defendant company. He signed all the contracts between the plaintiff and the defendant and all the shipping schedules from the plaintiff were addressed to him. He was also the signatory for the 3 faxed letters from the defendant to the plaintiff dated 9th, 12th and 13th June, 2000. His witness statement, the content of which he adopted in the trial, could be seen from pages 95 to 97 in PBP1.

22. DW2 gave evidence first on the three cancelled contracts i.e. CT9920773RR, CT2020022R and CT2020023R. He said because the plaintiff had delayed shipment under those contracts, he spoke to PW1 on 29th May, 2000 and told him that the 3 contracts were cancelled by the defendant. DW2 also confirmed that there was a meeting on 9th June, 2000 but that meeting was held amongst PW1, DW1 and himself. Those hand writings against which PW1 had initialed on the top right hand corner of exhibit D1 was written by him. He wrote down those words to take down the plaintiff's proposal. DW2 stressed that the understanding then was that the acceptance of the proposal would be subject to their sub-buyer clients' consent. In fact DW1 were able to secure such consent from the defendant's client to treat the 3 containers of goods originally due under contract CT2020058 to be delivered under CT2020105. Hence, DW2 wrote down the different colour description on confirmation note number 201110 (see page 155 of DB) relating to goods under contract CT2020105. Before this amendment, all the goods under the contract were supposed to be in black colour. As for contract CT2020057, DW2 said that the defendant's client refused to consent to further delay to 15th June, 2000. Hence, the contract was cancelled and he said the same in his letter dated 12th June, 2000 (see page 34 of PBP1). He said in his letter dated 13th June, 2000 (see page 38 of PBP1) that he would call PW1 to discuss with him on this contract. In fact he did try but he could not reach PW1. He intended to tell PW1 that his client refused to grant consent for the delay. On the contract CT2020112, DW2 said that it was not he who talked to PW1 on 9th May, 2000 on the 4-blade fans contract. Instead his father DW1 did because it was his father who took charge of this contract. DW2 also rejected PW1's evidence in that DW2 had given PW1 a client's sample under this contract in early June, 2000. Finally, on contract CT9920727R (i.e. the contract on the "defective" fans), DW2 said that he had never received any sample from the plaintiff either before or after shipment was made. He said the signature appearing on page 74 of PBP1 was not his and the document got no company chop of the defendant company.

23. Ms Petty Kwok was DW3 and was a director of the defendant. She adopted her statement given in pages between 91 and 93 of PBP1. In the statement, she maintained that there was a meeting amongst PW1, PW1's father and DW1 to negotiate the defective fans in July, 2000 but no result could be reached. The defendant had to mitigate its loss by negotiating with the sub-buyer of the defective fans. In another meeting held months later, the PW1's father proposed to settle all the claim by the plaintiff paying the defendant with $30,000. For the non-delivery of the fans in other contracts, the plaintiff refused to pay any compensation. In her evidence given in court, DW3 said that the last meeting referred to in her statement took place in November, 2000.

24. DW3's evidence also covered a document which was an invoice issued by the plaintiff to the defendant for payment for the delivery of 3 containers of fans under contract CT2020058 (see page 153 of DB). DW3 said she discovered that the particulars of good delivered under this invoice should in fact be those under contract CT 2020105. Hence, she amended it in her own hand to reflect this. She presumed that it was a typing error and she had asked her staff to inform the plaintiff about this mistake. She eventually authorized the payment of this invoice.

25. Under cross-examination, DW3 confirmed that page 9 of PBP2 was the invoice she refers to earlier in page 153 of DB. She also confirmed that the deductions made near the bottom were typed onto the invoice by her staff. She accounted for the absence of amendment on the contract number on this copy appearing on the plaintiff's bundle by saying that she could have just made amendment on just one but not all copies of the invoice. She said she did not have to make amendments on all copies of the invoice because she just wanted to let the other party learn about the mistake.

Should PW1's evidence given in re-examination relating to the fact that the shipment deadline of Contracts CT9920773RR, CT2020022RR and CT2020023R had been revised to June, 2000 be disregarded?

26. The defence sought a ruling on this issue in the resumed hearing on 19th February, 2003 (i.e. on day 10 of the trial). I then directed that the issue should be dealt with in my final judgement and I now give my ruling and the reason for the same now.

27. The objection in brief was that the plaintiff had not specifically pleaded such revisions of shipment dates in those three contracts in their pleadings before the trail and that this matter were only specifically raised when PW1 was giving evidence in re-examination.

28. I disagree with the defence's contention and rule that all the evidence given in relation to this issue in re-examination to be admissible. Clearly, the defence to the counter claims pleaded by the plaintiff on the 3 concerned contracts were that these contracts were cancelled by mutual consents of the parties on 31st May, 2000. This defence did not change even the shipment dates of those contracts were postponed. Furthermore, the relevant 3 shipment schedules dated respectively 17th, 19th, and 31st May, 2000 (see pages 129, 130 and 49 of DB) and the two revised contracts CT 2020022RR and CT2020023R bearing amended shipment dates to June, 2000 (see pages 73 and 75 of PBP1) had been included in the bundles of the parties and were exchanged well before the trial commenced. The defence had also been given an opportunity to further cross-examine PW1 at length on this issue specifically raised in re-examination. This application was only raised in the middle of DW1's evidence in-chief and DW1 had already given evidence in agreeing that there were revised contracts in CT2020022RR and CT2020023R to change the colours of the fans involved. Given all these considerations, I am not satisfied that the defence was prejudiced by the specific reference made by PW1 in re-examination to the changes of shipment dates in those 3 contracts. The defence was not prejudiced in their conduct of their case against the plaintiff. Hence, I rule that such evidence to be admissible.

On the Creditability of the Witnesses

29. I have examined the evidence given by the various witnesses in the trail and compared their evidence given in court with their evidence in their various statements as well as with the documentary evidence submitted in court and those filed in the parties bundles. In the end, I am satisfied that PW1 was a frank and forthcoming witness. Much of the evidence he gave were supported by contemporaneous documentary evidence known to the parties. Apart from some details on dates and numbers which PW1 were not sure of, his accounts on what in fact happened were logical and in tune with common sense and business efficacy.

30. On the other hand, all the witnesses giving evidence for the defence mainly relies on verbal agreements, telephone conversations and documentary evidence with a self-serving nature and were unknown to the other party at the time of their conception to prove the defence's case on issues in dispute. In some instances, the versions put forward by the defence were contradicted by contemporaneous documentary evidence. I also found that unfold of events as alleged by the defence to be illogical and in defiance of common sense. As a result, I do not find the defence witnesses to be trust worthy. Hence, whenever there were disagreements between the facts in the evidence of PW1 and those of DW1 to DW3, I prefer those versions given by PW1 to form the basis of my judgment. I shall go into those issues of facts and my resolution thereof in the following paragraphs when I deal with the various claims in greater details.

31. So far as the plaintiff's claim is concerned, the defendant obviously did not put in any evidence to say that the goods under invoice BSI002197 were not delivered. The invoice was issued by the plaintiff to the defendant for payment for 2 containers of fans under contract CT 2020105 shipped on 16th June, 2000. There was no evidence of payment nor was it in dispute that that the goods under this invoice was not delivered. Judgment in favour of the plaintiff at HK$315,700 must be entered against the defendant subject to any set-off that the defendant might succeed in the counter-claims.

32. On whether or not interest is payable by the defendant for late payment of the invoiced sum, the plaintiff relied on trade practice between the plaintiff and the defendant in particular the payment of such interest made on 31st July, 2000 by a cheque on page 56 of PBP1. There was no dispute that this payment was made for interest in respect of late payments for 7 invoices as shown in schedule on page 55 of PBP1. The defendant maintained that this was an one off payment on a gratuitous basis. While admitting that this was the only payment on interest resulting from over due payments that the defendant had ever made to the plaintiff, PW1 denied that the defendant had ever told him that this would be only an one off payment. In my judgment, if the nature of such payment was made on such basis, DW1, a very experienced businessman in every respect, should have made this clear to the other side at the time when such payment was made. I also noticed that this defence of "one off payment" was only put in by application in November, 2002 after the trial had already begun. Bearing in mind that by 31st July, 2000, the defendant was already of the view that the plaintiff had committed many breaches on non-shipment of goods under the contracts named in the counterclaims and that the defendant was planning to ask the plaintiff for compensation thereon, the defendant would not have made such gratuitous payment to the plaintiff. Such payment even if made, must accompany with a rider that it was made on an one off basis. As a result, I found that the more likely inference to be made from such facts as proved is that there was such an agree practice on calculation of interest on over due payments from the defendant to the plaintiff.

33. I now turn to the counter-claims made by the defendant. Firstly, on non-delivery for goods under contracts CT9920773RR, CT2020022R and CT2020023R, I have to decide whether it was a case of cancellation by consents between the plaintiff and the defendant or it was a case where the defendant exercised its right on cancellation subject to claim on damages. I noticed that under cross-examination, PW1 did agree to the suggestion made by counsel for the defence that these contracts were cancelled by the defendant unilaterally in May, 2000. However, on other parts of his evidence, PW1 had equally maintained that the cancellation was by the consent of parties meaning that the plaintiff would no longer be required to supply and the defendant would not be required to take delivery of the goods under those contracts. Much was also said by the defence that it would not be likely that the delay of paying some of the invoices due under other deliveries would affect the plaintiff's circulation of fund in their production process. I have reviewed the evidence of PW1 carefully. In my judgment, what he said in evidence taking the overall effect of the same simply amounted to this:

" The defendant had outstanding payments amounting to 1 million at the time. I do not want the defendant's indebtedness becomes worse. Hence, when the defendant took the initiative to tell me that they did not want the goods, I agreed that they should cancelled the contract with no liability incurred by either party." I found such interpretation of PW1's evidence to be in line with the undisputed circumstances the parties were in at the time. Such circumstances were (i) that no deposits were paid by the defendant under any of their contracts, (ii) that for some of the delivery made, the paid date was not due, but the goods concerned had already been shipped out and the plaintiff's only chance of not sustaining a loss was that the defendant would pay up, (iii) that May was amongst the peak seasons of the year and there were quite a substantial number of other contracts between the defendant and plaintiff pending delivery and (iv) the parties were still having good relationship at the time.

34. I do not find the evidence given by DW1 and DW2 on these contracts bear any ring of truth. On the documentary evidence, it was clear that the shipping date for contract CT9020773RR had been postponed to 1st June, 2000 in the two shipment schedules dated respectively 17th and 19th May, 2000 appearing in pages 129 and 130 of DB. If the defendant was not happy with such postponement, DW1 or DW2 would have protested and insisted on the original delivery date provided for under the contract. Yet, there was a complete absence of documentary evidence showing that the defendant had protested the delayed shipment date. As for contract CT2020022RR and CT2020023R, there is no dispute that there was a request to amend the colours of the fans under these contracts. The defendant had sent out two amended versions of the contracts both dated 18th May, 2000 bearing no changes on the original shipment dates but changing the colour descriptions. I do not accept DW1's evidence in that change of colour did not require more work to be done. In particular, by 18th May, 2000, the shipment date provided for under contract CT2020022RR namely, 2nd week of May, 2000 had already become history. In view of such additional work, it would only be natural for the PW1 to ask for a change of shipment date of these contracts to June, 2000. I accepted PW1's evidence and find that he did send the green copy of the two amended contracts back to the defendant. In the end, for reason best known to DW2, he decided to cancel these two contracts along side with contract CT9020773RR with PW1's consent. I also find that the cancellation carried an understanding by the parties that there would be no further liability of each of them. Or else, the defendant would not have kept the plaintiff in the dark about all the negotiations between the defendant and the sub-buyers under those contracts until they filed their defence and counter-claim. For the same reasons, I cast doubt on the authenticity of the various correspondences between the defendant and the sub-buyers that led to the subsequent compensation paid by the defendant. I hold that the defendant fails in their counter-claim on these contracts.

35. On the issues relating to contracts CT2020057 and CT2020058, the defence's case was that the two contracts were cancelled by a written fax message dated 9th June, 2000 (see page 103 for the unmarked copy and exhibit D1 for the original of the marked copy). The cancellation related to the whole of contract CT2020057 and 3 containers under the 5-container contract CT2020058 (2 containers under this contracts had already been delivered on a prior date). To examined the issues under these two contracts, I have looked into the relevant fax communications at or about that time (i.e. 3 faxed messages from the defendant to the plaintiff dated 9th, 12th and 13th June, 2000 and 1 faxed message from the plaintiff to the defendant on 13th June, 2000) between the parties and contrasted the same with their evidence in court. In the end, I accepted PW1's evidence in that there was a meeting held between PW1 and DW2 on the 9th June, 2000 after PW1 had received the fax message on that date. I find that DW1 was not present in the meeting or else exhibit D1 would not have just shown the handwritings of PW1 and DW2. It should be remembered that DW1 said in evidence that he had been the person mainly handling all the dealings with the plaintiff company. Had he had such lengthy discussions with PW1 on 9th June, 2000, the exhibit must at least show some hand writing of his. I also reject the evidence of DW1 and DW2 in that the handwritings appeared on the top right hand corners of exhibit of D1 recorded the plaintiff's request or proposal subject to the defendant's clients' approval. DW2 agreed that those words are "7 x 40 HQ Glory will ship on 15/6/2000 otherwise I only take 2 x 40 HQ Black". Those wordings simply spelt out the shipment of 7 containers on 15th June, 2000 (there was no dispute that the 7 containers refers to 3 in CT2020058, 2 in CT2020057 and 2 in CT2020105). The only condition shown in the handwritings was that if the goods could not be shipped on 15th June, 2000, the defendant would only accept delivery of 2 containers of black colour fans. Nothing was mentioned that the deal would be subject to the sub-buyers' consents. Nor was there any wordings showing that three containers of goods under CT2020058 would be applied to satisfy the contract CT2020105. To the contrary of this contention of the defence, the hand written notes under CT2020105 went further to provide for the shipping dates the remaining 3 containers after first two containers were shipped on 15th June, 2000; that is to say two containers on 18th June and 1 container on 20th June.

36. From what appeared on exhibit D1, it is clear that on the balance of probability that there was an agreement reached between PW1 and DW2 in that the defendant would accept the 7 containers under the 3 named contracts to be delivered on 15th June, 2000. On such agreement, the plaintiff had acted upon the same to prepare shipment of the goods concerned. But for the defendant's fax message sent on 12th June, 2000, the plaintiff would have dispatched the 2 containers of goods under CT2020057 together with the 5 containers of goods which were in fact delivered. It was because of this sudden change of mind on the part of the defendant in refusing to accept delivery on 12th June, 2000 before the agree extended delivery date, the plaintiff had written a fax message in strong word protesting against the same on 13th June, 2000. If it can be said that there was any breach of the contract CT2020057, the breach was committed by the defendant on 12th June, 2000 when they wrote to the plaintiff indicating that the contract was cancelled before the extended delivery date. I find that the defendant failed in their counter claim under contract CT2020057.

37. Also from exhibit D1, it is clear that on the balance of probability that there was no agreement between the defendant and the plaintiff in that 3 containers under CT2020058 would be applied as delivery made under CT2020105. The defence had tried to rely on certain shipping documents like shipping order, marking advice and bill of lading to show that the goods under CT2020058 in fact were delivered to the sub-buyer of goods under contract CT2020105. DW3 had also given evidence to say that she had marked on the invoice to show plaintiff this mistake.

38. It should be pointed out that under the established trade practice between the plaintiff and the defendant, the plaintiff would sent the goods under their contracts to any one named by the defendant with the specified shipping mark instruction printed onto the packing of the fans. The plaintiff was not privy to the contracts or otherwise called the confirmation notes that the defendant had contracted with the sub-buyers for it was their understandings that the defendant should not contact the factories in China producing the fans and the plaintiff should not contact the sub-buyers. As such, the plaintiff would not query but mark the shipping mark on the goods and fill the particulars on the blank columns of the shipping order as instructed by the defendant. Hence, even if the goods under CT2020058 were in fact sent to the sub-buyer for goods under CT2020105 does not necessarily mean that there was an agreement between the defendant and the plaintiff that the goods would be so applied. It could well be that after the defendant had agreed with the plaintiff on 9th June, 2000 that the 3 containers would be shipped on 15th June, 2000 (together with the 5 other containers under other contracts), the defendant then decided to use the goods in one contract to meet the demand of another without telling the plaintiff. There can be lots of reasons why the defendant would make such a decision and I am not going to speculate on this. What I know is from the wordings of the first paragraph of item one and the third paragraph of item 2 in the fax communication sent by the defendant on 12th June, 2000 read together with the wordings in item 1 and item 3 of the fax reply sent by the plaintiff on 13th June, 2000, the only sensible interpretation was that the parties agreed that the remaining 3 containers under contract CT 2020058 shall be sent on 15th June, 2000 and that the 3 remaining containers under contract CT 2020105 shall be cancelled.

39. I also do not accept DW3's evidence on her spotting the wrong contract reference and made the amendment on the invoice appearing in page 153 of DB. That page doses not show the calculation of deductions made by the defendant but a copy of the same was returned to the plaintiff as shown in page 9 of PBP2. The plaintiff's copy got no amendment but only the deduction. It was DW3's evidence that she was in-charge of all the payments made by the defendant and that all invoices went to her for approval to pay. If indeed it was as she said that she spotted the wrong but vital reference of contract number on the invoice, she would not have just amended the defendant's copy but not the plaintiff's. It would also be very strange that she would not have had called the plaintiff to clarify this herself but simply be comfortable with the presumption that someone in her office would do the job.

40. In the end, I am satisfied on the balance of probability that the plaintiff had fully performed their obligation under contract number CT2020058. Whether or not the defendant had applied the goods delivered under that contract to satisfy another order is their own business and would not affect the plaintiff's position under this contract in any way. As a result, I find that the defendant fail in this head of their counter claim as well.

41. For the defendant's counter claim under contract 2020112, this contract related to the non-delivery of an unusual product in the form of a 4-blade fan. I have examined the evidence in detail and do not accept DW1's evidence in that he was the one who talked to PW1 on this contract. It is because I found all the contracts between the plaintiff and the defendant, including this one appearing in page 86 of the DB was signed by DW2. The plaintiff's signature was missing from this contract. PW1's evidence was that the contract was not signed and returned because this was a new product and that he had to wait for DW2's sample before a test product could be produced. I accepted this version of the PW1 for I find him to be a creditable witness and that his evidence is to be preferred to those given by the defence witnesses. I realize that PW1's signature did not appear on contract CT 2020182R (exhibit D12) as well but that was a cancelled contract and it was never shown to PW1 during cross-examination. I also noted that in all the relevant shipping schedules, no shipping dates were specified but the column was filled with either "depends on sample" or "wait for samples". I do not accept the defence witnesses' evidence and I have already assessed their creditability in the foregoing paragraphs. In the end, I hold that there was no valid contract CT2020112 that the defendant could sue on. Hence, I find that the defendant fails on this head of their counter claim.

42. Lastly, I now deal with the counter claim under contract CT9920727R. This contract related to a batch of fans ran on 110 volts power supply. The goods were to be used in Mexico though it was shipped to Los Angeles in the United States where the intermediary buyer was. In order to succeed on this head of the counter-claim, the defendant must prove on the balance of probabilities that the fans delivered were defective. The only evidence on defects of such goods was from DW1 and a report from SGS US Testing Company Inc. DW1 said he had inspected the goods in the United States and found that the fans were running at very low speed. For this the defendant company had paid compensation at $US2 per fan to the sub-buyer. The report said that the fan being tested ran at an increditably slow speed at 303/355/338 (RPM - rounds per minute) at low/medium/hi sectors. The maker of the report was not called. No defective fan was produced in court to prove the defendant's case. The explanation of such failure put forwards by the defence was that the sample held at the defendant's office was thrown away by the staff by accident. As for the sample on which the SGS test was run, DW1 said that because the fan was not collected within one month after the test was done, the SGS personnel threw it away as well. I also notice that date on which the test was run was 18 March, 2002 while the defendant first aware of the defects in July, 2000. I disbelieve DW1's evidence for reasons which I have pointed out before. If the fans were running at such low speed, they were virtually useless and I doubt very much the sub-buyer would accept it at a discount of $US per piece. The co-incidence of losing all the defective samples in the possession of the defendant is simple unbelievable. As a result, I find the defendant has failed to prove that the fans delivered under contract CT9920727R were defective.

Conclusion

43. For reasons stated hereinbefore, I give judgment for the plaintiff in respect of their claim in full. I dismiss the defendant's counter-claim. I also grant an order nisi to become absolute in 21 days that the defendant shall bear the costs of the plaintiff on a party-to-party basis with counsel certificate to be taxed if not agreed. The award shall carry interest from the date of writ to date of judgment at judgment rate and thereafter at judgment rate until payment.