PROTRONICS CO LTD v. KOUOI VINCENT t/a UNIVERSEL ENTERPRISE CO

DCCJ 3234/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3234 OF 2004

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J U D G M E N T

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Introduction 

1.  In this action, the Plaintiff was the seller and the Defendant was the buyer of the goods, namely, oval double side mirror (“the Goods”).

2.  The Plaintiff claims HK$309,541.67 being the balance of the price of the Goods as well as the transportation cost and expenses incurred on the Defendant’s behalf.

3.  In defence, the Defendant alleges that due to the Plaintiff’s late delivery of the Goods, the Defendant had incurred air freight in the total sum of HK$234,971.50.  The Defendant claims to set off the Plaintiff’s claim by the amount of his counterclaim.

4.  The Defendant had all along been legally represented.  4 days before trial, he filed a notice to act in person.

Background

5.  This was the first business transaction between the parties.

6.  The parties understood that the Goods would be manufactured by the Plaintiff’s factory at Zhongshan of the Mainland.

7.  According to the pleadings, the following are not in dispute:

(1) The Defendant agreed to buy and the Plaintiff agreed to sell 28,250 pieces of the Goods at US$4.05@.

(2) The price was FOB Zhongshan and any extra charges would be on the Defendant’s account.

(3) The Defendant would pay 30% deposit and the balance in cash on delivery for each invoice.

8.  There is also no dispute that during the period between 13 March and 31 March 2004, the Plaintiff delivered a total quantity of 27,650 pieces of the Goods for shipment to various overseas destinations designated by the Defendant.  The price was HK$871,223.85.

9.  For arranging shipment of the Goods, the Plaintiff has incurred HK$9,441.73 and RMB42,020.40 (or HK$40,019.28) on the Defendant’s behalf.  These are evidenced by the relevant documents including delivery notes, invoices and debit notes.

10.  During the period between February and May 2004, the Defendant paid to the Plaintiff a total amount of HK$582,168.43 and RMB30,423.50 (or HK$28,974.76).

11.  The abovementioned amounts and the outstanding balance of HK$309,541.67 were set out in the Plaintiff’s statements of account dated 30 April 2004 and 5 May 2004 issued to the Defendant before the commencement of this action.  There is no evidence from the Defendant which could contradict these amounts.  During trial, the Defendant confirmed that he did not dispute these amounts.

12.  In the premises, what remains to be decided is the counterclaim.

The counterclaim

13.  There is no pleading of dispute as to the quality of the Goods.

14.  Though the quantity of the Goods actually delivered was 27,650 pieces instead of the 28,250 pieces ordered by the Defendant.  There is no allegation of or claim for short delivery.

15.  The case therefore boils down to whether the Plaintiff was late in delivering the Goods and thus causing the Defendant to ship the Goods by air as alleged by the Defendant.

The deliveries

16.  The documents show, and the Defendant does not really dispute, that the 27,650 pieces of the Goods were delivered for shipment on the following dates:

Delivered to port	Quantity	For Destination
13.3.2004	2,200 pieces	Korea (by sea)
18.3.2004	5,800 pieces	Korea (by air)
20.3.2004	5,000 pieces	Korea (by sea)
25.3.2004	2,000 pieces	Korea (by sea)
27.3.2004	5,000 pieces	via Singapore for Taiwan (by air)
27.3.2004	950 pieces	Malaysia (by sea)
29.3.2004	1,500 pieces	Hong Hong (by sea)
30.3.2004	4,000 pieces	Shanghai (by train)
31.3.2004	200 pieces	Singapore (by sea)
31.3.2004	1,000 pieces	Thailand (by sea)

17.  It could be seen that the Defendant’s complaint relates to 2 lots of the Goods: the 5,800 pieces for Korea and the 5,000 pieces for Taiwan.  According to the Defendant, these 2 lots had to be shipped by air as a result of the Plaintiff’s delay in delivery.

Agreement as to time of delivery

18.  The Defendant alleges that the Plaintiff agreed to deliver 15,000 pieces of the Goods by the end of February and the balance by 10 March 2004.  The Defendant persistently referred to his purchase order to the Plaintiff dated 12 January 2004 (“the PO”) as containing the agreed delivery dates of the Goods.

19.  The Defendant first approached the Plaintiff in August or September 2004.  Before the Defendant actually placed order with the Plaintiff, the Plaintiff apparently had to produce a mock up sample of the Goods for the Defendant’s approval.  The correspondence between the parties show that the Defendant was still requesting for modification of the mock up sample of the Goods in December 2003.

20.  Ms Adele Chan (“Chan”), assistant to executive of the Plaintiff, gave evidence in court.  According to her, the Plaintiff was concerned about the suspension of production during the coming Chinese Lunar New Year holiday in January 2004.  Therefore, she sent the e-mail dated 6 January 2004 to the Defendant advising him that the factory would take 30 days for tooling, i.e., to produce the tool or mould for production.  She also requested the Defendant to send his firm order to the Plaintiff.

21.  The Defendant then sent to the Plaintiff the PO on about 12 January 2004.  The PO contained, among other things, the following terms:

“Unit price: US$4.05/pc.

Packing: Each mirror in polybag & gift box protect by a paper shell, then in a strong export carton, provided by Universal Enterprise Company free of charge.

Payment: Master invoice shared by four, 30% deposit, balance COD for each invoice and respect the order delivery as below.

Delivery: Overseas destinations to be communicated.

Order of delivery: first delivery minimum 15,000 pcs or more on the end of Feb, second delivery the rest of products on 10 March or before.”

22.  The PO contained this request in bold print: “PLEASE SIGN & RETURN”.

23.  There is no dispute that the Plaintiff did not sign or return the PO to the Defendant.  Instead, Chan sent an e-mail to the Defendant on 13 January 2004 as follows:

“Thanks for your Purchase Order of Dior Mirror, please confirm the following immediately:

(1) Price: Should be FOB Zhongshan US$4.05/pc

(2) Packing: Gift box and strong export carton were provided by Universal

(3) Payment: Please advise payment date for the 30% deposit

(4) Invoice: Four shipdate-extra charges for document and LCL charges will be at Universal account.”

24.  The Defendant during trial said that he orally replied to Chan regarding her e-mail.  According to him, he also accepted the terms as stated in Chan’s this e-mail though they somehow differed from those contained in the PO.

25.  It should be noted that Chan’s e-mail dated 13 January 2004 made no mention of the delivery date(s) of the Goods, whether proposed in the PO or not.  However, according to Chan, she had previously informed the Defendant verbally that delivery of the requested quantity by the end of February 2004 would be impossible though the Plaintiff would try its best.  The impossibility of delivering 15,000 pieces of the Goods by the end of February indeed became clear when the Plaintiff sent an “updated delivery schedule” to the Defendant by e-mail on 28 January 2004.  Though it was so called, it was actually the Plaintiff’s production schedule rather than a schedule of delivery dates of the Goods.  According to this schedule, tooling would be completed on 15 February 2004.  Off-tool sample would be ready on 19-20 February 2004.  From the 5^th day of the Defendant’s approval of the off-tool sample, production would begin at the rate of 2,000 pieces per day.  Producing all the Goods ordered would take 2 weeks.  According to this production schedule, if one assumes that the off-tool sample would be approved on 20 February (at the earliest), production would begin on 25 February.  At the rate of 2,000 pieces per day, the target of producing 15,000 pieces by the end of February would obviously be impossible.

26.  In the same e-mail, the Plaintiff asked the Defendant to comment on the production schedule.  Had it already been agreed between the parties since the PO that not less than 15,000 pieces of the Goods had to be delivered by the end of February 2004 (as the Defendant alleged), this production schedule would not have been welcome by the Defendant (not to mention whether this amounted to the Plaintiff’s anticipatory breach).  The fact was that in his reply by e-mail dated 31 January 2004, the Defendant made no adverse comment about this schedule but he also stated his expectation to receive the off-tool sample on 19-20 February in accordance with this schedule.  Apart from referring to this production schedule, the Defendant added nothing about it in his witness statement.  In the circumstances, any oral evidence of the Defendant now to the effect that he had in fact verbally objected to this schedule as being contrary to the contractual deadlines for delivery under the PO must be viewed with scepticism.

27.  On 5 February 2004, the Defendant sent to the Plaintiff a sales contract (“the Sales Contract”).  The Sales Contract referred to the PO and contained the provision of “Ship Date: February 29, 2004”.  However, in the light of the Plaintiff’s production schedule known by the parties by then, one really cannot contend that these features of the Sales Contract per se evidence the Plaintiff’s acceptance of the delivery deadlines proposed in the PO.  According to Chan, that was meant to be the date when delivery could begin.  In any event, the Sales Contract expressly provided that the duplicate of this document had to be signed and returned to the Plaintiff within 7 days in order to be valid.  According to the Defendant, he never received or signed the Sales Contract.  The Plaintiff also did not dispute that the Sales Contract had never been signed or returned by the Defendant.

28.  In the circumstances, neither the PO nor the Sales Contract became the document embodying the parties’ agreement on the delivery date(s) of the Goods.

29.  The Defendant alleged that the Plaintiff in any event knew or ought to have known that the Goods had to be delivered to various countries within time limits.  Specifically, 20,000 pieces of the Goods had to be shipped to Korea and Taiwan at the end of February or early March 2004.  The reason was that the Defendant had provided the Plaintiff with a delivery schedule, and according to him, after the PO.  During trial, this document was identified to be an undated document (page 104 of the bundle) which contained, among other things, a table listing out the quantity of the Goods for each destination and their respective “On Counter Date”.  According to the Defendant, the “On Counter Date” was the date on which the Goods should be on the customer’s counter at the department stores in each country.

30.  I hesitate in accepting this document as the proof of the Plaintiff’s knowledge of the time limits for delivery of the Goods.  First, there is little, if any, evidence of the source of this document.  Second, while the Defendant relies on the table in this document, he is unable to explain it satisfactorily.  For instance, he has no idea about what the dates in the column under “Request Avail. Date in HKG” referred to.  Regarding the Goods for Thailand, the entry in this column was “Beg of Feb 04” suggesting the beginning of February 2004.  However, not even the tooling was completed by then.  There was also no entry in this column regarding the Goods for Korea and Taiwan, the 2 destinations of the Goods in question.  Third, the “On Counter Date” of the 15,000 pieces of the Goods for Korea was 1 April 2004.  The Defendant explained that upon the arrival of the Goods at Korea by the end of February 2004, time would needed for their distribution to various provinces of the country.  While this may on its face be understandable, it would be going too far to expect the Plaintiff to deduce from that the deadlines for its own delivery so as to meet such “On Counter Dates” at the overseas destinations.

31.  In the circumstances, I reject the Defendant’s allegation of the contractual deadlines for the delivery of the Goods, whether pursuant to the PO or not.

32.  In the absence of agreed delivery date(s) of the Goods, the Plaintiff was obliged to deliver the Goods within a reasonable time.  This is the effect of section 31(2) of the Sale of Goods Ordinance, Cap.26.

33.  What is a reasonable time within which delivery should be made depends on the circumstances of each case.  I find that the starting point in this case must be the production schedule projected by the Plaintiff on 28 January 2004 (mentioned above).  According to Chan, the off-tool sample of the Goods was ready on 20 February 2004 and the Defendant approved it in 2 to 3 days.  Production commenced thereafter.  By 1 March 2004, the Defendant had supplied to the Plaintiff the gift boxes and cartons for packing the Goods.  In the following few days, the quotations from the freight forwarder for shipments to Korea and Taiwan respectively by sea were obtained.

34.  However, the Plaintiff was apparently not able to follow its production schedule.  According to Chan, due to the electricity shortage at the electroplating factory, the production was therefore delayed during early March 2004.  She informed the Defendant accordingly.  The new production schedule since the first shipment (on 15 March 2004) was sent to the Defendant by e-mail dated 16 March 2004.  According to the new schedule, the last lot of the Goods would not be available until 27 March 2004.

35.  At about the same time, the Defendant instructed the Plaintiff to ship the next lot of the Goods by air.  This was the lot of 5,800 pieces of the Goods for Korea.

The 5,800 pieces for Korea

36.  As mentioned above, the Plaintiff’s production was clearly delayed during early March 2004.  The question, however, is whether this delay in fact caused the Defendant’s decision to ship this lot of 5,800 pieces of the Goods for Korea by air.

37.  According to Linda Ho, the shipping supervisor of the Plaintiff, the Defendant requested this lot of the Good for Korea be shipped by air for reason relating to customer response but she did not know the details.  It was at a later stage when she gathered that the Goods were gifts for promotion.

38.  The first lot of the Goods for Korea was shipped on 15 March 2004 by sea.  In his e-mail dated 17 March 2004, which was sent after receipt of his customer’s e-mail the day before, the Defendant asked the Plaintiff to confirm the air shipment of this next lot of 5,800 pieces of the Goods.  Though the Defendant expressed in the e-mail that he, and probably his customer, were too late on their promotion schedule, the e-mail gives me no impression that the Defendant was blaming the Plaintiff for late delivery.  Instead, the Defendant considered that the Plaintiff was helping him in arranging the air shipment.  The Defendant, who claims to speak French fluently, explained the content of his customer’s e-mail dated 16 March 2004 which led to the Defendant’s e-mail to the Plaintiff mentioned above.  Late delivery was apparently not suggested by his customer.  Further, the Defendant in the same e-mail requested the Plaintiff to prepare the shipment of the rest of the Goods for Korea and the 5,000 pieces for Taiwan.  No request was made for them to be shipped by air.  The fact was that they remained to be shipped by sea (on 20 March and 25 March respectively).

39.  There is no dispute that the Goods for Korea, including the last 2 lots shipped by sea, were accepted by the Defendant’s customer despite the alleged substantial late delivery.  It should be noted that the last shipment to Korea on 25 March 2004 was the result of even further delay caused by the Chinese customs after this lot arrived at the warehouse for shipment (see e-mail dated 22 March 2004 from Ho to the Defendant).  There is no documentary evidence indicating claim or threat of claim by the Defendant’s customer against the Defendant on the basis of late delivery of the Goods.  The Defendant first complained in writing about late delivery by the Plaintiff in his letter dated 8 April 2004.  However, this came only after the Plaintiff’s demand for settlement of the outstanding balance owed by the Defendant.

40.  In the circumstances, even though the Plaintiff might have failed to fulfil its original production schedule, I have serious reservation whether that was the real cause of the Defendant’s decision to ship the 5,800 pieces of the Goods for Korea by air.

The 5,000 pieces for Taiwan

41.  My reservation about the Defendant’s allegation about the late delivery and its causation with the air shipment grows when I consider the other lot of the Goods in question – the 5,000 pieces for Taiwan.

42.  By 23 March 2004, the Plaintiff had arranged to deliver the 5,000 pieces to the port for shipment to Taiwan on 27 March 2004.  The estimated date of arrival at Taiwan was 29 March 2004.  The documents show that this arrangement was cancelled on about 24 March 2004 and this lot of the Goods were subsequently shipped by air instead.  The Defendant attributed this change of shipment arrangement to the Plaintiff’s late delivery.

43.  Regarding this lot of the Goods, the Defendant’s customer in its e-mail dated 25 March 2004 to the Defendant expressed concern about the rigid Taiwanese custom clearance of goods made in China.  The Defendant was therefore requested to conceal the fact that the Goods were made in China and to ship them to Singapore first.  The Goods would then be labelled as goods made in Singapore before being shipped to Taiwan.  Between shipment by sea and by air, the Defendant’s customer apparently preferred the latter after comparing the relative ease in obtaining Taiwanese customs clearance of shipment by these 2 means.  The customer accordingly requested the Defendant to arrange air shipment of this lot.

44.  It should also be noted that by changing to shipment by air, the Defendant and his customer ended up with this lot of the Goods arriving at Taiwan on about 1 April (whereas they should have arrived on about 29 March had they been shipped by sea on 27 March 2004 as originally arranged). 

45.  The Defendant’s case of the alleged causation between the alleged late delivery of these 5,000 pieces of the Goods and shipment by air contains no truth at all.

Conclusion

46.  I prefer the evidence of the Plaintiff’s evidence to that of the Defendant.  I reject the Defendant’s claim that the 2 lots of the Goods for Korea and Taiwan respectively were shipped by air as a result of the alleged late delivery by the Plaintiff.

Other problems with the counterclaim

47.  On the basis of his case, the Defendant would not have been entitled to the amount of the air freight being claimed.  At most, he might claim the extra shipment expenses being the difference between the air freight amount and the sea freight amount for these lots of the Goods.

48.  According to the pleading, there was suggestion of loss of reputation and business opportunity due to the alleged breach of the Plaintiff.  There is a complete lack of particulars or evidence of such suggestion and any counterclaim for damages on such basis, if indeed intended, must fail in any event.

Decision

49.  For the above reasons, I find for the Plaintiff on its claim and dismiss the counterclaim.  The Plaintiff shall have judgment in the sum of HK$309,541.67.  Mr. Ling for the Plaintiff asked for interest on the judgment sum at the base rate plus 1% p.a.  I so order and such interest should run from the date of writ until judgment.  Interest thereafter should run at the judgment rate until payment.

50.  I see no reason why costs should not follow the event.  I make an order nisi that the Defendant shall pay the Plaintiff’s costs of this action, such costs to be taxed if not agreed, with certificate for counsel.