Gold Insignia Electronic Co. Ltd. v. Ciponic Technology Co. Ltd.

DCCJ003150A/2001

DCCJ3150/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3150 OF 2001

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BETWEEN
	Gold Insignia Electronic Company Limited	Plaintiff
	AND
	Ciponic Technology Company Limited	Defendant

_________________

Coram: Deputy Judge Yu

Date of Judgment: 12 June 2002

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J U D G M E N T

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1. The plaintiff claims against the defendant for the price of certain goods. It is not disputed that by a purchase order appearing at page 130 of the bundle and subsequently amended by the amended purchase order at page 131, the plaintiff agreed to sell and the defendant agreed to buy the goods particularised in paragraph 1 of the amended Statement of Claim. It is not disputed that some of the goods had been delivered by the plaintiff to the defendant and paid for. The remaining portion of the goods is set out in paragraph 2 of the original Statement of Claim, which has not been delivered to the defendant. The plaintiff complains that the defendant has been in breach of the contract by failing to take delivery. However, the plaintiff confirms he is not claiming for damages for breach of contract in this case. It is the plaintiff's case that the property in the non-delivered goods had already been transferred to the defendant, as the goods had been appropriated to the contract with the implied assent of the defendant. Accordingly, there was constructive delivery, and the plaintiff would be entitled to the full purchase price of the non-delivered goods, notwithstanding that the actual goods had not been delivered to the defendant.

2. Two lines of defence have been raised by the defendant. The defendant claims that the plaintiff does not plead appropriation and/or implied assent in the original or amended Statement of Claim. Accordingly, the plaintiff is not entitled to argue that the goods have been appropriated to the defendant, and is not entitled to recover price. And in any event, there is no evidence from the plaintiff to establish appropriation and/or implied or expressed assent from the defendant. Hence the plaintiff could not establish that they are entitled to the price of the non-delivered goods. Since the plaintiff is not claiming for damages, even if the defendant has been in breach, which is not really disputed, I should not grant any judgment to the plaintiff on their case relied upon. I shall first deal with the pleading point.

3. It is trite law that the plaintiff must plead his case with sufficient particulars to let the defendant know the case they were to meet. Mr Justice Bokhary said in the case Aktieselskabet Dansk Skibsfinansiering v Wheelock Marden [1994] 2 HKC 264 at 269:

"...the things which properly particularise pleadings must do are to:

(1) inform the other side of the nature of the case they have to meet as distinguished from the mode in which that case is to be proved;

(2) prevent the other side from being taken by surprise at the trial;

(3) enable the other side to know what evidence they ought to be prepared with and to prepare for trial;

(4) limit the generality of the pleadings, the claim and the evidence;

(5) limit and define the issues to be tried and to which discover is required; and the hands of the party so that he cannot without leave go into any matter not included (although if the opponent omits to ask for particulars, evidence may be given which supports any material allegations in the pleadings). None of the basic rules of pleading have anything to do with technicality. All of them have everything to do with practical justice."

4. Defence counsel submitted that there is no contention in the Statement of Claim as to where and how the property of the undelivered goods has been passed to the defendant. There is no pleading as to whether the goods were unconditionally appropriated to the contract, either by the plaintiff with the assent of the defendant, or by the defendant with the assent of the plaintiff; or whether any assent was expressly or impliedly given before or after the appropriation.

5. Counsel for the plaintiff contends that the Statement of Claim has been sufficiently pleaded to allow the defendant to know its case to meet. He submitted that the so-called omission on pleading on the Statement of Claim has no ground. In order to resolve this argument, I have to look at paragraph 2 and paragraph 3 of the amended Statement of Claim in greater detail.

6. Paragraph 2 of the Statement of Claim reads:

"Despite the plaintiff's repeated request and notice that the goods were ready for collection from his office, the defendant has only taken part of the goods from the plaintiff, but has failed and/or refused to take delivery of the following quantity of goods from the plaintiff."

It goes on to set out particulars of the non-delivered goods.

7. Paragraph 3 of the amended Statement of Claim reads:

"By a letter dated 8 November 2000, the plaintiff, through his solicitor, demanded the defendant to take delivery of the non-taken goods. The defendant has still failed and/or refused to take delivery of the non-taken goods or to pay the said sum of $53,440 or any part thereof to the plaintiff."

8. Paragraph 4 of the Statement of Claim goes on to claim interest on the said sum of $53,440. Then the plaintiff prayed for the said sum of $53,440 and interest.

9. By looking at the Statement of Claim, it only spelt out the event leading to the claim herein. It does not expressly state the basis of the claim. It does not state that the property of the non-delivered goods had been passed to the defendant, which entitled the plaintiff to the price. One is left in the dark as to the basis of the claim. If I were to interpret the basis for the plaintiff claim purely by reading this amended Statement of Claim, it appears to me that he is claiming that the defendant has been in breach of the contract in failing to take delivery. The plaintiff would therefore be entitled to damages arising from the breach. I could not, even by stretching my imagination, read into the Statement of Claim a claim for the full price based on the argument that the proprietary interest of non-delivered goods had been passed to the defendant.

10. The defendant had filed a request for further and better particulars on the Statement of Claim, and the plaintiff has filed the answer thereto. Having considered all the requests and answers, the only answer that might assist the plaintiff is answer 6 to the request for further and better particulars under paragraph 2 of the original Statement of Claim. The question and answer are:

"Question 6:- Please state in detail at different location(s) where exactly the non-taken goods are since the plaintiff learned of failure and/or refusal of the defendant to take delivery of the non-taken goods."

"Answer 6:- The whole quantity of the non-taken goods has been kept in the plaintiff's office since the plaintiff learned of the defendant's failure and/or refusal of taking delivery of the non-taken goods."

11. Even with this question and answer, the plaintiff had not pleaded a case that the non-delivered goods have been appropriated to the contract and/or that the property has passed to the defendant; there is no pleading of the implied assent by the defendant as well. Surely, implied assent, which is relied upon by the plaintiff, must be a matter that should be pleaded. Since appropriation or implied assent have not been pleaded at all, one cannot expect the defendant to start bringing up questions for such particulars. It will be grossly unfair to the defendant if I were to allow the plaintiff now to argue that the goods had been appropriated with the implied assent of the defendant.

12. Further on, after discovery, the defendant obtained leave of the court to inspect the alleged non-taken goods at the plaintiff's office. Then they amended the defence.

13. Paragraph 6A(b) of the amended defence pleaded that the alleged goods that had been inspected by the defendant were not earmarked themselves or on a master carton or the inner box containing the said goods to show that they were unconditionally appropriated to the defendant. The plaintiff could always sell any of these goods and replace them with the similar goods in its warehouse.

14. Counsel for the plaintiff said since the defendant has pleaded appropriation in the defence, it is only right for them to have the liberty to rebut such allegations.

15. Faced with a positive assertion by the defendant, I am surprised that the plaintiff has not filed a Reply. It remained the fact that the plaintiff had not responded to this assertion raised by the defendant. It is correct that by the joinder, the issue is settled. If they were to answer an allegation that the goods could not have been appropriated, that remained an answer to a defence. They have not pleaded "appropriation" in the Statement of Claim, and that position has not been altered, and there is no amendment to that effect on the Statement of Claim. All that the plaintiff has done after the inspection was to amend paragraph 2 of the Statement of Claim to delete item 1 of the non-delivered goods, one of the items which, as claimed by the defendant, that could not come into existence in the year 2000.

16. In the circumstances, the plaintiff has not pleaded its case, particularly the case of a transfer of property, with such clarity that the defendant could apprehend. I bear in mind the guidelines of the ruling of Mr Justice Bokhary which I have earlier referred to. It would be wrong for me to allow the plaintiff to introduce evidence that is not covered by the pleadings. In the circumstances, the plaintiff should not be allowed to argue on the case that they now try to rely upon, and in that case, their claim must be dismissed.

17. For completeness, I would also consider whether there is any evidence for appropriation and/or implied assent. It is a case for the plaintiff to establish appropriation and implied assent to the appropriation by the defendant. Section 20 rule 5 of the Sales of Goods Ordinance provides:

"Where there is a contract for the sale of unascertained or future goods by description, and goods of that description, and in a deliverable state, are unconditionally appropriated to the contract, either by the seller with the assent of the buyer, or by the buyer with the assent of the seller, the property in the goods thereupon passes to the buyer. Such assent may be express or implied, and may be given either before or after the appropriation is made."

18. It is commented in the book Sales of Goods by Benjamin, 5th Edition, at paragraph 5-68 that it is difficult to define appropriation. The author goes on to say:

"'Appropriation' may also be used in another sense, viz. where both parties agree upon the specific article in which the property is to pass, and nothing remains to be done in order to pass it. For property to pass under a contract for the sale of unascertained or future goods, it is undoubtedly necessary that appropriation in the last sense should have occurred. In essence, however, 'appropriation' is to be understood as an overt act manifesting an intent to identify specific goods as those to which the bargain of the parties shall apply. It is the act of one party only, and its purpose is to identify the goods to be sold."

19. To begin with, I asked the plaintiff's counsel for the evidence of appropriation. In a situation like the plaintiff, I would expect their warehouse people to have taken steps to earmark and/or put aside the goods to be delivered to the defendant. In any event, these are matters of evidence from the plaintiff.

20. It is not disputed that people from the warehouse of the plaintiff has not attended court to give evidence. PW1 is a salesman, and he has no personal knowledge on the warehouse running. PW2 is a manager of the customer service department. She has information as to the working system of the plaintiff company, including the warehouse, but she has not attended the warehouse to check whether the goods were set aside or earmarked for the contract either. The highest of her evidence is a statement that when the plaintiff decided to bring this action, she informed the warehouse to keep the goods, and the warehouse confirmed that there should be no problem. But she has no personal knowledge of how the goods were kept or appropriated.

21. Counsel for the plaintiff submitted that the plaintiff is a big company. PW2 is a senior officer and has personal knowledge of the system of work of the warehouse. The warehouse would pack the goods into cartons and/or boxes. I can draw the inference that the goods, as stated in the order schedule, has been appropriated to the contract unconditionally.

22. It is a fact that PW2 had no personal knowledge. It is obvious that appropriation is a clear, intended act to treat certain goods different from other goods.

23. I just wish to repeat this passage from the book by Benjamin. He said:

"It is an overt act manifesting an intent to identify specific goods."

Surely that is a matter which some officer or employees of the plaintiff must state how and when they appropriated the goods. There is no evidence on even the packing of the goods, least to say that the goods were packed and appropriated for the contract.

23. There is simply no evidence. The highest I could rely upon PW2 is that the plaintiff had a good computer system, but how this computer system worked is unknown. And more important is even PW2 had not really informed this court that by packing, the plaintiff intended the goods to be appropriated to the contract. So there is absolutely no evidence on appropriation introduced by the plaintiff.

24. But appropriation alone is not enough. Paragraph 5-69 of the book Sales of Goods by Benjamin goes on to say:

"It is clear that the act of the party appropriating in simply selecting the goods which he intends to be delivered cannot pass the property in them by appropriation; something more is required. Either the selection will have subsequently to be approved by the other side, so that both parties are agreed that those are the goods to be sold, or one party, for example, the seller, must have been previously authorised to do an act which passes the property to the buyer by appropriation. In the latter case, the act must be one which irrevocably determines the appropriating party's election to specify the goods, and not one by which he may still be at liberty to select other goods. It is here that most difficulty arises, since it may not be easy in any individual case to decide whether the selection made by the seller is a mere revocable manifestation of his intention, or the final determination of a selection conclusively binding on him. Property, however, will only pass where the identity of the goods has been finally and irrevocably established by the mutual assent of both parties. This is a question of law."

25. It is not disputed that there is no expressed assent from the defendant to the appropriation. The plaintiff relies on implied assent from the defendant.

26. Counsel for the plaintiff invites me to draw the inference from the fact that there had been previous dealings and trading between the plaintiff and the defendant. In all these dealings, the defendant allowed the plaintiff to choose the items of goods to be sold and delivered to the defendant. They must have impliedly assented to the appropriation.

27. Leaving a free hand to the defendant to choose the goods for delivery does not mean an assent. An assent is an agreement to adopt title. It is perfectly normal for a buyer to leave the seller to choose the items of goods for delivery and the property only pass upon delivery.

28. There must be some act on the part of the defendant which shows that they are willing to let the plaintiff appropriate the goods. The previous trading is not sufficient. Further, I have no details as to the previous dealings between the plaintiff and the defendant. Just a bare assertion that the defendant leaves the choice of article to the plaintiff is not sufficient to conclude that the defendant must have given an implied assent to the plaintiff to appropriate the goods to this contract.

29. Finally, one point of importance is the result of the inspection. As a result of the inspection, it was discovered that item 1 of the goods claimed by the plaintiff to have been appropriated to the contract could not be in existence in the year 2000. Although this item is deleted from the Statement of Claim by way of amendment, PW2, in her witness statement, referred to the non-delivered goods, including the deleted items. There is no explanation as to the discrepancy. It was further conceded by counsel for the plaintiff at a hearing before his Honour Judge Carlson on 2 August 2001 that the goods originally earmarked or allocated to the contract would not be delivered, but an identical replacement. Again, this has not been explained in evidence. If the goods originally appropriated have been disposed of, that is evidence that they have not been appropriated to the contract.

30. If I may quote again a passage from Sales of Goods by Benjamin, he said:

"...the act must be one which irrevocably determines the appropriating party's election to specify the goods, and not one by which he may still be at liberty to select other goods."

This must be evidence showing that the plaintiff is still at liberty to select other goods. Then it would not be an irrevocable appropriation of the goods.

31. In conclusion, I find that the plaintiff failed to establish that the property passed and they are not entitled to the price of the non-delivered goods. They failed to establish both appropriation and the implied assent from the defendant. They may be entitled to damages, but since this is not their case, I am not supposed to grant any judgment.

32. In the circumstances, the plaintiff's claim is hereby dismissed.

33. I shall now hear the parties on the question of costs.

MR YEUNG: Your Honour, pursuant to order 62(3), the defendant is a successful litigant and is entitled to costs, those costs to follow the event.

COURT: Yes. Will there be any submission on this?

MR WONG: I will only say that perhaps your Honour would be aware that in fact before the trial hearing on 20 May 2002 the plaintiff had invited the defendant to conduct this trial by way of paper submissions instead of calling any witness to give evidence, but said suggestions have been rejected by the defendant, and so in such circumstances I would submit that if the defendant is entitled to costs, which I'm entirely in your Honour's hands, I would submit that the defendant is just entitled to the costs of the day in which we made our submissions as well as today. Unless I can be of further assistance.

34. It appears that in order for the plaintiff to succeed this case, they need oral evidence; it is quite clear to me. Although the pleading point is the first part of my judgment, which I dismissed the plaintiff's claim, the plaintiff maintain that their pleading is proper. So if their pleading is correct, I fail to see how they could succeed without calling oral evidence. I cannot say that the defendant has been acting unreasonably in refusing that. If they were to think that this is a preliminary point that they wish the court to rule on whether the pleading is correct or not, it is for them to take out application, and I have just recently seen a judgment by his Honour Judge Li when he invited the parties to rule on a preliminary point and have that resolved, then the matter was finalised. So I cannot say that should tilt the balance or in any way affect my order.

35. Having said that, I would conclude that I should follow the rules and grant costs in favour of the defendant, costs to be taxed if not agreed.

	Deputy Judge Roy Yu
	District Court Judge

Representation:

Mr Wong Ka-yu, instructed by Messrs Kenneth C C Man & Co., for the Plaintiff

Mr Wilson Yeung, of Messrs Wilson Yeung & Co., for the Defendant

DCCJ003150/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3150 OF 2001

 

BETWEEN
	Gold Insignia Electronic Company Limited	Plaintiff
	AND
	Ciponic Technology Company Limited	Defendant

Coram: H H Judge Carlson in Chambers

Dateof hearing: 2 August 2001

Date of Ruling: 6 August 2001

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R U L I N G

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1. This is an appeal against an order of Master Kwong dated 10 July this year refusing an application for specific discovery by the defendant requiring the plaintiff to disclose by affirmation whether it has or at any time had in its possession, custody or power, the documents specified in the schedule to the summons for discovery which is dated 22 May this year. The schedule is in these terms:

1) All purchase orders received by the plaintiff from its customers, purchasers and its subsidiary or associated company, if any, for the purchases of plaintiff's goods as defined in paragraph 1 of the Statement of Claim (the goods) for the period from 10 March 2000 to the date of discovery.

2) All invoices and delivery notes of the plaintiff for its sales of the goods for the period from 10 March 2000 to the date of discovery.

3) All stock lists of the plaintiff in respect of the goods in the possession of the plaintiff from the period of 10 March 2000 to the date of discovery.

4) The relevant financial statements of the plaintiff for the period from 10 March 2000 to the date of discovery in respect of the sales of the goods capable of disclosing the purchases of the goods by the plaintiff from its own suppliers and the re-sales of the goods by the plaintiff.

5) All the plaintiff's purchase orders to the plaintiff's own suppliers for the supply of the goods for the period from 10 March 2000 to the date of discovery. The delivery notes and the invoices of the plaintiff's own suppliers for the supplies of the goods.

6) Lists of customers of the plaintiff who have, are purchasing or will purchase the goods from the plaintiff.

7) All advertising documents and materials published by the plaintiff or on its own behalf in respect of the goods for promotion of sales of the goods for the period from 10 March 2000 to the date of discovery.

2. It is necessary for me to explain the nature of the claim and the defence to it. The plaintiffs are suppliers of spare parts and components for computers. By a purchase order dated 10 March 2000, the plaintiffs agreed to sell to the defendants over 217,000 computer parts to the value of $229,440. The defendants took delivery of the majority of the order for which payment has been made but has declined to accept and pay for 92,500 parts costing $91,840.

3. These facts are essentially agreed on the pleadings. The plaintiff's claim is for the price of these untaken goods, namely $91,840. The plaintiffs say these goods have always been available and they require the defendants to take delivery and to pay the price.

4. The defendant's case is that they informed the plaintiffs that they did not intend to take delivery of these items and that in such circumstances the plaintiffs should have sold them elsewhere and thereby mitigated their loss which is what they are required to do. Further, these items are very commonplace for which there is a ready market and the plaintiffs who sell these items on a daily basis should and could have sold the untaken goods elsewhere and therefore they would have suffered no loss.

5. Miss Tsui who appears for the plaintiffs accepts that these components are commonly sold by her clients and that in suing for the price, she has also made clear that her clients would not have given delivery of the precise consignment of parts which may originally have been earmarked or allocated to the defendant's order but an identical replacement order which is and would have been readily available to the plaintiffs in the ordinary course of their business. The plaintiffs insist on performance of the contract and they require the price to be paid to them. There is no claim for damages for non-acceptance.

6. Without wishing to prejudge the outcome of the action, I am bound to say that this is an unusual and high risk stance for the plaintiffs to adopt on a sale of commonplace items, particularly when there is no alternative claim for damages to compensate them for loss of profit, although the court, of course, retains the power in an action for the price to award damages instead, if it considers this to be the appropriate remedy.

7. I now come to the purpose of the summons for discovery. Mr Wilson Yeung for the defendants submits that in an action for the full amount of the price, the plaintiff is required to show that the goods continue in his possession, ready to be delivered, the goods being the very goods originally appropriated to this contract and not any substitute goods. He says that there is a burden on the plaintiff to show that the untaken goods remain in its possession and that the line of discovery now sought is designed to trace the goods into the plaintiff's possession and to test whether or not the goods are still in its possession. He is correct in that submission, but this is all very well if the case was being contested on this basis. In fact, it is not.

8. Miss Tsui accepts that any goods which may originally have been earmarked for the defendants have now been disposed of and the plaintiff's case is that at all times the plaintiffs would be in a position to deliver identical replacements, and so the defendants do not have to meet the sort of case postulated by Mr Yeung. They do not have to try and destroy an allegation that the original goods were ready for delivery and remain with the plaintiffs and are still ready for delivery.

9. That being so, the potentially extensive discovery sought by this summons is entirely unnecessary and I shall therefore refuse to make the order asked for by Mr Yeung. This appeal must therefore stand dismissed.

10. But before I leave this matter, I should perhaps make some cautionary remarks, but as I have already observed, without in any way wishing to prejudge the outcome of the action. This is a claim in respect of commonplace items. It would be unusual to order the defendants to pay the price and to oblige them to accept delivery. The court may or may not award damages in the alternative, particularly where none are claimed. In any event, the plaintiffs would bear the burden of showing that they had made a loss for which they should be compensated. If there was such an alternative claim, that claim would require full particulars and there would be a requirement to make disclosure of a number of matters relating to it. Where this has not been done, the court may decide that it should not award damages as an alternative remedy. These matters should be reflected on, primarily by the plaintiffs, before the litigation and the costs in what is a modest claim escalate disproportionately.

(Submissions on costs)

11. Costs in the cause.

	Ian Carlson
	District Court Judge

Representation:

Present: Miss Jennifer Tsui, instructed by Messrs Kenneth C C Man & Co, for the Plaintiff

Mr W Yeung, of Messrs Wilson Yeung & Co., for the Defendant

Present: Ms Olivia Lai, of Messrs Kenneth C C Man & Co., for the Plaintiff

Mr W Yeung, of Messrs Wilson Yeung & Co., for the Defendant