Tai Hing Cotton Mill Ltd v Kamsing Knitting Factory

Section 53 (3) of the Sale of Goods Ordinance provides:

“Where there is an available market for the goods in question, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered, or, if no time was fixed for delivery, then at the time of the neglect or refusal to deliver.”

On March 23, 1971, the sellers, yarn manufacturers, agreed to sell 1,500 bales of cotton yarn to the buyers at HK$1,335 per bale. The parties agreed that the buyers should call for deliveries of the yarn giving reasonable notice, when they required them. It was common ground that reasonable notice for the purposes of the contract was one month's notice. The sellers made some deliveries but in late 1971 or early 1972 they began to supply less than the quantities requested by the buyers and they ceased deliveries altogether in May 1973. The buyers complained to the sellers and on July 31, 1973, the sellers wrote a letter to the buyers saying that they were treating the contract as cancelled. The buyers continued unsucessfully to press the sellers to adhere to the contract but eventually on November 28, 1973, alleging that the letter of July 31 was a repudiation of the contract, they issued a writ claiming damages for breach. At that date 424.20 bales of yarn were undelivered. The buyers' claim for damages was based on the difference between the contract price and a market price of HK$3,325 at July 31, 1973. The evidence was that the market price in August 1973 was HK$3,300 per bale but that it began to fall in September 1973 and continued to do so until January 1975 when it reached HK$1,800 per bale. There was no specific evidence of the market price in December 1973. The trial judge gave judgment for the buyers. On appeal the Full Court of Hong Kong, holding that the contract was one which fixed no time for delivery, applied the second limb of section 53 (3) of the Sale of Goods Ordinance and assessed damages on the basis of the difference between the contract price and the market price at July 31, 1973, the date of the sellers' repudiation of the contract.

On the sellers' appeal to the Judicial Committee on the grounds that damages should have been assessed on the basis of the difference between the contract price and the market price at a reasonable time after November 28, 1973 (the date of the buyers' acceptance of the sellers' repudiation), and that since the buyers had not adduced evidence of the market price of yarn in December 1973 they had failed to prove any loss: —

Held allowing the appeal, (l) that where there was a repudiation of a contract by one of the parties to it damages for breach fell to be assessed under section 53 (3) of the Sale of Goods Ordinance by reference to the date on which the other party accepted that repudiation and rescinded the contract and that notwithstanding that the second limb of section 53 (3) of the Ordinance might have no other significant content its wording was not sufficiently clear or specific to provide for a departure from the general principle of the first limb and had no application in any case of anticipatory breach; and that, accordingly, since November 28, 1973, was the last date on which the buyers could have given reasonable notice that they required delivery of the outstanding bales and on which they accepted the sellers' repudiation by the issue of their writ damages fell to be assessed on the basis of the difference between the contract price and the market price on December 28, 1973 (post, pp. 66A–B, 70A–E, H–71A, C–E).

Millett v. Van Heek & Co. [1921] 2 K.B. 369, C.A. applied.

(2) That notwithstanding that the buyers had not adduced evidence enabling the damages they had suffered to be quantified precisely it was evident that they had suffered substantial loss and a figure should be fixed, assuming a steady decline in the market, on the evidence available (post, pp. 71H–72B–D).

Order of the Full Court of the Supreme Court of Hong Kong varied.