Harrisons & Crosfield (NZ) Ltd v Lian Aik Hang(a firm)

• Jurisdiction: Singapore
• Judge: Lai Kew Chai J
• Judgment Date: 26 February 1987
• Neutral Citation: [1987] SGHC 4
• Docket Number: Suit No 3645 of 1981
• Date: 26 February 1987
• Year: 1987
• Published date: 19 September 2003
• Plaintiff Counsel: Hiew Hin Chung (Godwin & Co)
• Citation: [1987] SGHC 4
• Defendant Counsel: Clive Heng (Murphy & Dunbar)
• Court: High Court (Singapore)
• Subject Matter: Sale of goods,Aflatoxin in excess of permissible limit,Samples not representative of peanut kernels shipped,Appropriate damages,Sale by sample,Sale of peanut kernels,s 15 UK Sale of Goods Act 1979,Commercial Transactions,Whether breachof implied undertaking

Cur Adv Vult

The plaintiffs as buyers of some 314 metric tons of peanut kernels under a contract concluded just before Christmas 1980 are claiming the return of the purchase price of the goods together with the cost of insurance, landing charges, legal fees, survey charges and interest thereon. They claim the sum of US$535,244.08 or, alternatively, damages, interest and costs.

It is common ground that by two contracts in writing contained in telexes dated 19 and 22 December 1980 and entered into between the plaintiffs and the defendants, which were in all material respects reproduced in the defendants` form of contract, the defendants agreed to sell to the plaintiffs a maximum of 314 metric tons of peanut kernels of 60/70 pieces per ounce TBS (ie Thai Brown Skin) to be packed in new jute bags at the price of US$1,447 per metric ton C & F Auckland, New Zealand. It was further agreed that the peanut kernels shall be from the `1980 Thailand Crop`. It is also common ground that payment was to be effected by a confirmed irrevocable letter of credit available if the draft and bill of lading were accompanied by (a) a Singapore Government issued Aflatoxin Free Certificate; (b) a Certificate of Crop 1980; and (c) a Certificate that the goods were packed in sound clean new bags not previously used for any purpose.

By para 3 of the re-re-amended statement of claim the plaintiffs aver that the sale of the goods was by description, namely `1980 Thailand Crop`. Accordingly, the plaintiffs say that it was an implied condition or, alternatively, the defendants had warranted that the goods would correspond with the said description and would be merchantable under the said description.

Further the plaintiffs say that they had agreed to buy the goods from the defendants who sold the goods in the course of their (defendants`) business and that, therefore, it was an implied term of the said contract that the goods should be of merchantable quality.

By para 5 of the statement of claim the plaintiffs make the further and alternative averment that the sales were sales by samples which the defendants had supplied prior to the conclusion of the contract and on the basis of which the contract was concluded. The plaintiffs therefore say that it was an implied term of the contract that the bulk of the goods should correspond with the said samples, which were in fact supplied by the defendants, and that the goods should be free from any defect rendering the same unmerchantable and which would not be apparent on reasonable examination of the said samples. Finally, it is claimed that the plaintiffs as buyers should have a reasonable opportunity of comparing the bulk with the samples.

The defendants deny that the peanut kernels they had shipped were unmerchantable. They deny that they were not in accordance with description or sample and put the plaintiffs to strict proof of these allegations. By para 7 of their defence, they say that the contract was a `C & F` contract and, accordingly, the risk and property in the goods passed to plaintiffs upon shipment. The defendants further aver that if the goods had deteriorated or were otherwise unmerchantable, which they deny, the deterioration or unmerchantability was in fact caused by the neglect of the plaintiffs. In response to a request for further and better particulars of the allegations of such neglect, the defendants filed the particulars in these terms:

The said goods when shipped were merchantable and ought to have been merchantable upon arrival at destination. If when examined, the said goods had deteriorated or were otherwise unmerchantable, which is denied, then such deterioration or unmerchantability was occasioned either by some cause unknown to the defendant or by inference by the neglect or act of the plaintiffs.

In the event, in January and February 1981 the defendants shipped in 18 containers three consignments of peanut kernels to the order of plaintiffs. The plaintiffs had bought the goods for sub-sale to Sanitarium Health Foods whose initials `SFH` appeared as markings on the jute bags of peanut kernels. The three consignments were (1) 4,292 bags or 198.145 tonnes of peanut kernels shipped on mv `Nedlloyd Albany` under Bill of Lading No 733 dated 20 January 1981 which vessel arrived at Auckland, New Zealand on 10 February 1981; (2) 2,072 bags containing 82.88 tonnes peanut kernels shipped on mv `Nedlloyd Adelaide` under Bill of Lading No 607 dated 9 February 1981 which vessel arrived at Auckland, New Zealand on 6 March 1981; and (3) 824 bags containing 32.975 tonnes peanut kernels shipped on mv `Strathmuir` under Bill of Lading No 18 dated 24 February 1981 which vessel arrived at Auckland, New Zealand on 18 March 1981.

After the shipments the defendants in the case of each of the three consignments presented to the advising bank the relevant bill of lading evidencing the shipment, the draft drawn on the plaintiffs, the Fumigation Certificate of the Port of Singapore Authority, their Certificate of 1980 Thailand Crop, the Aflatoxin Free Certificate of the Department of Scientific Services, Singapore accompanied by a firm of surveyors` certificate that they (the surveyors) had drawn at random a sample for the Department`s analysis, the Surveyors` Certificate of Weight and Quality and their Certificate of Inspection. The defendants were duly paid for the three consignments.

However, the plaintiffs allege that on their arrival of the separate shipments in Auckland, New Zealand, the goods were inspected by them and they did not correspond with the samples and were of seriously inferior quality. The plaintiffs further allege that the goods were not from the 1980 Thailand Crop as described but were from an older crop in respect of a large proportion, some 20%, of the peanut kernels. Further, they say that the said goods were `unfit for human consumption and were by reason of the mould aflatoxin age and degree of infestation by insects of unmerchantable quality`. The defendants disputed these allegations and they refused to reimburse the plaintiffs.

At this stage I should say something about aflatoxins. Aflatoxins are carcinogenic toxins produced mainly by the mould, known as Aspergillus Flavus. The mould, which is found on peanut kernels, is a living micro-organism and it proliferates and produces toxins in moisture and under favourable physical, chemical and biological conditions.

At all material times the quantitative presence of aflatoxin in peanut kernels at or below 15 parts per billion (or 15 ppb) was acceptable and the peanut kernels would be regarded as aflatoxin free. Anything in excess of 15 ppb was unacceptable, although in New Zealand at the material time there was no such regulation. However, in 1984 this regulation was introduced in New Zealand.

In October 1981 the plaintiffs instituted proceedings in the High Court to seek the reliefs I have referred to. On 15 October 1984 the plaintiffs obtained an order appointing Mr Anthony Frederick Grant, a solicitor in Auckland, New Zealand, as special examiner for the purpose of taking the evidence of the plaintiffs` witnesses, including several expert witnesses, bearing on the arrived condition of the peanut kernels, the degree of insect infestation, the level of aflatoxin, the conditions of the `shrivelled` nuts, the manner and extent of sampling, the steps taken to salvage the consignments and the quality of the peanuts compared with the samples. These aspects of the evidence should be self-evidently clear as they are set out.

The special examiner took the evidence over eight working days commencing 3 December 1985. The depositions were extensive. The evidence on survey and sampling is this. After the first shipment on mv `Nedlloyd Albany` had been discharged on Freyberg Wharf, Auckland, the plaintiffs instructed Richard Newbery, a marine surveyor, of GW Dunsford & Associates to survey the 4,929 bags of peanut kernels which were shipped in eleven 20-foot containers. Newbery`s mandate was not to conduct any general survey of the shipment. In fact, he was instructed initially to ascertain if the consignment needed fumigation, the expenses for which the plaintiffs had taken out an insurance. Fumigation was carried out. On 12 February 1981 he inspected the consignment alone without any other help and took samples from the face of the stow in ten containers as he could not gain access to the 11th container. He went back two days later to take a sample from the 11 container. The samples for insect infestation along with a small sample of the kernels from one bag were placed in polythene bags and were duly marked with the container numbers and sealed with a wire twist. Newbery handed the sample to a firm of analysts, Messrs TJ Sprott & Associates who had in their employ Olaf Harald Skarsholt, a Consulting Chemist, who was in overall charge of the analyses and Quenton Earle Dodwell, an industrial microbiologist who conducted a qualitative, though on account of a lack of the necessary equipment, not a quantitative analysis for the presence, if any, of aflatoxin.

On 23 February 1981 TJ Sprott & Associates sent 12 samples which they had made from those they had received from Newbery to Dr Alice Earnshaw to identify the insects and the extent of insect damage.

Two of the 11 containers...