KAGA (H.K.) ELECTRONICS LTD v. SUN CUPID TECHNOLOGY (HK) LTD

DCCJ 2088/2013

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION No. 2088 OF 2013

____________

_______________________________________

DECISION

_______________________________________

Introduction

1.  This is an application of the defendant by its summons dated 27 February 2014 (“the Summons”) for leave to appeal against my decision handed down on 30 January 2014 (“the Decision”) whereby this court dismissed the defendant’s application to set aside the default judgment dated 12 July 2012. By the Summons, the defendant further applies for a stay of execution of the default judgment including the garnishee proceedings herein pending the determination of its intended appeal.

2.  Section 63A of the District Court Ordinance, Cap.336 provides that leave to appeal shall not be granted unless this court is satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice that the appeal should be heard. A reasonable prospect of success means an appeal with prospects that are more than “fanciful” but which do need to be shown to be “probable”: SMSE v KL [2009] 4 HKLRD 125 at §17 per Le Pichon JA.

3.  I shall refer to the Decision for the background facts, which I shall not repeat here. I also adopt the abbreviations used therein.

4.  On the other hand, Kaga applies for a garnishee order absolute and Sun Cupid by its summons dated 7 March 2014 (“the Stay Summons”) applies for a stay of execution pending determination of this application for leave to appeal. The applications were first heard by Registrar Lai on 13 March 2014 and then adjourned to the date of the hearing of the Summons for my resolution.

Five Grounds of Appeal

5.  At this hearing, Mr Lam, counsel for Kaga, puts forth five main grounds of Kaga’s intended appeal, referring to a draft Notice of Appeal annexed to the Summons settled by him. I shall deal with them in turn.

6.  First, Mr Lam insists that the PO was not a genuine purchase order. In particular, he points out that neither Kaga nor Sun Cupid took any steps to carry out any of their respective obligations under the PO.

7.  This submission is unmeritorious. It plainly overlooks, among other contemporaneous documents, Kaga’s PO whereby Kaga placed an order with Ortus for the purpose of the PO. No issue has ever been taken about the authenticity of Kaga’s PO. I have set out my reasons for holding the bona fide of the PO in §§35 to 46 of the Decision and I am not persuaded that they are wrong in the absence of new and cogent arguments.

8.  Mr Lam next submits that there is a genuine issue as to whether there was unconditional appropriation of the LLT Materials by Kaga so that the property in the LLT Materials actually passed to Sun Cupid. In this connection, Mr Lam refers to §68 of the Decision where I held that the LLT Materials were ascertained when, if not an earlier time, by the Reply Email dated 10 May 2013 whereby Kaga demanded Sun Cupid to accept delivery of the LLT Materials.  

9.  Mr Lam submits that in any event, Sun Cupid by the Email (the contents of which were reproduced in §18 of the Decision) made it clear to Kaga that it would not accept delivery of the LLT Materials. Mr Lam relies on the decision of the Court of Appeal in Torvan Shipping Ltd. v Gilman & Company Ltd. [1977] HKLR 460 where Huggins JA held that an implied authority to appropriate given to the seller by the purchaser is capable of cancellation.

10.  Therefore, as Mr Lam’s argument runs, from the date of the Email, i.e. 7 May 2013 onwards, there could be no assent of Sun Cupid to any appropriation of the LLT Materials to the PO by Kaga. Mr Lam submits that the Email amounts to a withdrawal of the implied assent to the appropriation of the subject matter of the PO. As a result, the Reply Email does not assist Kaga to establish appropriation with the assent of Sun Cupid and Kaga could not possibly maintain an action for price based on the allegation that the property in the LLT Materials had passed to Sun Cupid despite its refusal to take delivery.

11.  Mr Li, senior counsel for Kaga, takes no issue with the proposition enunciated in Torvan Shipping Ltd. v Gilman & Company Ltd though the facts of that case are very different from those of the present case. He points out that this court merely holds that, by the latest, as at the date of the Reply Email, appropriation of the LLT Materials to the PO had been completed. He submits that Kaga pressed hard for Sun Cupid to issue the official PO for its purchase of the LCD monitors in December 2012 by emails. This showed that the LLT Materials had already been ascertained and appropriated for the purchase of the manufacture of the LCD monitors. Such emails included one dated 10 December 2012, one dated 14 December 2012 and one dated 25 December 2012. In the first one, the delivery schedule of the LCD monitors was given and the first date of delivery fell on 19 January 2013.

12.  Mr Li submits that the parties intended that the LLT Materials would be used by Ortus to manufacture those LCD monitors to be supplied under the official PO. Mr Li then submits that the demands of Kaga for the issuance of the official PO relating to the LCD monitors pursuant to the PO on 15 December 2012 and its indication that the LCD monitors would be ready for delivery in January 2013 must necessarily mean that the LLT Materials under the PO should have been ascertained and appropriated with the assent of Sun Cupid in mid-December 2012. This is so particularly given the lack of contrary evidence.

13.  The submission of Mr Li, which is set out in §58 of the Decision, makes commercial sense when one looks at the overall picture. I agree with his submission. It follows that the Email, produced after the ascertainment and appropriation of the LLT Materials, does not assist the defence against a claim for price.

14.  Mr Lam further takes a pleading point. He complains that neither the ascertainment and/or appropriation of nor the passing of the property in the LLT Materials is pleaded in the Statement of Claim. Mr Lam submits that the two precedents in Bullen & Leake & Jacob’s Precedents of Pleadings (14^th edn., 2001) in Mr Li’s List of Authorities are of no relevance. One of them dealt with a claim for price of goods sold and actually delivered whereas in the other one, the plea of appropriation is actually made. His observations are correct.

15.  I find no merit in this challenge, nevertheless. As I indicated to Mr Lam on the previous occasion, in the precedent provided in Bullen & Leake & Jacob’s Precedents of Pleadings (13^th edn., 1990) for a claim for price of goods agreed to be sold published before the Woolf reform, no plea of ascertainment, appropriation and passing of the property is necessary. I am not convinced that, as a matter of pleadings, any of those matters is essential and must be pleaded. I further accept Mr Li’s submission that should the defence wish to make any of those matters an issue on the pleading, Kaga could deal with them in its Reply. I do not find that the Statement of Claim is defective as claimed.

16.  Mr Lam next submits that this court is right in the conclusion that the common intention of the parties was that the LLT Materials were required for the manufacture of the LCD monitors. He submits that it must follow from this conclusion that once Sun Cupid did not place the official PO for the LCD monitors, the parties’ common intention would be that   LLT Materials would not be required by Sun Cupid.

17.  This submission, with respect, is a non sequitur. First, it completely ignores the clear and plain wordings of the PO. It also ignores the court’s conclusion in §46 of the Decision. Lastly, this purported common intention is not supported by any contemporaneous documents including all the correspondence.

18.  Based on the evidence that Sun Cupid had repeatedly informed Kaga of its refusal to take delivery of the LLT Materials, Mr Lam submits that there is an issue of failure to mitigate loss on the part of Kaga.

19.  Mr Li submits that there is no evidence that Kaga could have resold the LLT Materials elsewhere so as to mitigate its loss.

20.  The last challenge is unmeritorious in my view. The short answer is that the duty to mitigate in common law affects only a claim for damages and not a claim for the price: Benjamin’s Sale of Goods (18^th edn. 2010) §16-004.

Conclusion and Orders

21.  Apart from Mr Lam’s submissions on the five grounds of appeal, this court has considered the entire draft Notice of Appeal. I am not convinced that the intended appeal of Sun Cupid has any reasonable prospect of success. Nor is there any reason in the interests of justice that the appeal should be heard. I hence refuse to grant leave to appeal to Sun Cupid.

22.  Given my dim view of the intended appeal and the absence of any evidence that Kaga would not be able to return to Sun Cupid the judgment sum in the event of a success appeal, I see no reason why a stay of execution should be granted. I therefore dismiss the Summons in its entirety.

23.  I further order that the garnishee order be made absolute. There can be no stay of execution, either. The Stay Summons falls to be dismissed.

24.  Costs should follow the event. I make an order nisi that Sun Cupid do pay Kaga costs of both the Summons and the Stay Summons, to be taxed if not agreed, with certificate for counsel.