FANTA TIME INDUSTRIAL LTD. v. PROSPERING CLOTHING ACCESSORIES LTD.

HCA5759/96

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5759 OF 1996

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J U D G M E N T

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1. This is a case about goods sold and delivered. The Plaintiff is and was a manufacturer and supplier of buttons, with a factory in the PRC. The Defendant is and was a retailer and wholesaler of buttons. The Plaintiff's case is simple. It sues for the price of buttons sold and delivered pursuant to 17 invoices variously dated between 28th November 1995 to 28th March 1996. The sum owed and claimed is HK$204,612.80. This sum, which remains unpaid since the date of delivery, represents the cost price of a total of 1,073,304 buttons.

2. The history of this action is not edifying. The Defendant, on differing dates in 1996, purported to issue two cheques in settlement of some of the invoices. The first cheque was in the sum of HK$83,401, which was dishonoured upon presentation on 29th February 1996, and the second cheque was post-dated to 25th March 1996 and was for the sum of HK$123,933. Once again, this cheque was dishonoured upon presentation.

3. On 17th April 1996, a letter before action was sent from the Plaintiff's solicitors to the Defendant. There being no response, the Plaintiff issued its Writ, endorsed with a Statement of Claim on 23rd May 1996. The Defendant responded with a Defence and Counterclaim on 16th July 1996. This document contained alleged complaints about the date of delivery, together with complaints about the quality and quantity of the buttons so supplied. The battle lines having thus been drawn, the matter proceeded to trial.

4. However, the case in its immediate pre-trial phase was not wholly straightforward. Ms Ng, who represented the Plaintiff before this Court today, appeared on two pre-trial reviews on 8th September and 14th September respectively. As is also the case today, Mr Cheng appeared on behalf of the Defendant during those reviews. During the first review, Ms Ng complained that having recently taken up the case, she perceived that it was necessary to examine the allegedly deficient buttons. She requested a chance to do so, and, if necessary, to prepare evidence pursuant to such inspection. Mr Cheng who, throughout this saga has behaved with dignity in the face of considerable difficulties, did not object; indeed, he pronounced himself anxious to assist.

5. However, on 14th September when the parties returned to Court, they informed me that although they had tried to make arrangements for a joint inspection, it transpired that far from being so available for inspection, these goods had in fact been sold by the Defendant. In this connection there was little Mr Cheng could say save to apologise to the Court for the inaccuracy of his instructions in this regard. Accordingly, Ms Ng obtained an order for the urgent discovery of documents relating to the sub-sale of these goods. Once again, Mr Cheng did not demur.

6. What happened on the morning of this trial, was that Ms Ng moved a summons whereby she sought to have the Defence struck out on the basis that there had been flagrant non-compliance with the order of this Court as to such discovery. I declined that relief and adjourned the summons, and Ms Ng then proceeded to prove her case.

7. She has called two witnesses of fact, namely Mr Yeung Wai Keung and Mr Tong Wai Wah. Mr Yeung was the Sales Manager in charge of the transaction on behalf of the Plaintiff at the relevant times, and Mr Tong is and was a Director of the Plaintiff. They gave evidence in terms of their witness statements, and were but briefly cross-examined. I say this not out of any criticism of Mr Cheng but because he had been left, in my view, in a very difficult position. At the outset of the case he had told the Court not only that he had been unable to cause his client to comply with the discovery order that had been made but several days previously, but also that his client, Miss Chan Yuk Wah, a Director of the Defendant, was unable to attend Court. I did not press him unduly, but he clearly was placed in an untenable position.

8. Be that as it may. In my judgment, the Plaintiff has amply proved its claim. Mr Yeung Wai Keung struck me as a robust witness and he gave his evidence well. He was really the major player on behalf of the Plaintiff. Mr Tong Wai Wah simply confirmed the more peripheral aspects of the matter, including the fact that there had been abortive settlement negotiations, during which the Defendant had requested time to pay.

9. No evidence was called on behalf of the Defendant simply because Mr Cheng had no witness so to call. Nor did he feel able, in the circumstances, to address the Court as to why these monies claimed were not due. In this regard, in my view he showed considerable judgment. There was simply no evidence available to him that would have been sufficient to backup any such contention even if otherwise he had felt able to make it.

10. So there can be no doubt in this case. The Plaintiff is to have judgment in terms of the sum claimed, namely HK$204,612.80.

11. As to interest, Ms Ng ambitiously asked for the judgment rate on such sum from the date of the unpaid invoices onwards. I do not think this is appropriate. In my view, the correct order as to interest is that there shall be interest on the judgment sum at the rate of 8% for the period from 29th March 1996 to today's date, that is 21st September 1999. Thereafter, there is to be interest on the principal sum at the judgment rate from time to time prevailing until payment.

12. The sole matter outstanding, therefore, is that of costs. Ms Ng asked for costs on an indemnity basis in light of the history of this transaction. She says, or at least this is how I have understood her submission, that the entire matter was in reality a sham, as now evidenced by the non-appearance of Ms Chan of the Defendant in Court, or indeed any other witness for the Defendant. Mr Cheng submits that this is a case where normal party and party costs should be awarded. Admittedly, he said, the Defendant had not conducted itself with distinction over the latter part of the case, but he maintained that to say that the matters raised in the Defence were a sham was simply pure speculation. So that he agreed that the Defendant, having lost the case, must pay costs and interest, but that such costs should be in the normal course.

13. In the context of this case, and given the way it has developed at this hearing, it may be that the issue of costs has provoked more food for thought than the substantive issue. In the lunch time adjournment, I have had cause to refer to a number of well-known authorities, the most recent being that of the Hong Kong Court of Appeal in Sung Foo Kee Limited v. Pak Lik Company (a firm) [1996] 3 HKC 570, in which the Court took the opportunity to review the jurisdiction to order indemnity costs, and where in particular the judgment of Godfrey JA indicated that the court's discretion was "not ... limited by indications in previous cases". As I read the judgment of the learned Justice of Appeal, he was agreeing with the English trend, and cited three leading English cases to the effect that indemnity costs should not only be awarded if there is some deception or underhand conduct on the part of the losing party. In other words, that there should be a far wider judicial discretion in this area. There is no doubt that this judgment in Hong Kong now constitutes the benchmark as to the award of indemnity costs, but the question is, of course, should it apply to this case? On balance, I think not. I have considered the ambitious content of the Defence and I have also considered the regrettable sequence of events immediately prior to this trial. And of course the non-appearance of Ms Chan today, nor any other person to give evidence on behalf of the Defendant. I have come to the conclusion that I am not prepared to characterize all matters pleaded, as Ms Ng would have it, 'a sham'. But I do feel that the game plan of this Defendant throughout had simply been to delay and obfuscate as, in fact, these recent events have tended to bear out.

14. After some reflection, although I am disinclined to award indemnity costs, I nevertheless think that the circumstances warrant an order of costs in this action against the Defendant on a higher than normal basis. Accordingly, my order is that the Plaintiff is to have the costs of this action, such costs, if not agreed, to be taxed and paid on a common fund basis.

15. Lastly, it follows from the foregoing that the Defendant's counterclaim is itself dismissed. I do not know if, for the purposes of taxation, the dismissal of the counterclaim should attract a separate costs order but, for the avoidance of doubt, I dismiss it with costs on a like basis.

16. It remains only to thank both Counsel for their efforts in ensuring that this case came to trial without further delay and, in particular also, for assisting the Court in the way that they did during the pre-trial reviews.