XCHRX CARRIER HONG KONG LTD. v. KWAN KEE ELECTRICAL & WATER ENGINEERING CO. LTD.

HCA1954/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.1954 OF 2000

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J U D G M E N T

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1. I have before me an application by the plaintiff for summary judgment and a counter-application by the defendant for determination under O.14A, and for a dismissal of the claim of the plaintiff.

2. The claim of the plaintiff is for damages arising out of an agreement between the plaintiff as seller and the defendant as buyer, of an air-conditioning system to be specially made by the plaintiff for the defendant for the purpose of installing the air-conditioning system in a department store called Galeries Lafayette in Beijing.

3. The contract is evidenced by a purchase order dated 5 October 1998 from the defendant to the plaintiff which was signed by the defendant on 5 October 1998 and by the plaintiff on 12 October 1998. The goods are described on the first page of the order (at page 66 of the Bundle). They consisted of some 14 items and the contract price was $1.7 million CIF Hong Kong with delivery time not later than 20 December 1998 and with payment terms stated as follows :

"30% deposit to be issued to you on or before 9th October 1998, balance by irrevocable letter of credit at sight by bill of lading before factory shipment."

4. The contract, after it was signed on 12 October 1998, was followed by a letter dated 15 October 1998. The letter was an attempt by the plaintiff to amplify (if I may use that word neutrally) the precise terms of the contract that had been signed by the parties.

5. It seems to me, and I do not think Mr Chua for the plaintiff disputes this, that a party is not at liberty to unilaterally impose additional terms to a signed contract which are not consistent with the terms in the signed contract. As far as I can see, the only material term referred to in the letter of 15 October 1998 was a reference to Delivery Order. But, as one can see later on, the facts of this case show that this term is not material to affect the outcome of the case.

6. What happened was, of course, after the plaintiff had received the 30% deposit from the defendant, the plaintiff caused the goods to be manufactured. The defendant unfortunately did not present or issue to the plaintiff any letter of credit as agreed and stipulated in the contract. The goods eventually arrived in Hong Kong and the fax of 16 December 1998 (at page 173 of the Bundle) shows that the plaintiff informed the defendant of the impending arrival of the goods on 21 December 1998 and that the goods would be ready for collection by the defendant.

7. It seems to me clear on the affidavits and all the materials before the court that when the goods arrived in Hong Kong, which was around 22 or 23 December 1998, the defendant was unable, or unwilling, to take delivery of the goods or to pay for the goods. The reason was a simple one. The defendant contracted to buy these goods because it in turn had received an order, probably from a Mainland customer, for these goods. The customer of the defendant was not willing to pay for the goods, or to take delivery of the goods. The goods, upon arrival, had therefore to be discharged from the ship and stored. When it was clear that the defendant was not going to take delivery of the goods or to pay for them, the plaintiff made attempts to sell the goods the best way it could.

8. These goods were specially tailor-made to be used in the climate of Northern China, and they could not be so easily be sold in the somewhat different climate of Southern China, i.e. in Hong Kong. The evidence of the plaintiff was that doing the best it could - although it had sent out quotations - it could only manage to sell the goods at the price of $180,000 as evidenced in the letter dated 31 January 2000 (at page 262 of the Bundle). Under that contract of sale, it had to give the new buyer free storage for delivery up to end of April 2000.

9. The question that arose at the hearing was whether the defendant could be said to raise any triable issue, or has any genuine defence to the claim of the plaintiff.

10. In my view, no bona fide defence had been shown at all. The first defence as to the slightly late delivery or tender of the goods on about 22 December 1998, instead of the contractual delivery time of 20 December 1998, has to my mind no substance. First of all, time is not stated to be of the essence and that of course is quite perfectly understandable. In relation to air-conditioning system shipped in 14 containers which were extremely heavy and voluminous and required time to be installed in Beijing, time could not be of such critical importance. The reality, of course, was that the parties never regarded time as that important. The reason that the defendant did not take delivery was not because of the lateness but because it had no customer who wanted to take it up.

11. The second defence is that the plaintiff should not have shipped the goods until the condition precedent had occurred, that is, that the defendant had issued the letter of credit to the plaintiff. To my mind, this is a defence totally devoid of merit. The obligation of the defendant under the contract is to issue a letter of credit within a reasonable time. The defendant cannot possibly, by reason of its own breach to open a letter of credit, say that the goods should not have been shipped, and that therefore it would not be liable.

12. The third defence is that the plaintiff had failed to tender the shipping documents and was therefore in breach. The plaintiff was entitled to receive the letter of credit and if that had been done, then, of course the plaintiff was obliged to present the necessary documents stipulated in the letter of credit, including the bill of lading, in order to obtain payment. But the defendant did not open the letter of credit and what the plaintiff did was to ship the goods, tender the goods and seek payment from the defendant. The defendant did not wish to take up the goods and refused to pay. I can see no substance in this alleged defence of the plaintiff failing to tender the shipping documents. I think the reality is if the defendant was willing to take up the goods and make payment, the plaintiff was more than happy to tender whatever shipping documents would be necessary to enable the defendant to take delivery of the goods. So, again, there is no substance.

13. There is, therefore, no genuine or bona fide dispute to the liability of the defendant under this contract.

14. There is however a twofold dispute on quantum. The defendant says, first, that the quantum of the damages should be assessed because the credit given for the resale of the goods pursuant to the plaintiff's obligation to mitigate its loss was too low and should go to trial. Mr Wong in his spirited defence, acknowledged that the transaction, i.e. the resale by the plaintiff at $180,000 under the document of 31 January 2000 (at page 262 of the Bundle), is genuine and bona fide, but he nevertheless says that the sale by the plaintiff should be at a higher price. There is some evidence that the plaintiff sent out quotation at a higher price in the middle of January 2000. But the sending out of quotation does not mean that the plaintiff was going to find a buyer at that price. There is also evidence adduced by the defendant of a quotation for an air-conditioning system in Hong Kong at a lower price. But, again, that does not suggest or prove that the plaintiff could have sold this system at a price higher than $180,000.

15. What cannot be disputed is this : the plaintiff was an expert in the field, it knew what it was doing, and the plaintiff, as reasonable business people, would want to sell at the best price possible, and it only managed to after a long period sell it at $180,000, which is a bona fide sale.

16. The obligation of the defendant, if it wants to contest the quantum, is to show that there is a bona fide dispute and, as is well-known, the desire to find a defence or to investigate is not sufficient. It seems to me that it is clear that the defendant does not come anywhere near to discharging the burden upon a defendant to show that it has a bona fide defence that the plaintiff had failed to mitigate, or had acted unreasonably in what it had done to mitigate. It is not an easy burden to discharge especially in the light of the total lack of substantial material put before the court by the defendant.

17. I have, therefore, no hesitation in coming to the conclusion that summary judgment should be given for the amount claimed by the plaintiff, i.e. the amount of $1,503,470 less $180,000. Therefore, the amount of judgment given to the plaintiff should be in the sum of $1,323,470 as stated on page 4 of the Bundle under paragraph 1 of the Inter Partes summons.

18. The last remaining question is whether the quantum of storage charges, said to be $649.83 a day for something like 133 days, should also be the subject of summary judgment.

19. [Further argument from counsel]

20. Having heard further argument on the question of storage charges on the quantum, I have come to the view that summary judgment should be given for the whole sum, including the storage charges up to the end of April. Therefore, the amount of summary judgment to be given under item (2) of the Statement of Claim is $86,427.39.

21. So far as interest is concerned, I grant interest on the judgment sum from the date of the writ at the rate of 2% above prime. The defendant's counterclaim is dismissed because it seems to me that having regard to what I have said about the summary judgment, there is obviously no substance in the counterclaim or in the Order 14A point raised by the defendant. The Order 14A summons is also dismissed. There should be costs to the plaintiff of the costs of the Order 14A summons and costs of the action. I propose to proceed to a gross sum assessment of the plaintiff's costs which I have just ordered.