MEI KEE PLASTIC FACTORY LTD. v. IBT INTERNATIONAL BUSINESS & TECHNOLOGY LTD.

HCA 45/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 45 OF 2001

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JUDGMENT

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1. The plaintiff is a limited company incorporated in Hong Kong and carrying on business as a plastic manufacturer. The plaintiff entered into an agreement on 17 November 1997 with the defendant, also a limited company incorporated in Hong Kong and carrying on business as a supplier of machines to plastic-product manufacturers.

2. The agreement between the parties was that the defendant sell to the plaintiff two sets of a type of sealing machine at a total price of $668,000 for delivery of the machines to be on or before 28 January 1998. 45 percent of the purchase price was payable and paid upon the signing of the principal agreement and a further 45 percent of the purchase price was payable on delivery of the machine, with the remaining 10 percent to be paid within 30 days after the conduct of a running test of the seal machines to the satisfaction of the plaintiff.

3. Clause 10 of the principal agreement provided that the defendant should have the whole sum paid by the plaintiff refunded within seven days if the said defendant failed to deliver the machines to the plaintiff on or before 28 January 1998. On 18 November 1997, $300,600 were paid by the plaintiff to the defendant by way of deposit. There were certain modifications to the machine which resulted in a supply of a different model of machine. The price, however, was to be the same as the original machine so the contract was varied only to the extent that the model number of the machine, and therefore the type of machine to be delivered, was altered in all other particulars. The contract remained the same.

4. These matters were accepted via letter dated 10 January 1998 from the defendant to the plaintiff.

5. On 5 May 1998, the plaintiff instructed that the intended modification was no longer required and, on the same day, the defendant confirmed in writing the plaintiff's instruction and asked for a further payment of $300,600 and, on 18 May 1998, the plaintiff paid to the defendant, a further sum of $300,600. The defendant informed the plaintiff that delivery of the seal machines was expected to be on 12 June 1998. Those machines were never delivered.

6. The plaintiff claims damages in the sum of $601,200 having been paid to the defendants against the delivery of the machines together with interest thereon and costs. The case for the defence was that the plaintiff ordered in addition to the modified machines, a further set of moulds, 17 in number, having already ordered 17 moulds for the first machine. The total sum extra to be paid, the defendant say, by the plaintiff to the defendant, was a sum of $317,200.

7. There is nothing in the evidence which has been placed before me, other than the statements of the defence witnesses, to indicate that any agreement was made between the parties for the payment of that sum, nor that all of the moulds were ever produced. There is no evidence before me upon which I can rely to indicate that the payment of the sum of $317,200 was a condition precedent to the delivery of the machines.

8. Miss Law, in her helpful submission, sets out the two issues which I must decide: Was the plaintiff liable to pay $317,200 before taking delivery of the machines from the defendant? And, secondly, was the defendant entitled under the contract to forfeit the deposit paid by the plaintiff? Having found that there is no credible evidence, the defendant not having appeared before me today, that the sum of $317,200 for the additional equipment was ever agreed between the parties, or agreed to be paid prior to delivery of the machines, I am satisfied to the required standard that the plaintiff was not liable to pay that sum to the defendant before taking delivery of the machines.

9. I am referred by Miss Law to Chitty on Contracts Vol. 1, 27th Edition, pp.27-124, where the learned author said:

"If in a contract for sale, there is no express forfeiture clause and the seller terminates the contract upon the buyer's default, the buyer may recover any prepayment or instalments paid in part-payment of the price."

10. In this case, the contract of sale contains no express forfeiture clause and I am satisfied that the plaintiff is entitled to repayment of the whole of the sum paid by it to the defendant upon the defendant's failure to deliver the machines, the subject of the contract. There will be judgment for the plaintiff in the sum of $601,200.

11. There will be interest thereon from the date of the issue of the writ, which is 4 January 2001, to today's date at the rate of 8.125 percent per annum and there will be costs for the plaintiff.