GREAT TIME HOTEL SUPPLIES LTD v. AU HING MING ANDY

HCA 1310/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1310 OF 2009

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BETWEEN

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REASONS FOR DECISION

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1.  This is an application by the defendant to enforce the terms of a sanctioned offer as contained in an Order (made by consent) made by Deputy High Court Judge Mayo on 1 September 2011.

2.  The defendant had been an employee of the plaintiff.  The underlying dispute concerned a consignment of 80,580 glasses which the plaintiff complained had been ordered by the defendant when he was in their employ without authorization.  The dispute was settled on terms contained in the said Order, as follows.

“1. Upon:-

i. the undertaking by the Plaintiff to the Defendant; and the Plaintiff to the Court; and the Defendant to the Plaintiff; and the Defendant to the Court not to enforce any costs order(s) against each other under the above action;

ii. the Defendant checking and examining the 80,580 pieces of Pasabahce #44193 (‘the Goods’) at its own cost and expenses at the date and time and venue to be arranged by both the Plaintiff and the Defendant mutually convenient to them (but in any event not later than 14 days after the acceptance of this offer by the Plaintiff, namely 2^nd September 2011) and satisfied himself that the Goods are in good and sound condition; and

iii. the withdrawal of the action with no order on costs.

2. The Defendant agrees to purchase the Goods at HK$6.00 per piece totaling about HK$483,480.00 and shall pay the said sum of HK$483,480.00 to the Plaintiff within 14 days after the delivery of the Goods by the Plaintiff to the Defendant at the Defendant’s cost and expenses and/or the Plaintiff’s own cost and expenses to be reimbursed by the Defendant in full (inclusive of all costs, interests and disbursements) in full and final settlement of all Plaintiff’s claim under the above action, subject to Defendant’s rights to check and examine the qualities and quantity of the Goods within 2 days from the date of delivery.”

3.  Thus, the defendant agreed to buy the goods at an agreed price after inspection. 

4.  Unfortunately, no proper inspection took place. The plaintiff provided just 5 glasses for inspection.  The background to the defendant’s acceptance of the consent order was that he had a buyer for the consignment.  He has exhibited a contract which is dated 24 August 2011 (7 days before the consent order) by which he had agreed to sell the consignment at $11.05 per glass.  By the enforcement summons the defendant seeks firstly, specific performance of the sanctioned offer or alternatively damages for loss of profits.

The hearing

5.  After some discussion it was established that specific performance of the consignment was impossible.  The plaintiff had disposed of the glasses elsewhere.  It transpired that even at the time of the consent order the plaintiff was no longer in possession of the bulk of the glasses.  Mr Timothy Wong, counsel for the plaintiff, explained to the court that this was due to “mistake” and “confusion”.

6.  Thereafter, both parties made sensible and helpful concessions which narrowed the focus of the hearing.

7.  Mr Wong, for the plaintiff, conceded that:

(1) the plaintiff’s failure to produce all but 5 glasses put them in breach of the undertaking in the Order;

(2) specific performance of the actual consignment was now impossible. If the court ordered specific performance a new consignment would have to be ordered from Turkey which would take time. Both parties agreed that this should not be ordered and that therefore;

(3) the plaintiff was liable to pay the defendant damages for loss of profits. The only issue therefore was the quantum of such damages.

8.  Mr Frederick Chan, counsel for the defendant, stated that:

(1)the defendant no longer sought specific performance;

(2) his expected profit, pursuant to the contract he had entered was $5.05 per glass;

(3) if every glass, after inspection, had been perfect, the total profit would have been $404,050;

(4) however, he conceded that up to 40% of the glasses may have been damaged which, if so, would have reduced his profit to $242,448.

9.  At the conclusion of the hearing, I awarded the plaintiff damages, pursuant to paragraph 3 of the defendant’s summons dated 23 November 2011, in the sum of $242,448 together with the costs of and occasioned by the application.

10.  The brief reasons for that award are as follows.

Reasons

11.  Mr Wong, for the plaintiff submitted that the defendant should be awarded damages of 20 cents profit per glass.  This was based on:

(a) the plaintiff’s affirmation evidence that during 2011 they had sold the same glasses to the same purchaser at $6.20 per glass; and

(b) the defendant’s contract for sale of the glasses at $11.05 per piece must therefore be a fraudulent contract designed to inflate his damages. It must, it was submitted, be fraudulent both as to price and date. It must have been backdated.

12.  Mr Wong conceded that paragraph (b) was a suspicion based on paragraph (a).  They simply did not believe in the authenticity of the defendant’s contract. 

13.  However, they were unable to provide any further evidence in support of their grave suspicions.  Mr Wong submitted that the court should award “reasonable” damages and that the price charged per glass by the plaintiff in earlier contracts was the best evidence of what amounted to a “reasonable” price.

14.  Mr Chan submitted that the authenticity of his written contract with a bona fide third party could not be challenged.  It was dated before the consent order and before it was known that the consent order could not be complied with.  The price was influenced by the fact that, at the time, there was no stock of this particular type of glass in Hong Kong at all.  They were manufactured in Turkey and by virtue of the settlement he would have the only supply in Hong Kong and there was a demand in Hong Kong.

15.  Moreover, and importantly, the defendant had been seeking specific performance throughout.  It was only when it transpired that the glasses were no longer available that he focused on his alternative claim for damages.  His consistent wish for delivery of the goods themselves supported his contention that the contract was bona fide.

16.  Mr Chan further submitted that there was no evidence of fraud.  It was a mere suspicion without any evidential foundation. 

17.  The situation that had arisen was due entirely to the plaintiff’s fault.  The plaintiff had originally complained that it was in possession of glasses it did not want.  It then disposed of them but nonetheless agreed to a settlement which they should have realized was impossible to perform. 

18.  Mr Chan also made a proper concession.  He acknowledged that a significant proportion of the glasses would very probably be unsellable.  A 40% reduction was a generous discount.

19.  For all the reasons advanced by Mr Chan I made the award as per paragraph 9 of these written reasons.