NEW WELL INTERNATIONAL METAL WARE LTD v. IMPACT SPECIAL MACHINES INC.

HCA 2863/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2863 OF 2006

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J U D G M E N T

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1.  In this action, the plaintiff sues for the return of a sum of US$156,000.  The money was paid by the plaintiff to the defendant, pursuant to an agreement dated 25 April 2005, for the supply by the defendant, a Canadian corporation, of a “hot forging and annealing machine”.  The total purchase price of the machine was US$411,000.  It was to be delivered to Dongguan on the Mainland on 30 September 2005. 

2.  The contract provided for payment of the purchase price by instalments.  The first instalment, being 40% of the purchase price, was payable within three days after the signing of the contract.  Another 50% was payable “prior shipping to customer, and after machines are cleared China Custom”.  It would appear from the contract that another sum of US$21,000 was also to be paid upon customs clearance.  The final 10%, according to the contract, was payable 30 days after acceptance of the machine on “customer site”. 

3.  Pursuant to the contract, the plaintiff duly paid to the defendant the sum of US$156,000.  However, delivery of the machine was greatly delayed.  Eventually, the machine, according to the evidence that I have no difficulty in accepting, was delivered to Shanghai where some test running of the machine was conducted.  Thereafter, the defendant, according to the correspondence and the oral evidence adduced, asked the plaintiff to effect full payment of the balance of the purchase price before it would deliver the machine to the plaintiff’s customer in Guangdong. 

4.  That, it should be noted, is quite plainly a deviation from the terms of payment provided by the contract which I have already described.  In particular, the second instalment of 50% was only to be payable after the machine had cleared customs.  In this respect, according to the evidence before me, there simply was no evidence that the defendant had done so. 

5.  In any event, the plaintiff did not pay the balance of the purchase price as requested and the defendant did not deliver the machine.

6.  In those circumstances, both sides claimed that the other side had repudiated the contract.  The plaintiff commenced the present action against the defendant for recovery of the first instalment on 29 December 2006.  Originally, the defendant entered an appearance and defended the claim on a number of grounds but, eventually, the defendant’s solicitors came off the record and no solicitors were appointed by the defendant, a foreign corporation, to represent it in the present action.  The defendant has filed no witness statement and has not appeared at today’s trial.

7.  In those circumstances, I have directed that the trial be proceeded with.  In the course of trial, I have heard the oral evidence of Mr Hung Chung-pang, the general manager of the plaintiff.  I have no difficulty in accepting his evidence.  The plaintiff has also adduced documentary evidence and the Court has considered that evidence.

8.  On the basis of the evidence that I accept, I agree with Mr Jonathan Chang, counsel for the plaintiff, that the plaintiff has made out a case for the return of the money paid.  That claim may be justified on more than one basis.  First, in relation to who has repudiated the contract, I am with Mr Chang that, according to the contract, the second instalment was only payable after clearance of customs and there simply was no evidence that the defendant had done so.  So it was quite wrong for the defendant to insist on being paid the whole of the purchase price first before making delivery of the machine.  The defendant had obviously, by its conduct, evinced an intention no longer to be bound by the contract.  On the evidence before me, the plaintiff was quite entitled to treat the contract as having come to an end by reason of the wrongful repudiation of it by the defendant.

9.  Alternatively, even if one were to assume that the plaintiff was in the wrong, it would not follow that the defendant should be entitled to hold on to the first instalment.  As I said, the money paid by the plaintiff to the defendant was an instalment of the total price.  It was not paid as a deposit.  There was no provision in the contract entitling the defendant to retain or forfeit any part of the purchase price paid by the plaintiff, even in the event of the plaintiff’s breach.  I agree with Mr Chang that no such term could be implied either.

10.  In those circumstances, it is quite clear from the authorities cited by Mr Chang, namely, Stockloser v Johnson [1954] 1 KB 476 and Polyset Ltd v Panhandat Ltd (2002) 5 HKCFAR 234, that the wrongful party is entitled to the return of the instalment money paid, subject only to any cross-claim by the innocent party for damages.

11.  In the present case, the defendant has never counterclaimed for loss or damage and there simply is no evidence to that effect.  In those circumstances, even if one were to assume that the plaintiff was in the wrong, the plaintiff would still be entitled to the return of the instalment paid.

12.  For these reasons, as I have said, I have come to the conclusion that the plaintiff has made out a good case for the return of the instalment money. 

[Submissions on the rate of interest]

13.  I will give judgment to the plaintiff for the sum of US$156,000, together with interest at the prime rate plus 1%, from the date of writ, namely, 29 December 2006, to the date of judgment and, thereafter, at the judgment rate until full payment.

14.  I also order that the defendant pay to the plaintiff the costs of this action, to be taxed if not agreed.