PANG HIU MUI v. DAI CHI KEUNG

DCCJ 3000/2021

[2024] HKDC 886

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3000 OF 2021

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ASSESSMENT OF DAMAGES

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Introduction

1.  This is an assessment of damages arising out of a sale of goods dispute.

2.  On 25 June 2021, the Plaintiff buyer commenced the present action against the Defendant seller for breach of agreement of the sale and purchase of certain facial treatment products.

3.  On 11 November 2021, the Defendant, represented by his solicitors, has filed his Defence. After the close of pleadings, the Defendant has become unrepresented and has been absent in the proceedings since 21 October 2022.

4.  On 24 February 2023, it was ordered by the Court that, unless the Defendant file and serve his List of Documents on or before 14 April 2023 by 4 pm, the Defence be struck out and judgment be entered by the Plaintiff. Despite the said order, the Defendant did not file his List of Documents.

5.  On 14 April 2023, interlocutory judgment is entered against the Defendant with damages to be assessed with interests and costs.

6.  On 20 November 2023, the Plaintiff issued a Notice of Appointment of Assessment of Hearing of Damages. Directions were given as to trial. At the hearing of assessment of damages, the Defendant was absent.

7.  Solicitors for the Plaintiff have filed an affirmation of service on 6 December 2023, stating that the Order dated 20 September 2023 setting out the date and time of the assessment of damages hearing, the hearing bundle, and the Plaintiff’s written submissions and list of authorities had all been served on the Defendant.

8.  I am satisfied that, the Defendant had been properly notified of the hearing. I proceed with the hearing in the absence of the Defendant. At the hearing, I have also directed that the proceedings be conducted in English with evidence heard in Chinese.

The Plaintiff’s Claim

9.  According to the Statement of Claim, the Plaintiff’s pleaded case is that: -

(1)  By way of an oral agreement made in or about October 2017, the Plaintiff agreed to buy and the Defendant agreed to sell certain Oogiwa facial treatment products (as fully particularised in the Statement of Claim) (the “Products”) for the total price of RMB 300,000 (the “Sum”). (the “Agreement”)

(2)  Pursuant to the Agreement, the Plaintiff paid the Defendant RMB 300,000 to his bank account.

(3)  The Plaintiff had also paid RMB 36,215 for the delivery of the Products.

(4)  In or about mid-August 2018, the Products were delivered to the Plaintiff and the Plaintiff discovered that the Products were defective and not up to standard.

(5)  Upon receipt, the Plaintiff rejected the Products and demanded a replacement or a refund from the Defendant. The Products were subsequently returned to the Defendant.

(6)  Despite repeated requests, the Defendant failed to replace the Products or to refund the Sum to the Plaintiff.

(7)  As a result of the Defendant’s breach of the Agreement, the Plaintiff was unable to sell the Products on her cosmetic products platform in the Mainland China and has suffered loss and damage.

10.  At the hearing, Mr Ng representing the Plaintiff, confirms that the Plaintiff only relies on breach of the oral agreement as pleaded in the Statement of Claim. The Plaintiff is not relying on a breach of the written franchise agreement or misrepresentation as causes of action for her claim.

11.  On that basis, as confirmed by Mr Ng at the hearing today, the Plaintiff now only claims damages under three heads being, (1) the purchase price of the goods of RMB 300,000, (2) delivery expenses of RMB 36,215, and (3) loss of profits in the sum of RMB 897,000.

The Plaintiff’s Evidence

12.  Madam Pang Hiu Mui, the Plaintiff herself gave evidence at the hearing of assessment of damages. She adopted her witness statement filed on 18 May 2023 as evidence-in-chief.

13.  On the Defendant’s breach, the Plaintiff’s evidence is that, when she received the Products in or about mid-August 2018, the Plaintiff discovered the Products were defective, not of merchantable quality and not reasonably fit for its purpose as facial treatment products.

14.  The Plaintiff’s pleaded case is that, she had complained the problems of the Products to the Defendant that: -

(1)  the Products were yellowish in colour and did not have the appearance as the sample products provided earlier.

(2)  the Products caused skin allergic symptoms, such as redness itchiness and swelling, to their users.

(3)  the Products did not come with the requisite certificates of compliance from the authorities of Mainland China.

15.  The Plaintiff therefore rejected the Products and returned them to the Defendant. When the Defendant failed to arrange for any replacement of the Products, the Plaintiff asked to terminate the Agreement on the Defendant’s breach and asked for a refund by way of a WeChat message on 3 October 2018.

16.  The Plaintiff has also disclosed as part of her documents the WeChat messages between the Defendant and her at the material times, and photos of the Products and that of users’ reaction after using the Products.

17.  Her evidence is unchallenged by the Defendant. In this respect, I accept her evidence which is supported by contemporaneous WeChat messages and photos. I find that, the Plaintiff is entitled to reject the Products on the ground that they were defective, not of merchantable quality and not reasonably fit for its purpose as facial treatment products.

18.  I now turn to each of the three heads of damages claimed.

Purchase Price of the Products

19.  In the circumstances, I find that the Plaintiff is entitled to claim damages for wasted expenditure in performing the Agreement which is the purchase price she paid for the Products. (See Chitty on Contracts, 35^th edition, at §30-029 at [2240]-[2241])

20.  It is the Plaintiff’s pleaded case that, she paid the Defendant the sum of RMB 300,000 as the purchase price of the Products.

21.  The Plaintiff has produced her bank transaction records showing that on diver dates in the period between March 2018 and August 2018 (the “Bank Records”), she has made payments into the Defendant’s bank account in tranches of RMB 50,000. According to her evidence, the payments included those under the franchise agreement.

22.  The Plaintiff also produced and referred to a receipt of purchase dated 8 August 2018 (the “Receipt”), stating that a total of RMB 298,900 was paid for the Products. I take this figure as the actual amount paid for the purchase price of the Products.

23.  Therefore, I allow the sum of RMB 298,900 under this head.

Delivery Expenses of the Products

24.  I find that the Plaintiff is also entitled to the claim damages for the delivery expenses of the Products.

25.  The Plaintiff’s evidence is that, she paid the Defendant RMB 36,215 for the delivery of the Products in or about mid-August 2018. The payment of RMB 36,215 is shown in the Bank Records.

26.  In this connection, the Plaintiff produced an invoice dated 8 August 2018 from courier services for the packaging and transportation costs of the Products in the sum of HK$ 36,064. Further, from the WeChat messages disclosed by the Plaintiff, it is the Plaintiff’s evidence that the payment of RMB 36,215 represents the transportation costs of HK$ 36,064 (converted from HKD to RMB at the prevailing rate) and RMB 4,500, which is the balance of the purchase price under the Receipt. Therefore, the delivery expenses actually incurred should be the payment made by the Plaintiff less the balance of the purchase price of RMB 4,500.

27.  As such, I allow the sum of RMB 31,715 under this head.

Loss of Profit

28.  As for the claim for loss of profit, Mr Ng of the Plaintiff referred the Court to Paul Chen and Anor v. Lord Energy Ltd (2002) 5 HKCFAR 297 at §§21-22, where it reads: -

“21. Where damages have resulted from a breach of contract (or may fairly and reasonably be considered as arising naturally from the breach), the measure of damages would be such damages as the parties should reasonably have contemplated would flow from the breach. If the damages are within the reasonable contemplation of the parties, such damages would not be considered too remote and are therefore recoverable. What is within the reasonable contemplation of the parties is a question of fact depending on the circumstances of the case and the information available to the parties at the relevant time, usually the time of the contract.

22. Alternatively, where there were special circumstances under which the contract was made and which had been communicated or made known to the defaulting party, the damages resulting from the breach are such damages as they should reasonably contemplate would flow from such breach in such special circumstances. In such cases, it is necessary to show that the defaulting party has knowledge of the special circumstances giving rise to the damages which are being claimed. If the defaulting party has no such knowledge, the damages may be considered too remote and are not recoverable.”

29.  Further, in the specific context of the sale of goods, the Plaintiff also relies on Kem Cheen Trading Company v Hong Kong Shen Nan Trading Company Limited (unrep., HCA3596/1987, 22 November 1988), where McGregor on Damages, 15^th edition, §763 at [497] was cited therein: -

“Where damages are allowed for loss of profit on a resale of which the seller knew the actuality or the probability, he will not be liable for an exceptional loss of profits unless he has been informed of the details of the sub-contracts and only then if he can be said to have taken the risk of such loss on his shoulders.”

30.  The Plaintiff’s pleaded case is that, the Plaintiff was unable to sell the Products on her cosmetic products platform in the Mainland China as a result of the Defendant’s breach of the Agreement and claims for loss of profits to be assessed. In her evidence, the Plaintiff claims the sum of RMB 897,000 under this head.

31.  The legal principles set out in the authorities cited by the Plaintiff are trite and well established. However, in my view, there are two issues with the Plaintiff’s claim under this head.

32.  As I understand from Mr Ng’s submissions, the loss of profit claim is based on the Defendant’s representation prior to the Agreement that the Plaintiff would become the head of franchise of the Oogiwa products in Mainland China, that could sell and make a profit of 400% (the “Representation”). The Plaintiff in her evidence also refers to an undated franchise agreement of M Plus Workshop Limited listing out the suggested retail prices of Oogiwa products (the “Products List”).

33.  Mr Ng submitted that, the estimated selling price of the Products in the quantity purchased by the Plaintiff should be RMB 1,197,000 which is based partly on the Representations and partly on the Products List. The loss of profits would therefore be estimated at RMB 897,000.

34.  Mr Ng also submitted that, the Defendant must knew the Plaintiff intended to sell the Products through an online platform and ought to have known she would make a profit of 400%.

35.  First, I note that any alleged knowledge, actual or imputed, of the Defendant or its basis is not pleaded in the Statement of Claim. There is no evidence of an actual or possible resale of the Products, let alone that being within the reasonable contemplation of the Defendant.

36.  Second, the Plaintiff relies on the Representation and the suggested retail price of the Products List as the basis of her claim of a profit margin of 400% or a profit margin estimated under the Products List. However, there is simply no factual or expert evidence of the selling price or market price of the Products or any evidence on the profit margin of the Products or similar products.

37.  As such, I am unable to allow the Plaintiff’s claim under this head of damages.

Orders Made

38.  In the premises, I allow the Plaintiff’s claim under the two heads, being (1) the purchase price of the Products in the sum of RMB 298,900, and (2) delivery expenses of RMB 31,715. I reject the claim under the head of loss of profits.

39.  As such, I assess the damages and award the total sum of RMB 330,615 to the Plaintiff. I also award interest on the sum at 1% above the best lending rate of HSBC from the date of writ to the date of this judgment, and thereafter at judgment rate until payment in full.

40.  I order that the Plaintiff do have costs of the assessment. After considering the Plaintiff’s Statement of Costs dated 4 January 2024, I summarily assess the costs of the assessment at HK$ 40,610.