HOI FAT CONSTRUCTION MECHANIC CO. LTD. v. LING CHI FAI

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL ACTION NO. HCA5066 OF 1999

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J U D G M E N T

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1. This is an assessment of damages following interlocutory judgment for the plaintiff against the defendant, arising out of a failed hire purchase agreement. The plaintiff, Hoi Fat Construction Mechanic Company Limited, (The Plaintiff) sues under an re-amended writ of summons as an assignee of a hire purchase agreement.

The Facts

2. Unless otherwise indicated, the following are the facts of the case, as I find them. On 4 October 1996, the defendant entered into a hire purchase agreement with Dah Sing Finance Limited (Dah Sing Finance) for the purchase from the plaintiff of a hydraulic excavator at the price of HK$770,000, together with insurance and hire charges. After deducting a cash deposit of $231,550 the defendant contracted to pay Dah Sing Finance the sum of $665,496 by 24 monthly instalments of $27,729 each.

3. Pursuant to the agreement, the defendant made about 10 instalments and thereafter no further payments have been made. That was not, it seemed on the evidence, the reason for the termination of the hire purchase agreement. The immediate cause was the defendant's failure to furnish Dah Sing Finance, pursuant to the hire purchase agreement, a comprehensive insurance policy.

4. On 26 February 1998, Dah Sing Finance authorised, by letter of the same date, the plaintiff to repossess the excavator. On 15 June 1998, Dah Sing Finance wrote to the defendant offering redemption and settlement of the outstanding loan amount. The plaintiff was also instructed to resell the excavator on a consignment basis. The resale was not successful.

5. Under an agreement with Dah Sing Finance entitled the "Master Dealer Agreement" dated 4 April 1987, the plaintiff had agreed to indemnify Dah Sing Finance against all losses and damages which Dah Sing Finance may suffer as a result of entering into a hire purchase agreement with any customers of the plaintiff for the purchase of goods from the plaintiff.

6. Pursuant to that agreement, on 23 December 1998 the plaintiff and Dah Sing Finance entered into an arrangement regarding the resale of the excavator and the recovery of all losses arising out of the hire purchase agreement between Dah Sing Finance and the defendant. That arrangement involved, as the sole witness for the plaintiff had explained, an assignment by Dah Sing Finance absolutely of all its rights, title, benefit and interest under the failed hire purchase agreement to the plaintiff, for $532,431.20.

7. As the plaintiff was experiencing some financial difficulty at the time, in order to finance this buy-back - if I may use this loose description - of the excavator, the plaintiff entered into a hire purchase agreement to purchase the excavator from Dah Sing Finance. The price of the excavator in that hire purchase agreement was HK$500,000, the balance of $32,431.20 having been paid directly by the plaintiff to Dah Sing Finance. Under this second hire purchase agreement made between Dah Sing Finance and the plaintiff, the plaintiff had to pay a total sum of $585,000 to Dah Sing Finance by 24 monthly instalments. This sum of $585,000 included hire charges.

8. Mr Yung testifying for the plaintiff indicated that the bulk of this sum had already been paid to Dah Sing Finance, with possibly a balance of about $90,000 outstanding for which arrangements have already been made for its payment. Under this second hire purchase agreement the plaintiff charged the excavator to Dah Sing Finance as security.

9. For the purpose of unloading the excavator, Vigers (HK) Limited had been hired to provide a valuation report. On 23 December 1998, Vigers (HK) Limited assessed that the excavator had a value of $245,000. That value was described as a fair market value (forced sale). The evidence revealed that the excavator required a measure of repairs before it could be sold on. The plaintiff caused repairs to be done at the cost of $98,968. That sum was paid.

10. Mr Yung also described how the plaintiff had, over the space of about a year, attempted without success to resell the excavator. I am satisfied that timely and proper measurements have been undertaken by the plaintiff to mitigate its loss. Owing to the lack of demand caused in part by the downturn in the economy, the excavator was not sold until much later. When it was finally sold to a customer of the plaintiff, the price obtained was considerably higher than the value assessed by Vigers (HK) Limited. It was resold for $380,000 for which credit must be given to the defendant.

11. Arising out of this failed hire purchase transaction, the plaintiff had incurred the following sums on the evidence: under the second hire purchase agreement with Dah Sing Finance it had contracted an indebtedness of $585,000. That comprised the loan of $500,000 made to it by Dah Sing Finance, the sum of $32,431.20 that was paid directly to Dah Sing Finance at the time of entering into the second hire purchase agreement and hire charges under that hire purchase agreement. It had also incurred repair costs of $98,968, as I earlier referred to.

12. In total, the plaintiff had incurred loss in the sum of $716,399.20. This is made up as follows: loan and interest, $585,000; balance of the price paid directly to Dah Sing Finance, $32,431.20; costs of repairs, $98,968. From that aggregate of $716,399.20 must be deducted the resale price of $380,000, leaving an outstanding balance of $336,399.20.

13. I conclude that the plaintiff had acted reasonably and properly in mitigation of its loss by selling the excavator eventually at the price of $380,000. That was the best price that could be obtained in the circumstances and represented, in my judgment, the best open market price obtainable at the time. That being so, I adjudge that the plaintiff is entitled to have recourse from the defendant. The defendant is to pay the plaintiff the sum of $336,399.20. The benefits, rights and title under the original hire purchase agreement having been assigned by Dah Sing Finance to the plaintiff, the plaintiff is entitled to costs on a full indemnity basis.

14. I, therefore, award the plaintiff costs of the assessment on an indemnity basis. There shall be interest at judgment rate on the sum of $336,399.20 from today until full payment thereof.