GLOBAL ASIA LTD. v. VERDI PRINTING CO. LTD.

HCA5081/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.5081 OF 2001

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J U D G M E N T

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1) This is a trial of an action brought by the plaintiff against the defendant for damages arising out of a breach of contract dated 12 March 2001 entered into between the plaintiff and the defendant.

2) The plaintiff, at all material times, was a supplier of printing machines. The defendant was in the business of printing and therefore required a printing machine. The machine in question was a Sanjo machine manufactured by Sanjo in Japan which was to be supplied by Sanjo in Japan to the plaintiff. The contract in question was entered on 12 March 2001. Under this contract, delivery was stated to be June/July 2001. The printing machine arrived in Hong Kong on 26 August 2001. The defendant failed to take delivery and, in fact, refused to take delivery. The plaintiff, therefore, sues by this action for damages suffered as a result of the failure by the defendant to honour the terms of the contract.

3) Two issues arise for consideration by the court at the hearing, the first is liability and, the second is quantum of loss alleged to be suffered by the plaintiff.

4) So far as the liability is concerned, the principal defence relies on late delivery, which entitles the defendant not to accept delivery. Second defence is that there was an agreement to accept a cancellation of the contract.

5) So far as late delivery is concerned, it is clear that the contract does not specify that time of delivery is of the essence. In fact, by clause 4 of the contract, it said that :

"The Company will use its best endeavours to despatch or cause to be despatched the goods herein referred on the estimated date of delivery set out in the Company's acknowledgement of order form but it is hereby expressly stated that time for delivery is not of the essence of the contract ..."

So, time of delivery is not of the essence of the contract. It seems to me, quite clear, that the delivery stated in the contract was an approximation. Furthermore, by the act of the parties, time for delivery was, quite clearly, postponed to a reasonable time after July 2001.

6) This came about as a result of the defendant failing to comply with its payment obligations under the contract; the defendant failed to pay the 10% deposit which is stipulated to be paid upon the signing of the contract and the defendant failed to open the L/C in the amount of 90% of the purchase price.

7) It is not necessary in this judgment for me to recite the exact sequence of events except to say that instead of the defendant issuing to the plaintiff a L/C opened upon the defendant's application, the application for the opening of the L/C was made by the plaintiff to Dah Sing Bank in favour of the Japanese seller. That L/C was issued on 11 April 2001. The amendment of the L/C was on 23 June 2001 with an amended shipment date of 31 August 2001. In fact, even as late as 4 June 2001, Mr Cheng signed a specification document from Sanjo confirming the details of the specification. So, it was quite clear that Mr Cheng of the defendant had known and agreed all along that the time for the delivery of the machine was not going to be in late July but sometimes afterwards. I accept the evidence of Mr Chu for the plaintiff that because of the delay caused by the defendant's default, time for delivery would be at least four and a half months' working time from time of the plaintiff's order placed with Sanjo. It was quite clear in June and July that the delivery was going to be at least in late August/early September.

8) The machine, in fact, arrived in Hong Kong on 26 August 2001 and the defendant was asked to take delivery. Various excuses and difficulties were created by the defendant for not taking delivery. There were discussions about concession requested to the plaintiff to accommodate the defendant. But in fact nothing came out of this.

9) In my view, the defendant was a very good businessman who was trying to squeeze the plaintiff to obtain better terms. I have heard the oral evidence from both Mr Chu of the plaintiff and Mr Cheng of the defendant. I have no doubt that Mr Chu was an honest and reliable witness. He might not be very bright and this could be seen from his conduct in this affair (some of which may not be very commercial), but he certainly is honest so I accept him as a witness of truth. On the other hand, Mr Cheng is in my view a clever and devious businessman and I do not believe his evidence. So it is quite clear to me that the so-called late delivery of the machine could not possibly form a proper basis for the defendant to refuse delivery.

10) As to the alleged defence that there was agreement to cancel, there was simply no basis for that. Even putting at its highest, Mr Cheng merely said that he asked for a cancellation but Mr Chu did not agree. So, on liability, I have come to the clear view that the defendant is liable to the plaintiff for breach of contract.

11) I now turn to the question of quantum. The quantum is claimed under three different heads. (The $5,500 for transportation to China, under page 60, had been dropped, so, there are really three heads of damages.)

12) The first head is a claim for the difference in price between the contract price of YEN 55,800,000 (converted at the rate of 0.83, arriving at the figure of HK$3,794,400, appearing on page 26 of the bundle in the answer to the Request for Further and Better Particulars) and the actual price which was eventually realized by the plaintiff (RMB 3,100,000, converted at the rate of 1.05, arriving at a figure of HK$2,952,380 see page 26). The difference in price is HK$842,020.

13) I have no problem with that figure of loss because it is quite clearly shown in the evidence of Mr Chu and in the contemporaneous documents that after considerable difficulties, the goods were sold at the price of RMB 3,100,000 and with postponed payments.

14) Then, there is the question of the storage charges as a result of the refusal by the defendant. This claim really consists of two parts : the first part is the sum of HK$6,600 (at page 59 of the bundle) which consists of the charge imposed by the container yard for the storage of a container at the yard for a period of time, from 3 September to 13 September (because the limited number of days of free storage expired on 2 September). I accept that figure of claim. The balance of the claim for storage consists of storage into a warehouse for about four months. The documents can be seen from pages 66 to 69 and at page 79, they added up to a total of HK$13,240.30. I also accept that evidence. Therefore, under that heading for storage, the sum established as quantum of loss is HK$19,840.30.

15) Finally, there is a claim for bank interest of HK$50,000. This arises out of a special arrangement that the plaintiff had to make because of the non-receipt of the L/C amount from the defendant and because the plaintiff, in its sale to the Chinese buyers, did not receive the full payment of RMB3,100,000 immediately upon delivery of the goods in January. This caused a cash flow problem to the plaintiff and in order to bridge over that problem and to enable the Japanese seller to be paid and for the goods to be delivered to China without receiving in the meantime the full sum, a lease agreement of HK$1.05 million was entered into by the plaintiff with Dah Sing Bank. The document can be seen at page 82. This is a lease of the equipment for a period of one year, and one can summarise the position by saying that as a result of this lease, interest of HK$50,000 had to be borne, and that is the amount of interest that is claimed by the plaintiff as a result of the breach of the various terms of the agreement by the defendant. I accept this head of claim of HK$50,000 although it is somewhat complicated in the way it comes about.

16) I therefore find in favour of the plaintiff in the sum of $911,860.30 ($842,020 + $19,840.30 + $50,000). I also award interest to the plaintiff at the rate of 2% above prime from the date of the writ until today.

17) So far as the counterclaim is concerned, that must be dismissed.

18) I also award costs of the action, including costs of the counterclaim to the plaintiff.