WAYFOONG CREDIT LTD v. NG SIU CHEONG AND OTHERS

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

___________

_________________________

ASSESSMENT OF DAMAGES

__________________________

1. The Plaintiff is a finance company carrying on the business of, inter alia, leasing of machineries. By 2 Lease Agreements dated 16th March 1988 and 14th April 1988, and offset machine and a plain paper copier were respectively leased to the Defendants for a 36 month period commencing from the dates of the said agreements, and upon the terms and conditions therein contained. The Defendants defaulted in the monthly rentals resulting in the determination of the leases in September 1988, and the commencement of these proceedings by the Plaintiff in August 1989. Interlocutory judgment for damages to be assessed was obtained on 2nd October 1989 in default of a notice of intention to defend.

2. The assessment was heard on 26th March 1990 when it was adjourned part-heard. It was further heard on 17th May 1990 when judgment was reserved. The Plaintiff called a total of 2 witnesses, the section head of the Arrears Section and a valuer. The Defendant was absent throughout the proceedings.

3. Under the First Agreement dated 16th March 1988 for the Gestetner offset machine, a monthly rental of $3,805.00 was payable on the 16th day of each month. Interest on overdue rentals was payable at the rate of 2% per month. In paragraph 3 of the Statement of Claim it was pleaded "The hire charges included in respect of the first Agreement was HK$27,828.00", despite it was also pleaded that the transaction was one of leasing and not the hire-purchase of the machine. In evidence, Mrs. Wong Po San (P.W.1), the section head of the Arrears Section said the price of the machine was $108,000.00, and not $109,152.00 ($3,805.00 x 36 - $27,828.00). The Defendant paid only 5 instalments totalling $19,025.00 and $168.88 in part payment of the rental due on 16th August 1988. The agreement was terminated by notice on 19th September 1988. As at the date of such termination, there were due to the Plaintiff arrears of rental in the sum of $7,441.12 ($3,805.00 x 2 - $168.88) and overdue interest in the sum of $387.69.

4. Under the Second Agreement dated 14th April 1988 for the plain paper copier, a monthly rental of $493.00, and an overdue interest of 2% per month were payable. The "hire charges" pleaded in paragraph 5 of the Statement of Claim was $4,104.00, though in evidence the price was stated to be $13,120.00 and not $13,644.00 ($493.00 x 36 - $4,104.00). Only 4 instalments totalling $1,972.00, and $6.00 in part payment of the rental due on 14th August 1988, were paid. At the date of termination of the agreement on 16th September 1988, there were due to the Plaintiff arrears of rental in the sum of $980 ($493,000 x 2 - $6.00) and overdue interest in the sum of $33.59.

5. The 2 sets of machines were repossessed on 28th December 1988 by the Plaintiff's agent, one United Motors. A sum of $4,028.00 was claimed for the repossession, storage and transportation of the offset machine; and a sum of $500.00 was claimed for the repossession of the copier. A further sum of $60.00 was claimed for advertisement fee for the offset machine. However, in evidence, P.W.1 said the advertising fee was incurred in respect of the Second Agreement.

6. The above claim of the Plaintiffs, save the $60.00 advertising fee, have been satisfactorily established and damages are awarded as per claimed.

7. The Plaintiff also claimed for the total rental for the unexpired term of the said Lease Agreements in the sum of $86,681.65. In so claiming the Plaintiff relied on Clause 8(c) of the Lease Agreements which provided:-

 

Then (without prejudice to any right of the Lessor to recover damages from the Lessee for breach of this Agreement) the Lessee shall, on demand, pay the amount of such loss to the Lessor."

8. Initially, counsel for the Plaintiff also relied on Clause 8(e) to submit that the court is only entitled to enquired into the accuracy of the arithmetic of the formula adopted by the Plaintiff in the determination of the amount of damages claimed, but not the reasonableness of such an amount. Clause 8(e) provided:-

However, this submission was abandoned when its validity was being tested against various well-established legal principles as well as reasonableness. Without the need to decide the issue, I am, however, satisfied that Clause 8 could not possibly have the effect of entitling the Plaintiff, in law, to any amount of damages it sees fit to determine. The disposal market value of the goods, and damages, always remain a matter for judicial determination.

9. No evidence at all was led to establish any attempt on the part of the Plaintiff to relet the said machines. The Plaintiff's attempt to recover its loss was confined solely to the selling of the machines. To succeed, the Plaintiff needs to construe the conjunction "or" joining Clause 8(c)(i) and (ii) to have a disjunctive rather than a conjunctive meaning. Without the benefit of any submission being made on the point, I have come to the view that the said conjunction should be given a disjunctive meaning. In the premises, it is not necessary for the Plaintiff to exhaust the remedy of reletting before it is entitled to disposal of the goods by sale. This is more so as the Plaintiff conceded that the "Rule of 78" would be applied to take into account the accelerated payment brought about by a sale before the expiration of the outstanding term of letting.

10. However, it transpired during the testimony of P.W.1 that, in accordance with the Plaintiff's usual practice, offers for the sale were in fact only invited from seven chosen dealers who were customers of the Plaintiff. Despite the brief reference to the placing of advertisement in a newspaper, it was unclear whether it involved the offset machine or the copier. In the premises, there was no satisfactory evidence that any of the said 2 machines was ever offered to the public for sale. P.W.1 further said that after tenders were received from same of the dealers, a private approach to one of such dealers, Gestetner (i.e. the supplier of the machines), was made by phone. As a result of such an approach, Gestetner increased its offer for the offset machine to $18,000.00 (from the original offer of $15,000.00) thereby defeating Tai Cheong Fang's offer of $17,300.00. Such shockingly unfair practice would totally destroy the fundation of any tender system. An identical private apprcach managed to secure the copier to Gestetner for $4,000.00 (after it revised its original offer of $1,500.00), by defeating Tai Cheong Hang's offer of $3,000.00.

11. In view of such state of evidence, an adjournment was sought by the Plaintiff afterwhich a valuer, Mr. Maxims Martes (P.W.2), was called to place a valuation on the said machines. He valued the offset machine to have a "forced liquidation value" of $30,000.00 to a speculative buyer. He said the market value to an enduser-buyer would be 30-40% higher i.e. $39,000.00 to $42,000.00. He said if the machine was taken back by the supplier/dealer, the price offered would be 20-30% lower than those that would be offered by a speculative buyer, i.e. $21,000.00 to $24,000.00 only. This is because the supplier has a reputation to protect and would only resell its own product after proper reconditioning, and would also be offering a guarantee for the same. He added the offset machine would not have a readily available market as it could only be used by a printer. I accept his evidence and find the market value of the offset machine to be that of a forced liquidation value in the sum of $30,000.00, and not the actual realisation price to Gestner of $18,000.00.

12. For the copier, P.W.2 said the speculative buyer price would be $3,000.00. But an enduser would offer 40-50% higher for the same i.e. $4,200.00 to $4,500.00. He concluded that there is a good market for this sort of office equipment, and the price should be at least $4,500.00. I am satisfied that the market value of the copier ought to be $4,500.00 and not the realisation value of $4,000.00.

13. Pursuant to the "Rule of 78", a rebate of $18,175.94 and $2,865.41 would be credited to the offset machine and copier respectively. In the premises, damages for the unexpired term under the Lease Agreements are awarded in the respective sums of $62,169.06 and $7,424.59.

First Agreement

Second Agreement

14. In the premises, damages suffered by the Plaintiff under the 2 Lease Agreements are certified in the total sum of $82,964.05.

First Agreement

Second Agreement

Total = $82,964.05

15. There will be an order nisi for costs of the assessment to the Plaintiff with a certificate for counsel. However, as the adjournment on the first day of hearing was mainly to accommodate the Plaintiff to enable expert evidence on valuation to be called, the Plaintiff's costs for the hearing on 17th May 1990 will be disallowed.

16. Dated the 22nd day of May 1990.