GARLITZ INVESTMENT LTD v. TECH-TRANS LTD

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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DECISION ON ASSESSMENT OF DAMAGES

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          In this action, the Plaintiff claims against the Defendant for the return of a deposit paid to the Defendant pursuant to a contract for the supply and installation of a computer system and also for damages for breach of the contract. Upon the Defendant's failure to comply with an order for specific discovery, judgment was entered against the Defendant on 25th October 1996 for $100,000, being the amount of the deposit, together with interest, and for damages to be assessed and costs of the action.

          At the hearing of the assessment of damages, the Defendant, whose solicitors had since July 1996 ceased to act for it, was absent. The Plaintiff called one witness, Miss Tam Kit-tak, Annie, a managing director and a shareholder of the Plaintiff. Miss Tam had previously made an affidavit ("Second Affidavit of Tam Kit Tak Annie filed on 19.12.1996) and she adopted the contents of it as her evidence. At the close of the hearing, I awarded in favour of the Plaintiff damages in the amount of $999,041.09 together with interest and costs. I said I would deliver the written decision later on, which I now do.

          The Plaintiff is a company which trades as a retailer of clothing and operates the stores of the Boutique Bazaar Group in Hong Kong. By an agreement made on or about 12.5.1993. the Plaintiff contracted with the Defendant for the supply and installation of a computer system ("the Defendant's System") to handle the sales, accounts and stock of the Plaintiff and to replace the Plaintiff's existing system which was inadequate to cope with the demands generated by the expansion in the Plaintiff's business. The Defendant's System comprised a computer software known as Tech-Trans Chain Store Management System and the hardware, being an IBM RS/6000 Model 340. It was to be installed at all the retail shops operated by the Plaintiff, including 4 new shops to be opened at Hankow Centre in summer 1993. The total cost was $839,494 and a sum of $100,000 was paid to the Defendant by way of deposit and part payment.

          It was initially agreed between the parties that the Defendant's System was to be delivered within 7 weeks from the making of the agreement. In about mid-August 1993, the parties agreed to extend the delivery date to 31.8.1993. The intended opening date for the Plaintiff's new shops at Hankow Centre was 18.9.1993. and the Defendant was made aware that the system was required to be installed before that date. The Defendant was unable to deliver and install the computer system by 31.8.1993. The Plaintiff accepted the repudiation, terminated the agreement and brought the present action to recover the $100,000 paid and for damages and loss occasioned by the Defendant's breach.

          As a result of the non-availability of the Defendant's system, expenses incurred by the Plaintiff in preparation for the Defendant's System had become wasted and the Plaintiff is entitled to recover them from the Defendant. The first of these expenses is the charges paid to Hongkong Telecommunications Limited for telephone lines to link up the terminals (the Data link 64K) for the period from 27.8.1993 to 30.91993, being $4,589.09. Secondly, there is also the costs for printing invoices, reports and forms in formats suitable for use on the Defendant's System, being the sum of $4,270.

          On the other hand, the Plaintiff had to acquire from another supplier a comparable computer system of International Computers Hong Kong Limited ("ICL System") as replacement. A point by point comparison of the ICL System and the Defendant's System was prepared by the Plaintiff's Computer Program Consultant and exhibited to Miss Tam's affidavit. The costs for acquiring the ICL System, including the programs, equipment and services, was $1.230.693. The Plaintiff is therefore entitled to recover from the Defendant the difference in price between the two systems, being $391,199.

          The Plaintiff is further entitled to recover from the Defendant expenses incurred to facilitate the operation and use of the ICL System. Firstly, there is the costs of installing the power supply and cable wiring system to cater for the network of the ICL System in the amount of $59,120. Secondly, there is the costs of providing training sessions for Plaintiff's staff on the use of the ICL System in the sum of $7,000.

          The ICL System was only installed and fully operational in April 1994. Before that, in operating the 4 new shops, the Plaintiff had to rely on extra temporary staff to manually enter data about its sales, accounts and stock on its existing computer system. The salary of the extra temporary staff, totalling $93,780, is to be borne by the Defendant.

          In addition, the opening date for the 4 new shops in Hankow Centre was deferred to 28.9.1993 in order that the Plaintiff could reprint its invoices and reports, reorganise its cashier stations and engage extra staff. The Plaintiff is to be compensated by the Defendant for the profits it would have made had the shops opened as scheduled and the overheads rendered wasted as a result of the late opening. The average daily turnover of the 4 shops for the period from 28.9.1993 to 30.10.1993 was $43,708.50. Discounting one day on which the shops would have been closed anyway because of typhoon, the number of days for calculating the Plaintiff's loss as a result of the late opening is 10, giving a loss of $437,085.

          A summary of the damages assessed is as follows :-

1. The Plaintiff seeks interest from 1.4.1994 and at commercial rate, which I accept. Accordingly. the amount of damages for which the Defendant is liable is certified at HK$999,041.09, together with interest thereon at 1% above the best lending rate of Hongkong and Shanghai Banking Corporation from 1.4.1994 until 23.12.1996 and thereafter at judgment rate until payment. The costs of the assessment of damages will be to the Plaintiff, to be taxed if not agreed.