XCHRX Gold Insignia Electronic Co. Ltd. v. Ciponic Technology Co. Ltd.

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3150 OF 2001

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R U L I N G

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1. This is an appeal against an order of Master Kwong dated 10 July this year refusing an application for specific discovery by the defendant requiring the plaintiff to disclose by affirmation whether it has or at any time had in its possession, custody or power, the documents specified in the schedule to the summons for discovery which is dated 22 May this year. The schedule is in these terms:

1) All purchase orders received by the plaintiff from its customers, purchasers and its subsidiary or associated company, if any, for the purchases of plaintiff's goods as defined in paragraph 1 of the Statement of Claim (the goods) for the period from 10 March 2000 to the date of discovery.

2) All invoices and delivery notes of the plaintiff for its sales of the goods for the period from 10 March 2000 to the date of discovery.

3) All stock lists of the plaintiff in respect of the goods in the possession of the plaintiff from the period of 10 March 2000 to the date of discovery.

4) The relevant financial statements of the plaintiff for the period from 10 March 2000 to the date of discovery in respect of the sales of the goods capable of disclosing the purchases of the goods by the plaintiff from its own suppliers and the re-sales of the goods by the plaintiff.

5) All the plaintiff's purchase orders to the plaintiff's own suppliers for the supply of the goods for the period from 10 March 2000 to the date of discovery. The delivery notes and the invoices of the plaintiff's own suppliers for the supplies of the goods.

6) Lists of customers of the plaintiff who have, are purchasing or will purchase the goods from the plaintiff.

7) All advertising documents and materials published by the plaintiff or on its own behalf in respect of the goods for promotion of sales of the goods for the period from 10 March 2000 to the date of discovery.

2. It is necessary for me to explain the nature of the claim and the defence to it. The plaintiffs are suppliers of spare parts and components for computers. By a purchase order dated 10 March 2000, the plaintiffs agreed to sell to the defendants over 217,000 computer parts to the value of $229,440. The defendants took delivery of the majority of the order for which payment has been made but has declined to accept and pay for 92,500 parts costing $91,840.

3. These facts are essentially agreed on the pleadings. The plaintiff's claim is for the price of these untaken goods, namely $91,840. The plaintiffs say these goods have always been available and they require the defendants to take delivery and to pay the price.

4. The defendant's case is that they informed the plaintiffs that they did not intend to take delivery of these items and that in such circumstances the plaintiffs should have sold them elsewhere and thereby mitigated their loss which is what they are required to do. Further, these items are very commonplace for which there is a ready market and the plaintiffs who sell these items on a daily basis should and could have sold the untaken goods elsewhere and therefore they would have suffered no loss.

5. Miss Tsui who appears for the plaintiffs accepts that these components are commonly sold by her clients and that in suing for the price, she has also made clear that her clients would not have given delivery of the precise consignment of parts which may originally have been earmarked or allocated to the defendant's order but an identical replacement order which is and would have been readily available to the plaintiffs in the ordinary course of their business. The plaintiffs insist on performance of the contract and they require the price to be paid to them. There is no claim for damages for non-acceptance.

6. Without wishing to prejudge the outcome of the action, I am bound to say that this is an unusual and high risk stance for the plaintiffs to adopt on a sale of commonplace items, particularly when there is no alternative claim for damages to compensate them for loss of profit, although the court, of course, retains the power in an action for the price to award damages instead, if it considers this to be the appropriate remedy.

7. I now come to the purpose of the summons for discovery. Mr Wilson Yeung for the defendants submits that in an action for the full amount of the price, the plaintiff is required to show that the goods continue in his possession, ready to be delivered, the goods being the very goods originally appropriated to this contract and not any substitute goods. He says that there is a burden on the plaintiff to show that the untaken goods remain in its possession and that the line of discovery now sought is designed to trace the goods into the plaintiff's possession and to test whether or not the goods are still in its possession. He is correct in that submission, but this is all very well if the case was being contested on this basis. In fact, it is not.

8. Miss Tsui accepts that any goods which may originally have been earmarked for the defendants have now been disposed of and the plaintiff's case is that at all times the plaintiffs would be in a position to deliver identical replacements, and so the defendants do not have to meet the sort of case postulated by Mr Yeung. They do not have to try and destroy an allegation that the original goods were ready for delivery and remain with the plaintiffs and are still ready for delivery.

9. That being so, the potentially extensive discovery sought by this summons is entirely unnecessary and I shall therefore refuse to make the order asked for by Mr Yeung. This appeal must therefore stand dismissed.

10. But before I leave this matter, I should perhaps make some cautionary remarks, but as I have already observed, without in any way wishing to prejudge the outcome of the action. This is a claim in respect of commonplace items. It would be unusual to order the defendants to pay the price and to oblige them to accept delivery. The court may or may not award damages in the alternative, particularly where none are claimed. In any event, the plaintiffs would bear the burden of showing that they had made a loss for which they should be compensated. If there was such an alternative claim, that claim would require full particulars and there would be a requirement to make disclosure of a number of matters relating to it. Where this has not been done, the court may decide that it should not award damages as an alternative remedy. These matters should be reflected on, primarily by the plaintiffs, before the litigation and the costs in what is a modest claim escalate disproportionately.

(Submissions on costs)

11. Costs in the cause.