SPC CREDIT LTD v. SUN HUNG HANDBAG FACTORY CO LTD AND ANOTHER

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINSTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NUMBER HCA 3290 OF 1997

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JUDGMENT

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1. This was an assessment of damages, which came before me on Tuesday, 15 September 1998. Miss Kung, of Fairbairn Catley Low & Kong, appeared on behalf of the Plaintiff. Neither Defendant appeared, either in person or by a solicitor. I was satisfied by an affirmation of service made on 25 June 1998 by Lee Ka Fai, Timothy that notice of the appointment had been served on both Defendants. The case was duly called outside my courtroom and inquiries were made at the Information Counter on the Ground Floor of this building, but there was no trace of either Defendant. The 2^nd Defendant's wife did, however, appear in my courtroom shortly after the Plaintiff's witness had started giving his evidence. She produced a note from the 1^st Defendant on its letterhead, which was obviously intended to authorize her to represent the 1st Defendant. However, no order had been made by the Registrar permitting her to represent the 1st Defendant. The papers she produced were insufficient to enable me to make an order in that respect. Nevertheless, after the Plaintiff's witness had given his evidence in chief, I explained the position to her and I gave her a short adjournment, so that she had a chance to reflect on her position. When I returned, she told me that she had nothing to say, as she had only wished to discuss a repayment programme. She then left my courtroom.

2. This action was a claim against the 1st Defendant for damages for breach of two lease agreements. These were dated 19 December 1995 and 8 February 1996 respectively. I shall refer to them as 'the First Agreement' and 'the Second Agreement.' The 2^nd Defendant was sued under two guarantees which he had given in respect of the First and Second Agreements. Interlocutory judgment for damages to be assessed was entered against both defendants on 2^nd January 1998, in default of defence.

3. On 8 June 1998, Master Muttrie ordered that the affirmation of Woo Chung Wing made on 12 March 1998 should stand as his evidence in chief at the assessment.

4. In fact, Miss Kung did not call Mr. Woo. She told me that he was on leave. Instead, she called Mr. Tse Kwok Cheung to give evidence on behalf of the Plaintiff. Mr. Tse told me that he was a collection controller employed by the Plaintiff. He said that he was familiar with this case because he had been responsible for contacting the Defendants about payment of the amounts due and that he had also been responsible for instructing the Plaintiff's solicitor in connexion with these proceedings. He adopted Mr. Woo's affirmation as his evidence.

5. Under the First and Second agreements, which Mr. Tse produced to me and which are exhibits WCW1 & WCW2 to Mr. Woo's affirmation, the Plaintiff had let the 1^st Defendant various pieces of machinery. The two Agreements are in identical terms, mutatis mutandis. Both provide for the machinery to be let for terms of 36 months, with rent being payable by instalments.

6. Under the First Agreement, the rent was payable by an initial payment of $108,375, which was payable on the delivery of the machinery, and 31 monthly payments of $21,675 each, which were payable on the 19^th day of each month thereafter. The evidence was that the machinery had been delivered to the 1^st Defendant on or about 19 December 1995, so the first monthly payment had fallen due on 19 January 1996.

7. Under the Second Agreement, the rent was payable by an initial payment of $80,385, which was payable on the delivery of the machinery, and 31 monthly payments of $16,077 each, which were payable on the 8th day of each succeeding month thereafter. The evidence was that the machinery had been delivered to the 1^st Defendant on or about 8 February 1996, so the first monthly payment had fallen due on 8 March 1996.

8. Both Agreements provide, inter alia, that, if any instalment is not paid on its due date, such instalment should bear interest at 3% per month until it was paid(clause 4 b) and that the Plaintiff might terminate the leasing (clause 9 a i). They also provide that, if upon any termination, the Plaintiff is unable to relet the machinery, the 1^st Defendant would pay the plaintiff the amount of any loss to it, without prejudice to its right to recover damages (clause 9 c.) Clause 4 m of both Agreements provides that that the 1^st Defendant would, inter alia, pay the Plaintiff all costs, charges, duties, fees and expenses (including legal costs on a full indemnity basis) in connexion with legal proceedings to enforce the Agreements.

9. When he came to deal with the amount due by the 1^st Defendant to the Plaintiff, Mr. Tse said that he had checked and satisfied himself that the various figures, amounts and dates set out in Mr. Woo's affirmation were correct. Miss Kung put Mr. Woo's affirmation to Mr. Tse. He confirmed that it was correct.

10. In summary, Mr. Tse told me that the 1^st Defendant had been late in making payments under both Agreements. He said that it had failed to pay the insalments falling due under the First Agreement on 19 January 1997 and 19 February 1997 ($21,675:00 each); and that it had failed to pay the instalments falling due under the second agreement on 8 January 1997, 8 February 1997, and 8 March 1997 ($16,077:00 each.) He confirmed the details given in paragraph 22 of Mr. Woo's affirmation were correct. This paragraph sets out the amounts overdue under both of the Agreements on 10 March 1997. That was the date on which the Plaintiff's solicitors had written to the 1^st Defendant giving it notice, inter alia, that the two Agreements had been terminated. The amount overdue under the First Agreement was then $55,444.68, while the amount overdue under the Second Agreement was then $10,900.21, making the total amount overdue $59,131.21.

11. Mr. Tse also told me that the 1^st Defendant had failed to return the machinery to the Plaintiff, despite demand. He added that, as the machinery was in Mainland China, the cost of repossessing it would exceed its value. The Plaintiff had therefore been unable to relet any of the machinery

12. Mr. Tse said that, after termination, the 1^st Defendant had made further payments to the Plaintiff, as set out in paragraphs 24,25 and 28 of Mr. Woo's affirmation. These payments had been applied by the Plaintiff in reducing its claim for post-termination losses, as set out in paragraph 29 of Mr. Woo's affirmation. Mr. Woo had quantified these post-termination losses at $130,038.51 in respect of the First Agreement and $96,453.43 in respect of the Second Agreement. These were the net figures due, he said, after taking into account the further payments made by the First Defendant and after reducing the interest element in accordance with the Rule of 78.

13. In summary, therefore, the total amount claimed by the Plaintiff in Mr. Woo's affirmation from the First Defendant in respect of its pre and post termination losses was $185,483.19 in respect of the First Agreement, and $155,584.64 in respect of the Second Agreement. Thus, the Plaintiff sought judgment for a total amount of $341,067.83 (see paragraph 29 (bis) of Mr. Woo's affirmation.)

14. Mr. Tse said that these figures needed revising, because the Plaintiff had received some further payments, after Mr. Woo's affirmation had been prepared. Mr. Tse said that the Plaintiff had received two payments of $21,675 each under the First Agreement, on 11 March 1998 and 21 March 1998 respectively, while it had received two payments of $16,077 each under the Second Agreement, on 11 March 1998 and 21 March 1998 respectively, and a further payment of $10,000 on 5 May 1998. The consequence of these further payments, he said, was that the total amount due to the Plaintiff under the First Agreement was $142,133.19, and not $185,483.19 (as stated in paragraph 29 of Mr. Woo's affirmation), while the total amount due under the Second Agreement was $113,430.64, and not $155,584.64 (as stated in paragraph 29 of Mr. Woo's affirmation.) The total due under the two Agreements was therefore $255,563.83.

15. Mr. Tse produced the two guarantees executed by the 2^nd Defendant in favour of the Plaintiff for the 1^st Defendants liabilities to the Plaintiff. These were dated 19 December 1995 and 8 February 1996 respectively. The earlier guarantee is limited to $780,300 together with interest and costs, including legal costs on an indemnity basis. The later guarantee is limited to $578,772, together with interest and costs, again including legal costs on an indemnity basis. The two guarantees are payable on demand and are expressed to be cumulative.

16. Both guarantees were called by letters dated 10 March 1997, from the Plaintiff's solicitors to the Second Defendant. Mr. Tse told me that the 2^nd Defendant had never disputed his liability under either guarantee.

17. I had no hesitation in accepting the evidence given to me by Mr. Tse, including his confirmation of Mr. Woo's affirmation.

18. The result was that I assessed the Plaintiff's damages against both Defendants at $255,563.83 and allowed interest on the amount from time to time owing from 12 March 1998 to the date of the assessment, and thereafter at the judgment rate from time to time in force. I awarded the Plaintiff its costs of the assessment as against both Defendants, such costs to be taxed on the indemnity basis (if not agreed.)