WO FUNG PAPER MAKING FACTORY LTD. v. SAPPI KRAFT (PTY) LTD.

HCA 1407/1987

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1407 OF 1987

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ASSESSMENT OF DAMAGES

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Introduction

1. In this action, the plaintiff sues the defendant for breach of eight sale of goods contracts. Under each of these contracts, the defendant agreed to sell to the plaintiff 500 metric tons of kraft paper at the price of US$253 per metric ton CIF Hong Kong. The latest shipment dates varied from 5th March 1986 to early June 1986. The first two contracts were in fact two of the six made between the parties on 24th October 1985. The remaining six contracts were made on 2nd January 1986. The defendant failed to deliver 443.572 metric tons of paper under the 1st contract and any paper under the other seven contracts, making a total of 3,943.572 metric tons. Negotiations ensued between the parties. And the plaintiff had, upon the request of the defendant, extended the validity of the letters of credit. Eventually, on 24th October 1986, the defendant indicated in writing that it refused to make any more delivery under the contracts. The plaintiff accepted the repudiation and on 10th March 1987 commenced the present proceedings.

2. The defendant, a South African company, took issue on jurisdiction. What followed was a string of hearings on jurisdiction and stay of proceedings, which ended up in the Court of Appeal. On 15th April 1988, the Court ruled against the defendant. The proceedings continued but the defendant failed to file a defence. On 4th April 1991, the plaintiff duly obtained an interlocutory judgment for damages to be assessed. Directions regarding the assessment hearing were not obtained until 31st May 1995. The plaintiff took 2 years to comply with the directions to file the affidavit of Mr. Ko Kim Ching ("Mr. Ko") dated 25th June 1997. It was yet another year when the assessment eventually came before me 18th September 1998. Unfortunately, the hearing was adjourned for want of proper hearing notice to the defendant. When everything is ready for the assessment to proceed, it is already 12 years and 9 months since the date of writ.

Assessment

3. The plaintiff claims for:-

(1) direct loss arising from the non-delivery of the 3,943.572 metric tons of paper; and

(2) consequential loss, being the banking charges for extending the letters of credit in the sum of HK$19,737.55.

4. In respect of the direct loss, the plaintiff initially raised 4 different methods of calculation covering, inter alia, loss of profit and loss of goodwill. Eventually, Mr. Ng, counsel for the plaintiff, only relies on the calculation pursuant to Section 53(3) of the Sale of Goods Ordinance. Section 53(3) provides:

"Where there is an available market for the goods in question, the measure of damages is prima facie to be ascertained by the difference between the contract price and the market or current price of the goods at the time or times when they ought to have been delivered, or, if no time was fixed for delivery, then at the time of the neglect or refusal to deliver."

5. Mr. Ng submits that since the parties were negotiating after the defendant had failed to deliver the goods on time, no time had been subsequently fixed for delivery under any of the eight contracts. 24th October 1986 was the time of refusal to deliver within the meaning of Section 53(3) when the defendant emphatically indicated that it would not make any delivery. Further, it is Mr. Ko's evidence that as at October 1986, there was an available market of the kraft paper and the market price was $425 per metric ton. These are not contradicted by any other evidence before me. I accept Mr. Ng's submission and applying Section 53(3), the loss is US$(425-253) x 3,943.572 = US$678,294.38.

6. Turning to the consequential loss, I note that when the letters of credit were extended, the parties were negotiating. The bank charges did not arise out of the subsequent non-delivery. Further, there is no evidence to suggest that the defendant had agreed to reimburse or otherwise compensate the plaintiff for such charges. Accordingly, I hold that these charges are not recoverable.

Interest

7. Undoubtedly, there has been substantial and inordinate delay on the plaintiff's part in prosecuting this action. Mr. Ng cannot explain why. He concedes that the plaintiff is only entitled to interest for 6 years from the date of refusal to deliver, 6 years being the limitation for actions in contract.

8. As seen above, the initial progress of the action was hindered by the hearings on jurisdiction and stay. The plaintiff could not be blamed for the time lost before obtaining the default judgment on 4th April 1991. However, had it been more diligent in expediting the matter thereafter, the assessment was likely to be disposed of within 1 year or so. Mr. Ng's suggestion of 6 years from the date of breach (24th October 1986) is therefore reasonable in the circumstances. And I accept it.

Order

9. Accordingly, I enter the judgment for the plaintiff against the defendant for the sum of US$678,294.38 or its equivalent in Hong Kong currency with interest at the judgment rate from 24th October 1986 for a period of 6 years. I also make an order nisi that the plaintiff do have the costs of the assessment to be taxed if not agreed, to be made absolute after the expiration of 14 days from the date of judgment.