LOCAL INTERNATIONAL LTD v. JOIN HO KNITTING LTD

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP)

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DECISION

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1. This is a case where the Respondent Company made application to set aside a judgment and on that setting aside application of course the Respondent Company had to show merits.

2. The order that was made was that the default judgment which was in the sum of $929,078.94 was set aside to the extent of $250,000.00 leaving a default judgment of $679,078.94 and the Defendant, who is the Respondent here, was given unconditional leave to defend the Plaintiff's claim to a sum of $250,000.00; under paragraph 4 of the Order the Respondent was entitled to file and serve a Defence and Counterclaim in relation to that $250,000.00.

3. The action turned on a failure to deliver quota. I need not go into the calculation of how that sum came to be owed but it was owing on a collection of orders for Temporary Quota and the sum ties in with a letter sent in February this year which is exhibited CWL-19 to Mr. CHUI's affirmation of 26 April. That, incidentally, is a letter from the Respondent agreeing to pay 75 per cent of the sum which is claimed.

4. The Respondent Company says that there had been an agreement in January of 1996 whereby 3,000 dozen of Type B Permanent Quota would be sold for $250 per dozen. The Respondent's case is that 1,000 dozen were delivered but the remaining 2,000 was not delivered. There does seem on the documents which are then exhibited to be a case that by 31 March of that year the price of the quota had risen; what had been about $250 per dozen, seemed by then to be closer to about $276 to $280 per dozen. This does lend some credence to the fact that the Petitioner, who had contracted to supply that quota, had been unwilling to supply it at $250 per dozen.

5. There is support for the argument that the Respondent was willing to pay by the fact that there has been exhibited a copy of an application by what appears to be a linked company of the Respondent for a Letter of Credit for the full 3,000 dozen. The Defence and Counterclaim which has been put in, which claims in respect of this 2,000 dozen, sets out the alleged damage which the Respondent is claiming in the Action. Paragraph 12 of the Counterclaim reads as follows:

And paragraph 13:

"The defendant is also entitled to Counterclaim against the Plaintiff for interest on such sums as found to be due to the Defendant at such rates and for such period as the court sees fit."

6. There is no Counterclaim in respect of any losses or contractual losses, by the Respondent with its customers but what they are claiming is that they were forced to buy the Temporary Quota and they failed to get the Permanent Quota.

7. It seems to me that on the failure to get the Permanent Quota, the damage at least on the documents which are dated as early as April of 1996, is approximately $30 per dozen and that would give a figure of at least $60,000. If the Respondent is correct that the only reason that it purchased the Temporary Quota was the failure to deliver the Permanent Quota, then that has to be taken into account in itself.

8. In those circumstances, it seems to me that the Respondent has produced enough to just satisfy me that it should be allowed to proceed with its case. There are aspects of its case which trouble me. What I propose to do is to stay this Petition until after the High Court Action is completed, in other words, until after the Respondent's Defence and Counterclaim in Action 2142 has been tried and heard.

9. I am reluctant to stay a petition but I do it in this case because, whilst I am not wholly satisfied with the Respondent's case, I think they have produced sufficient to have some alleviation; but of course they must be kept under a strict timetable and I will require an undertaking from them to proceed with the Counterclaim as quickly as possible and to have that Action set down as soon as possible. If that does not happen this matter is to be restored to this court for further consideration.