WILTECH (HK) ELECTRONICS LTD v. DAILY POWER BATTERIES LTD

DCCJ 6137/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6137 OF 2006

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REASONS FOR JUDGMENT

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1.  This is the trial of an action brought by the Plaintiff against the Defendant for a sum of HK$401,063.32. Ms Pauline Leung, counsel for the Plaintiff, confirmed to the court at the hearing that the claimed amount should be HK$401,063.30. The Defendant acted in person and was absent at the trial. 

2.  The Plaintiff had engaged in the business of selling power batteries and started to have business transactions with the Defendant in November 2003 for the supply of power batteries to each other. In order to save costs and time, a practice was established between the parties that the Defendant would deliver power batteries to a company named 浙江三特電池股份有限公司 in China (the “Company”) direct for packaging. After packaging, the Company would deliver the packed batteries to destinations designated by the Plaintiff for reselling at profit.

3.  In March and April 2004, the Company, on behalf of the Plaintiff, ordered power batteries from the Defendant under invoices nos. 003133, 003146, 004961, 004966, 004972 and 004978 for resale in Egypt (“Battery 2”). The purchase was evidenced by a Sales Confirmation/Sales Order No. SO002 issued by the Defendant. At the same time, the Defendant also placed several orders with the Plaintiff for the purchase of power batteries. The Plaintiff duly delivered the power batteries as ordered to the Defendant.

4.  In or about March 2004, there was an outstanding payment due from the Defendant to the Company in the sum of HK$441,960.00. By an Agreement of Assignment of Debt, all the parties agreed that the Plaintiff would pay the said sum of HK$441,960.00 to the Company while the Defendant agreed to repay the same to the Plaintiff by four instalments by four post-dated cheques. The Plaintiff did pay the Company a total sum of US$54,206.81 (HK$422,813.12) pursuant to the Agreement of Assignment of Debt by remittance payments on 9^th December 2004 and 23^rd February 2005.

5.  Of the four post-dated cheques issued by the Defendant to the Plaintiff pursuant to the Agreement of Assignment of Debt, only one in the sum of HK$100,000.00 was honoured upon presentation. The other three cheque nos. 143095, 143085 and 143086 for a total sum of HK$341,960.00 were dishonoured on 24^th June 2004, 15^th July 2004 and 15^th August 2004 respectively and the reason given for the dishonouring was “refer to drawer”. As a result of the dishonoured cheques, William Lim (“Lim”) of the Plaintiff who gave evidence at the trial contacted Mr Leung Kwok Chuen (“Leung”) of the Defendant. There were a few telephone conversations between Lim and Leung during which Leung informed Lim that the Defendant was in financial difficulties and was not in a position to pay the Plaintiff.

6.  To solve the impasse, the Plaintiff and the Defendant managed to reach a settlement agreement dated 1^st November 2004 (the “Settlement Agreement”) whereby it was agreed that 40% of the purchase price of purchase order to be placed by the Plaintiff with the Defendant would be used to pay off the amount owed to the Plaintiff by the Defendant. The balance of the 60% of the purchase price would be paid by the Plaintiff to the Defendant seven days after inspection by the Plaintiff. The Settlement Agreement also provided, inter alia, that where more than 0.5% of power batteries supplied by the Defendant were defective, the Defendant should be responsible for replacing the defective batteries and indemnifying the transport costs and custom charges. The Settlement Agreement further provided that where customers of the Plaintiff lodged other claims for compensation, the Plaintiff and the Defendant would negotiate to resolve the dispute. As to the duration of the Settlement Agreement, it was further provided that the same should take effect immediately and would expire when the Defendant had paid off all the outstanding amount owed to the Plaintiff.  

7.  Pursuant to the Settlement Agreement, the Plaintiff placed several orders with the Defendant (“Battery 1”) starting from December 2004 and requested the Defendant to pack the power batteries and deliver the same to the Plaintiff for re-sale in New York as the same had been re-sold to one Golden Million Enterprises Inc. There are quite a number of documents evidencing the purchases and I do not intend to list them in this judgement. It is sufficient for me to record that those documents are items 13 to 26 and 61 of the Plaintiff’s Agreed Paginated Bundle of Documents. According to Lim, the aggregate value of the power batteries for Battery 1 was HK$341,960.00. 

8.  In or about September 2005, both the Plaintiff’s customers in the US and Egypt (i.e. in respect of Battery 1 and Battery 2) complained that some of the batteries supplied by the Defendant to the Plaintiff were defective with problems of leakage and failure to generate electricity.

9.  Upon receipt of the complaints of its customers, Lim and Madam Ma Ching Fong (“Madam Ma”) of the Company informed the Defendant of the complaints both orally and in writing. Some of the defective samples were also delivered to the Defendant for verification purposes. After negotiation, the Defendant agreed in writing in an agreement dated 6^th March 2006 that, as compensation for the defective batteries supplied in respect of Battery 2, it would refund the purchase price to the Company in the respective sums of HK$94,236.40 and RMB27,900.00 at an exchange rate in November 2004 at RMB1 = HK$0.96, giving the sum of HK$26,826.90. Thus, as far as Battery 2 is concerned, the total amount due from the Defendant is HK$121,063.30. 

10.  As the Company was only buying batteries on behalf of the Plaintiff, it wrote to the Defendant in a letter dated 17^th May 2006 and requested the Defendant to issue cheque for the above-mentioned compensation to the Plaintiff directly.

11.  For Battery 1, as a result of the defects, the US customer only accepted those workable batteries for the value of HK$61,960.00 out of a total value of HK$341,960.00. The remaining batteries, valued at HK$280,000.00 were all rejected by the Plaintiff’s customer. Lim informed the Defendant of the defects and requested the Defendant for compensation by two fax letters dated 15^th December 2005 and 23^rd December 2005.

12.  Then on or about 6^th September 2006, both the Plaintiff and the Defendant participated in the exhibition held at the Hong Kong Convention and Exhibition Centre. The US customer of the Plaintiff also attended the exhibition and presented the defective samples of the batteries and demanded immediate compensation. Madam Ma led the US customer to the exhibition booth of the Defendant. The customer then presented the defective batteries to Leung who first alleged that the warranty period had expired. Lim explained in his evidence that in fact, the warranty period had expired simply because the Defendant was late in delivery so that the customer in the US was unable to inspect the power batteries supplied within the warranty period. In any event, Leung agreed that if the power batteries were supplied by the Defendant, the Defendant would compensate the Plaintiff’s loss.

13.  But so far, the Defendant has failed to compensate the Plaintiff.

14.  There being no rebuttal evidence from the Defendant disputing the claim of the Plaintiff, I accept the evidence of the Plaintiff and allow the claim of the Plaintiff.

15.   The Defendant had put in a Counterclaim. As, however, there was no evidence from the Defendant in support of the Counterclaim, I do not intend to go into the details of the Counterclaim. It would be sufficient for me to say that Lim had explained the Counterclaim in his evidence. I accept the explanation. I, therefore, would dismiss the Counterclaim of the Defendant.

16.  The orders I shall make are as follows:

(a)  Judgement be entered in favour of the Plaintiff and against the Defendant in the sum of HK$401,063.30;

(b)  the Counterclaim of the Defendant be dismissed;

(c)  there shall be interest on the said sum of HK$401,063.30 at the rate of prime plus 1% from the date of the Writ until judgement and thereafter at the judgement rate; 

(d)  costs order nisi of the action, including all claims and counterclaims, in favour of the Plaintiff with certificate for counsel, to be taxed if not agreed;

(e)  the costs order nisi shall become absolute in 14 days.