APPLICA CONSUMER PRODUCTS, INC. AND ANOTHER v. TONIC APPLICANCES LTD

HCA 2011/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2011 OF 2006

____________

____________

__________________________________

REASONS   FOR   JUDGMENT

__________________________________

1.  In this action, the Plaintiffs claimed against the Defendant in respect of some coffee makers manufactured by the latter.  The Plaintiffs bought the coffee makers for resale in the United States of America.  As a result of the defects in the coffee makers, large quantity of them had to be recalled from the market and the Plaintiffs suffered loss and damages.

2.  The case was set down for trial with an estimated length of 9 days.  There were to be witnesses and experts from overseas.  The legal costs of a full trial could be colossal.

3.  At the pre-trial review on 14 April 2010, the Defendant’s solicitors applied to cease to act.  Before granting such application, the court gave some directions as regards the future conduct of the case.  The solicitors for the Defendant had duly notified the Defendant of these directions before leave was granted by the court for them to cease acting.

4.  To provide for the efficient conduct of the expert evidence, the master had directed joint meeting of the experts.  This court noted at the pre-trial review [“PTR”] that the direction had not been complied with.  Thus, at the PTR, the court directed that experts meeting would take place by 30 April and joint expert statement shall be filed by 7 May.  The court further directed that a defaulting party would be barred from adducing expert evidence at the trial.

5.  Instead of complying with such direction, the Defendant instructed its expert not to undertake further work on the case.  Therefore, despite repeated attempts by the Plaintiff’s expert to arrange for joint meeting, the meeting did not take place.  The Defendant, as the defaulting party, was barred from adducing expert evidence at the trial.

6.  Another direction given at the PTR was that the trial would take place on 12 May 2010 (though it would be adjourned to the 9 days originally scheduled for trial in June if the Defendant contested the case by counsel or its authorized representative) and notice of trial was given to the Defendant accordingly.  The direction also provided that the Plaintiff’s evidence could be admitted on papers (without calling the witnesses) if the Defendant did not appear to challenge the same.

7.  I believe the direction is in line with the underlying objectives under Order 1A Rule 1 and within the case management power of the court under Rule 4.  The reason why such direction was given was that this court did not see any justification for escalating the costs to be incurred in a trial in which a party no longer has any further interest to contest.  If the Defendant had no interest in cross-examining the witnesses, why should the Plaintiff be required to incur the costs of flying them over from the United States?

8.  On the other hand, if the Defendant intended to contest the claim, it should appear on 12 May 2010.  In that event, the trial could be proceeded in the June dates in the usual manner.

9.  As it turned out, the Defendant had no intention to contest the claim and did not appear on 12 May 2010.

10.  The trial took place in accordance with my direction.  I gave judgment in favour of the 1^st Plaintiff in the sum of US$2,005,352.92 with interest at 1% above prime from the date of writ to judgment, and thereafter at judgment rate.  I also gave the Plaintiffs costs of the action, to be taxed if not agreed.

11.  The Plaintiffs had 3 witnesses, two factual and an expert.  All the witnesses had confirmed their witness statements and expert report on oath by way of affidavits.  I accept their evidence.

12.  On the evidence, I find that the claim of the Plaintiffs was established.  The salient facts are as follows.  The Plaintiffs engaged the Defendant to manufacture about 420,000 coffee makers Model TCM 800 in accordance with specifications provided by the Plaintiffs.  The coffee makers were sold in the market in 2004.  Afterwards the Plaintiffs received complaints from customers and there were instances of the coffee makers severely overheating, smoking and catching fire or even melting.  The Plaintiffs were seriously concerned about such complaints and steps were taken to investigate the cause of the problems.  It was found that the overheating was due to the failure of the microprocessor and the electronic control of the coffee maker and the thermal cut off device was not working properly.

13.  These defects were confirmed by the Plaintiffs’ expert, Mr Hoffmann, who has conducted tests on two returned units.  He also found that all the TCM 800 units had a risk of overheating, melting and catching fire as a result of the manufacturing defects.

14.  I find that the coffee makers supplied by the Defendant were not manufactured in accordance with the Plaintiffs’ specifications.

15.  As a result, the Plaintiffs had to recall TCM 800 from the market in June 2006.  In so doing, the Plaintiffs acted reasonably in view of the fire hazard risk of the coffee makers.

16.  The quantum of damages suffered by the Plaintiff was set out in an accountant’s report.  At the PTR, this court directed that the schedule in the report be treated as Plaintiff’s Statement of Damages and the Defendant, if it wished to dispute the same, were to file an Answer by 30 April 2010.  I also directed that if the Defendant did not file any Answer, it would be barred from challenging the quantum at the trial.  Such a direction was necessary in view of the voluminous documentary evidence on quantum.  Without any Answer, the trial on quantum would be unfocused and difficult to manage.

17.  The Defendant did not file any Answer.  Thus, it was barred from challenging the quantum.

18.  Items 1 to 3 of the schedule of damages related to costs of the recall exercise and compensation or refund to retailers.  I have held that the exercise was reasonable.  The three items should be allowed.

19.  The other parts of the schedule relates to the inventory.  Of the two figures under item 4, counsel for the Plaintiffs quite properly invited this court to adopt the lesser figure of US$1,415,179.70 as the book value of the inventory.  86,928 of these units had been reworked at the costs of US$256,748.63 to become TCM 999 units.  The sale figure of 50,167 reworked units was set out in the Schedule as US$844,246.32.  Counsel fairly accepted that credit should also be given to other reworked units.  The total credit for the 86,928 units was worked out to be US$1,462,886.84.  Thus, the net loss suffered by the Plaintiffs in respect of the inventory should be US$209,041.49.

20.  Adding all the items together, the total figure for the damages is US$2,005,352.92.  I gave judgment accordingly.