WINPLUS AUSTRALASIA PTY LTD v. BEAUTY CAPTIAL INDUSTRIAL DEVELOPMENT LTD

DCCJ3718/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3718 OF 2012

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JUDGMENT

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BACKGROUND

1. This is a breach of contract claim by the purchaser of 4,320 pieces of digital audio broadcasting (“DAB”) radios against the seller for return of deposit and loss of profit.  

THE PLAINTIFF’S CASE

2. The plaintiff is a company incorporated in Australia and carries on a wholesale business of consumer products.

3. The defendant is a company incorporated in Hong Kong and carries on a manufacturer and supplier of DAB radios.

4. By a partly oral and partly written agreement (the “Agreement”), the plaintiff agreed to buy and the defendant agreed to supply 4,320 pieces of DAB radios (the “Goods”) at the price of US$23 each for a total sum of US$99,360.

5. The Agreement contains the following conditions:-

(a) The Goods would be shipped from Shenzhen on 18.6.2012;

(b) the Goods were expected to arrive at Melbourne, Australia on 11.7.2012; and

(c) time was of the essence.

6. The Agreement also contains the following implied conditions pursuant to the Sale of Goods Ordinance, Cap 26, Laws of Hong Kong:-

(a)   The defendant had a duty to deliver the Goods in accordance with the terms of the Agreement; and

(b)   the defendant’s duty to give possession of the Goods to the plaintiff was a concurrent condition to the plaintiff’s payment of the price to the defendant under the Agreement.

7. At all material times, the defendant knew the plaintiff purchased the Goods for resale at a profit, to its customer Aldi Stores of Australia and the Goods were selected and designed by Aldi Stores with special designs required by Aldi Stores.

8. Pursuant to the Agreement, on 20.4.2012, the plaintiff paid the defendant US$49,680 as deposit.

9. In breach of the Agreement the defendant failed to ship or deliver any of the Goods to the plaintiff.

10. By email dated 19.7.2012, the plaintiff accepted the defendant’s repudiation and now sues for return of the deposit and loss of profit in the total sum of US$74,747.02.

THE DEFENDANT’S CASE

11. The defendant states the plaintiff knew the final stage of production of the Goods would take place after the issuance of Certificate of Europe (“CE”) by SGC_CSTC Standards Technical Services Co Ltd.  Therefore, the delivery date on the Agreement was only tentative and can be varied by reasonable notice from the defendant to the plaintiff.

12. On or about 29.5.2012, the defendant informed the plaintiff that two components of the Goods required retesting to pass CE.

13. On 3.7.2012, the defendant delivered two samples of the Goods for plaintiff’s approval and informed the plaintiff that after approval it would require two weeks to complete production and deliver the Goods.

14. On 10.7.2012, the plaintiff informed the defendant that it will not require CE in order for the defendant to arrange production; however, the plaintiff refused to confirm the same in writing.

15. On 18.7.2012, Mr Wong Kin Kwok of the defendant met with Mr Leung Chung Ho of the plaintiff and informed him that the Goods can be completed within 2 weeks upon receipt of written confirmation that the plaintiff would accept the Goods pending resolution to the issue of CE.

16. The plaintiff canceled the Agreement on 19.7.2012.

THE PLAINTIFF’S REPLY

17. The plaintiff stated the shipping and delivery date of the Goods were not tentative, but first agreed by exchange of emails and later confirmed on the plaintiff’s purchase order and the defendant’s proforma invoice.

18. The defendant represented that the Goods had been tested for CE, but it was not until 12.6.2012, that the defendant informed the plaintiff the Goods failed to pass CE test.

19. Although the plaintiff later gave consent to the defendant to start production prior to obtaining the CE, the defendant still refused to commence production.  On 18.7.2012, the defendant did not inform the plaintiff of the delivery date of the Goods. 

PRELIMINARY MATTERS

20. On 2.5.2014, the defendant’s former solicitors applied for and allowed to cease to act in this matter.  At the pre-trial review dated 19.5.2014, Mr Wong Kin Kwok (“Mr Wong”), director of the defendant represented the defendant.

21. Mr Wong submitted to the court that the defendant would engage new solicitors for the trial and undertook to obtain and file a certified translation of his own witness statement.

22. Irrespective of Mr Wong’s submission, no certified translation of his witness statement was filed, the defendant failed to engage new solicitors and was absent at the trial.

23. The trial proceeded and the plaintiff proved its case without the presence of the defendant.

THE AGREED FACTS

24. The parties agreed to the following:-

(a)   There was an agreement for the purchase and sale of the Goods;

(b)   the plaintiff purchased the Goods for resale to its customer, Aldi Stores;

(c)   the US$49,680 deposit was paid;  

(d)   the defendant did not obtain CE for the Goods;

(e)   the Goods were not completed on the date the plaintiff rescinded the Agreement.

THE ISSUES

25. The way I see it, the following are the issues in this matter:-

(a)   Was the 16/18.6.2012 shipping date a confirmed shipping date, as alleged by the plaintiff; or was it tentative as alleged by the defendant?

(b)   Was CE for the Goods included as part of the Agreement?

(c)   Is the plaintiff entitled to claim loss of profit as part of its damages?

THE ANALYSIS

Was the 16/18.6.2012 shipping date a confirmed shipping date, as alleged by the plaintiff; or was it a tentative date, as alleged by the defendant?

26. From the emails exchanged between the parties prior to the issuance of the plaintiff’s purchase order dated 13.4.2012 and the defendant’s issuance of its proforma invoice dated the same day, it is clear that 18.6.2012 shipping date was a confirmed shipping date and not tentative as alleged by the defendant.

27. In the email dated 12.4.2012, plaintiff’s Matthew Burnett (“Mr Burnett”) wrote Judy of the defendant as follows:-

“Good news! As discussed we have received the final order confirmation from Aldi. They have increased their initial order estimate from 3600 units to 4320 units in total. Review the below requirements and deadlines and reply with your confirmation.

Winplus Payment terms: 30% deposit, 70% on bill of lading

Warranty stock: 1% warranty stock to be provided = 43 units

Confirm the below dates are achievable:

April 24^th - Sample with Bauhn logo, MicroSD screen print, DAB+ screen print

May 15^th – 2 x Pre production samples to approve for mass production

June 11^th – Final QC inspection

June 18-20^th – Product to leave Shenzhen port

……

Once we agree to the above requirements and schedule we will issue our PO and make our first deposit.  Please advise if you have any questions.  Thank you for your support.”

(Emphasis added)

28. On the same day, Judy of the defendant replied:-

“…The delivery time is OK, delivery time can be make sure...”.

29. In view of the fact that on the plaintiff’s purchase order and the defendant’s proforma invoice, the delivery date were both stated as 18.6.2012, the parties had clearly agreed to the same as the confirmed shipping date and not a tentative shipping date.

Was CE for the Goods included as part of the Agreement?

30. In the email dated 13.1.2012, after stating the general specifications of the DAB radios that made up the Goods, Judy of the defendant represented to Mr Burnett as follows:-

“About the quality of our products. On the products and its accessories, most of the well-known certifications such as CE, EMC, RoHS, …... have been tested. If there are certifications we don't have yet for other specific market which the market(s) we haven't sold to, we'll take care of it upon request. ……”

(Emphasis added)

31. Clearly, the defendant has represented to the plaintiff not only CE were included in the Agreement, the DAB radios that made up the Goods had actually passed “well-known certifications such as CE ……”.

32. In fact, the DAB radio failed to pass CE test, base on this misrepresentation alone, the plaintiff was entitled to terminate the Agreement and sue for damages.

33. The defendant was clearly in breach and the plaintiff was entitled to terminate the Agreement and sue for damages when the defendant failed to make delivery on 18.6.2012.

Is the plaintiff entitled to claim loss of profit as part of its damages?

34. On claiming loss of profit as a part of damages for breach of contract, the learned author of Chitty on Contract, 31 Ed., para 26-147 has this to say:-

“The fact that the buyer has resold (the goods) at a higher price will normally be disregarded on the grounds that the buyer can buy replacement goods in the market to satisfy the sub-buyer. It is only when the parties contemplated that the buyer might re-sell the self-same goods, and thus would not be able to substitute other identical goods, that the buyer may recover loss of profit on the resale.”

35. Here, the defendant knew that the Goods were to be delivered directly to the plaintiff’s sub-buyer, Aldi Stores, and if it failed to make delivery as agreed, there would be no opportunity for the plaintiff to substitute other goods.

36. Accordingly, the plaintiff is entitled to recover loss of profit as part of its damages.

ORDERS

37. I give judgment for the plaintiff against the defendant in the sum of US$74,747.02, Mr Cheung agrees today’s exchange rate between US dollar and Hong Kong dollar is 7.75 to 1 and therefore the judgment sum should be HK$579,289.41.

38. There should be pre-judgment interest, on the aforesaid sum, calculated from the date of writ until today and post-judgment interest, from today until full payment is received, both in accordance with the judgment rate.

39. I make an order nisi, to be made absolute in 14 days, that the defendant do pay the plaintiff costs of this action, to be taxed, if not agreed, with certificate for counsel.