TECH GAIN INTERNATIONAL LTD v. LA WIN TRADING LTD

DCCJ 6361/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6361 OF 2006

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REASONS FOR DECISION

1.  The present case involved the sale and purchase of computer hard disk drives (HDD).  Tech Gain, the buyer, contends that due to La Win (the seller)’s breach, it had cancelled the order to La Win for the HDD.  Tech Gain claimed for the return of the payment made or alternatively damages.  La Win disputed the claim and counterclaimed for damages for Tech Gain’s refusal to take delivery of the HDD.

2.  After trial, this court handed down the judgment on 16 May 2008.  I dismissed the claim and allowed the counterclaim.  Tech Gain applied for leave to appeal against the judgment.

3.  After hearing Tech Gain’s application, I refused to give leave to appeal and ordered that La Win should have costs of this application to be taxed if not agreed with certificate for counsel.  I said I would give my reasons in writing, which I now do.

4.  Leave would normally be granted unless the grounds of the intended appeal have no realistic prospect of success: see Smith v Cosworth Casting Processes Limited [1997] 1 WLR 1538.

5.  Mr Kwan, who was not involved in the trial, appeared for Tech Gain in the present application.  The draft notice of appeal lists out the grounds of the intended appeal.  Mr Kwan submitted on the following issues:

(1)  subject matter of sale;

(2)  warranty of quality by La Win; and

(3)  cancellation of the order by Tech Gain.

Subject matter of sale

6.  During trial, there was dispute as to whether the subject matter of sale was used HDD as alleged by Tech Gain or scrap HDD as alleged by La Win.  I found that parties did not really consider that there was any misunderstanding about the subject matter at the material time.  They simply chose to describe them differently (paras.16-23 of the judgment).

7.  Mr Kwan agrees with these findings.  In this respect, Mr Kwan should perhaps note this court’s observation about the difference between Tech Gain’s pleaded case and its position when the trial closed (see paras.16; 22-23 of the judgment).

Warranty of quality

8.  During the trial, the dispute as to quality consisted of two issues: (1) whether the HDD corresponded with the alleged samples; and (2) whether La Win warranted that every HDD supplied could be repaired for resale and undertook to replace every one that could not be so repaired.

9.  I rejected Tech Gain’s allegation about the samples of the HDD (paras. 24-27 of the judgment).  There is no proposed appeal against this.  I also rejected Tech Gain’s allegation that La Win warranted that every HDD could be successfully repaired or undertook to replace every one that could not be so repaired (paras. 24-25; 28 of the judgment).  This became the second issue taken by Mr Kwan for the intended appeal.

10.  There was no dispute that out of the shipment of 14,000 HDD, La Win agreed to take back and to replace 9,300 HDD.  Mr Kwan queried why La Win would have agreed to replace such a large quantity, if it had not undertaken to replace each defective one with a proper one as alleged by Tech Gain.  Mr Kwan submitted that the explanation by Tech Gain is more credible than that of La Win in this aspect.

11.  In accepting La Win’s version, this court has considered the evidence including that as to why Tech Gain requested and why La Win agreed to replace the 9,300 HDD (paras. 24-25; 28; 30-32 of the judgment).  Mr Kwan did not suggest that the findings are plainly wrong or are those that this court is not entitled to make: see Ting Kwok Keung v Tam Dick Yuen & Ors [2002] 3 HKLRD 1.  I am not convinced that the appellate court would intervene.  The intended appeal against such findings of fact has no realistic prospect of success.

12.  In any event, La Win did take back the 9,300 HDD and Tech Gain agreed to wait for the replacements.  The real issue became eventually whether Tech Gain was entitled to cancel the order thereafter (para.29 of the judgment).  This leads to the third issue taken by Mr Kwan.

Cancelling the order

13.  Tech Gain sought to cancel the order for two reasons: (1) La Win had failed to deliver the goods on or before 15 June 2006 according to its purchase order; and (2) the 4,700 HDD accepted by Tech Gain did not accord with the sample (para.33 of the judgment).

14.  In respect of this court’s rejection of La Win’s allegation about the quality of the 4,700 HDD (paras.39-40 of the judgment), there is no proposed appeal.

15.  Regarding the time of delivery, by accepting the 4,700 HDD in July 2006 and agreeing to wait for the 9,300 replacement HDD to be delivered in mid-September 2006, Tech Gain must have waived any previously agreed delivery date or dates (para.41 of the judgment).

16.  The replacement HDD did not arrive in mid-September 2006.  Since October 2006, the parties had engaged in e-mail correspondence in relation to the delivery of the replacement HDD.  In the intended appeal, it is said that this court:

(1)  wrongly ignored the contents of Tech Gain’s e-mails in October 2006 urging La Win to deliver the replacement HDD by October 2006 (para.(2)(b) of the draft notice of appeal);

(2)  wrongly accepted the e-mail dated 10 October 2006 from La Win that informed Tech Gain of the expected arrival of the shipment at the end of October or during the first week of November 2006 (para.(2)(a) of the draft notice of appeal); and

(3)  paid no or no sufficient regard to Suen Fu Foon’s evidence regarding the e-mails (para.(2)(c) of the draft notice of appeal).

17.  The above criticism is not justified, in view of the contents of the correspondence and evidence that this court did consider and refer to in the judgment (paras.35-38; 42-44 of the judgment).

18.  There is challenge against this court’s consideration of the contents of Tech Gain’s e-mails since 25 October 2006 (paras.(2)(d)-(e) of the draft notice of appeal).  Mr Kwan submitted that by its e-mail dated 9 October 2006, Tech Gain set the deadline for delivery of the replacement HDD to be by the end of October 2006.  He submitted that Tech Gain clearly evinced the intention to cancel the order by its e-mail dated 25 October 2006, i.e., prior to the arrival of the replacement HDD on 6 November 2006.

19.  In view of La Win’s e-mail dated 10 October 2006 and the contents of Tech Gain’s e-mails dated 18, 25, 27 October and 6 November 2006, I do not see how the fact was and could be that as submitted by Mr Kwan.

20.  If the end of October 2006 had been the deadline set by Tech Gain, I do not see how Tech Gain could have been entitled to cancel the order on 25 October 2006, in the absence of any assertion or evidence during the trial that La Win had by 25 October 2006 evinced an intention not to perform.  As I found, by its e-mail dated as early as 10 October 2006, La Win already informed Tech Gain of the expected arrival of the replacement HDD at the end of October or during the first week of November, 2006 (paras. 43-44 of the judgment).  Even Tech Gain acknowledged in its e-mail dated 18 October 2006 that the shipment would arrive soon.

21.  This court found that while La Win was willing to perform and was indeed performing the contract, it was Tech Gain’s purported cancellation of the order and its refusal to take delivery of the replacement HDD that amounted to breach (para.45 of the judgment).  I see no realistic prospect of successfully overturning this finding.

Conclusion

22.  This court dismissed Tech Gain’s claim after considering all the evidence including those specifically analysed in the judgment (para.54 of the judgment).  I am not satisfied that the grounds in the draft notice of appeal or those submitted in court have a realistic prospect of success.  I therefore refused leave.

Representation: