Lucky Horse Garment Factory Ltd. v. CHAN Lie Hung t/a Luen Sang Textiles Co. (a firm)

HCA 18682/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 18682 OF 1999

____________________

____________________

___________________________

ASSESSMENT OF DAMAGES

___________________________

This is an assessment of damages in respect of the plaintiff's loss pursuant to the judgment granted by Mr. Justice Cheung, as he then was, on 27 June 2000. It was the order of Mr. Justice Cheung that:-

(a) the defendant do pay the plaintiff damages and interest thereon to be assessed; and

(b) the defendant do transfer to the plaintiff or its nominee or assigns 2,024 dozens of category 347 quota on a Type B transfer basis (Permanent Transfer) within 14 days from 7 July 2000.

2. The plaintiff and the defendant were both engaged in garment export business. On 8 April 1998 the defendant acquired a temporary transfer of 2,000 dozens of category 347 quota from the plaintiff for the export of manufactured garments to the United States. A guarantee was signed by the defendant to acknowledge his obligation to utilize a minimum of 95% of the assigned quota, in default of which the defendant undertook to indemnify the plaintiff its loss arising out of the defendant's breach and to effect permanent transfer, on or before 30 April 1999, the quantity of quota that the plaintiff was deprived of as a result of the defendant's breach of his obligations.

3. The transfer was effected through the plaintiff's broker agent Cherry Empire Limited. Transfer fees in the sum HK$314,000, at HK$157 per dozen, was paid by the defendant to the plaintiff.

4. On 15 July 1999 the plaintiff was informed by the Trade Department that the manufacturer had failed to satisfy the Director-General of Trade that the goods exported with the use of the said transferred quota were of Hong Kong origin. The plaintiff was invited to make representation on why 2,024 dozens of Cat 347 quota ought not be deducted from the plaintiff's allocation. As the plaintiff was unable to persuade the Director-General otherwise, the plaintiff was notified by letter on 10 September 1999 that 2,024 dozens of category 347 quota was removed from its allocation.

5. Despite of demands, the defendant failed to honour his obligation under the guarantee to effect permanent transfer of the 2,024 dozen of category 347 quota back to the plaintiff, thus giving rise to the present litigation, summary judgment and assessment.

6. As at the date of the hearing the defendant has not made any transfer of category 347 quota to the plaintiff despite of the order granted by Mr. Justice Cheung.

7. Loss and damages suffered by the plaintiff can be quantified in the following manner :-

(a) damages in conversion for the defendant's wrongful use of the transferred quota resulting in the plantiff's confiscation of 2,024 dozens of category 347 quota; or

(b) alternatively damages for breach of the defendant's contractual obligations under his letter of guarantee and the defendant's failure to return to the plaintiff the quantity of quota which the plaintiff was deprived of on 10 September 1999 as a result of the defendant's default.

8. On the evidence I accept the defendant's obligation to effect permanent transfer of 2,024 dozens of category 347 quota arose on 10th September 1999 when the plaintiff was stripped of his allocation by the Department of Trade. Hence the date of contractual breach and the defendant's act of conversion occurred on 10 September 1999. Though the plaintiff has a duty to mitigate, his duty did not arise until 27 June 2000 when the issue of liability was resolved in court. After judgment was awarded the defendant was permitted time to effect permanent transfer of the 2,024 dozens of quota until 21 July 2000. Thus the plaintiff ought to acquire the replacement quota from the market after 21 July 2000.

9. Hence I accept the damages suffered by the plaintiff were as follows:-

(a) loss of profit in respect of its right to effect temporary transfer of 2,024 dozens of category 347 quota for the trading year of May 1999-March 2000.

I accept the evidence of Wong and Ho's, witnesses testifying on behalf of the plaintiff, about the prices of the private sales and agent sales of category 347 quota in the same period. According to Mr. Ho, the invoice prices represented the payments paid by the buyers and the sellers would take 98% of the invoiced sum with the balance of the 2% going to the agent's commission. Adding all the available data on the transactions executed by the plaintiff and the agent, I accept the average selling price of category 347 quota for the year of 1999/2000 to be about HK$250.589 per dozen. Hence the plaintiff's loss of profit in respect of his right to execute temporary transfer in the year of 1999/2000 was HK$507,192 ($250.589 x 2,024).

(b) Right to be reimbursed in respect of its financial outlay for the acquisition of permanent transfer of the confiscated quota after pronouncement of the judgment.

I accept Ho's testimony that the permanent transfer price of category 347 quota should be about HK$500 per dozen in the year of 2000. Hence the financial outlay of the plaintiff to secure a replacement of the quota in July 2000 should be HK1,012,000 ($500 x 2,024).

(c) The plaintiff also claimed a sum of legal expenses of $17,200 in the preparation of written submission to the Trade Department in July 1999. The bill presented, unfortunately covered also the work done in respect of the present litigation. The plaintiff was unable to quantify the portion of legal costs attributable to the submission to the Trade Department and invited this court to decide on the quantum of legal costs as though I was assuming the role of a taxing master.

In my other roles as a taxing master, I would usually be informed of the time spent in the drafting of the submission and the hourly charge. With the presentation of a gross sum bill, taxation is impossible. Taking into consideration that there were a few conferences and a few letter of correspondence with the Department of Trade, I am prepared to accept a sum of HK$8,000 as the reasonable amount of legal expenses incurred towards making representations to the Department of Trade.

The Award

10. I award the plaintiff damages in the sum of HK$1,527,192 ($507,192 + $1,012,000 + $8,000) and interest at 1% above prime from 21 July 2000 to the date of this judgment and thereafter at judgment interest from the date of judgment until payment.

11. I also award costs nisi in favour of the plaintiff for the assessment hearing. The quantum of costs, if not agreed, is to be taxed.