Wayfoong Credit Ltd v. Chiu Ping Kai

DCCJ000377/1980

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT TSUEN WAN

CIVIL JURISDICTION

T.W. ACTION NO. 378 OF 1980

____________

Between

_________________

Coram: B.W.M. Downey, District Judge

________

RULING

________

1. By summonses dated 15th July, 1980 the plaintiffs in the above actions sought leave, under Order 84 rule 3 of the Rules of the Supreme Court, to enter judgment for the sums of $14,191.48 and $3,054.90 against the respective defendants, neither of them having served any defence. Both actions arise out of hire-purchase agreements which, for the purpose of these applications, are identical in all material respects.

2. I heard the application in Action No. 377 on the 5th August, 1980. Although the matter was not fully argued, I was of the view that part of the claim was based on a clause in the agreement which might be a penalty. Judgment was entered for the sum of $2,822.00, being arrears of rental under the agreement, and for damages to be assessed in respect of the other relief sought.

3. The application in Action No. 378 came before me on the following day. As the clause in question has some curious features (e.g. it appears to provide that termination by the hirer under his express right conferred by the agreement is deemed to be a repudiation of the agreement), and I considered the question whether it was a penalty was one which should be fully argued, I adjourned the application to the 15th August, 1980. At the same time, I decided to review my decision in Action No. 377, being doubtful of the correctness of entering judgment for damages to be assessed in default of defence, as distinct from requiring the plaintiff to prove its case, which appears to be the proper course if leave is refused under Order 84. For obvious considerations of convenience, I decided that this review should take place on the same day as the adjourned hearing of the summons in Action No. 378.

4. At the hearing on the 15th August, 1980, Mr. Chan contended that the present actions were not within Ord. 84 because the claims (other than those for arrears of rental) were, in reality, claims for unliquidated damages, notwithstanding that they were endorsed on a writ form (i.e. Form 4) appropriate to a claim in debt or for liquidated damages. He referred to the annotations in the Supreme Court Practice for 1973 (84/1 - 3/4) and 1979 (6/2/4A), and contended that whenever the sum claimed has to be proved and assessed in a manner which requires more than a purely arithmetical calculation, it must be regarded as a claim for unliquidated damages. He sought to support his contention by reference to the decisions in Chartered Finance (HK) Ltd. v. Helen Fashions [1978] DCLR 2O; Wayfoong Finance Ltd. v. Ng Chung [1975] DCLR 70, and paragraphs 10 and 11 of the Particulars of Claim. He also adverted to the fact that under clause 13(A) of the hire purchase agreement the plaintiffs must prove that the price obtained on the resale of the goods, which form the subject matter of the agreements, was the "best" price, and that the expenses of such resale were "properly incurred" and, accordingly, these being matters not involving a mere arithmetical calculation, the claim was one for unliquidated damages.

5. In my view, Mr. Chan's last point does not really support his argument. Clause 13(A) is what is usually referred to as a "minimum payment" provision, commonly found in standard hire-purchase agreements. It provides for a sum to be paid by the hirer upon termination of the agreement upon various events, including a breach by the hirer. In my judgment, Order 84 was introduced specifically with provisions of this nature in mind, to enable the Court to scrutinize a claim for a liquidated sum allegedly due under such a provision, and to refuse leave to sign judgment in default if it might be a penalty, and therefore unenforceable, or to grant leave if it is a genuine pre-estimate of damage, in which case it is recoverable as liquidated or agreed damages.

6. In my judgment, the fact that the amount of the damages cannot be ascertained by a simple arithmetical process, but may require investigation of other matters, does not mean that the claim cannot be one for liquidated or agreed damages. I can see no distinction in principle between contracts providing for the agreed sum to be ascertained by reference to unspecified quantities of goods or acreage of Land (of Diestal v. Stevenson [1906] 2 KB 345; Elphinstone v. Monkland Iron and Coal Company (1886) II App Cas 332 or "not less than 2% or more than 10% above or below "the estimated market value" (of Stewart v. Carapanayoti [1962] 1 WLR 34) and the present agreement, where the sum payable under clause 13(A) is dependent upon the resale price of the goods being the "best price obtainable" and the resale expenses being "properly incurred". If the provision in question is a genuine agreed pre-estimate of the probable damage, and not a penalty or void for uncertainty, it replaces the usual remedy of a claim for unliquidated damages. By their agreement, the parties intend to avoid the complexity, difficulty and expense of proving the nature and extent of the actual damage, which may in fact be greater or less than the agreed sum.

7. The reason why, in my judgment, these proceedings are not governed by Order 84 is that the plaintiffs have not based their claims on clause 13(A) of the agreement. That clause is referred to in paragraph 6 of the Particulars of Claim solely to support the alleged repudiation by the defendants. That part of clause 13(A) which provides a formula for assessing damages is not expressly set out in the Particulars of Claim. It is referred to obliquely in paragraphs 10 and 11, where the plaintiffs set out the resale price of the goods, the repossession expenses, and various other sums, by which the plaintiffs seek to compute their damages. (These figures are, in fact, erroneous since in each case the sum alleged to be the net proceeds of sale of the goods exceeds the gross proceeds of sale!) Nowhere is it alleged that the price obtained on resale of the goods was the "best price obtain-able" or that the expenses were "properly incurred in such resale". The manner in which the Particulars of Claim are drawn is somewhat misleading, but I do not think that they contain a elaim for agreed or kuquidated damages under clause 13(A) of the agreement. Accordingly, in my view, leave to enter judgment in default of defence is not required in. these cases.

Representation:

Warren Chan (Johnson, Stokes and Master) for plaintiffs.