Crown Favour Enterprises Ltd v. K & B International Ltd

dccj 2643/2004

IN THE DISTRICT COURT OF THE

HONG KONG ADMINISTRATIVE REGION

CIVIL ACTION NO.2643 of 2004

________________

between

________________

Coram: Deputy District Judge K.W.Wong in Court

Date of Trial: 26^th ,27^th October 2005

Date of Handing Down of Judgment: 28^th October 2005

_________________

JUDGMENT

_________________

1.The Plaintiff claimed against the Defendant for a total sum of $165,637.00 being prices for goods sold and delivered under two invoices both dated 30^th July 2003. The Defendant pleaded a defence of breach of contracts on the part of the Plaintiff by supplying defective goods and counterclaimed a sum of $712,359.97 being damages suffered.

2.No representative of the Plaintiff showed up at trial. It is noted that at the Pre-trial Review on 7^th June 2005 when both parties were legally represented, the matter was set down for trial by the Listing Master upon confirmation by the parties’ legal representatives that they were ready for trial. The date of the trial i.e. today’s date was pronounced there and then. However, some time in September this year the solicitors for the Plaintiff went off the record. As the trial date has been made known to the Plaintiff through its legal representative, I am satisfied that the Plaintiff should have notice of the trial. I therefore proceed with trial in the absence of the Plaintiff.

The Plaintiff’s Claim

3.Since the Plaintiff failed to show up to prove its case, the Plaintiff’s claim is dismissed with costs to the Defendant, to be taxed if not agreed.

Amendment

4.According to the Amended Defence and Counterclaim, the counterclaim is based on breach of an implied term, i.e. the goods supplied under the two sales contract between the parties have to pass the European and American flammability tests respectively. At the commencement of trial, counsel for the Defendant sought to re-amend the pleadings to the effect that the passing of the flammability test was an express term in each of the contracts. She also applied to dispense with service of the Re-Amended Counterclaim.

5.Miss Wong, counsel for the Defendant submitted that it was unnecessary to adjourn the trial as it was the Plaintiff who chose not to show up to contest the matter. In fact the Plaintiff also failed to attend two interlocutory hearings prior to trial.  Furthermore, she submitted that all the facts in support of an express term have been contained in the witness statements disclosed prior to trial. It was the Defendant’s case that the Defendant expressly requested the Plaintiff to supply samples complying with the said flammability tests. The Plaintiff agreed. The samples supplied were then sent for testing and found to have complied with the flammability tests. In the Defence to Counterclaim the Plaintiff denied the implied term and the goods supplied not in conformity with samples. So Miss Wong submitted that the Plaintiff knew what case it was going to meet. The Defence to Counterclaim had already covered the Defendant’s proposed amended case. No prejudice would be suffered by the Plaintiff. I accept counsel’s submission and allow the applications. I also order the trial to proceed.

Liability

6.The Defendant called its director, one Madam Tsang Hing Ling, to give evidence. She confirmed what had been stated in her witness statement to be true and correct. The Defendant was a company selling toys to overseas buyers and the Plaintiff was a company manufacturing component parts for toys. She testified that since end of 2002 to mid-2003, she asked the plaintiff for samples of certain fabric parts for productions of toys for sales to clients in Europe and the States. She had told one Samuel of the Plaintiff that as the toys to be manufactured were to be sold to these two markets, the parts had to comply with the European standard, EN 71 and the American standard, ASTM. Samuel agreed and supplied samples for laboratory testing to be carried out. These samples met with such requirements. The overseas buyers, one Siplec from France and Janco from the States therefore placed orders with the Defendant who in turn placed orders with the Plaintiff. It is the evidence of the Defendant that the Plaintiff was well aware of the fact that the component parts supplied would be incorporated in the toys which would then be sold for profit.

7.The toys to be produced for the Siplec and Janco were the same. As they were to be delivered to two different destinations, the Defendant split the orders into two purchase contracts. The toys were duly manufactured using the fabric parts supplied by the Plaintiff. However these fabric parts in the two batches of toys failed the flammability tests of the said European and American standards.  Both Siplec and Janco cancelled the orders. As a result the Defendant suffered losses.                  

8.A clerk of the Defendant also testified and confirmed her witness statement. Basically her evidence is corroborative to what Madam Tsang has said.

9.From the unchallenged evidence of the Defendant, I am satisfied that the Plaintiff is in breach of a condition in each of the two contracts between the parties and is liable for damages suffered by the Defendant.

Quantum

10.Counsel for the Defendant submitted that the Defendant was entitled to wasted costs, such as the costs in manufacturing the toys, wasted bank charges and storage charges of the rejected goods. The Defendant also claimed loss of profit as it was within the contemplation of the Plaintiff. The Plaintiff knew too well that the toys would be sold for profits. I accept her submission.

11.In mitigation of loss, part of the rejected toys had been sold in 2 batches at a net unit price of $8 and US$2.5 respectively. A total sum of $106,560.63 was reaped. Some 8,876 piece remained unsold. Miss Wong invited the Court to adopt the unit rate of $8 and seek to attach a value of $71,008.00 to the unsold stocks. However, the Defendant’s evidence is that it has sent out various quotations to potential purchasers offering to sell at a discount with price ranging from US$3.0 to US$3.6. No direct evidence on the value of the remaining stocks was adduced.

12.I consider that the unit price of $8 too low and that US$2.5 is a more reasonable estimate of the unit price for the unsold stocks. It is a price which the Defendant has once fetched and is close to the price which the Defendant expects he can obtain.

13.The losses suffered by the Defendant are all supported by documentary evidence. Counsel conceded, and I think fairly, that the Defendant would not be claiming any losses which were not supported by documents. The value of unsold toys, by adopting a unit price of US$2.5 and an exchange rate of 1 UD dollar to HK$7.75 (which is the exchange rate used by the Defendant as stated in paragraph 33A of the witness statement of Madam Tsang), is $171,972.5. The losses suffered by the Defendant are thus as follows:

	Under the contract with Siplec (HK$)	Under the contract with Janco (HK$)	Total (HK$)
Wasted production costs	318,981.60	24,400.00	343,381.60
Loss of profit	160,626.87	16,660.96	177,287.83
Bank charges and storage	33,363.21	-	33,363.21
Deposit paid to the Plaintiff	60,000.00	-	60,000.00
Amount recovered by sales of the rejected goods	-	-	(106,560.63)
Value of the remaining rejected goods held by the Defendant	8,876 pieces x US$2.5 x 7.75=171,972.5		(171,972.5)
Total			335,499.51

Interest And Costs

14.There is judgment on liability for the Defendant against the Plaintiff in respect of the Counterclaim with damages assessed at $335,499.51. Interest is allowed at half judgment rate from the date of the writ up to judgment, and thereafter at full judgment rate until payment. The Plaintiff do pay the Defendant’s costs of the counterclaim with certificate for counsel, to be taxed if not agreed.

Representation

Plaintiff acting in person, absent

Miss Becky Wong instructed by M/s. Francis Kong & Co. for the Defendant