Tech Gain International Ltd v La Win Trading Ltd

CourtDistrict Court (Hong Kong)
Judgment Date16 May 2008
Judgement NumberDCCJ6361/2006
Subject MatterCivil Action
DCCJ006361/2006 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

____________

BETWEEN

TECH GAIN INTERNATIONAL LIMITED Plaintiff
and
LA WIN TRADING LIMITED Defendant

____________

Coram: His Hon Judge Leung in Court

Date of hearing: 11-13; 27 March 2008

Date of judgment: 16 May 2008

JUDGMENT

1. In April 2006, Tech Gain (the Plaintiff) placed an order for computer hard disk drives (HDD) to be supplied by La Win (the Defendant). Payment was made in advance of delivery. Eventually Tech Gain sought to cancel the order and now claims for return of the payment made or alternatively damages. La Win disputes the claim and counterclaims for Tech Gain’s refusal to take delivery.

BACKGROUND

2. Tong used to be a subordinate of Suen. In 1997, Tong joined his father’s company, i.e., La Win. Since about 2002, La Win had numerous business dealings with Tech Gain. Tech Gain carried on the business of trading in computer components and accessories.

3. In about March 2006, Suen of Tech Gain and Tong of La Win began to discuss the sourcing of what were essentially second hand HDD for repair and resale in the Mainland. La Win would supply these HDD. Tech Gain would have them repaired by its counterpart in the Mainland.

4. On 4 April 2006, Tech Gain sent a purchase order (PO) for HDD to La Win. On 26 May 2006, La Win sent to Tech Gain a proforma invoice. On the same day and subsequently in June 2006, Tech Gain paid La Win a total sum of RMB 840,000 for the HDD.

5. In June 2006, a shipment of 14,000 HDD arrived. On 23 June 2006, Suen on behalf of Tech Gain signed La Win’s delivery note for the shipment. Eventually, Tech Gain kept only 4,700 HDD out of the shipment and signed another delivery note dated 4 July 2006 for this quantity while the remaining 9,300 HDD were returned to La Win for replacements. The replacements arrived in November 2006. Tech Gain informed La Win that the order was cancelled and demanded refund of the RMB 840,000 paid. It also refused to take delivery of the shipment of the replacement HDD.

6. I do not see real dispute regarding the above background.

DISPUTE

7. Broadly, the major issues in dispute are:

(1) what the terms of the order were and, in particular, the subject matter contracted for;

(2) whether Tech Gain was entitled to cancel the order;

(3) which was the innocent party and what the loss and damage it has suffered.

THE ORDER

The PO and the proforma invoice

8. Tech Gain’s case is that the parties concluded their agreement by virtue of its PO dated 4 April 2006 (referring to p.53 of the bundle) allegedly sent by e-mail on the same date. La Win’s case is that it has received altogether 3 versions of the PO, all dated 4 April 2006. The version relied on by Tech Gain (p.53 of the bundle) was not the first one attached to Suen’s e-mail to Tong on 4 April 2006. It was actually the last version of the PO La Win received only on 26 May 2006.

9. According to Tong, he received the first version of the PO (referring to p.156 of the bundle), which was attached to Suen’s e-mail to him on 4 April 2006. According to this version of the PO, the quantity ordered was 31,000 HDD at US$9.50 each. They were described as used HDD belonging to 4 brands with specification of the quantities of various memory sizes. It also specified that each HDD should have a bubble pack.

10. However the terms of this PO were not quite in line with what Tong explained in his earlier e-mail to Suen. Tong explained that by e-mail dated 2 April 2006, he informed Suen that the HDD belonged to Grade-A brands at scrap rate in the market. It would be too time-consuming to break the bulk of HDD down into different brands, memory sizes and degrees of fault. If he were to do that, he would have had to charge Suen at least US$15 per HDD. He also made clear that the HDD would be packed in non-standard pallet lose box.

11. In view of the difference, Tong sent an e-mail to Suen on the day following the receipt of the PO. Tong made clear that, among other things, he could not control the assortment of the brands of the HDD though they mostly belonged to the 4 brands described in the PO. The same applied to the assortment of the memory sizes though 60-70% of the bulk would be over 40G. He also attached a photograph of the container and packing of the HDD that Tech Gain should expect to get. A proforma invoice in similar terms would be sent to Tech Gain.

12. Subsequently, Tech Gain again sent a PO (referring to p.157 of the bundle) to La Win. This PO, though freshly signed, was identical to the one sent on 4 April 2006. The facsimile journal record on the top of this fax copy of the PO clearly shows that it was faxed from Tech Gain on 23 May 2006.

13. On 26 May 2006, Tech Gain sent to La Win the last version of the PO (referring to p.53 of the bundle). The material terms of the PO, which differed from the previous 2 versions of the PO, were as follows:

(1) The quantity was reduced from 31,000 to 25,000 HDD.

(2) The unit price was reduced from US$9.50 to RMB 60.

(3) Delivery was expected to be on or before 15 June 2006.

(4) Deposit of RMB 400,000 should be paid on 26 May 2006.

(5) Condition of the HDD should be as per sample or better.

14. On the same day, La Win sent to Tech Gain its proforma invoice. According to Tong, to signify that the PO had been revised as mentioned above, he added the letter ‘R’ to the PO reference in this proforma invoice. The proforma invoice contained, among others, the following terms:

(1) The HDD were described as HDD (scrap item), instead of used HDD as described in the PO.

(2) The unit price was US$7.50, which was equivalent to RMB 60 as per the PO.

(3) The 1st deposit of US$50,000 was payable on 26 May 2006, i.e., the day of this proforma invoice.

(4) The 2nd deposit of US$62,500 would be payable on 1 June 2006.

(5) Delivery would take place in about 3 weeks upon receipt of the 1st and the 2nd payments.

(6) The balance of the contract price would be payable by post-dated cheque upon receipt of the goods.

(7) There would be no refund or return.

15. Considering the evidence of Suen and Tong against the contemporaneous documents, I find Tong’s evidence to be more in line with the truth. I find that Tech Gain’s allegation that the contract was already concluded on 4 April 2006 cannot stand. In fact, even in his subsequent...

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