Tung Shing Metal Product Factory Ltd T/a Tai Wang Metal Product Factory v Royal Glory International Ltd

CourtDistrict Court (Hong Kong)
Judgement NumberDCCJ5090/2007
Subject MatterCivil Action
DCCJ005090/2007 TUNG SHING METAL PRODUCT FACTORY LTD t/a TAI WANG METAL PRODUCT FACTORY v. ROYAL GLORY INTERNATIONAL LTD

DCCJ 5090/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5090 OF 2007

____________

BETWEEN

TUNG SHING METAL PRODUCT
FACTORY LIMITED trading as TAI WANG
METAL PRODUCT FACTORY
Plaintiff
and
ROYAL GLORY INTERNATIONAL
LIMITED
Defendant

____________

Coram: Her Honour Judge H.C. Wong in Court

Dates of Hearing: 11 May 2009, 2-5 November 2009, 18 December 2009 and 8 January 2010

Date of Handing Down Judgment: 25 March 2010

JUDGMENT

1. The Plaintiff is and was a limited company incorporated in Hong Kong carrying on the business of watch components manufacturing with a register address at Room 806, 8th Floor, Wang Yip Industrial Building, 1 Elm Street, Tai Kwok Tsui, Kowloon. Tai Wang Timepiece Company Limited was a limited company incorporated in Hong Kong carrying on the business of watch components manufacturing (“Tai Wang Timepiece”). Its registered office was Room 1301, 13/F, Wang Yip Industrial Building, 1 Elm Street, Tai Kok Tsui, Kowloon before it was deregistered and dissolved on 3 April 2007.

2. The Defendant is and was a limited company incorporated in Hong Kong with a register office at 19/F, Seaview Commercial Building, 21-24 Connaught Road West, Hong Kong (“Royal Glory”).

The Plaintiff’s Case

3. In or about 2002, Royal Glory began placing orders for watchbands with Tai Wang Timepiece while orders for watch buckles were placed with Tung Shing Metal Product Factory (“Tung Shing”). Mr. Wang Kwun Hi (“Mr. Wang”) was a shareholder and director of Tung Shing and Tai Wang Timepiece, they were also operated by him. Because of the common ownership, Royal Glory subsequently placed its orders solely with Tai Wang Timepiece for the buckles manufactured at Tung Shing to be delivered to Tai Wang Timepiece for assembly before delivery to Royal Glory. Samples of watchbands with buckles would be sent to Royal Glory for approval before delivery of goods.

4. Between May and December 2003, Royal Glory placed a number of purchase orders at Tai Wang Timepiece for watchband models B2091L and B2092L. Tai Wang Timepiece agreed to sell at the price of HK$55.00 per watchband and buckle at HK$12.00.

5. Pursuant to the purchase orders placed by Royal Glory, Tai Wang Timepiece delivered watchband models B2091L and B2092L with buckles to Royal Glory between 17 July 2003 and 26 December 2003 and issued invoices for the goods sold and delivered to Royal Glory.

6. In or about December 2003, Royal Glory alleged that some of the watchbands delivered under earlier invoices were defective and requested replacements. Though the allegation was disputed by Tai Wang Timepiece, it nevertheless agreed to deliver replacements for defective watchbands.

7. Consequently, between 16 December 2003 and 10 January 2004, at the request of Royal Glory, Tai Wang Timepiece delivered replacement watchbands with buckles in the total value of HK$703,433.00.

8. It is Tai Wang Timepiece’s claim that Royal Glory reached an agreement with Tai Wang Timepiece that the watchbands with buckles would be replaced on condition that the defective watchbands with buckles would be returned to Tai Wang Timepiece (“the replacement agreement”).

9. It is not disputed that by 13 March 2006, Royal Glory had returned only 1,645 pieces of watchbands with buckles to Tai Wang Timepiece. Despite repeated requests from Tai Wang Timepiece, Royal Glory failed to return further watchbands to Tai Wang Timepiece.

10. On 1 September 2004, the Plaintiff, Tung Shing Metal Product Factory Limited was incorporated (“Tung Shing Metal”). It took up all the businesses of Tung Shing and Tai Wang Timepiece. Tung Shing Metal claimed that notices were sent to Royal Glory and all customers of Tung Shing and Tai Wang Timepiece. They were informed of the incorporation and the taking over of the businesses of Tai Wang Timepiece and Tung Shing by Tung Shing Metal. An assignment was executed by Tai Wang Timepiece assigning all its assets and rights to Tai Wang Metal on 30 September 2004.

11. Tung Shing Metal upon taking over the assets and rights of Tai Wang Timepiece subsequently issued invoices on behalf of Tai Wang Timepiece to Royal Glory for the payment of the replacement watchbands Tai Wang Timepiece had delivered to Royal Glory between December 2003 and January 2004. At the trial, the Plaintiff accepted a deduction of the price for the 1,645 pieces returned from the total sum claimed of $703,433.00.

The Defence’s Case

12. Royal Glory admitted that orders were placed with Tai Wang Timepiece for the manufacture of watchbands and buckles model numbers B2091L and B2092L. It found some of the watchbands were defective and Tai Wang Timepiece had agreed to deliver replacements for them. Royal Glory, however, denied it was a term of the agreement that the replacement was conditional upon the return of the defective goods to Tai Wang Timepiece. It claimed there was an implicit understanding and/or agreement between the parties that they would not claim against each other because Royal Glory had also incurred delivery costs to its customers in Italy in the sum of HK$40,000.

13. Alternatively, Royal Glory alleged it was not under a duty to return the defective goods to Tai Wang Timepiece other than making them available for Tai Wang Timepiece’s collection.

14. It was Royal Glory’s claim that the watchbands were defective because the length of the bands could not be adjusted. It accepted there was no defects with the buckles attached to the watchbands. So far as the invoices issued by Tai Wang Timepiece for the replacement goods are concerned, Mr. Gary Wong of Royal Glory (“Mr. Wong”) claimed that Mr. Wang of Tai Wang Timepiece had informed him they were issued for internal accounting record only and Royal Glory could ignore them.

15. Royal Glory denied that between January 2004 and July 2005, Tai Wang Timepiece or Tung Shing had ever requested Royal Glory to return the defective watchbands.

16. Royal Glory further denied the notice dated 16 September 2004 was a valid notice of assignment. It claimed it was merely a notice of change of company name. As to the document of assignment dated 30 September 2004, Royal Glory disputed its authenticity and validity.

17. Royal Glory admitted that in or about the end of 2005 Mr. Wang of Tung Shing did request Mr. Wong of Royal Glory to locate and return the defective watchbands. As a gesture...

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