Skk (H.K.) Co Ltd v. Tsui Po Hing and Tsui Po Cheung t/a Protech Industrial Co
Read the full judgment text of CACV 36/2012 on BabelCite. This Court of Appeal judgment was delivered on 14 October 2016.
1. I agree with the judgment of Yuen JA.
Cites 1 case
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CACV 36/2012 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 36 OF 2012 (ON APPEAL FROM HCA NO. 16850 OF 1998) _______________________
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_______________________ J U D G M E N T _______________________ Hon Cheung JA: 1.I agree with the judgment of Yuen JA. Hon Yuen JA: 2.This is an appeal by 徐寶興 (“TPH”) and 徐寶祥 trading as Protech Industrial Company (“PIC”) from a judgment of To J (“the judge”) given on 18 January 2012 (“the Judgment”). 3.1.PIC was not legally represented either at trial or on appeal. Its notice of appeal contained 34 grounds of appeal, one of which was abandoned at the hearing. Its skeleton submissions ran to 71 pages, contrary to practice directions limiting the length to 10 pages for appeals from law and 15 pages for appeals from fact. The appeal bundles ran to more than 1230 pages. There was also a summons to adduce fresh evidence on appeal. 3.2.With the benefit of hindsight, the court should have given directions prior to the hearing of the appeal for the grounds to be properly formulated and the materials to be properly collated. As such directions had not been given, the court had to do its best in the circumstances. The time taken to render this judgment is regrettable. 3.3.Although the Judgment was written in Chinese, and appellate court judgments are usually written in the same language as the trial judgment, it has been found more convenient to deliver this judgment in English, as English was used in some of the documentary evidence. Should either party require a translation into Chinese, that can be arranged through the court. 4.The background to the action has been set out in detail in the 109-page Judgment. The following is a brief summary of the facts material to this appeal. Background 5.SK Kaken Co Ltd (“SKK(Japan)”) is a Japanese company that manufactured paint for buildings. It had an associate company in HK called SKK (HK) Co Ltd (“SKK (HK)”). It is necessary to differentiate between SKK (Japan) and SKK (HK) because only SKK (HK) is the defendant in this action. SKK (HK) was run by Bernie Yuen Tat Keung 袁達強 (“BY”). Its accounts manager was Glendy Wong Po Fong 黃寶芳 (“WPF”). 6.PIC had no business operations in Hong Kong but it had a joint venture with a company in the PRC. The joint venture company was called 上海嘉寶新型裝璜材料有限公司 (“JB”). TPH was in charge of both PIC and JB. In the present case PIC and JB have been treated by both parties as being identical. 7.1.In 1992, SKK (HK) appointed PIC as the sole sales agent of SKK products in Shanghai. 7.2.In 1995, SKK (HK) appointed PIC as sole sales agent of SKK products in Shanghai for a period of 3 years from 1 January 1995. 7.3.The relationship between SKK (HK) and PIC continued until the expiry of that agreement in January 1998. Third party customers 8.1.Although PIC was the sole sales agent of SKK products, some third party customers (“the customers”) wished to contract with SKK (HK) or SKK (Japan) directly, and not with PIC or JB. This was for various reasons, eg because the customer only trusted SKK by reason of its reputation, or because of the customer’s wish to make payment in foreign currency outside the PRC. 8.2.This led to different contractual relationships affecting PIC/JB during the course of business, which PIC categorized on appeal as follows. Types of contracts 9.(1)PIC referred to 供應及施工合約 “Supply and Apply contract” between the customer and SKK (HK) as “the 1st type of contract”. The judge referred to them as 工程合約 “works contract”. (2)After SKK (HK) signed such a contract with a customer, SKK (HK) would appoint PIC as its sub-contractor. PIC referred to the contract between SKK (HK) and itself as “the 2nd type of contract”. The judge referred to them as 交給合約 “handover contract”. SKK (HK) made no profit from the sub-contracting, but that makes no difference to the nature of the contract. To J held correctly (para. 82) that if PIC could prove that it had performed the work required in the contract between SKK (HK) and the customer, which SKK (HK) had sub-contracted to PIC, SKK (HK) was contractually bound to pay PIC, whether or not the customer paid SKK (HK). (3)To perform the sub-contract (ie the 2nd type of contract), PIC bought the paint from SKK (HK). PIC referred to these purchases as “the 3rd type of contract”. 10.There was also a variant form of the 1st type of contract, which occurred when the customer only purchased paint, and did so directly from SKK (HK) or SKK (Japan) (“the variant”). PIC and SKK (HK)’s respective cases as to how these were dealt with are also discussed below. 11.The transactions set out above led to a large number of monetary transactions between SKK (HK) and PIC. Unfortunately, by the end of the 3-year contract period in 1998, SKK (HK) and PIC’s relationship had deteriorated. 12.1.In June 1998, PIC sued SKK (Japan) and SKK (HK) in HCA9602/1998 (which later became HCCL42/2004). PIC’s claims were dismissed by Stone J and its appeal was dismissed. 12.2.It is not known why directions were not given for that action to be heard together with HCA16850/1998 (from which judgment this is the appeal), in which SKK (HK) sued PIC for unpaid invoices. SKK (HK)’s claim in HCA16850/1998 13.1.In this action, SKK (HK) sued PIC for $8,163,580.70 for unpaid invoices which were issued to PIC itself or to the following companies, viz -
13.2.SKK (HK)’s case was that as PIC found the credit limit under the sole sales agent agreement insufficient, there was an arrangement under which PIC bypassed the credit limit by ordering goods through these 4 other companies, on the understanding that PIC would be responsible for payment of the invoices issued to these companies. BY had agreed to this arrangement on behalf of SKK (HK). 13.3.The unpaid invoices for all these 5 companies (PIC, CAC, IHG, QTS and SGH) were listed in para. 12 of SKK (HK)’s statement of claim. They amounted to $8,163,580.70. PIC’s Defence and Counterclaim 14.1.PIC (which was originally legally represented) filed a Defence and Counterclaim on 17 December 1998, which was subsequently amended on 16 September 2003. 14.2.Subsequently PIC was no longer legally represented. On 30 December 2009, the Defence and Counterclaim was substantially re-amended. 14.3.The pleading was further amended again on 21 September 2010. 14.4.PIC’s final version of its defence and counterclaim appears to be as follows. - Defence 15.1.PIC accepted that it was responsible to pay the invoices issued to itself, CAC and IHG, but not the invoices issued to QTS and SGH because QTS and SGH were “real” customers with building projects requiring goods. PIC considered that it was therefore not liable to pay the invoices issued to these 2 companies. 15.2.According to PIC, the total sum payable to SKK (HK) for the unpaid invoices issued to itself, CAC and IHG was:
- Counterclaim 16.PIC’s counterclaim against SKK (HK) consisted of 3 claims.
(1) PIC’s claims against SKK (HK) for balance of payment under 22 contracts: 17.1.PIC alleged that between 1993 and 1998, SKK (HK) entered into 22 contracts with customers which gave rise to PIC’s counterclaims. 17.2.According to PIC, these were contracts of the 1st type (including the variant) that SKK (HK) had entered into with customers, which SKK (HK) had sub-contracted (at no profit) to PIC. Hence PIC’s claim was under contracts of the 2nd type for the price of the contracts of the 1st type (including the variant), which PIC alleged it had performed. 17.3.According to PIC, under these 22 contracts,
(2) PIC’s claim for loss of profits: 18.This claim arises from SKK (HK)’s breach of the sole sales agent agreement by directly selling goods to 7 customers: $4,495,140.94 (3) PIC’s claim for breach of warranty of quality: 19.This claim arises from a breach of warranty of quality of certain goods: $1,129,046.67 20.1.The total sum involved in these 3 claims in the counterclaim was:
20.2.On the basis of the above, PIC claimed a net balance of:
Trial 21.1.At trial the main witnesses were WPF for SKK (HK) and TPH for PIC. BY was not called as a witness. It is essential to note that the judge had the opportunity to see and hear WPF give evidence first hand, and he found her to be a credible and reliable witness. 21.2.WPF was able to testify to the transactions between the parties even though documentary evidence was incomplete. 21.3.On SKK (HK)’s part, although WPF did produce documents which she had compiled contemporaneously, she did not produce copies of various cheques and bank statements. She explained that this was because SKK (HK) banked with Daiwa Bank, and this bank had closed. She also explained that it was not until the end of 2009 that PIC substantially re-amended its Defence and Counterclaim, providing particulars for the first time of the transactions in question. That was nearly 12 years after the end of the parties’ relationship in early 1998. 21.4.On PIC’s part, essentially it failed to produce documents showing its performance of the sub-contracts. The judge found that this was unusual as PIC was responsible for the execution of these contracts. This was an important feature in the judge’s findings of fact. Judgment 22.1.For reasons which have been set out extensively in his lengthy judgment, the judge accepted SKK (HK)’s claim and rejected part of PIC’s defence and counterclaim. 22.2.The judge found that PIC had in fact used the names of QTS and SGH to buy goods (paras. 42-50). In respect of the sum claimed by SKK (HK), the judge accepted WPF’s evidence and found the claim for $8,163,580.70 established (para. 52). 23.1.However as PIC had a different way of calculating the sum payable, the judge also considered PIC’s method of calculation as a means of reviewing SKK (HK)’s claim (para. 52). 23.2.This exercise resulted in an issue concerning 7 cheques which will be discussed in detail later. According to TPH’s closing submissions, these 7 cheques (in a total sum of $3,228,048.57) had been paid by PIC and received by SKK (HK), but had not been credited to PIC, CAC, IHG, QTS or SGH. 23.3.The judge found that although SKK (HK) had received these 7 cheques, PIC had failed to prove that they were for the payment of the relevant unpaid invoices which were the subject matter of this action. 23.4.Accordingly the judge found that it was not necessary to deduct the sum of the 7 cheques from the sum claimed by SKK (HK) (paras. 61-63). 24.The judge noted that after adjustments, according to PIC’s method of calculation, the total sum of invoices which it had not paid was $10,333,644.58, which was even more than the sum claimed by SKK (HK). The judge accepted that in fact SKK (HK)’s calculation was correct (para. 69). 25.1.As for PIC’s counterclaim,
25.2.The total sum allowed on the counterclaim was therefore:
25.3.Deducting this sum from SKK (HK)’s claim, the judge found PIC liable to SKK (HK) in the following sum:
25.4.The judge duly awarded the reduced sum of $1,532,907.97 to SKK (HK) together with interest at the contractual rate from 5 October 1998 (the date of SKK (HK)’s writ to date of judgment together with costs of the claim and counterclaim on a party and party basis. Appeal 26.PIC appealed. Its grounds were contained in a Supplementary Notice of Appeal filed on 30 September 2014 which superceded the original notice of appeal. It contained 34 grounds of appeal, of which one (no.26, relating to contract no.11) was abandoned at the hearing. Application to adduce fresh evidence 27.1.PIC filed a summons on 7 October 2014 for leave to produce further evidence on appeal. It transpired that some documents (no. 2, 3, 4 and 11) had already been produced at trial but had not been included in the appeal bundle. We gave leave to PIC to refer to these documents, as well as an extract from the defendants’ closing submissions 被告人的結案陳詞 at the trial. We did not give leave to PIC to produce the rest of the documents as TPH’s affirmation in support of the summons contained no explanation why those documents could not have been obtained with reasonable diligence at trial (see Ladd v Marshall [1954] 1 WLR 1489). 27.2.The summons was disposed of accordingly, with PIC being ordered to pay the costs of the summons. 27.3.It follows from the above that all references to the new documents contained in PIC’s submissions will be ignored. Issues on appeal 28.On appeal, PIC’s challenge to the judge’s findings can be summarized as follows.
Principles on appeal 29.1.In PIC’s written and oral submissions, it argued that the judge had erred in omitting to consider some evidence, and/or that the judge’s findings were inconsistent with some other evidence that he had not mentioned. 29.2.However it is important to stress that generally an appellate court does not interfere with a judge’s findings of fact, nor with the weight that a judge may place on one piece of evidence compared with another piece of evidence. Moreover as Lord Hoffmann said in Biogen Inc v Medeva plc [1997] RPC 1 and repeated in Piglowska v Piglowski [1999] 1 WLR 1360:
29.3.It is with the above well-established approach in mind that this court has considered the judge’s 109-page judgment, a judgment based on findings on fact covering many different issues, hampered by incomplete documentation, but which was delivered after a trial of 11 days, and after the judge had seen and heard viva voce evidence. 29.4.This court has not seen the evidence unfold at trial as the judge has done. It is well-established that an appellant cannot “cherry-pick” his way through the evidence to raise disputed arguments of fact on appeal, and the whole of the oral and documentary evidence cannot be reviewed afresh. An appellate court would only interfere if the appellant can persuade it that the findings of the trial judge were “palpably wrong”. This is a very high threshold. Discussion 30.I shall now consider the main arguments put forward by PIC on appeal. (1) Was the judge right to find PIC liable for the unpaid invoices of QTS and SGH? 31.1.The judge had correctly noted that SKK (HK) bore the burden of proving that PIC was liable for the unpaid invoices of QTS and SGH listed in the statement of claim (para. 37). He found, after considering all the evidence, that PIC was so liable. 31.2.On appeal PIC argued that the judge had wrongly equated QTS and SGH with CAC. It argued that whilst PIC did use CAC’s name to order goods after PIC had reached its credit limit, QTS and SGH were actual customers with real projects, and for that reason, SKK (HK) was not entitled to make PIC liable for the unpaid invoices of these two companies. 31.3.However, there was the following evidence which the judge considered sufficient to show that PIC had undertaken liability for the unpaid invoices of QTS and SGH. - WPF’s evidence 32.1.First of all, the judge was impressed with the evidence of WPF, who had no personal interest in the litigation and whom he found to be an honest and credible witness (paras. 26 and 50). 32.2.WPF had personal day-to-day knowledge of the transactions. She had started working as an accountant for SKK (HK) in 1992 and was promoted to accounting manager in 1996. It was part of her daily duties to check invoices issued by SKK (HK), arrange payments by cheque into its bank accounts, prepare payments to vendors and service providers, post accounting entries, compile ledgers and accounts of customers, and prepare and settle accounts of SKK (HK). She had compiled accounting ledgers contemporaneously from SKK (HK)’s accounting records for her own reference, which she amended (if necessary) after checking from time to time. She had dealt with the accounts of PIC, CAC, IHG, QTS and SGH in accordance with the instructions of BY and TPH. 32.3.WPF said that in June and September 1996, BY and TPH had arranged for PIC to order goods in the names of QTS and SGH. The judge found that her modus operandi, coupled with her discussions with BY and TPH, clearly reflected the arrangement they had made (“她在這個模式下運作及與徐寶興和袁達強的對話，極能反映徐寶興與袁達強就訂購塗料達成的安排與實況”) (para. 26). - SKK (HK)’s fax 15.7.1997 and PIC’s reply 21.7.1997 33.1.Besides WPF’s evidence, there was important contemporaneous documentary evidence showing that PIC had undertaken liability for the unpaid invoices of QTS and SGH. 33.2.In a fax from BY dated 15 July 1997 to TPH (cc. Mr Moriji of SKK (Japan) and WPF), BY wrote:
33.3.TPH’s reply dated 21 July 1997 is important. He did not object to the contents set out above. He acknowledged his firm’s liability for the outstanding sum. The relevant part said (in English):
33.4.TPH’s evidence at trial was that he had not noticed the items put under QTS and SGH in BY’s fax (para. 48). This excuse was rejected by the judge, and understandably so. There were only 4 items listed under “actual outstanding”. No businessman could have failed to notice the items under QTS and SGH which comprised one-third of the total sum. And if the QTS and SGH sums were excluded, PIC’s liability would be substantially less than the “existing outstanding” of the rounded-up figure of “~HK$7.5M” acknowledged by TPH himself. - PIC’s payment of invoices issued to SGH 34.1.Further, on 30 December 1996, PIC had paid SKK (HK) a cheque for more than $1m, which tallies with the total sum of 6 invoices SKK (HK) had issued to SGH, being one of the companies for which PIC denied liability. TPH had no explanation for paying this sum to SKK (HK), other than to say that he simply did what BY told him to do (para. 49). 34.2.The judge was entitled to reject TPH’s excuse. Any experienced businessman would not issue a cheque for more than $1m without satisfying himself that he needed to do so, especially when the business was tight on cash. 35.On appeal PIC argued that the judge had misunderstood TPH’s oral evidence. However a transcript of TPH’s evidence was not provided to this court. Accordingly we cannot even begin to consider this argument, let alone accept it. 36.On a separate point, TPH also took this court through some invoices and said that PIC should only be responsible for CAC’s invoices marked “Everbright”. However he said he could not remember whether he had advanced this at trial. Again, without reference to a transcript or submissions, arguments of this nature cannot be accepted on appeal. - PIC’s arguments regarding CAC 37.1.PIC also argued that the judge had overlooked one matter. In SKK (HK)’s fax of 15 July 1997, the sum said to be outstanding under CAC as at 30 June 1997 ($3,762,204) was different from that appearing in the sales ledger ($4,944,782). 37.2.In my view, that is not relevant. The significance of SKK (HK)’s fax and TPH’s reply to it lay in the latter’s acceptance of liability for the unpaid invoices of QTS and SGH, not in the quantum for which CAC was liable to SKK (HK). The judge was clearly entitled on the strength of those two communications to accept SKK (HK)’s case that PIC had undertaken liability for the unpaid invoices of QTS and SGH listed in the statement of claim, and to reject TPH’s excuse that he had failed to notice references to these 2 companies’ names in the fax. 38.1.PIC also sought to discredit SKK (HK)’s claim by referring to a discrepancy between SKK (HK)’s sales ledger ending 31 December 1997 (B/380) and a Request for Confirmation of Balances dated 13 February 1998 in respect of the balance as at 31 December 1997 (E/1149). 38.2.However it should be noted that the Request was not confirmed. More importantly this discrepancy was in respect of the account between SKK (HK) and CAC, not QTS or SGH. Therefore it is not relevant to this part of SKK (HK)’s claim, which is for the unpaid invoices of QTS and SGH. Regarding CAC’s account, PIC had admitted its liability for the sums claimed. See the defendants’ closing submissions (para. 39) as recorded in the judgment (para. 9). - Argument regarding Invoice SKIVC96-0932(B) 39.1.PIC also pointed to the discrepancy between the sum claimed under invoice SKIVC96-0932(B) (“the relevant Invoice”) as stated in the statement of claim ($119,715.77) and in the actual invoice (D/917) ($267,798.40). 39.2.However it should be noted first, that the document at D/917 actually contained two invoice reference numbers, not only the relevant Invoice, but also SKK-02353. 40.In any event this discrepancy does not assist PIC’s case. The discrepancy is in PIC’s favour. 41.As for PIC’s reference to a Letter of Credit (D/965) opened by QTS in favour of SKK (HK) for the contract under which the relevant Invoice was issued, WPF had provided an explanation at trial (F/1260-1263). She said that SKK (HK) did not collect the entire sum under the L/C (F/1263). She also pointed out SKK (HK) was claiming the lower sum in the relevant Invoice because PIC enjoyed a lower unit price with a 20% discount. - Should SKK (HK) give credit to PIC for 7 cheques? 42.Lastly on the topic of unpaid invoices, there is the argument raised by PIC on the 7 cheques. As noted earlier, according to PIC’s closing submissions, there were 7 cheques (in a total sum of $3,228,048.57) which had been paid by PIC and received by SKK (HK), but had not been credited to PIC, CAC, IHG, QTS or SGH. 43.1.The judge found that although SKK (HK) had received these 7 cheques, PIC had failed to prove that they were for the payment of the unpaid invoices the subject matter of the action. In my view, there was evidence to support the finding of the judge. 43.2.First, the receipts for 2 of the cheques (in the total sum of $1,416,278.40) referred to 5 invoices, which were not in the list of unpaid invoices in SKK (HK)’s claim. 43.3.Secondly, as for the other 5 cheques (in the total sum of $1,811,770.17), PIC had not produced the receipts, so it could not be ascertained which invoices were being paid. The judge accepted WPF’s evidence that whenever SKK (HK) received funds from PIC, she would record the credit to PIC, CAC, IHG, QTS or SGH (as directed by BY or TPH) and issue receipts accordingly. There was no evidence to contradict that evidence. 44.In these circumstances the judge was entitled to find that PIC had failed to prove that the 7 cheques were for payment of the unpaid invoices. (2) Was the judge correct in his analysis of the parties’ rights and liabilities in respect of the following contracts, viz. no.2, 5, 8, 12, 13, 16, 17, 19, 20, 21 and 22? Contract no. 2 45.The judge dealt with this contract in paras. 76-89. 46.1.Both parties agreed that this was a “back-to-back” situation, where a Supply & Apply contract was made with the customer by SKK (HK) which SKK (HK) then sub-contracted to PIC. It follows that ifPIC performed the sub-contract, SKK (HK) would be obliged to pay PIC even if the customer did not pay SKK (HK). 46.2.There was no dispute that PIC had performed this sub-contract, and thus PIC was entitled to payment from SKK (HK). The total contract price was $1,262,647.42. The issue was whether SKK (HK) had already paid this sum. 47.1.Out of this sum, the judge found that SKK (HK) had paid PIC’s invoice dated 30 October 1995 (B/186 and B/485) in the sum of $593,360.13. This was made up of two sums, $200,000 and $393,360.13. 47.2.WPF testified that after she issued a cheque for $200,000 in part payment of PIC’s invoice, she stamped a “PAID” chop on the invoice, wrote the date “17-11-95”, and made a mark against the sum of $200,000 (at B/186). 47.3.Subsequently, after WPF issued a cheque for the balance, she stamped a “PAID” chop on a copy of the invoice, wrote the date “19-12-95”, and made a mark against both sums (B/485). 47.4.The judge was satisfied with WPF’s evidence that this indicated that SKK (HK) had paid the sum of $593,360.13 and held that PIC was only entitled to the balance ($1,262,647.42 - $593,360.13) ie $669,287.29. 48.The judge also found supporting evidence that PIC was owed only $669,286.29 on this contract. This was one of three figures which made up a total sum which PIC confirmed SKK (HK) owed it in a Confirmation of Balances as at 31 December 1997 (paras. 86-7) 49.1.On appeal, PIC argued that the other figures which made up the total sum confirmed in the Confirmation of Balances were incorrect. 49.2.However that is not to the point. The issue is what was owing on this contract. 50.1.PIC also argued that the judge should not have accepted that SKK (HK) had paid the sum of $593,360.13 because photocopies of the 2 cheques were not available. 50.2.However the judge had noted that PIC did not particularize its case until September 2010, some 15 years after the cheques in question were issued. By that time the Daiwa Bank had closed its operations in Hong Kong and so no documents were available. 50.3.In my view the judge was entitled to accept that explanation for SKK (HK)’s inability to produce copies of the cheques. 51.1.PIC also argued that certain letters at the top right hand corner of B/186 were “BOT” which meant Bank of Tokyo, and therefore the cheque must have been issued from this bank, and not Daiwa Bank. 51.2.This was a pertinent question which PIC should have put to WPF in cross-examination. However on appeal, TPH said he could not recall if he had cross-examined WPF on this topic. 51.3.In the absence of a transcript showing that a question was asked of WPF along this line in cross-examination, and if so, what was the answer she gave, it is not open to an appellant to pursue this type of argument on appeal. 52.1.Similarly, PIC also argued that the invoice (B/186 and B/485) were forgeries because it was unusual for the later payment to be marked on a fresh copy of the invoice (B/485), and not on the previously marked invoice (B/186). 52.2.In my view, this argument is purely speculative. In the absence of a transcript showing that a question was asked of WPF along this line in cross-examination, and if so, what was the answer she gave, it is not open to PIC to pursue this type of argument on appeal. Contract no. 5 53.The judge dealt with this contract in paras. 90-102. 54.1.This was also a “back-to-back” contract. There was a dispute at trial as to what items were included in a confirmation of balances, which PIC reiterated on appeal. However it is not necessary to go into detail about that dispute because the real issue is whether SKK (HK) had paid PIC a total sum of $2,371,569.43 by way of 3 cheques (in the sums of $1,425,772.65, $700,000 and $245,680.74) in payment of PIC’s invoices. 54.2.WPF testified that she had issued cheques drawn on Daiwa Bank, then stamped the “PAID” chop on PIC’s invoices and marked them accordingly (except that for the last sum, she had forgotten to write the number of the cheque: B/493), similar to the situation discussed in respect of Contract No. 2 above. 55.1.Similarly to Contract No. 2, PIC disputed those payments because SKK (HK) could not produce photocopies of the cheques, and PIC alleged the cheques were drawn on Bank of Tokyo, not Daiwa Bank. 55.2.The judge accepted WPF’s evidence (para. 97). I repeat the discussion at paras. 47, 50, 51 and 52 above. 56.1.The judge also noted that if SKK (HK) had failed to pay PIC the sum of more than $2.3m, making up the vast bulk of the contract sum, one would have expected PIC to have chased up SKK (HK) instead of silently continuing to carry on the work under this contract. 56.2.Moreover this claim was not raised until 2009, a decade after the proceedings were commenced (para. 98). 57.These are cogent reasons on which the judge was entitled to find that the disputed total sum of $2,371,569.43 had indeed been paid by SKK (HK). Contract No. 8 58.The judge dealt with this contract in paras. 103-115. 59.The customer (QTS) and SKK (HK) had entered into a written Supply & Apply contract for a building. Although TPH also signed the contract on behalf of JB, neither PIC nor JB was a party. JB was referred to in the contract as SKK (HK)’s Shanghai liaison unit and as the company responsible for applying the paint (Condition I para. 1.6). (At trial it was assumed that JB and PIC were the same entity, and I shall refer hereafter only to PIC). 60.1.The judge found that there was a “back to back” contract whereby PIC was SKK (HK)’s sub-contractor for the Supply & Apply contract. 60.2.As discussed earlier, the judge held correctly (para. 82) that if PIC could prove that it had performed the work required in the contract between SKK (HK) and the customer (“the 1st type of contract”), which SKK (HK) had sub-contracted to PIC (“the 2nd type of contract”), SKK (HK) was contractually bound by the sub-contract to pay PIC, whether or not the customer paid SKK (HK). 61.PIC submitted on appeal that it follows that the burden was on SKK (HK) to prove why the customer did not pay it (SKK (HK)) and only then would SKK (HK) not need to pay PIC on PIC’s counterclaim under the sub-contract. 62.1.However the relationships between the customer, SKK (HK) and PIC were not like those governed by typical Hong Kong construction contracts where there are express provisions governing architects’ certificates and payments which affect all the parties, ie employer, main contractor and sub-contractors. In the present case, the 1st type of contract (between the customer and SKK (HK)) and the 2nd type of contract (between SKK (HK) and PIC) were two entirely separate and independent contracts. 62.2.PIC’s submission (which permeated throughout the grounds of appeal) that it was prima facie entitled to payment unless SKK (HK) could prove why the customer did not pay it (SKK (HK)) is fundamentally incorrect. 62.3.It is well-established that in litigation, he who asserts must prove. Since PIC was asserting that SKK (HK) owed it a certain sum, it must prove the facts which gave rise to its entitlement to such a sum. Since PIC was claiming that SKK (HK) owed it a sum for performing a contract made between them, it must prove that it had performed that contract. The mere fact that the contract was a sub-contract does not prove that it had been performed. 63.Therefore the issue at trial was whether PIC had proved to the satisfaction of the judge (1) what the contract sum was, and (2) that it had performed the contract. 64.1.As for issue (1), the contract between the customer and SKK (HK) estimated the total price to be $6,670,670. It was only an estimate because the price was to be calculated according to the actual area to which paint was applied. 64.2.In addition to the estimated contract price, the customer was also liable to pay $400,000 tax. 64.3.In other words, assuming the contract was not varied and that the estimate was correct, the customer would have to pay SKK (HK) the total sum of $7,070,670 under the contract, and separately SKK would be liable to pay PIC the same sum under the sub-contract (subject of course to PIC paying SKK (HK) for whatever paint it needed to perform the sub-contract). 65.1.As far as actual payment was concerned, contrary to the terms of payment set out in the written contract which provided for payment into SKK (HK)’s bank account, the customer opened an irrevocable letter of credit (“L/C”) in favour of SKK (HK). 65.2.The evidence before the judge was that the L/C was in the sum of $3,596,088.04, but SKK (HK) only drew a total of $1,792,605.46 which it paid to PIC. At trial PIC counterclaimed the balance between the total (estimated) contract price ($7,070,670) and the money it had received ($1,792,605.46), ie $5,278,064.54. 66.Accordingly the burden was on PIC to prove at trial in respect of issue (1), that the estimated contract price was correct; and in respect of issue (2), that it had performed the sub-contract. 67.There was very little documentary evidence on these issues. 68.1.On issue (1), the judge considered that the amount of the L/C was evidence (in the absence of other contemporaneous documentary evidence) that there might have been a substantial reduction in the estimated contract price. 68.2.On appeal PIC argued that the judge was only speculating that was so, and it is not clear what fax(es) the judge was referring to when he referred to fax(es) in August 1995. 69.However the point is that the use of L/C for payment itself showed that the written contract must have been varied. And more importantly, it was for PIC to prove that the estimated contract price was correct and that it had performed the sub-contract, which leads to issue (2). 70.On issue (2), the judge noted that the relationship between SKK (HK) and PIC at that time was good. Therefore there was no reason for SKK (HK) not to draw more funds under the L/C if it could do so. However it could only do so if the customer’s requirements contained in the terms of the L/C were met, ie by proof of PIC’s performance. In my view, the judge’s reasoning that the work contemplated in the written contract had not been fully performed by PIC is supported by the evidence. 71.1.Indeed in WPF’s evidence at trial (p.1263D and p.1264Q-T), she was saying exactly what the judge found, that even though the L/C was for a sum of about $3.5m, SKK (HK) could only draw on it in the approximate sum of $2m (in fact it was about $1.8m). 71.2.PIC’s argument on appeal that WPF accepted that SKK (HK) had also received a separate sum of $148,082.63 is not borne out by the evidence referred to (pp.1260-1263). 72.Essentially the judge was concerned with the lack of documentary evidence. He took the view that as the entire contract had been sub-contracted to PIC, it should have been able to provide contemporaneous documents (eg bills of lading, invoices, packing lists, delivery orders from PIC’s own stores, documents relating to progress of works and the areas to which paint had been applied, etc) to prove the contract had been performed, but it did not do so. 73.1.The only evidence PIC relied upon was the irrevocable L/C and the lack of complaint from QTS. 73.2.However the fact that the L/C was irrevocable does not prove the contract had been performed at all. And the lack of complaint argument was advanced on the assumption that the contract was not varied. 74.In my view, the judge was entitled to place weight on the lack of contemporaneous documentary evidence, and to find that PIC had not discharged its burden of proof on both issues. Contract No.12 75.The judge dealt with this contract in paras. 116-119. 76.1.This was a Supply & Apply contract entered into between a customer and JB, although BY signed the contract on behalf of the latter. 76.2.Under the contract, the payment of $310,000 was to be made to SKK (HK) in Hong Kong by way of an L/C. 76.3.PIC (assuming it to be the same as JB) claimed that SKK (HK) had received the funds but had not transferred them to it. SKK (HK) denied that it had ever received any funds under the L/C. WPF gave evidence to that effect. 77.1.Under the terms of the L/C which expired on 25 January 1996, SKK (HK) could only draw on it upon production of a receipt acknowledging the customer’s receipt of the goods on or before 15 January 1996. 77.2.As the judge noted, JB/PIC was responsible for delivery of the goods. If it had fully delivered the goods before that date, it should have the relevant documentary evidence. However it failed to produce such evidence at trial. 77.3.In my view the judge was entitled to dismiss PIC’s claim on that basis alone. 78.However in addition, the judge noted first, that JB did not chase the customer for the payment, and secondly that SKK (HK) had credited CA with the sum of 2 cheques of $38,000 and $15,500.69 which SKK (HK) had received from the customer. The judge took the view that they were probably the final balance. The judge therefore dismissed this claim. 79.1.On appeal, PIC argued that the contract was not made between the customer and JB, but between the customer and SKK (HK) which SKK (HK) then sub-contracted to JB. 79.2.However that is to ignore the clear wording of the contract which was typed on JB letter paper, and on which JB’s chop was stamped. The fact that payment was to be made to a third party to the contract (SKK (HK)) does not make the contract one between the customer and the payee. 79.3.Further it is clear that PIC is incorrect in its submission that the burden was on SKK (HK) to prove that it had not received the funds. Discussion on the burden of proof has been set out earlier in this judgment (para. 62.3). 80.1.Further PIC referred to certain items in an invoice (D/891-2) as evidencing its delivery of paint under this contract. 80.2.However that invoice does not show that the items were supplied under this contract. 81.As for PIC’s submissions regarding the judge’s views on the cheques, as I have indicated earlier, they were not necessary to his decision on this contract. Contract No.13 82.The judge dealt with this contract in paras. 189-195. 83.This was a transaction where the customer initially intended to purchase paint from PIC. However as the customer wished to effect payment in USD, SKK (HK) became the party to the contract, which it then sub-contracted to PIC. Payment from the customer was to be by way of L/C. 84.1.Again the judge was not satisfied with the lack of evidence showing delivery by PIC. Discussion on the burden of proof has been set out earlier in this judgment (para. 62.3). 84.2.PIC argued that as part of the paint delivered could have been from its stock (instead of having been purchased specifically for this contract), it could not provide evidence of delivery. 84.3.In my view the judge was entitled to reject this argument. There was no reason why PIC could not have produced stock lists or delivery notes. 85.1.PIC also argued that it could be inferred from the lack of evidence of complaint by the customer that it had performed the contract. 85.2.The judge was entitled in the weighing exercise not to give much weight to this piece of evidence when compared with PIC’s inability to produce contemporaneous documentary evidence, which it should possess, to prove its claim. It is well-established that an appellate court would not interfere with a trial judge’s weighing of evidence. Contracts No. 16, No. 17 and No. 20 86.These may be dealt with together as they involve the same issue, viz whether SKK (HK) should be held liable in transactions where the contracting party was SKK (Japan). 87.The judge dealt with contract no. 16 in paras. 200-204, contract no. 17 in paras. 205-207 and contract No. 20 in paras. 218-220. 88.1.These concerned transactions where the customers contracted to purchase paint from SKK (Japan) directly. 88.2.PIC alleged that SKK (HK) sub-contracted them to PIC. It alleged that it had performed the contracts and therefore it was entitled to payment which it had not received. 88.3.SKK (HK) denied that it was liable for any payment, because it was not a party to any contract with the customer, and it had no sub-contract with PIC either. 88.4.SKK (HK) also relied on Sale Commission Agreements between SKK (Japan) and PIC which showed that SKK (Japan) had agreed to pay PIC commission on these transactions. 88.5.PIC agreed that it had signed the Commission Agreements, but alleged that the “commission” was actually its sub-contract profit. 89.Be that as it may, the judge held that even if there were sub-contracts, they could only have been between SKK (Japan) and PIC, and not between SKK (HK) and PIC. That was enough to dispose of these two claims. 90.1.On appeal, PIC relied on a report dated 2 April 1997 (E/1137-1140) from SKK (HK) to SKK (Japan) in which it was written “We, SKK (HK) and (J) have to pay the commission to the Protech for the projects which were recommended by them and the details are as follows ...”. 90.2.However this report had been considered by the judge who rejected it as insufficient evidence that SKK (HK) had undertaken liability for SKK (Japan), a different corporate entity, for these transactions. 90.3.The judge was entitled to take that view. It should also be noted that in the details that followed that opening sentence in the report, SKK (HK) made it clear which items were to be paid by SKK (HK) and which others were to be paid by SKK (Japan) “through” SKK (HK). In the context, the opening sentence was clearly not intended to mean that both companies were to be liable for all the commission payable. It was intended to be subject to the details which followed. Contracts No. 19 and No. 22 91.These may be dealt with together as they involve the same issue, viz whether SKK (HK) had paid commissions to PIC. 92.The judge dealt with contract no. 19 in paras. 213-217 and contract no. 22 in paras. 225-231. 93.1.These were transactions where the customer purchased paint only, and did so directly from SKK (HK). Payment was received by SKK (HK) from the customer. 93.2.PIC alleges that SKK (HK) should transfer the purchase price to it. 93.3.SKK (HK)’s defence was that since the customer directly purchased the paint from it even though PIC was the sole sales agent, it (SKK (HK)) had agreed to pay commission to PIC. PIC duly issued invoices, which SKK (HK) duly paid by way of cheques. By the time of the trial, WPF was only able to produce PIC’s invoices on which she had noted down the numbers of SKK (HK)’s cheques. The judge accepted that this was contemporaneous documentary evidence of payment. 94.1.TPH’s evidence at trial was that these invoices were only a formality “形式” to prevent PIC from claiming tax from SKK (HK), and that it had never been agreed that PIC would only receive a commission from these contracts. 94.2.The judge rejected this evidence, as there was nothing in the invoices (or indeed other documents) which mentioned the alleged agreement on tax. 94.3.Further there were other instances where PIC was compensated by way of commission when SKK (Japan) made direct sales to customers. 95.On appeal PIC questioned the judge’s acceptance of WPF’s evidence that she was not able to access these cheques, when SKK(HK) had provided more than 100 cheques for the trial. PIC also queried why the cheques were drawn on one of the banks SKK (HK) used, and not another. 96.These are matters which a trial judge would weigh in his mind before deciding whether or not to accept a witness’s evidence. In the present case, having seen and heard WPF give evidence, the judge accepted that her inability to access the cheques was due to the fact that this counterclaim was raised very late. 97.These findings are matters which are entirely within the province of the trial judge, with which an appellate court would not interfere. Contract No. 21 98.The judge dealt with this contract in paras. 221-224. 99.1.This was a contract where the customer purchased paint only, and did so directly from SKK (HK) in place of JB. The amount of paint was only an estimate, and the contract provided a system for calculation and inspection of the area of paint and the quality, for the purpose of payment, which was to be by L/C. 99.2.PIC claimed that SKK (HK) had entered into a sub-contract for it (PIC) to supply the paint, that it had performed the contract and therefore it should be entitled to payment. 99.3.SKK (HK)’s defence was that it had only entered into the contract with the customer on PIC’s request and as such, it was only a conduit for payment between the customer and PIC. 99.4.In any event according to WPF’s evidence, SKK (HK) had not received any payment from the customer. 99.5.SKK (HK) also put PIC to proof that it had performed the contract. 100.1.The judge rejected that part of SKK (HK)’s defence in which it asserted it had no personal liability under the sub-contract and was only a conduit for any payment from the customer. 100.2.However the judge held that PIC had failed to prove that it had performed the contract. Essential to the judge’s decision was PIC’s failure to produce contemporaneous documents which it should have in its possession evidencing delivery. That was enough for the judge to dismiss this claim and it cannot be said that the judge was palpably wrong in arriving at that conclusion. Order 101.It follows from the above that PIC has failed to reach the high threshold that is required to persuade an appellate court that the facts found by the judge were palpably wrong. I would dismiss the appeal with costs. Hon Chu JA: 102.I agree for the reasons given by Yuen JA that this appeal must be dismissed with costs to the plaintiff to be taxed if not agreed.
Mr Gary Lam, instructed by Tsangs, for the plaintiff (respondent). The defendant (appellant), unrepresented, appeared in person. | ||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under CACV 36/2012