Sea Trader International Ltd v. Straits Bunkering Pte Ltd
Read the full judgment text of HCMP 1883/2018 on BabelCite. This High Court CFI judgment was delivered on 22 January 2019.
1. There are before the Court three summonses, two issued by the plaintiff (“STI”) consisting of an originating summons and a summonsapparently issued within the proceedings begun by the originating summons,and a summons issued by the defendant (“SBP”) under Order 41, rule 6.
Cites 1 case
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HCMP 1883/2018 [2019] HKCFI 135 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 1883 OF 2018 ____________
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_______________ J U D G M E N T _______________ 1.There are before the Court three summonses, two issued by the plaintiff (“STI”) consisting of an originating summons and a summonsapparently issued within the proceedings begun by the originating summons,and a summons issued by the defendant (“SBP”) under Order 41, rule 6. 2.Both of the summonses issued by STI seek an injunction restraining SBP from presenting, taking out and/or advertising any winding- up petition against STI based on a debt of US$21,600 and two sums due for legal costs stated to be due in a statutory demand dated 9 October 2018 issued by SBP. 3.The summons issued by SBP seeks an order striking out certain paragraphs in two affirmations relied on by STI in support of its injunction application. Those affirmations are the second affirmation of Mr Szeto Pui Yan (paragraphs 4 to 9) and the affirmation of Ms Ho Ka Man (paragraph 12). 4.STI is a company incorporated in Hong Kong that carries on business as a sale and supply agent of fuel, lubrication oil and petroleum cargo. 5.SBP is a company incorporated in Singapore that provides bunkering services to vessels calling within Malaysian waters. 6.As is well-known, by sections 177(1)(d) and 178(1)(a)(ii) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, a company may be wound up on the basis that it is unable to pay its debts if it fails to pay a sum within 3 weeks of service on it of a statutory demand stating that a sum which exceeds HK$10,000 is due. 7.In a statutory demand served on STI on 9 October 2018, SBP claims a debt equivalent to HK$174,718.69 made up of: (i) a debt of US$21,600 due as agreed cancellation fees at the rate of US$30 per mt on the cancellation of a purchase agreement for 720 mt of MGO bunker fuel at a price of US$723 per mt; and (ii) SG$331.70 and HK$3,700 due in respect of legal fees. 8.It is accepted by SBP that the sums claimed by way of legal expenses in the statutory demand cannot form part of the debt that it can rely on in seeking to wind up STI on the ground that STI is unable to pay its debts. 9.STI contends that it has a bona fide defence to the claimed cancellation fee and in support of its injunction application relies on the long established readiness of the court to grant a quia timet injunction restraining a statutory demand creditor from proceeding with a winding-up petition if the alleged company debtor can show that to the knowledge of the creditor the debtor has a defence on substantial grounds to the creditor’sclaim; see eg Re Sinom (Hong Kong) Ltd [2009] 5 HKLRD 487 (Kwan J, as she then was). 10.The central issue raised by STI’s summonses is therefore whether STI can establish that it has a bona fide defence on substantial grounds to the claimed cancellation fee. 11.The evidence relating to the contract for the purchase of 720 mt of marine gas oil (“MGO”) bunker fuel at a price of US$723 per mt and whether it was agreed between STI as purchaser and SBP as seller that a cancellation fee of US$30 per mt would be payable if the purchase contract was cancelled is as follows. 12.On Saturday 15 September 2018 STI, acting by Ms Ho Ka Man, entered into negotiations with SBP, acting by Mr Soo Leong Tan, for the purchase of 720 mt of MGO to fulfill purchase orders STI had received from the owners of six fishing vessels for 120 mt of MGO each vessel. The negotiations were conducted using the WhatsApp text messaging service. 13.At 12:43 Ms Ho asked Mr Tan whether he could offer 720 mt. She told him that her customer said she must make an offer that day and not leave it to the following Monday. At 12:45 Mr Tan replied “ETA sis?” and was told by Ms Ho at 12:47 “23 to 24 Sept all 6 vsls come tgt. Can do cia [cash in advance] and pls advise the cancellation fee or other charges.” 14.From 12:55 the messages passing back and forth were as follows:
15.The following day, 16 September 2018, SBP placed an order for the purchase of 172 mt of MGO back to back with the agreement it had come to with STI the previous day. 16.At 10:52 am on Monday 17 September 2018, STI emailed a Purchase Nomination document to SBP for signature and chopping. Thisdocument set out what had been agreed on 15 September 2018 as to quantity and price of the MGO; time and method of payment; and the ETA of the vessels, but it did not say anything about a cancellation fee. It also included a declaration by the supplier that the fuel would be in conformity with various regulations. 17.At 11:30 am on the same day, SBP returned the Purchase Nomination duly chopped and signed and sent its own pro forma invoice andsix Sales Confirmations, one for each of the six vessels, which confirmations set out essentially the same information that appeared in STI’s Purchase Nomination and in addition listed 10 provisions covering, inter alia, how delivery was to be effected and ending with the words, “All other terms and conditions applies [sic] to our company’s sales terms and conditions”. No mention was made in the invoice or the Sale Confirmations of any agreed cancellation fee. 18.Later that day there was further communication between STI and SBP on the subject of another transaction involving different fishing vessels under which payment by STI was to be made to a company called Kairos Oil Trading Pte Ltd (“Kairos”) and not SBP. In the course of these communications, SBP made it clear that payment under the transaction agreed “yesterday” ie the transaction done on the Friday, was to be made to SBP, to which STI responded “so will be no change for the 6 vsls we fixed on sat right?” 19.On 19 September 2018, STI informed SBP by WhatsApp that their customer for the 720 mt of MGO was cancelling the contract, to which SBP replied, “there will be a cancellation charge of 30 permtd” and later stated: “sorry sis as mentioned already we bought the cargo back to back … we will still charge the cancellation.” Notice of cancellation of the contract was also sent to SBP by email. 20.On 21 September 2018, SBP issued an invoice to STI for a cancellation fee in the total sum of US$21,600. On 26 September 2018, STI pointed out to SBP by WhatsApp that they too had lost on the transaction and apologised to SBP “for causing inconvenience”. On 28 September 2018, SBP messaged STI checking on the payment status for cancellation to which STI replied that they were still negotiating with the customer and asked for more time. SBP replied, “ok we will proceed further with the lawyers thank you.” SBP again pressed for payment of the cancellation fee on 1 October 2018 and on 4 October STI proposed a settlement plan under which SBP would offer a price for another transaction that would fully settle the cancellation fee issue, but this proposal was rejected by SBP. STI also asked for documentation relating to the cancellation fee claimed but SBP rejected this request relying on the agreement to pay the fee during the negotiations on 15 September. 21.At no time until STI’s lawyers responded to the Statutory Demand was it ever contended by STI that the claimed cancellation fee had never been agreed and was not part of the contract between STI and SBP. 22.STI’s bona fide defence to SBP’s claimed cancellation fee is that the fee was never contractually agreed. Counsel for STI, Mr Micky Yip, submitted that when Ms Ho responded to Mr Tan’s offer received at 12:55 – 12:56 by stating at 13:44 “customer said tol expensive … any best,” Ms Ho is to be taken to have rejected not only the offer to sell at US$728 per mt but also to have rejected SBP’s stipulated cancellation fee of US$30 per mt, and Mr Tan having failed to repeat SBP’s cancellation fee stipulation when he made the subsequent offer of “723 + 500” and when he agreed “no barging”, the agreement reached during these negotiations did not include the proposed cancellation fee. 23.Mr Yip further relied on the fact that there was no mention of the cancellation fee in the documentation exchanged by the parties on 17 September 2018 and contended that it followed that SBP was precluded from adducing the evidence contained in the WhatsApp screen by virtue of the parol evidence rule. 24.Mr Yip also attempted to rely on paragraphs 4 to 9 of Mr Szeto’s second affirmation dated 11 December 2018 where Mr Szeto deposes that there is a trade practice in the bunker supply trade that an enquiry made during negotiation will not become a contractual term unlessand until it is included in the written contract or confirmation signed by the parties. Mr Szeto also states that it is not the trade practice in the bunker supply trade to charge a cancellation fee upon the cancellation of an order and such a fee can never be implied in a bunker supply agreement. 25.Finally, Mr Yip sought to support STI’s case by reference to paragraph 12 of an affirmation of Ms Ho (also dated 11 December 2018) in which she stated that it was not normal in dealings between STI and SBP for there to be a cancellation fee as was demonstrated from the fact that, to date, STI had placed 15 orders (excluding the 6 orders cancelled on 19 September 2018) with SBP where Kairos was nominated to be the counterparty and in not one of those orders was there any agreement for a cancellation fee. 26.I cannot accept Mr Yip’s submissions. It was not suggested on either side that the law governing the question of the formation and content of the contract was any different from the applicable law of Hong Kong and accordingly what was contractually agreed resulting from the negotiations conducted on 15 September 2018 has to be decided on the basis of an objective assessment of what occurred during the negotiations. In my judgment, an objective observer would have clearly understood that a binding contractual agreement was reached at 14:46 and that that agreement included a term that a fee of US$30 per mt would be payable if the agreement were cancelled. I say this having regard to the following matters: (i) it was Ms Ho who first raised the question as to whether there was going to be a cancellation fee and when Mr Tan said there would be a cancellation fee of US$30 per mt, she expressed no disagreement regardingthis condition; (ii) SBP’s first offer received at 12:55 – 12:56 consisted of anumber of separate free standing terms including the stipulated cancellation fee; (iii) when responding to that first offer, Ms Ho cavilled only at the price of US$728 per mt and expressed no disagreement as to any of the other quite separate (non-price) terms proposed by Mr Tan; (iv) when responding to Ms Ho’s refusal to accept the proposed price of US$728 per mt plus US$500 lump sum barging cost, Mr Tan did not repeat any of the non-price elements of his first offer, including the cancellation fee but replied only on the subject of price; (v) the agreement that was manifestly concluded was not merely as to price but as to all the non-price elements contained in SBP’s first offer. 27.In seeking to invoke the “parol evidence rule”, Mr Yip proceeded on the basis that, pursuant to this rule, wherever parties have concluded a written agreement in the wake of prior negotiations, evidence of an orally agreed term is inadmissible as a matter of law. But, this approach is out of accord with what is now the generally accepted view of the scope and effect of the parol evidence rule. This view is stated in Chitty on Contracts:General Principles (33rded) paras 111 – 113 where the authors express agreement with the conclusion of the Law Commission of England and Wales that: (i) there is no rule of law that evidence is rendered inadmissible or is to be ignored because a document exists which looks like a complete contract; and (ii) whether the document is a complete contract depends on the intention of the parties, objectively judged, and not any rule of law. 28.Applying this approach, which I unreservedly accept, I conclude that, objectively judged, the intention of STI and SBP was not that STI’s counter-signed Purchase Nomination or SBP’s Sale Confirmation was intended to be the complete contract to the exclusion of the orally agreed cancelled fee. I take this view for the following reasons: (i) given that the cancellation fee was agreed between the parties on 15 September 2018 it is irrational to think that they were in agreement that their subsequent contractual documentation should represent the entirety of what they had agreed; (ii) neither STI’s Purchase Nomination nor SBP’s Sale Confirmation contains a term stating that its terms constitute the entire agreement of the parties; and (iii) the terms found in STI’s Purchase Nomination and SBP’s Sale Confirmation, apart from what was agreed on 15 September 2018 as to price, quantity, type of bunker fuel and time for delivery, differ as between themselves and from what had been earlier agreed in the WhatsApp negotiation. 29.As to Mr Yip’s trade practice argument founded on paragraphs 4 – 9 of Mr Szeto’s second affirmation, I find this self-serving evidence falls well short of what would be necessary to prove that there was a clearly established trade practice that precluded orally agreed cancellation fees from becoming contractual terms unless the agreement is reduced to writing. What Mr Szeto says is:
30.In my judgment, orally agreed terms such as cancellation fees are quite different in nature from last-minute price adjustments and changes in the quantity of the bunker to be supplied and I decline to accept that these sorts of last-minute adjustments and changes has led to an unvarying industry-wide practice of requiring all contractual promises to be reduced to writing when this could so easily have been achieved by including an “entire agreement clause” in the written contractual documentation. I also note that Mr Szeto refers to not a single instance where to his knowledge a party to a bunker supply contract has successfully resisted honouring a clear orally agreed term such as a cancellation fee provision on the ground that itwas not contained in the subsequent documentation. Further, I am bound to observe that if the trade practice claimed by Mr Szeto was notoriously established in the bunker supply trade as he says it was, it is most surprising that this point was not made by STI to SBP throughout the period before the issuance of SBP’s statutory demand when SBP was pressing for payment of the agreed cancellation fee. Lastly, what Mr Szeto says about it not being the practice in the trade to charge cancellation fees is irrelevant in this case because STI, through Ms Ho, asked if there would be a cancellation fee and was told there would be such a fee in the sum of US$30 per mt. 31.Turning to Mr Yip’s course of dealing argument founded on Ms Ho’s affirmation referred to in paragraph 25 above, I also find Ms Ho’s evidence to be irrelevant given the fact that, in the instant case, Ms Ho was told at her asking that there would be a cancellation fee of US$30 per mt and made no objection to this stipulation. 32.I accordingly conclude that STI has no bona fide defence on substantial grounds to SBP’s claim to a total cancellation fee of US$21,600 and it follows that both of STI’s summonses must be and are dismissed. SBP’s summons to strike out paragraphs 4 to 9 of the second affirmation of Mr Szeto Pui Yan and paragraph 12 of the affirmation of Ms Ho 33.In support of SBP’s strike out summons, Mr Lavesh Kirpalaniargued that in paragraphs 4 – 9 of Mr Szeto’s second affirmation, Mr Szeto raised new irrelevant matters by way of an ambush that had never been raised before. In regard to Ms Ho’s affirmation, Mr Kirpalani complained that the reference to the dealings with SBP where Kairos was to be the counterparty was irrelevant, designed to be confusing and an attempt to bring up the issue of trade practice by a side wind. 34.In my judgment, the issue of SBP’s strike out summons was disproportionate. It was quite enough for SBP’s purposes to contend, as SBP did, that the evidence objected to was irrelevant and should be disregarded. Conclusion (1) STI’s summonses for injunctive relief are dismissed. (2) SBP’s strike out summons is dismissed (3) The Court will make an order nisi that STI should pay the costs of its summonses and there will be no order as to costs on SBP’s summons since STI would have had to deal with SBP’s objections to the evidence even if that summons had not been issued.
Mr Micky Yip, instructed by ONC Lawyers, for the plaintiff Mr Lavesh Kirpalani, instructed by Tsui & Co, for the defendant |
Cases cited in this judgment