Kyocera Corporation (The Successor of Kyocera Optec Co., Ltd) v. W. Haking Enterprises Ltd and Another
Read the full judgment text of CACV 554/2019 on BabelCite. This Court of Appeal judgment was delivered on 9 October 2020.
1. I respectfully agree with the judgment of Yuen JA and order proposed by Her Ladyship at [61] below. This Court will make an order in those terms. I only wish to add that the pleading issue raised by Mr Chong, I must say with respect to counsel, is utterly unmeritorious. It is crystal clear from the pleadings that the plaintiff sued on a contract of sale of goods and it was the plaintiff’s primary case that the 1 st defendant was the contracting party. The reference to the Purchase Order of 2
Cited by 4 cases · Cites 1 case
|
CACV 554/2019 [2020] HKCA 817 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO 554 OF 2019 (ON APPEAL FROM HCA NO 239 OF 2015) ___________________ BETWEEN
___________________ Before: Hon Lam VP, Yuen and Au JJA in Court Date of Hearing: 23 September 2020 Date of Judgment: 9 October 2020 ____________________ JUDGMENT ____________________ Hon Lam VP: 1.I respectfully agree with the judgment of Yuen JA and order proposed by Her Ladyship at [61] below. This Court will make an order in those terms. I only wish to add that the pleading issue raised by Mr Chong, I must say with respect to counsel, is utterly unmeritorious. It is crystal clear from the pleadings that the plaintiff sued on a contract of sale of goods and it was the plaintiff’s primary case that the 1st defendant was the contracting party. The reference to the Purchase Order of 2 February 2009 in paragraph 3A of the Amended Statement of Claim was part of the factual matrix and in no way a plea confining the contract to the terms as set out in the Purchase Order. This is perfectly clear if one were to read paragraph 3A together with paragraph 3B. The material facts had been adequately pleaded and the Pro forma Invoice was merely part of the evidence to support the plaintiff’s case on 1st defendant being the party to the contract. There is no requirement to plead evidence in the pleadings. As the 1st defendant and those advising it should have been clearly aware that the contest was about the identity of the contracting party and that the Pro forma Invoice would be relied upon as part of the plaintiff’s evidence, it is disingenuous for Mr Chong to submit before us that he would have conducted the defence differently if there had been an explicit reference to the Pro forma Invoice in the Amended Statement of Claim. Hon Yuen JA: 2.1.This is an appeal by both defendants from a Judgment of Recorder Houghton SC (“the judge”) given on 6 November 2019 (“the Judgment”) in which he gave judgment for the plaintiff against only the 1st defendant in the sum of USD180,600 with interest from the date of writ, and made an order nisi that the 1st defendant pay the plaintiff’s costs. 2.2.The plaintiff filed a Respondent’s Notice to vary the period from which interest should run. 3.1.After the Judgment was handed down, all parties (including the 2nd defendant) made a joint application by way of consent summons filed on 5 December 2019 to vary the judge’s costs order nisi, and by a consent order, Auyeung J varied the costs order as per the agreed terms. 3.2.The terms of the consent order are not relevant to this appeal, but what is notable is that the 2nd defendant did not apply to vary the costs order nisi for an order that the plaintiff pay its costs. The 2nd defendant’s appeal 4.1.Coming to the present appeal, the first issue was the nature of the 2nd defendant’s appeal. After hearing submissions, this court determined (for reasons set out in [5] - [9] below) that the 2nd defendant’s appeal related only to costs. 4.2.As leave to appeal is required under the High Court Ordinance Cap.4 (“HCO”)[1] for costs-only appeals, but had not been sought, the second issue was whether the 2nd defendant’s application for leave to appeal out of time (made orally to this court) should be granted. After considering the submissions of both sides, the application was refused (for reasons set out in [10] - [11] below). Accordingly, the 2nd defendant’s appeal being incompetent, it was dismissed with costs to the plaintiff. 4.3.Our reasons for determining that the 2nd defendant’s appeal related only to costs, and for refusing the application for leave to appeal out of time, are as follows. 5.1.By way of background, on 28 January 2015, the plaintiff filed a writ against the 1st defendant only. In the Statement of Claim filed on 22 July 2015, the claim was said to be evidenced by a Purchase Order No.POORD003627 dated 2 February 2009 (“the Subject PO”, also referred to in the Judgment as “the 2nd PO”). 5.2.In its Defence filed on 23 September 2015, the 1st defendant denied that it had issued the Subject PO[2]. 5.3.On 24 March 2016, the plaintiff amended the statement of claim to add the 2nd defendant as an additional party. The writ was amended on 19 April 2016.
6.1.By the time of closing submissions at trial however, it was clear that the plaintiff was no longer advancing a case that the 2nd defendant was jointly liable as the 1st defendant’s agent.
6.2.It is thus clear that by the time of closing submissions at trial, the plaintiff’s claim against the 2nd defendant was solely in the alternative. In other words, if the 1st defendant was liable to the plaintiff, the 2nd defendant was not. 7.1.In the Judgment[3], the judge found that it was the 1st defendant which was the contractual party, and he disposed of the action by holding “the plaintiff’s claim against the 1st defendant succeeds”[4]. Judgment was entered against the 1st defendant only. 7.2.Although it would have been clear beyond argument had the judge expressly dismissed the action against the 2nd defendant, its argument that the judge had neglected to consider the issue of its liability is contrived. In light of the plaintiff’s closing submissions that the 2nd defendant would only be liable in the alternative to the 1st defendant, it must follow (and the 2nd defendant must have known) that when the judge found the claim against 1st defendant succeeded, the claim against the 2nd defendant failed. 8.In the costs order nisi, the judge made no order as to the 2nd defendant’s costs. As noted above, the 2nd defendant did not apply to vary the costs order nisi for an order that the plaintiff pay its costs. Counsel for the 2nd defendant Mr KM Chong[5] submitted that it did not do so because the issue of its liability had not been decided by the judge. For the reasons set out in [6] - [7] above, that submission is incorrect. Besides, the 2nd defendant had joined in the consent summons to vary the costs order in other respects. 9.1.In the Notice of Appeal, the 2nd defendant asked for an order that
9.2.The first thing to notice about [i] is that this is inconsistent with the 2nd defendant’s submission before this court that the issue of its liability had not been considered at all by the judge. Thus, on its own submission, there is no Judgment against it to be set aside. More to the point, by reason of the plaintiff’s alternative case discussed in [6] - [7] above, it is clear that, by holding the 1st defendant liable, the judge has not given any judgment against the 2nd defendant which it could ask to set aside. 9.3.Further, by reason of the plaintiff’s claims being alternative only, it is clear in respect of [ii], that the plaintiff has no extant claim against the 2nd defendant which the latter could ask this court to dismiss. 9.4.As such, the 2nd defendant’s appeal can relate only to [iii], i.e. that the judge had made no order as to its costs. In other words, the true nature of the 2nd defendant’s appeal is that it is a costs-only appeal. 10.1.The ramification of that is as follows. Section 14(3)(e) HCO provides (where material):
10.2.The rules of court require that an application for leave should first be made to the court below[6]. The 2nd defendant did not do so. Even though the HCO provision set out above was pointed out in the plaintiff’s skeleton submissions[7], it was not until the hearing of this appeal that the 2nd defendant applied for leave to appeal out of time. 11.1.This court has a discretion to extend time[8]. It is well - established that in considering whether to exercise its discretion to extend time, the court would take into account factors including: (a) the period of delay; (b) any reasons for the delay; (c) the prospects of success of the intended appeal and (d) any prejudice to the other side[9]. 11.2.As for (a), the period of delay in the present case is considerable, as the Judgment was handed down on 6 November 2019, and leave to appeal should have been sought within 14 days thereafter[10]. The period of delay was therefore 10 months. 11.3.As for (b), no reasons have been proffered for the delay, although it may be presumed that the 2nd defendant was acting on legal advice. 11.4.As for (c), the 2nd defendant did not have reasonable prospects of success if it were allowed to pursue its costs-only appeal.
11.5.Finally, as for (d), it is well-established that the absence of prejudice to the other party is not by itself a ground for extending time to appeal[18]. 12.In view of the above, this court declined to exercise its discretion to extend time to the 2nd defendant to apply for leave to advance its costs-only appeal, which was thus incompetent. Accordingly, at the hearing the 2nd defendant’s appeal was dismissed. It did not object to an order that it should pay the plaintiff’s costs. Background facts 13.Coming then to the 1st defendant’s appeal, the background facts are summarized below. 14.1.The plaintiff is a wholly owned subsidiary of Kyocera Corporation, a conglomerate based in Japan. Another wholly owned subsidiary of Kyocera Corporation is a PRC company called Dongguan Shilong Kyocera Optics Co Ltd (“DSK”). The plaintiff sold camera lenses manufactured by DSK. 14.2.The 1st and 2nd defendants are part of the W. Haking group of companies[19]. The 1st defendant is the holding company, and the 2nd defendant is involved in the design and manufacture of products including film cameras. 15.In 2007, a company in the defendants’ group agreed to sell MF-2 film cameras to a company called JNC Datum Tech International Ltd (“JNC”). JNC specified that the lenses for the cameras should be produced by DSK. First business transaction 16.1.On 5 December 2007, the 2nd defendant sent a purchase order to DSK (this was referred to in the Judgment as the “1st PO”) for the production of 200,000 lenses at a cost of USD516,000[20]. This was the first time that any company from the defendants’ group had done business with any company from the plaintiff’s group. 16.2.On 22 January 2008, the delivery note and packing list for the goods under the 1st PO was issued by the plaintiff (not DSK) to the 1st defendant (not the 2nd defendant)[21]. 16.3.Subsequently, following deliveries of the goods, a series of invoices were issued by the plaintiff (not DSK) to the 1st defendant (not the 2nd defendant) from January to April 2008[22]. However, no payment was received. On 7 May 2008, Mr Lan Man Leung (“Lan”), an employee of DSK, sent an email to a staff member of the 2nd defendant saying that DSK appointed the plaintiff to receive payments on DSK’s behalf[23]. However, payment was still not forthcoming. 17.1.The plaintiff sent a series of emails to Dr Tai seeking a meeting not only in respect of payment, “but also further cooperation”[24]. 17.2.Although some payments were made to the plaintiff by the 2nd defendant in May and June 2008, the plaintiff still pressed for a meeting “in order to have mutual further understanding”[25]. 17.3.On 11 October 2008, Dr Lo sent an email on behalf of the 1st defendant to the plaintiff. After reassuring the plaintiff of some further payments soon, she said the following:
This was pursuant to JNC’s placing of a further order of 110,000 cameras with a company in the defendants’ group the previous month[26]. 17.4.Meanwhile, Dr Lo was pressed by the plaintiff for a written agreement. She said she was informed that the plaintiff’s “headquarters had required an agreement to be used for the plaintiff’s internal purpose”[27]. 17.5.On the other hand, Mr Toshio Ochiai, the Senior Manager of the plaintiff’s International Sales Department, said:
17.6.On 15 October 2008, Dr Lo sent an email to the plaintiff in which she said, among other things:
17.7.On 27 October 2008, the plaintiff emailed Dr Lo saying:
Business Agreement 18.1.It was against the above background that a document entitled “Business Agreement” was signed between the plaintiff and the 1st defendant. Dr Lo says she signed it on 7 November 2008. 18.2.What was relevant was the fact that the plaintiff expressly informed the 1st defendant (in the 27 October 2008 email) that they needed to have “such agreement before concreting further discussion”, in response to the 1st defendant’s intimation of a new PO (in the 11 October 2008 email). 18.3.As the judge noted, “there is some disagreement as to the background and purpose of this agreement, but it is clear that it was formally drawn up, and stated in terms that it was an agreement made between [the 1st defendant] and the plaintiff”[29]. He also accepted Mr Ochiai’s evidence that the purpose of the agreement was to ensure that the plaintiff and the 1st defendant would assume responsibility for future transactions[30]. 19.The Business Agreement was a short document with 6 articles, headed Purchase Order, Delivery, Payment, Restriction, Retention of title and Replacement of defective lenses. Two articles are relevant to the present appeal.
The Subject PO 20.1.The 2nd order Dr Lo referred to in her email of 11 October 2008[31] was issued by the Subject PO[32] which was issued on 2 February 2009 by the 2nd defendant[33] and addressed to DSK, as follows:
20.2.Upon receipt, it was chopped with the plaintiff’s chop, but only bore the signature of Mr Lan, who was an employee of DSK, but not of the plaintiff. The plaintiff’s evidence was that Mr Lan had no authority to act on its behalf. The defendants did not challenge this. In fact, the defendants relied on this to support their case that the contract was made by DSK and not by the plaintiff[34]. 20.3.However, what is notable is that this PO, without an authorized signature of the plaintiff, would not have complied with Article 1 of the Business Agreement. Pro forma Invoice 21.1.It is further notable that on the same day, the plaintiff (not DSK) sent a Pro forma Invoice to the 1st defendant (not the 2nd defendant) referencing and reiterating the contents of the Subject PO, viz quantity of goods ordered and delivery dates, with the addition of payment due dates which corresponded with Article 3 of the Business Agreement. 21.2.What is also significant is that only one sum (USD283,800) was stated in the Pro forma Invoice for the order[35], rather than four amounts, one for each lot as in the Subject PO. 22.The Pro forma Invoice was signed by the plaintiff, and the judge found that Dr Lo signed it on behalf of the 1st defendant[36]. 23.1.What is also notable is that a couple of days later, on 4 February 2009, Dr Lo emailed the plaintiff (not DSK) asking as a matter of urgency “pls stop processing the PO per your Pro forma invoice ...” (emphasis added). The reason given was that “I feel that JNC should issue PO directly to your company instead of Haking”. 23.2.As events transpired, nothing became of this, and the original arrangement continued[37]. But what is notable is the reference made by Dr Lo to the Pro forma Invoice in the context of processing the PO. Delivery, invoicing and payment of goods 24.The 1st Lot of goods (20,000 pcs) was delivered on 26 February 2009. An invoice for USD51,600 was issued by the plaintiff (not DSK) to the 1st defendant (not the 2nd defendant)[38]. 25.The 2nd Lot of goods (30,000 pcs) was delivered on 30 March 2009. This was 3 days after the delivery date stated in the Subject PO and Pro forma Invoice. However, there was no contemporaneous complaint about late delivery. An invoice for USD77,400 was issued by the plaintiff (not DSK) to the 1st defendant (not the 2nd defendant)[39]. 26.The 3rd Lot (30,000 pcs) was delivered on 11 May 2009[40]. This was 2 weeks after the delivery date stated in the Subject PO and Pro forma Invoice. Again there was no contemporaneous complaint about late delivery. An invoice for USD77,400 was issued on 15 May 2009 by the plaintiff (not DSK) to the 1st defendant (not the 2nd defendant)[41]. 27.The invoice for the 1st Lot was paid in full by the 2nd defendant on 17 April 2009[42], but no payment was made for the 2nd Lot even by the time of the delivery of the 4th and last Lot. 28.The 4th Lot (30,000 pcs) was due to be delivered on 27 May 2009. A week later, on 3 June 2009, the plaintiff emailed Dr Lo attaching an invoice and also reminded her that it was awaiting payment of the previous shipments. On the same day (3 June 2009), Dr Lo emailed the plaintiff saying[43]:
In light of the request in the email not to send the balance of goods, the 4th Lot was not shipped and was kept at the factory[44]. 29.It was the defence case at trial that the 4th Lot had been rejected for late delivery. However, that is not borne out by the contemporaneous documents, for even as late as 24 September 2009 (more than 3 months later), the 1st defendant emailed the plaintiff saying the following (in italics) in reply[45] to the plaintiff’s email:
30.On 20 October 2009, the plaintiff sent the 1st defendant an Overdue Account Notice[46] stating that the 1st defendant’s payments were past due, and referring to the payment term of 49 days after invoice, as agreed between them in the Business Agreement. On the same day, the 1st defendant confirmed the plaintiff’s accounts payable statement as at the end of August 2009 by email[47]. 31.On 27 January 2010, the plaintiff sent the 1st defendant a demand letter[48], threatening legal action for collection of the overdue sums with interest. On 10 February 2010, the 1st defendant sent an email to the plaintiff confirming that it would pay for 20,000 pcs on 8 March 2010, and as for payment for the rest of 40,000 pcs[49], the delivery schedule would have to be worked out with JNC. 32.On 8 March 2010, the 2nd defendant paid USD51,600 (being the price of 20,000 pcs). There was no further payment or delivery. 33.1.Apparently at this time, there was litigation by a company (or companies) in the defendants’ group against JNC. 33.2.Finally, in response to the plaintiff’s enquiries regarding the JNC litigation and other things, on 11 July 2014, Dr Lo emailed the plaintiff saying:
33.3.As the judge put it, this email “finally [ended] any prospect of the further delivery of lenses or of payment for those already delivered but not paid for”[50]. The plaintiff’s evidence[51] was that by then, the lenses had become obsolete and had no value. Legal proceedings 34.As mentioned earlier, the plaintiff at first sued the 1st defendant only. The claim was later amended to include the 2nd defendant. The defence of both defendants was that the Subject PO was made between the 2nd defendant and DSK. The 2nd defendant’s defence included the limitation argument discussed earlier in this Judgment[52]. 35.The trial before the judge took 4 days. Among others, Mr Ochiai and Dr Lo gave oral evidence. The judge’s Judgment 36.1.In view of the plaintiff’s case by the time of closing, the judge did not consider it necessary to decide whether the Business Agreement was a contractually binding document, or whether its terms had been breached. However, he held that it “forms part of the factual matrix within which the 2nd PO was made”, and that “as a document self-evidently intended to regularize business dealings between the parties, it is of great significance in this case”53. After considering the oral evidence of the witnesses including Dr Lo, he held that “the Business Agreement was a firm and clear expression of the intention of the parties as to their future business arrangements”[54]. 36.2.With respect, that conclusion was clearly right. That conclusion was founded not only on Mr Ochiai’s evidence which the judge accepted, but also on the contents of the contemporaneous documents, especially the plaintiff’s email of 28 October 2008 which said “we need to have such agreement before concreting further discussion” (emphasis added), that further discussion being a reference to the further order of 110,000 pcs foreshadowed in the 1st defendant’s email of 11 October 2008. The Business Agreement was the foundation on which the structure of future business was built. 36.3.Indeed, the skeleton submissions of counsel for the defendants before this court acknowledge as “uncontroversial” the fact that the Business Agreement was “by its terms, an agreement in principle to deal with the possibility of future business” (emphasis in original text). 36.4.The foreshadowed Subject PO was clearly such “future business”. After the emphasis put by the plaintiff on having the Business Agreement in place before entering into future business, it would be absurd that somehow the parties then ignored the Business Agreement and allowed the foreshadowed business to be done between different parties. And there is no evidence that the plaintiff and 1st defendant had changed their minds between the time of the Business Agreement and the day when the Subject PO and Pro forma Invoice were issued. 37.1.Coming back to the Judgment, the judge held that the Business Agreement “spelled out a modus operandi by which orders were to be confirmed by the plaintiff and payments were to be arranged by [the 1st defendant]”[55]. 37.2.The judge then examined the evidence surrounding the order, i.e. the Subject PO was “issued by the 2nd defendant, addressed to DSK, and purportedly accepted by DSK’s employee affixing a chop of the plaintiff”[56], and that on the same day, the plaintiff issued the Pro forma Invoice addressed to the 1st defendant, and “referenced and reiterated the contents of the 2nd PO”[57]. He found that it was “most likely signed by Dr Lo before it was returned to the plaintiff”[58]. 37.3.In analysing the contractual position, the judge noted first that it was “accepted that the issue of the purchase order, by itself does not give rise to a contractual engagement”[59]. Having considered the evidence, he found that the Subject PO was not accepted by DSK because in affixing the chop of the plaintiff (not of DSK), it was clear that Mr Lan was not accepting the offer on behalf of DSK[60]. However, as Mr Lan was only an employee of DSK (not of the plaintiff), the PO was not accepted by the plaintiff either. 37.4.The judge noted that these acts were done “in the context of an earlier agreement [the Business Agreement] intended to regularise the way in which the parties were to conduct their business”[61]. As discussed in the preceding paragraph of this Judgment, it would be absurd if the parties ignored the Business Agreement the plaintiff insisted for so long on getting signed, and allowed the foreshadowed business to be done between different parties. 37.5.The judge held that “the issue of the pro-forma invoice may be analysed as a counter offer made by the plaintiff[62] which was accepted by Enterprises [the 1st defendant]”[63]. 37.6.The judge was entitled to arrive at that analysis on the evidence[64]. As DSK had not accepted the offer contained in the Subject PO, no contract was made by DSK. The Pro forma Invoice for the same products was then issued by the plaintiff, without any qualification that it (the plaintiff) was acting only as agent for DSK. It was sent to the 1st defendant (not the 2nd defendant). The acceptance of the counter offer is shown by the fact that the Pro-forma Invoice was signed under the name of the 1st defendant only (not of the 2nd defendant who had issued the Subject PO) and without any qualification that it (the 1st defendant) was acting only as agent for the 2nd defendant. 38.The judge had an alternative analysis, which was that the Pro forma Invoice was a patently ambiguous document, the meaning of which was to be found by reference to the background facts known to the parties, but on either analysis, the conclusion was the same, that the contract was made between the plaintiff and the 1st defendant[65]. 39.1.Having determined that the contracting parties were the plaintiff and the 1st defendant, the judge found that the contract was an entire contract[66], and that the 1st defendant had not rejected but had accepted the deliveries of the 1st, 2nd and 3rd Lots[67]. As for the 4th Lot, the judge found that as the contract was entire, the 1st defendant was not at liberty to cancel it at an interim stage without accepting all deliveries[68]. 39.2.As the price for the entire contract was USD283,800, of which only USD103,200 had been paid[69], the judge gave judgment for the plaintiff against the 1st defendant for the balance of USD180,600 together with interest at the commercial rate of prime + 1% from the date of issue of the writ. Although the plaintiff had also claimed damages for storage, this claim was not pursued by the time of closing. Appeal 40.On appeal, the 1st defendant raised the following issues, in brief:
41.The plaintiff’s respondent’s notice challenged the judge’s order that interest be paid only from the date of issue of the writ, and not from the date of breach. (a) 42.1.As discussed earlier in this Judgment[70], it was clearly open to the judge on the evidence, to find that the Pro forma Invoice constituted the contract between the plaintiff and the 1st defendant. 42.2.First, the significant factual matrix was that (1) the plaintiff had demanded that the 1st defendant sign a formal agreement with it before the foreshadowed second production order, and (2) the terms of the Business Agreement envisaged only the plaintiff and the 1st defendant as contractual principal counter-parties in the future business. 42.3.Then, there was the fact that Mr Lan did not chop the Subject PO with DSK’s chop but with the plaintiff’s chop, thereby indicating that DSK had not accepted the offer contained in the Subject PO, together with the fact that on the same day, the plaintiff (not DSK) sent the Pro forma Invoice for the same products to the 1st defendant only (not the 2nd defendant), which the 1st defendant accepted by signature without any qualification that it was acting as agent of the 2nd defendant. Mr Chong’s argument that the invoices for the Subject PO were sent by the plaintiff pursuant to Mr Lan’s email of 7 May 2008 is artificial, because that email was sent in relation to the first business transaction, and it was precisely to avoid the confusion surrounding the party liable to make payment in that transaction that the Business Agreement was concluded. 43.The 1st defendant’s argument on appeal was not that there was no evidence to support the judge’s analysis, but that it was not open on the pleadings. It submitted that the plaintiff had not pleaded that the Pro forma Invoice was its counter-offer which the 1st defendant accepted by the signature thereon, and that the 1st defendant had “never been afforded an opportunity to address and deal with these factual issues”[71]. 44.1.It is correct that the Pro forma Invoice was not pleaded in the Amended Statement of Claim. In fact, the Amended Statement of Claim did not plead how and when the contract was made. In the Amended Reply, the plaintiff pleaded that it had issued the Pro forma Invoice to the 1st defendant which was acknowledged and signed by the 1st defendant, and which stated the payment due dates[72]. The legal effect of those acts was not pleaded, but it is well-established that it is not necessary to do so. 44.2.In Tsang Wing Man v Chung On Ling[73]this court[74] held that the role of pleadings is:
44.3.More recently, and more pertinently, in Lo Yuk Sui v Fubon Bank[75], the Appeal Committee of the Court of Final Appeal held:
44.4.When adjudicating an action, a judge is required, on the facts he finds, to analyse the parties’ legal rights and obligations. When the parties have done a series of acts (a classic example being a “battle of the forms”), the judge has to apply the relevant law (in that case, the law of contract) in order to determine how the acts, as they unfolded, affected the parties’ legal positions. As the Appeal Committee of the Court of Final Appeal has held above, there is no requirement to plead the legal consequences of particular facts. In the present case, therefore, there was no requirement to plead that the legal consequence of the issue of the Pro forma Invoice was that it formed a counter-offer, and that the legal consequence of the 1st defendant’s signature thereon was that it constituted the acceptance of the counter-offer. 45.Further, it is incorrect to say that the 1st defendant had “never been afforded an opportunity to address and deal with these factual issues”. In closing submissions before the judge, it was submitted expressly by the 1st defendant that “the Pro forma Invoice was not a contract or evidence of a contract”[76], whereas the plaintiff submitted that the signatures of the plaintiff and the 1st defendant on the Pro forma Invoice showed who were the contracting parties[77]. (b) and (c) 46.These two issues can be disposed of together. 47.1.The question whether the judge was required to determine joint liability has been discussed earlier in this Judgment: [6.1]. Even though joint liability had been one of the pleaded cases of the plaintiff, it was no longer pursued at the closing of the trial. Accordingly, the judge proceeded on the basis that he had to determine whether it was the 1st defendant or the 2nd defendant who was liable in the alternative, and he determined it was the 1st defendant who was liable. As joint liability was no longer a live issue at the end of the trial, it is irrelevant on appeal[78] 47.2.The limitation argument has also been discussed earlier in this Judgment: [11.4(ii)] - [11.4(iii)]. In light of the judgment in Sun Focus (given in 2012), if the 2nd defendant had wished to advance a limitation argument, it should have done so by way of opposition to the plaintiff’s application to amend the writ and statement of claim back in 2016. Once leave to amend was granted, it was no longer open to the 2nd defendant to argue it at trial or on appeal. (d) and (e) 48.These issues can also be disposed of together. 49.1.In respect of issue (d), the 1st defendant argued that the contract was not entire, but was a divisible (sometimes called severable) contract. As the editors of Chitty on Contracts[79] explains:
49.2.In the present case, it was argued by the 1st defendant that the contract was a divisible one, with the consequence that it was free to accept some goods and reject others, whether delivered or not[80]. 50.1.The judge considered the relevant legal principles, emphasizing the passage in Benjamin’s Sale of Goods[81]:
50.2.The judge found that the contract was an entire contract for the supply and delivery of 110,000 pcs for the price of USD283,800. His construction was informed by the following: (a) the contract was for a stated total quantity in the value of USD283,800; (b) it was placed as one order, not four separate orders; and (c) the factual background of two emails sent by Dr Lo to the plaintiff on 20 January 2009[82] and 25 January 2009[83] requesting the plaintiff to start production of the entire quantity of 110,000 pcs[84]. It might also be added as part of the factual matrix that this was not a situation where the 1st defendant was merely replenishing stock in case it might receive orders from general purchasers from time to time. On the contrary, the order was specifically to fulfil JNC’s order of 110,000 MF-2 cameras[85]. 51.The judge was entitled, on the above evidence, to construe the contract as an entire contract. 52.1.In any event, in respect of issue (e), it is clear from the evidence that the 1st defendant had not rejected the goods. Although some of the goods were delivered late (and assuming that time was of the essence), the fact was that the 1st defendant never sought to reject them for breach of contract. 52.2.On the contrary, it is clear from the evidence that the 1st defendant had accepted the goods. In relation to both the 2nd and 3rd Lots, there was no contemporaneous complaint about late delivery. Instead, they were retained throughout without any intimation of rejection. Indeed, nearly a year after delivery, part payment was made on 8 March 2010 with the 1st defendant saying in its email of 10 February 2010[86] that payment for the rest (balance of the 2nd Lot and all of the 3rd Lot) was pending the working out of the delivery schedule with JNC. This related to the time of payment, not its liability to make payment. 53.As for the 4th Lot, the 1st defendant relied on a sentence (italicized below) in an email of 3 June 2009 as intimating rejection. This email[87] stated, in reply to the plaintiff’s email of the same day which had attached an invoice and also pressed for payment:
54.Again, there was no complaint of late delivery. The judge held that the italicized sentence was equivocal “at best”, but when taken together with a follow-up email on 24 September 2009[88], it was clear that there was no rejection of the 4th Lot for late delivery. In that email, the 1st defendant said the following (in italics) in reply to the plaintiff’s email:
That was enough to dispose of the argument that the 1st defendant had rejected the 4th Lot. 55.In conclusion, the 1st defendant has failed to sustain any of its arguments, and the appeal must be dismissed with costs. Respondent’s notice 56.The plaintiff applied to vary the Judgment for an order that pre-judgment interest on the amount of USD180,600 accrue from the date of breach, rather than from the date of issue of the writ. 57.1.In the Amended Statement of Claim, the plaintiff had claimed interest pursuant to section 48 of the HCO. Section 48 provides, in the case of a claim for debt or damages, for interest from the date when the cause of action arose (ie not from the date of issue of the writ). The 1st defendant’s Re-Re-Amended Defence did not plead why that section did not apply. 57.2.The Closing Submissions for the plaintiff[89] at trial sought pre - judgment interest from the date of breach, which was said to be 3 June 2009 (the date of the “for the balance delivery, pls do not send us” email)[90]. The Final Submission of D1 & D2 at trial did not address the issue of interest at all, and this court has not been referred to any oral submissions on the issue. 58.In the Judgment, the judge did not explain why he deviated from the period of interest claimed and provided for in the HCO. Whilst the award of interest is a matter within the judge’s discretion, it would appear, with respect, that the judge has overlooked the basic principle established in Hong Kong since the 1980's case of Komala Deccof & Co SA v Pertamina[91] - that prima facie the losing party should pay interest from the date when the sum due should reasonably have been paid, and the onus is on the losing party to show “something exceptional”[92] why that usual principle should not apply. 59.1.In the present appeal, Mr Chong argued first that the plaintiff had not asked for interest. This is not correct. See e.g. the plaintiff’s letters of demand[93] which included demands for interest. 59.2.Mr Chong then argued that this was not a normal commercial transaction, as it was due to JNC’s default that the 1st defendant was unable to pay the plaintiff, and it was JNC who designated the plaintiff as the supplier of the lenses. This argument must also be rejected. JNC’s designation of the plaintiff as supplier does not mean that the transaction between the plaintiff and the 1st defendant was not at arms’ length, nor does it constitute an exceptional circumstance for the usual principle not to apply. 60.As it falls to this court to exercise the discretion to award interest, the issue is what is the date when the sum due should reasonably have been paid. Taking into account the dates of the invoices for the 2nd and 3rd Lots, the 49 days term for payment[94], and the date when the 1st defendant intimated that it would not accept delivery of the 4th Lot, the judge’s order on interest should be varied to commence from the following respective dates:
Order 61.For the reasons set out above, the 1st defendant’s appeal is dismissed with an order nisi that the 1st defendant pay the plaintiff’s costs. Further, the judge’s order that judgment be entered for the plaintiff against the 1st defendant in the amount of USD180,600.00 together with interest accrued at a commercial rate of prime + 1% from the date of issue of the writ is varied to an order that interest accrue at the said rate on the respective sums and from the respective dates set out in the preceding paragraph of this Judgment, and with an order nisi that the 1st defendant pay the plaintiff’s costs of the Respondent’s Notice. Hon Au JA: 62.I agree with the judgments of Lam VP and Yuen JA.
Mr K M Chong, Mr K W Lai and Mr Alvin Cheng, instructed by Kenneth C C Man & Co, for the defendants Mr Richard Yip and Mr Jason Ko, instructed by Or & Partners, for the plaintiff 1 Section 14(3)(e). 2 (Which bore the name of the 2nd defendant). 3 [35] and [37]. 4 [50]. 5 With Mr KM Lai and Mr Alvin Cheng. 6 Order 59 rule 2B(1), RHC. 7 [14]. 8 Order 59 rule 2B(6), RHC. 9 Hong Kong Civil Procedure 2021, vol. 1, 59/4/9. 10 Order 59 rule 2B(1)(b), RHC. 11 Re-Re-Amended Defence of the 1st Defendant, [5]. 12 Sanderson v Blyth Theatre Co [1903] 2 KB 533. 13 Hong Kong Civil Procedure 2021, vol. 1, 62/1/5. 14 Limitation Ordinance, Cap.347 (“LO”), s.4. 15 [2012] 2 HKC 316 16 Fok JA and Lam J. 17 [11 - 12, 15]. 18 Hong Kong Civil Procedure 2020, vol. 1, 59/4/9. 19 (Although the companies bore the name of their founder Wong Haking, by time of the events in this action, the majority shareholders were Dr Tony Tai Chak-Leung and Dr Lo Tai-Chin. Both were directors of the 1st and 2nd defendants). 20 C/202. 21 C/215. 22 (In chronological order) C/213, 220, 230, 240, 247, 254, 204. 23 C/205. 24 C/208. 25 C/224. 26 Lo Tai-Chin Witness Statement, [47]. 27 Lo Tai-Chin Witness Statement, [50]. 28 Toshio Ochiai Witness Statement, [17]. 29 Judgment, [7]. 30 Judgment, [17]. 31 See [17.3] above. 32 C/287. 33 In the Judgment, it is said that “(the 2nd PO) was issued again by Marketing ...” (emphasis added). Presumably the word “Marketing” was a typographical error, because the PO was issued by the 2nd defendant, and Marketing had never issued a PO previously. 34 Final Submission of D1 & D2 at trial, [37]. 35 See [50.2] below. 36 Judgment, [26]. 37 Toshio Ochiai Witness Statement, [24]. 38 C/291. 39 C/292. 40 C/296. 41 C/296. 42 C/293. 43 C/298. 44 See further [33.3] below. 45 C/304-305. As stated in the email of 24 September 2009 from Dr Lo to Masamoto Onozuka at C/304, her reply was incorporated into the email from Onozuka to her on 14 September 2009. 46 C/320. 47 C/317. 48 C/321. 49 The balance of 10,000 pcs from the 2nd Lot + 30,000 pcs from the 3rd Lot. 50 Judgment, [32]. 51 Koichi Nemoto, Supplemental Witness Statement, [2]. 52 See [11.4(ii)] - [11.4(iii)]. 53 Judgment, [16]. 54 Judgment, [20]. 55 Judgment, [18]. 56 Judgment, [24]. 57 Judgment, [25]. 58 Judgment, [26]. 59 Judgment, [21]. 60 Judgment, [33]. 61 Judgment, [35]. 62 The judge’s reference to the Pro forma Invoice being issued by “Enterprises” in the previous sentence was obviously in error. 63 Judgment, [35]. 64 See [43] - [45] below for the discussion on whether the judge was entitled to make that analysis on the pleadings. 65 Judgment, [37]. 66 Judgment, [48] - [49]. 67 Judgment, [45]. 68 Judgment, [47]. 69 USD51,600 on 17 April 2009 and USD51,600 on 8 March 2010. 70 See [36] - [38] above. 71 Skeleton Argument of the Appellant (1st and 2nd Defendants), [12] - [13]. 72 [6(a)]. 73 Unrep., CACV129/2015, 4 Oct 2016, [53]. 74 (Barma and McWalters JJA and Harris J). 75 [2020] HKCFA 6, 12 March 2020, [9]. 76 Final Submission of D1 and D2, [50(c)]. 77 Closing Submissions for the Plaintiff, [15], [18.4], [20], [24]. 78 The 1st defendant was not asking for an order that this court should find joint liability: see the Order sought in the Notice of Appeal. 79 33rd ed., [21.029]. 80 Judgment, [40]. 81 10th ed., [8-061]. 82 C/283. 83 C/282, confirming an email of 23 January 2009, C/282. 84 Judgment, [48]. 85 Lo Tai-Chin Witness Statement, [47] - [48]. 86 C/327. 87 C/298. 88 C/304-305. 89 [48]. 90 See [28] above. 91 [1984] HKLR 219. 92 Komala Deccof, p.222. 93 C/321, C/322. 94 See [19] above. |
Cases cited in this judgment
Other judgments that cite this case