Shell Hong Kong Ltd v. Yeung Wai Man Kiu Yip Co Ltd & Another
Read the full judgment text of CACV 3749/2001 on BabelCite. This Court of Appeal judgment was delivered on 6 February 2004.
1. This is an appeal from a decision of Deputy Judge Muttrie given on 19 September 2001. The major reason for the apparent delay in the hearing of this appeal is that the appeal was originally heard before two judges. Following that, on appeal to the Court of Final Appeal it was held that the appeal to this Court constituted a Final Appeal and the decision of the two judge court was set aside for that reason. At the conclusion of the hearing of this appeal, this court dismissed the appeal with c
Cited by 2 cases
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CACV003749B/2001 CACV 3749/2001 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 3749 OF 2001 (ON APPEAL FROM HCA NO. 318 OF 1999) _________________________
_________________________ Coram: Hon Rogers VP, Le Pichon and Yeung JJA in Court Date of Hearing: 6 February 2004 Date of Judgment: 6 February 2004 Date of Handing Down Reasons for Judgment: 13 February 2004 _________________________ REASONS FOR JUDGMENT _________________________ Hon Rogers VP: 1.This is an appeal from a decision of Deputy Judge Muttrie given on 19 September 2001. The major reason for the apparent delay in the hearing of this appeal is that the appeal was originally heard before two judges. Following that, on appeal to the Court of Final Appeal it was held that the appeal to this Court constituted a Final Appeal and the decision of the two judge court was set aside for that reason. At the conclusion of the hearing of this appeal, this court dismissed the appeal with costs to the plaintiff save insofar as they had been increased by the inclusion of the claim that the 2nd defendant was directly liable under the franchise agreement dated 21 August 1997 ("the franchise agreement"), which is the subject of the action. Reasons were to be given in writing, which we now do. Background 2.In this action the plaintiff claims against the 1st defendant for breach of the franchise agreement. That agreement related to a petrol filling station at Boundary Street/Tung Choi Street Kowloon. The breaches include the non-payment of fees under the franchise agreement. The claim against the 2nd defendant is based on a personal guarantee executed on 9 August 1991. It is a claim for any sums found due from the 1st defendant in respect of goods supplied by the plaintiff. 3.The 2nd defendant is a director and, it would seem, the leading light of the 1st defendant. The 2nd defendant, and previously his father, had for many years operated the same petrol filling station. After the 1st defendant had been incorporated it entered into an operator agreement, dated 1 August 1991, with the plaintiff ("the operator agreement"). Under that agreement the 1st defendant was appointed to sell the plaintiff's automotive products. The operator agreement was for a period of 5 years. It expired on 31 July 1996. 4.As already referred to, the 2nd defendant gave the plaintiff a personal guarantee dated 9 August 1991 ("the personal guarantee"). There is no dispute that, under the terms of the operator agreement, such a guarantee could be required. For present purposes it is taken that the guarantee was given as part and parcel of the implementation of the operator agreement. The material terms of the guarantee are as follows:
5.After the operator agreement expired no new contract was made until 1997. The plaintiff then set up a new system of franchises for the filling stations. On 21 August 1997, the franchise agreement came into being. The 1st defendant became the franchisee and the 2nd defendant was named as "Nominated Principal". 6.Later, there was a dispute between the parties. The plaintiff claimed that the 1st defendant failed to pay fees due under the franchise agreement and terminated it. Proceedings were issued against both defendants. Amongst other relief, the plaintiff claimed injunctions against both defendants to remove them from the filling station and payment of outstanding fees of $909,083.50 and damages. The plaintiff claimed against the 2nd defendant under the personal guarantee. 7.The plaintiff has since abandoned any claim against the 2nd defendant under the franchise agreement and is pursuing that claim against the 1st defendant only. It now only claims against the 2nd defendant under the personal guarantee in respect of that part of its claim which arises from the supply of goods. The figure of $909,083.50 is expressed as being for outstanding fees. Under the franchise agreement, various fees such as franchise premium, operating licence fees, franchise fees and advertising and promotion fees were all payable monthly. How much of the total figure relates to the supply of goods has not been particularised. 8.The 2nd defendant applied for the determination of the following questions of law or construction under Order 14A, rule 1 of the Rules of the High Court:
9.The 2nd defendant's point has been throughout that the personal guarantee was executed by him in favour of the plaintiff for the purpose of the operator agreement only. It is said that the terms of the franchise agreement were substantially different from those of the operator agreement. Specifically, it is said that the transactions under the franchise agreement did not constitute sales on credit. That argument was based primarily on the existence of clauses in the standard terms and conditions relating to the franchise agreement, which provided that the legal and equitable title to the petrol and other relevant products did not pass to the franchisee until payment had been made. Thus, it is said, that the terms of the guarantee did not cover any liability incurred by the 1st defendant under the franchise agreement. 10.The judge below came to the clear conclusion that the questions raised under Order 14A should be answered in the affirmative. His conclusion was summarised in paragraph 28 of his judgment where he said:
11.On appeal to the two judge court, it was held that the resolution of the question as to whether the personal guarantee covered the liabilities of the 1st defendant under the franchise agreement was dependent upon the evidence. The appeal to the Court of Final Appeal, of course, related to procedural matters and did not involve a consideration, apart from a consideration of the history of the case, of the issues on this appeal. 12.In my view the issues in this case lie in a narrow compass and are not dependent upon any further evidence. Looking at the wording of the guarantee and the question that falls to be considered, the first point that must be made is that the franchise agreement nowhere suggests that the personal guarantee given by the 2nd defendant has been discharged. The question then has to be determined as to whether, in the terms of the guarantee, there has been supply to the 1st defendant of goods on credit or part credit basis. If there has been such supply, the 2nd defendant is "answerable and responsible to the plaintiff for the due payment by the 1st defendant for all goods as the plaintiff may from time to time and supply..." 13.It appears to me that a consideration of the franchise agreement can leave no doubt that there has been a supply of goods to the 1st defendant. Clause 10 of the franchise agreement is headed "Exclusive Purchase and Delivery Shortages". It required the 1st defendant to purchase all the petrol and petroleum products which were to be used at or resold at the filling station from the plaintiff. Clause 11 of the franchise agreement is even more specific. That was headed "Purchase and Sale Price". That provided that the plaintiff would sell petrol and other petroleum products to the 1st defendant at prices which would be notified by the plaintiff to the 1st defendant from time to time the 1st defendant was required to sell those products at the prices which the plaintiff would notify. 14.The Standard Terms and Conditions, which were Annex B to the franchise agreement, were even more specific. Clause 17 was headed "Sale and Purchase Requirements". That commenced in subclause (a) with the words "Shell agrees, subject to availability, to sell the Franchisee at the Premises and the Franchisee agrees so to purchase from Shell all quantities of the Products which are required for the purpose of conducting the Subject Business..." The payment terms are dealt with in clause 26 which provides that the 1st defendant would pay for "Motor Fuels" immediately upon delivery and for other "Petroleum Products" within 30 days. 15.It is in that context, therefore, of a contract which provides for sale and purchase of motor fuel where the payment terms are that payment should be made immediately upon delivery, and other petroleum products, where the payment terms are that payment should be made within 30 days of delivery, that clause 21 of the franchise agreement should be read. That clause is headed "Reservation of Title and Passing of Risk". The relevant parts of that clause reads as follows:
16.That clause does not in any way, prevent the supply of petrol and other petroleum products to the filling station being a supply of goods to the 1st defendant. Nor does it prevent the supply being on credit. In my view, it is indisputable that there was a supply of goods. That supply was on the basis of either immediate payment for the goods, in respect of what was probably the bulk, or on the basis of 30 days credit. In either situation there was an obligation on the 1st defendant to make payment. I see no basis for saying that the 2nd defendant was no longer bound by the guarantee signed on 9 August 1991, nor that he had been discharged from liability by reason of the execution of the franchise agreement. For these reasons I considered that the appeal fell to be dismissed. Hon Le Pichon JA: 17.I agree. Hon Yeung JA: 18.I agree entirely with the reasons of Rogers VP. I have nothing to add.
Representation: Mr Simon Chiu, instructed by Messrs M K Lam & Co.,for the Plaintiff/Respondent Mr Jason Pow, instructed by Messrs Leung, Chan & Pang,for the 2nd Defendant/Appellant |
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