Taching Petroleum Co, Ltd v. Meyer Aluminium Ltd

HCA 1929/2017 &
HCA 1069/2018

[2021] HKCFI 3028

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1929 OF 2017

____________

AND

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1069 OF 2018

Before: Hon Au-Yeung J in Court

Dates of Hearing: 27-30 July, 2, 3 and 9 August 2021

Date of Judgment: 12 October 2021

_______________

J U D G M E N T

_______________

1.This is a claim for payment for goods sold and delivered with a defence under competition law.

2.Taching and Shell were both suppliers of industrial diesel to Meyer.  By these 2 actions, Taching and Shell respectively claim against Meyer for costs of industrial diesel sold and delivered in the sum of HK$4,435,150 and HK$2,287,811.45 respectively.

3.There is no dispute about the sale and delivery.  Meyer’s sole defence is based on the allegation that Taching and Shell had contravened the First Conduct Rule by agreeing/engaging in a concerted practice to fix price or exchange of price information (“Alleged Contravention”).  Meyer contends that:

(1)     The “relevant agreement” pursuant to which Taching and Shell have respectively supplied the industrial diesel between 1 April and 5 June 2017 (in respect of Taching) and between 5 April and 4 July 2017 (in respect of Shell) were tainted with illegality and unenforceable against Meyer; and

(2)     Meyer is entitled to set off the damages it has suffered as a result of the Alleged Contravention to extinguish its liability to Taching and Shell for the outstanding price.

4.Meyer’s pleaded case on the Alleged Contravention was evidenced by and/or inferred from 2 factors only:

(1)     There were 118 Pairs of corresponding Price Adjustment Notices issued by Taching and Shell respectively, between January 2011 and June 2017 (“Relevant Period”).  Those 118 pairs of List Price Adjustment Notices made the same adjustments to the List Price of industrial diesel.

(2)     The adjustments of List Price specified in the 118 Pairs of Price Adjustment Notices were not public information and the striking uniformity in such changes could not be explained by mere coincidence.

5.Based on these 2 factors alone, Meyer claims that the only reasonable inference for the uniformity in the 118 Pairs of Price Adjustment Notices is that it was the result of anti-competitive collusion between Taching and Shell.

6.The Alleged Contravention has been transferred to the Competition Tribunal pursuant to section 113(3) of the Competition Ordinance, Cap 619 (“the Ordinance”) for determination as a preliminary issue in CTA 1 and 2 of 2018.

7.As these 2 High Court Actions were heard together with the 2 actions in the Competition Tribunal, I have directed all evidence to be taken under the High Court Actions in view of the unlimited jurisdiction of the High Court.  If evidence is taken under the Competition Tribunal, the parties could not, even by consent, confer jurisdiction on the Competition Tribunal to hear evidence that may be outside the scope of competition law.

Illegality defence

8.For the reasons given in the judgment of today’s date in CTA 1 and 2 of 2018 concerning the same parties, the Competition Tribunal has found that there was no breach of the First Conduct Rule.

9.The pleaded illegality defence has no independent existence from the breach of the First Conduct Rule and must fail.

10.I would add two observations.  Firstly, unlike the EU and UK parallel legislation, the Ordinance does not contain any provision that renders an agreement in contravention of the First Conduct Rule automatically void. 

11.Paragraph 1 of Schedule 3 to the Ordinance gives power to the Tribunal to make orders under section 94 which include an order in:

(g)     prohibiting a person from giving effect to an agreement;

(h)     requiring the parties to modify or terminate an agreement; or

(i)     declaring an agreement to be void or voidable.

12.Whether it should be the CFI or the Tribunal which should deal with the question of illegality and how the Tribunal should exercise its discretion under section 94 shall be left to a more appropriate case in future.

13.Secondly, on the question of illegality, Hong Kong is bound by the Court of Appeal decision in Arrow ECS Norway v M Yang Trading [2019] HKCA 176, Cheung JA which followed Tinsley v Milligan [1994] 1 AC 340.  Since then, in UK, there have been Supreme Court decisions which propound approaches different to Tinsley v Milligan, such as Patel v Mirza [2017] AC 467. Again, which approach to follow should be left to a more appropriate case in future.

Set-off

14.In respect of the defence of set-off, in [2021] HKCA 294, §58, the Court of Appeal identified 3 sub-issues, ie (i) whether or not the defence of set-off has been impliedly abrogated by the Competition Ordinance; (ii) whether contravention of the First Conduct Rule can give rise to a cross claim by Meyer against Taching and Shell on the basis of common law principles concerning breach of statutory duty; and (iii) if that cross-claim is sustainable, whether the common law criteria for equitable set-off can be satisfied.

15.The question of set-off does not arise in the present case in view of the Tribunal’s judgment.  Those 3 sub-issues are fact-sensitive.  It is more appropriate for them to be argued in an actual case with proper pleadings than for this Court to give an advisory opinion on a hypothetical situation of no relevance to the immediate parties.

Interest

16.For pre-judgment interest, I award to Taching P+1% from the date of writ to date of judgment and thereafter at judgment rate until payment: Chow How Yeen Margaret v Wex Pharmaceuticals Inc [2018] 3 HKLRD 163, §§45 and 75, CA.

17.The Shell-Meyer Agreement contained, amongst others, the following terms:

"1.     Payment of the purchase price … for each Delivery shall be due … as of the end of the month in which the relevant delivery took place.”

“Payment Date: The last day of the month following the month in which delivery took place, except that if the last day of such month is not a Business Day, then payment shall be made not later than the immediately preceding Business day.”

18.The General Terms and Conditions at Section B of the Shell-Meyer Agreement further stated that:

“6.4 Buyer agrees that payments not received by Shell or still owing more than ten (10) days past the due date will bear interest of 2% per annum above the Prime Rate quoted by the Hong Kong and Shanghai Banking Corporation Limited from time to time, calculated on a daily basis.”

19.Shell should be awarded pre-judgment interest in accordance with clause 6.4 and thereafter at judgment rate until payment.  I accept Shell’s computation of interest as per Annex 3 to its closing submission.

Costs

20.Meyer survived the applications for summary judgment but failed in its competition defence.  Meyer’s illegality defence raises substantial arguments on law which turns out to be unnecessary in view of the Tribunal’s judgment. For the same reasons given in Section N of the Tribunal’s judgment, the same costs order shall apply.

Conclusion

21.There being no defence to the claims, there shall be judgment against Meyer as follows:

(1)     Payment of HK$4,435,150 to Taching;

(2)     Payment of HK$2,287,811.45 to Shell;

(3)  On a nisi basis, there shall be payment of interest to Taching at the rate of prime+1% per annum from the date of writ to the date of judgment and thereafter at judgment rate until payment;

(4)     On a nisi basis, there be payment of interest to Shell at the rate of 2% per annum above the HSBC prime rate from the due date of payment to the date of judgment and thereafter at judgment rate until payment;

(5)     There be payment out of the sums in Court with accrued interest to Taching and Shell respectively in partial satisfaction of the judgment sums; and

(6)     On a nisi basis, Meyer do bear the costs of Taching and Shell, such costs in respect of the proceedings after close of pleadings in the Tribunal shall be on indemnity basis, to be taxed if not agreed, with certificates for 2 counsel.

22.I extend my greatest gratitude to counsel for their enlightening arguments and their dedicated efforts in this case.

Ms Catrina Lam and Ms Cherry Xu, instructed by Herbert Tsoi & Partners, for Taching, the Plaintiff in HCA 1929/2017

Ms Eva Sit, SC and Mr Joshua Chan, instructed by Clifford Chance, for Shell, the Plaintiff in HCA 1069/2018

Mr Kenneth K H Lee, Ms Nana Lui and Mr William Tse, instructed by Robertsons, for Meyer, the Defendant in both cases