Tobrix B.V. (A Company Incorporated in the Netherlands) v. Hongkong Tripod Ltd
Read the full judgment text of DCCJ 291/2021 on BabelCite. This District Court judgment was delivered on 31 December 2024.
1. This is my decision in relation to the trial of this action between the parties, which concerns disputes arising from orders that were placed for Personal Protective Equipment ( “PPE” ) (namely face masks, mask clips, and aprons [1] ) in the first half of 2020, and hence in the early days of what subsequently became known as the COVID-19 pandemic.
Cited by 1 case · Cites 7 cases
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DCCJ 291/2021 [2024] HKDC 2124 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO 291 OF 2021 -------------------------------
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--------------------------- JUDGMENT --------------------------- 1.This is my decision in relation to the trial of this action between the parties, which concerns disputes arising from orders that were placed for Personal Protective Equipment (“PPE”) (namely face masks, mask clips, and aprons[1]) in the first half of 2020, and hence in the early days of what subsequently became known as the COVID-19 pandemic. 2.At trial, the plaintiff was represented by Mr Philip Rompotis and Mr Lavesh Kirpalani[2], both instructed by Messrs Tanner De Witt[3]. Although the defendant had been represented by solicitors and counsel until late 2023, at trial[4], the defendant was represented by its sole director, Mr Johannes Jozef Bults (“Jos” or “Mr Bults”). The defendant was assisted by someone who was not in court, but who was in legal training. I. BACKGROUND 3.The plaintiff is a limited company incorporated in the Netherlands and engaged in the business of supplying medical equipment and related services. Its CEO is one Mr Antonius Johannes Cornelis Stokbroex (“Toine”). His brother, Mr Hank Stokbroex (“Hank”) is an employee of an international company, Huawei Enterprise Services, based in Shenzhen. 4.The defendant is a limited company incorporated in Hong Kong. As mentioned, Mr Bults is its sole director. He was born and educated in the Netherlands and has since 2000 lived in mainland China and Hong Kong. The defendant pleaded inter alia that it was experienced in sourcing manufactured goods, in particular PPE products, from mainland China and had experience arranging logistics of shipping such goods from mainland China to Europe, and procuring and inspecting documentation. 5.In early 2020, discussions took place between Toine and Hank, Hank and Mr Bults, and Hank, Toine and Mr Bults, which related to the ordering of PPE from China for use in Europe. From that period until around May 2020, several orders were placed for amounts of PPE and there were hence also, until at least around August 2020, various dealings and issues that arose between the parties, and also with various manufacturers/suppliers of PPE. The issues in this action relate mainly to 7 orders for PPE by the plaintiff (for face masks of various qualities, aprons, and mask clips) which are explained in more detail below as the 1st to 7th Orders. 6.However, the relationship and dealings of the parties in relation to these matters was not governed by a formally drawn up and executed written agreement (or agreements). Rather, in determining the exact nature and implications of the parties’ relationship, and the agreement(s) reached between them and consequences thereof in relation to the 1st to 7th Orders, both parties have pleaded and referred at trial to a several thousand messages that were exchanged directly between Hank and Mr Bults via WeChat (“Private Chat”), as well as between Hank, Mr Bults, and Toine via a WeChat group set up by Hank on 20 March 2020 (“Chat Group”) which concerned inter alia negotiations, payment, and other activities in relation to orders of PPE (some of which were inchoate). The 7 trial bundles contained all such messages sent in the Private Chat and the Chat Group, which amounted to, respectively, just over 2,500 messages and just over 5,100 messages. There were also 3 rounds of witness statements, which totalled over 250 pages, and an affirmation of Toine in relation to a discovery application by the defendant (“Toine Aff”). 7.Given the matters set out in the paragraph above, this judgment is somewhat lengthier than might normally be expected for an 8-day trial on a contractual claim. Another reason for its length is that I have sought to deal – insofar as is necessary to the Issues that I must decide in this action – with the wide variety of arguments raised by the defendant which thrust, materiality, and/or relevance were not always readily apparent. II. THE EVIDENCE BEFORE THE COURT 8.The parties did not refer to each and every document or page within the trial bundles, although as I have mentioned, the parties made numerous references during trial to messages sent in the Chat Group and the Private Chat. 9.At trial, the plaintiff called 2 witnesses, namely:
10.Both Toine and Hank were cross-examined by Mr Bults for the defendant, Toine for approximately 2½ hours and Hank for just under 3 hours. 11.Only 1 witness gave evidence for the defendant, namely Mr Bults, who had given 4 witness statements filed on 4 July 2022 (“Bults 1”), 24 November 2022 (“Bults 2”), 18 October 2023 (“Bults 3”) and 6 February 2024 (“Bults 4”). These totalled 200 substantive pages, including a 28-page Appendix A to Bults 1 (“Bults 1 Appendix A”), and were adopted as his evidence-in-chief. Mr Bults was cross-examined by Mr Rompotis over the course of some 2½ days. 12.It is convenient at this juncture to mention some other individuals mentioned within the documents, but who were not called to give evidence at trial, namely:
III. BROAD OUTLINE OF MAIN DISPUTES III.1 The pleadings and the parties’ cases 13.At trial, the pleadings comprised an Amended Statement of Claim dated 13 November 2023 (“ASOC”) which bore the name of Mr Rompotis[6], a Re-Amended Defence dated 3 January 2024 (“RADefAndCC”) filed by the defendant which was by then acting in-person, and an Amended Reply and Amended Defence to Re-Amended Counterclaim dated 17 January 2024 (“AReplyandDeftoCC”) settled by the plaintiff’s solicitors[7]. 14.For the purposes of general background, the parties’ main cases, and the disputes in relation to the relevant agreement(s) arising from the pleadings, can be broadly summarised as follows. 15.The plaintiff pleads that an agreement was reached between the parties (“the Agreement”) by a series of instant electronic messages between 20 March to 2 May 2020. Pursuant to such:
16.The defendant agreed per paragraphs 7 to 13 of the Statement of Agreed Facts (“SOAF”) that the plaintiff had made advance payments to the defendant in the amount of the said MOA, and in the amounts and on the dates (from 22 March to 6 April) in question set out. However, in its pleadings it disputed the plaintiff’s case and claim by saying inter alia that the parties did not enter into the Agreement. Rather the defendant pleaded that:
17.For present purposes the plaintiff’s pleadings in denying any such liability to the defendant (insofar as are relevant to disposal of the issues before the court) may be summarised as:
18.In essence, and at trial, as regards each of the 1st to 7th Orders, the main thrust of the plaintiff’s case was that each of them was placed by the plaintiff as buyer with the defendant as seller (which had placed separate orders for each with the relevant Manufacturer/Supplier) hence the application of Sale of Goods Ordinance (Cap 26) (“SOGO”) and of attendant liability regarding the 1st Order. The defendant’s case was that it acted as agent of the plaintiff in contracting with the Manufacturer/Supplier and provided services in relation to each order, hence SOGO does not apply but the defendant is entitled to be indemnified its expenses. III.2 Joint Statement of Issues 19.The parties had filed a Joint Statement of Issues in Dispute dated 24 May 2023 (“Joint Statement of Issues”), which was signed by the plaintiff’s solicitors, as well as the defendant’s then-solicitors. This set out the following issues.
20.I have considered and treated the Joint Statement of Issues as offering a broad framework for me to dispose of the live issues before the court, and have referred to the relevant Issues below because (i) the parties since amended or re-amended their pleadings between November 2023 and January 2024[15] (ii) apart from a portion of the defendant’s written closing submissions, the parties’ submissions were not generally structured in line with the Joint Statement of Issues and (iii) of developments in the defendant’s case during trial, which I will outline next. III.3 Developments in the defendant’s case during the trial of the action 21.Two other claims for damages were advanced, for the first time, in the defendant’s opening as filed on 22 April 2024, namely:
22.The defendant in the course of its oral opening abandoned the first of these claims, and agreed that the second would more properly be dealt with as a matter of its legal costs if and when such issue arose. 23.In its closing submissions, the defendant[16]:
III.4 The Lunch Agreement and the 1st to 7th Orders 24.Before going into the 1st to 7th Orders I should briefly refer to events that took place prior to the 1st Order being placed on the evening of 21 March 2020 (and hence also prior to the 2nd to 7th Orders), as they are relevant context for the purposes of deciding the pleaded issues. 25.Firstly, there were some discussions and dealings between Hank and Mr Bults regarding the trading of PPE prior to 20 March 2020. However, the first discussions they had which were directly linked to the 1st to 7th Orders took place on 20 March 2020 in the Private Chat, which led to further discussion in the Chat Group with Toine. During the discussions with Toine, there was an agreement in the Private Chat that Hank and Mr Bults would talk about “prices, margins and commissions tomorrow”, for as Hank said “I don't see any reason to support my brother financially, and I want to make some money from it myself.” 26.The next day (21 March 2020) there was a lunch at the Baia Burger concept in Shenzhen between Hank (accompanied by Kelly) and Mr Bults at which both of them reached an oral agreement (“the Lunch Agreement”), before the 1st Order was placed. It is clear, and I find, that they reached the Lunch Agreement pursuant to the previous discussions between Hank and Toine. I will determine the detailed terms of the Lunch Agreement below, but for now and in essence:
27.The 1st Order: This relates to an order for 550,000 FFP2/N95/KN95 face masks, (“the 1st Order”). I find (Issue 3) that the 1st Order was placed by the plaintiff pursuant to, and as can be seen from, discussions in the Chat Group that took place largely in the evening of 21 March 2020, to which I shall refer to below[17]. Further and on relation to such:
28.The 2nd and 4th Orders: These relate to two orders, each for 50,000 aprons. There is no dispute as to the quality required or provided. The Manufacturer/Supplier of all such aprons was Xinle Huabao Medical Products Co Ltd (“Xinle”). It was Mr Bults who found Xinle as a supplier. 29.As a matter of background, I find that on 28 March 2020 an order for 100,000 aprons at US$2.20 each was placed by the defendant with Xinle after there were discussions in the Chat Group (from 20 to 28 March 2020) as to, inter alia, the need and availability, of aprons meeting certain standards. Xinle then issued the defendant with a proforma invoice reflecting US$2.20 per mask for 100,000 aprons, and the defendant transferred US$110,000 to Xinle in relation to the said order of aprons (which is EUR100,000 or EUR2.00 per apron if one uses the exchange pleaded by the defendant). This was paid from money received from the plaintiff (SOAF paragraph 87) (i.e. part of the MOA). 30.I also find that pursuant to Toine’s request to Mr Bults in the Chat Group at around 10:00 pm on 1 April 2020, shortly thereafter the plaintiff in the Chat Group agreed to buy from the defendant all 100,000 of those aprons at EUR2.55 per apron. Over the next few days, there was an attempt to buy more aprons by the plaintiff, pursuant to which the plaintiff transferred a further EUR460,000 of MOA to the defendant on 4 April 2020 with a view to paying for that further order. However, on 6 April 2020, Xinle informed Mr Bults (and Mr Bults informed the Chat Group) that they were no longer able to supply the aprons on the initially agreed terms. Xinle then issued a pro forma invoice dated 10 April 2020, and a sales contract dated 22 April 2020, to the defendant (as “Buyer” in the sales contract) for 50,000 aprons at US$4.40 per apron. 31.While eventually a total of 100,000 aprons were eventually delivered from Xinle to the Netherlands, I also find that by 30 April 2020:
32.The 3rd Order: This relates to an order for 600,000 face masks (“the 3rd Order”). The Manufacturer/Supplier was a party named For You Essentials (“FYE”), which was also referred to as “Foshan” by the parties. I find that the quality of the masks required and were eventually provided were masks meeting the EN14683IIR standard, also described in the evidence as being “surgical masks”, which term I will use below. 33.On the evidence and pursuant to the parties’ agreement in SOAF paragraphs 101 to 102, it was on or about 1 April 2024 that the plaintiff agreed to buy the surgical masks that were the subject of the 3rd Order at EUR0.42 per mask, which price included transportation to Amsterdam[20]. This comes out to EUR252,000 for the whole order. I hence find that the 3rd Order was placed by the plaintiff in such terms on or about 1 April 2024. 34.I find that FYE as a supplier was not introduced by the plaintiff to the defendant, but was introduced by the defendant (acting via Mr Bults) to the plaintiff[21]. I also find that the 3rd Order of FYE masks were ordered and purchased by the defendant in USD for USD180,000 (USD0.30 per mask). As to the EUR equivalent to USD180,000 for which the defendant ordered the masks, on the plaintiff’s pleaded case and Mr Bults’ evidence in chief (which adopted Bults 1) such is said to be EUR168,000 (EUR0.28 per mask), although the defendant’s pleaded case uses a different exchange rate giving EUR163,636.36 (EUR0.27 per mask). 35.The 5th Order: This relates to an order of 25,000 mask clips (“the 5th Order”). No underlying documents between the defendant and the Manufacturer/Supplier (such as a contract or pro forma invoice) were included in the trial bundles, or were disclosed in the action. However, I find on the evidence before me (and taking into account Mr Bults’ admissions during cross-examination) that (i) Mr Bults had found the supplier (ii) the Manufacturer/Supplier had priced them at EUR0.14 each (hence EUR3,500 in total) (iii) the defendant had on 20 April 2020 quoted the plaintiff a price of EUR0.20 a mask which included the defendant’s margin of 15%, transportation costs, and any surcharge thereon (iv) the quote was accepted and the 5th Order placed by the plaintiff in the Chat Group and (v) the defendant then ordered the mask clips from the Manufacturer/Supplier. 36.The mask clips were sent by the defendant to the plaintiff on 22 April 2020 (SOAF paragraph 139). There is no dispute or issue as to the quality requested or provided of the goods. 37.The 6th Order: This relates to an order for 350,000 KN95 face masks (“the 6th Order”). Their Manufacturer/Supplier was named Shenzhen Yuguan Medical Instruments Co, Ltd (“YuGuan”), the masks met that quality, and they were delivered to the Netherlands on or around 25 May 2020. It is agreed and I find that on or about 6 May 2020 the plaintiff agreed to buy 350,000 YuGuan masks at a price of EUR1.21 each (SOAF paragraph 115). Further, the parties apparently agree that the sum to be paid by the plaintiff in relation to the 6th Order should be deducted from the remaining MOA between the parties. 38.However there are disputes between the parties as to the exact circumstances in which the defendant placed an order with masks from YuGuan, and the circumstances in which the plaintiff are said to have ordered such. Put simply, the plaintiff says the defendant had unilaterally[22] ordered such masks from YuGuan in early April 2020 and paid for them using the MOA transferred from the plaintiff to the defendant, and that when the plaintiff found out about this 6 May 2020, the parties then negotiated and agreed the 6th Order in terms above. The plaintiff says that it did this to try and retain/prevent the potential loss of LCH as a customer which had resulted from the rejection of the 2nd Batch/LCH Batch of the 1st Order. The defendant’s case, as explored in more detail below, is that the defendant placed its order with the Manufacturer/Supplier on behalf of the plaintiff pursuant to its obligations under the Services Agreement, and that the latter hence covered the 6th and 7th Orders. The defendant disputes that YuGuan was paid out of MOA. 39.At this stage, as context in resolving the above and other relevant disputes below, I find that on 8 April 2020 Mr Bults[23] visited the factory of YuGuan, and that the same day, after the defendant had conducted what Mr Bults says was “necessary due diligence”, the defendant made a payment to YuGuan of RMB1,900,000 (which fact of payment and sum is agreed) in relation to the supply of those facemasks. I also find from the underlying contract that the price that the defendant had agreed to pay was USD1.25 per mask (FOB Shanghai). It was the defendant’s evidence, using its pleaded exchange rate, that this worked out to EUR1.14 per mask. I also find that YuGuan was not introduced by the plaintiff to the defendant, but was instead introduced by the defendant to the plaintiff, and that it was Mr Bults who found YuGuan for the defendant[24]. 40.The 7th Order: This relates to an order for 250,000 KN95 face masks (“the 7th Order”). Their Manufacturer/Supplier was Promask Electronic Medical Device (Guangzhou) Manufacturing Co, Ltd (“ProMask”). As with the 6th Order, there is no dispute or issue as to the quality of the masks required (namely masks meeting the KN95 standard), nor as to the fact that they were delivered to the Netherlands after April 2020. It is agreed and I find that on 6 May 2020, the plaintiff agreed to buy 200,000 ProMask masks at a unit price of EUR1.21 each (SOAF Paragraph 128). Further, the parties apparently agree that the sum to be paid by the plaintiff in relation to the 7th Order should be deducted from the remaining MOA between the parties. 41.There are disputes between the parties as to the exact circumstances in which the defendant placed an order with masks from ProMask, and the circumstances in which the plaintiff are said to have ordered such. Those disputes are essentially identical (save that here the identify of the Manufacturer/Supplier is ProMask) to those mentioned in relation to the order with YuGuan, as set out in paragraph 38 above. 42.At this stage, as context in resolving the above and other relevant disputes below, I find that (i) on 8 April 2020 Mr Bults had placed an order with an entity named Hongkong Tanso Clothing Co Ltd (“Hong Kong Tanso”) for 350,000 KN95 masks at a price of USD1.245 each (ii) while Hong Kong Tanso had arranged for a supplier named Shunde to fulfil the order, Mr Bults was subsequently informed by Hong Kong Tanso that Shunde could not do so, and that it had been assigned to ProMask for completion (iii) the defendant made payment to Hong Kong Tanso on 22 April 2020 (iv) it was Mr Bults of the defendant who was first introduced to ProMask, and that the defendant introduced ProMask to the plaintiff[25]. IV. EVALUATING THE CREDIBILITY OF FACTUAL WITNESSES 43.As is well-known, the relevant principles relating to assessing the credibility of a witness require that I consider the inherent likelihood or unlikelihood of a witness’ evidence and the apparent logic of events, the consistency of that evidence with undisputed or undisputable evidence, with contemporaneous conduct and documents, with objective, undisputed, and/or indisputable facts and documents, the internal consistency of the witness’ evidence amongst their witness statements and with pleadings, and any material change of case. Some indications (without being exhaustive) that a witness’ evidence is unsatisfactory include where there are evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleading, disclosure and evidence shortcomings, self-contradiction, internal inconsistency, shifting case, new evidence, and selective disclosure. I also need to consider the totality of the evidence. I warn myself against attaching undue weight on demeanour, though demeanour is obviously relevant when considering credibility. 44.Some of those matters have been mentioned, alongside commentary on how to approach the fallibility and potential unreliability of human memory (which principles I have also borne in mind) in Hydrotech Waterproofing Solutions Limited v Shun Yuen Construction Company Limited [2022] HKCFI 1170 paragraphs 3 to 6 citing inter alia Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 1923. I highlight:
45.I will deal below with specific issues of credibility below, where relevant, when determining the relevant issues in this action. However, prior to such, I make the following observations which I have borne in mind when assessing (where it is relevant and necessary to do so) the credibility, reliability, and accuracy of each witness on any specific issue, also bearing in mind the totality of the evidence before me. 46.Firstly, given the nature of the allegations and issues raised by the parties (in particular on the nature and contents of the agreement that is said to have been reached), the identities of the witnesses, and the vast amount of evidence and messages contained in the Chat Group and the Private Chat evidence, the testimony given by all three witnesses tended (at least to some degree) to go beyond purely factual matters, and/or to emphasise matters/submissions that they (and/or possibly their legal advisors) had apparently perceived to be in support of the case of the party calling them. 47.Secondly, there was a clear shift in Mr Bults’ evidence, and in a major portion of the defendant’s case in its closing submissions, away from and in contrast to that which was contained in its pleadings, Mr Bults’ witness statements (as adopted as evidence-in-chief), and the defendant’s prior submissions. The shift was, as I have mentioned, the dropping of the defendant’s claim for “shipping costs” and for “a further surcharge of 5% on the actual incurred logistics costs for arranging export logistics”, and the reformulation of its claim for 15% and 5% by conceding to and agreeing with the plaintiff’s case on inclusion of margin. 48.This shift was notable as a whole, and was particularly stark in relation to the 5% claim. The original formulation of that claim was an important element of the defendant’s pleaded case and its evidence in relation to the Service Agreement and the 1st to 7th Orders, yet was totally inconsistent with the reformulated (and unpleaded by the defendant) 5% claim. Moreover, these changes in case clearly came about only as a result of the original claims being challenged in the course of Mr Rompotis’ cross-examination on how the defendant had handled such margins during the course of the parties’ dealings, and prior to its instructing its former solicitors in August 2020. I highlight, in particular, that:
49.In the round, I consider Mr Bults’ approach to giving testimony on these core topics during the trial to have been evasive, self-contradictory, and argumentative. I also consider that these exchanges and his shift in stance on the defendant’s case demonstrate Mr Bults had a stronger propensity (when compared to that of the two other witnesses) in these proceedings to give testimony and make assertions that he considered supported the plaintiff’s case, even in the face of objective and contemporaneous (or relatively contemporaneous) documentation. This does not reflect well on the absolute and relative truthfulness, reliability, and accuracy of Mr Bults’ oral testimony on the core issues in these proceedings. I have therefore considered the implications of such below where necessary, for example where there are direct conflicts of evidence with the testimony of other witnesses. 50.Thirdly, and as for Toine and Hank, given my views above on the general contents of their testimony I have placed more weight on objective contemporaneous evidence and will also continue to evaluate below (where relevant and necessary to the underlying issues) the credibility, reliability, truthfulness, and accuracy of their evidence below. However I deal here with some of the relevant criticisms or issues raised by the defendant as such are not as readily dealt with below:
V. THE APPROACH TO THE TERMS OF THE CONTRACT REACHED BETWEEN THE PARTIES V.1 The parties’ detailed cases on contract and agency 51.I begin with the defendant, as it was its stance in the pleadings and in its evidence that consequent to the Hank Services Agreement being entered into in “late March 2020”, the parties entered into the Services Agreement[28] (in relation to which the defendant confirmed at trial that I had to find the Hank Sourcing Agreement existed in order for me to find the Service Agreement) and that Hank’s role was to act on behalf of the plaintiff as its agent, not least by entering into the Service Agreement. 52.As regards the latter point the Services Agreement itself is pleaded as being one whereby “Hank and/or Toine on behalf of [the plaintiff] and [Mr Bults] on behalf of [the defendant] thereafter entered into [the Service Agreement]” (RADefandCC Paragraph 10(3), (my emphasis) in terms that then followed. As I have mentioned, it is pleaded that Hank also had a role in various capacities (i.e. Hank and Toine, Hank and/or Mr Bults, and Hank and/or Toine) in relation to certain obligations of the Service Agreement. I highlight in particular:
53.At trial, I sought clarification from the defendant as to whether its case was that the Hank Sourcing Agreement was contractual, or was non-contractual. The defendant seemed to submit that it could have been either. I also note that it was Mr Bults’ evidence that (i) the Hank Sourcing Agreement was an “oral agreement” (ii) based on the messages in the Private Chat between Mr Bults and Hank on 20 March 2020, Hank was sourcing the supply of PPE on behalf of Toine, and Mr Bults had “assumed” that Toine had asked Hank to explore PPE sourcing opportunities on behalf of the plaintiff and (iii) given the “actual events that occurred during the relevant period” (which I understand to mean from March until, at latest, 28 August 2020[29]) Hank was not simply establishing a line of contact between the plaintiff and Mr Bults, or acting as a postbox, but rather, was actively and heavily involved in “every aspect” of the sourcing process for the plaintiff[30]. 54.Also, as Mr Bults said in the course of the defendant’s oral opening, Hank involved the defendant to help him fulfil the ongoing Hank Sourcing Agreement with Toine, with Hank as “the liaison”. In cross-examination he claimed that Hank was the “liaison” between Toine on one side, and Hank and Mr Bults on the other. 55.The defendant also pleaded that there were portions in writing of the Service Agreement, on which it relied on certain WeChat messages from the Chat Group sent on 20 and 21 March 2020 which were set out in the pleadings. However, other than that, and that the Services Agreement had apparently been formed after the HSA was entered into, the defendant did not in its pleadings explicitly set out its case as to the point at which the Services Agreement was formed, and how it was entered into other than in writing (for example, whether orally or by conduct). 56.In the course of the parties’ oral openings, I hence raised the contents of Hong Kong Civil Procedure 2024 §18/12/4 and the attendant question of how to approach messages exchanged after the messages pleaded by the defendant 21 March 2020 (such as the messages set out in Bults 1 Appendix A, the majority of which were dated after 21 March 2020 and continued until 2 May 2020 as being apparently relevant to the terms pleaded at RADefandCC paragraphs 10(1) to (7)). 57.The defendant submitted that the framework of the Service Agreement and of its terms were agreed in the evening of 21 March 2020, and that I could refer to messages subsequent to that date as evidence of how it was executed thereafter, but which did not mean that they had formed or changed the agreement[31]. 58.I also understood that the defendant hence sought to imply the pleaded term of indemnification (RADefandCC paragraph 11) as a result of the alleged agency relationship between the plaintiff and the defendant, since at trial (in particular its written closing) the defendant stated that its claims for expenses arose as it had carried out its fiduciary duty as agent towards the plaintiff and the obligations in the Services Agreement. 59.The main thrust of the plaintiff’s case at trial on this issue was, firstly, that the Agreement (as pleaded by the plaintiff) was entered into “By way of a series of exchange of instant electronic messages between 20 March 2020 to 2 May 2020 in [the Chat Group]”. Secondly, there was no Service Agreement as:
V.2 The relevant principles and approach to contract and agency 60.The objective test is applicable in relation to the formation of a contract. As regards such:
61.Secondly, as to what are the necessary terms in relation to whether an agreement has been constituted:
62.Thirdly, as to agency, I have had regard to the following propositions cited by the parties which appear to be relevant:
63.Finally, on the drawing of inferences (which arises in relation to all other issues) I have applied (having referred the parties to such during trial) the principles set out in paragraph 31 of my decision in Lo Kit Man v Wong Wai Shing Vincent [2021] HKDC 405[45]. VI. ANALYSIS VI.1 Outline of Section VI. 64.Given the parties’ respective cases, I have therefore analysed the matter in stages, and roughly chronologically (with reference to Hong Kong time), as follows:
65.Much of the analysis in Sections VI.2 to VI.4 below concerns the defendant’s case on the Service Agreement. That is due to its pleaded contents, the manner in which it was advanced before me by its pleadings, evidence, and submissions[47], and as the defendant made references to numerous messages beyond those in Bults 1 Appendix A, including to messages in the Appendices to the defendant’s opening and closing submissions[48] regarding “List of Occasions demonstrating Hank’s management of the financial affairs and the MOA” (“DSub Appendix 1”) and “List of occasions demonstrating Toine and Hank regarded all participants as a team” (“DSub Appendix 2”). VI.2 Events until and including the evening of 21 March 2020 (as mainly relevant to Issues 1 to 5) 66.I have analysed in detail the parties’ dealings up to and including the early morning of 22 March 2020 (Hong Kong time) as:
67.Dealings between Hank and Toine, and between Hank and Mr Bults, in the period until the creation of the Chat Group at 4:02 pm on 20 March 2020: I have considered the evidence over this period, including of Hank and Mr Bults’ discussions in the Private Chat, the evidence from Hank and Toine of the discussions between them, and the 3 witness’ relevant oral testimony. I do not see that such evidence, considered in its totality and in context, establishes that the Hank Sourcing Agreement was entered into, whether as a contract (let alone an oral agreement as suggested in Mr Bults’ testimony) or otherwise. 68.I find that during the discussion between Hank and Toine (on which both Hank and Toine gave evidence and, as I have said, were not cross-examined by the defendant), Toine asked Hank if he could help in sourcing PPE from China. Toine did so as he had reason to believe Hank could do so, given that Hank lived there and had contacts in its Dutch community. They both discussed how that could be done quickly. I accept the evidence that Hank mentioned (as set out in Toine 1) Mr Bults to Toine[49], and that Toine also mentioned to Hank the general thrust of the License to Operate from 1 March 2020 onward (as later formalised and set out in a letter dated 1 April 2020). However I do not see that such amounted to the existence of a Hank Sourcing Agreement or authority for Hank to represent Toine/the plaintiff, let alone for Hank to enter into the Service Agreement on behalf of Toine/the plaintiff. 69.Given that context, and in any event, I also find that the timing and contents of the ensuing 70 messages over some 5 to 6 hours between both Hank and Mr Bults in the Private Chat (being contemporaneous documentary evidence prior to the creation of the Chat Group by Hank) are more consistent, objectively viewed, with Hank (and at most with the assistance of Kelly) seeking to work with Mr Bults and his company to meet the needs of Toine/the plaintiff to buy and import PPE to the Netherlands, and as exploring certain areas of that specific co-operation/arrangement between Hank and Mr Bults/the defendant. I do not consider that it establishes, on balance, the existence of the Hank Sourcing Agreement (contractual or otherwise), or any express or apparent authority of Hank to represent and/or enter into an agreement on behalf of Toine and/or the plaintiff:
70.Further dealings between Hank and Mr Bults, and Hank, Toine, and Mr Bults, in the period up until around 1:09am on 21 March 2020: Further to the above, and for reasons below, I do not consider (as was submitted by the defendant) that the creation of the Chat Group establishes or supports the existence of the Hank Sourcing Agreement (contractual or otherwise). I also do not consider that any of the additional events and discussion during this period establish that Hank had express or apparent authority as an agent for the plaintiff (particularly in relation to entering into contracts such as the Service Agreement on behalf of the plaintiff), or that there was an offer, acceptance, and agreement of a term that Hank had authority to act as the plaintiff’s agent. Nor do these added matters reflect any consensus that Hank was authorised to enter into the Services Agreement on behalf of the plaintiff. In particular, I do not see that these dealings support the defendant’s pleaded terms of the Service Agreement at RADefandCC 10(2) to (4) (regarding agency), and paragraph 10(6) (regarding transfer of funds). 71.While I have considered the Chat Group, the Private Chat, and the 3 witness’ relevant oral testimony on this additional period, given my observations on credibility and reliability above, I have primarily had regard to the relevant contents of the Chat Group and the Private Chat. 72.I have considered the contents of the discussions prior to and during this period (the latter of which are analysed in detail below). I find, given the aforesaid context and agreement between Mr Bults and Hank to “work together”, that Hank created the Chat Group to introduce Toine (who represented the plaintiff) and Mr Bults via WeChat, to facilitate their “work together” in relation to orders from the plaintiff for PPE, and to introduce Mr Bults to plaintiff so that they could discuss potential orders for PPE. I do not see how the parties’ dealings up to this point of Hank creating the Chat Group are consistent with (or establish) a Hank Sourcing Agreement, or that Hank had actual or apparent authority to act on behalf of Toine/the plaintiff. I reject such submission of the defendant. 73.Almost all of the discussion in the Chat Group during this period took place between Toine and Mr Bults in a context where Toine was clearly representing the plaintiff and Mr Bults the defendant, with almost no input from Hank. It is, in its totality and in context, entirely consistent with a discussion between two principals (subsequent to an introduction from someone who they mutually knew) seeking to discuss and understand the general terms of any commercial agreements between them to buy and sell goods, having particular regard to pricing of goods, quality, and eventually payments and transfers. 74.In particular, Mr Bults’ first message in the Chat Group was his attempt to outline his/the defendant’s ability to source quantities of surgical masks from suppliers, one of with which he mentioned he had been doing business with for 9 years. There was then discussion of the market for (including numbers) for FFP2 masks, and of pricing including the 15% and 5% figures. There is then further discussion of other PPE products and quality, delivery times, and payment. Three such products are offered by Mr Bults of his own volition with supporting details, namely hazmat suits which Mr Bults mentioned the quantities and pricing that “We can supply” and said he would send the details of later, aprons for which Mr Bults said he had three suppliers, and ventilators for which Mr Bults mentioned a quantity, price, and on which he later (after this period) sent through other information. 75.As regards the latter discussion, I find on the evidence before me (which was in any event conceded by the defendant at trial), that objectively speaking, during this discussion the parties had reached a both general understanding and consensus that the defendant’s 15% margin and 5% surcharge would be contained within the price to be paid from the plaintiff to the defendant. 76.I do not see that this discussion (even if one were to take into account the contents of previous discussions between Hank and Toine, and/or the Private Chat) reflects any offer, acceptance, or consensus in line with any entry into the Services Agreement by Hank and/or Toine on behalf of the plaintiff, nor at this point in the terms pleaded in RADefandCC paragraph 10(2) to (6):
77.Furthermore, shortly after the initial discussion on price and margin/surcharge in the Chat Group (which was followed by Mr Bults having of his own volition mentioned hazmat suits), Hank suggested and Mr Bults agreed that they would – the next day – discuss how Hank was to make money from any such PPE supplied to the plaintiff. As Hank wrote in the Private Chat “We [i.e. Hank and Mr Bults] need to talk about prices, margins and commissions tomorrow”, and “I don't see any reason to support my brother financially, and I want to make some money from it myself [Smile emoji].” This contemporaneous evidence is also inconsistent with the suggestion that there was (at least up to this point) some sort of understanding or term agreed between Hank and Toine that Hank would be compensated by Toine/the plaintiff. It does not support the suggestion that there was a contractual Hank Sourcing Agreement. A fortiori given the conclusion of the Lunch Agreement the next day, as in the next section. 78.I also do not see (particularly as no submissions were made before me to such effect) whether and if so how any knowledge by Hank and/or Toine as to the existence of the general terms of the License to Operate could be or is relevant to any potential permutation of consensus, offer and acceptance, or express or apparent authority, that might be said to give rise to the alleged terms of the Hank Sourcing Agreement reached before, and/or the framework of the Service Agreement and its terms as apparently reached in the evening of 21 March 2020. While submissions were made by the defendant in relation to the License to Operate and the Letters of Cooperation (circulated on 1 April 2020 and defined below), given the timing of the latter I will consider such submissions in the round when dealing, below, with events up until 2 April 2020. 79.As it is the defendant’s case that the framework of the Service Agreement and its terms were agreed on the evening of 21 March 2020, I will reconsider the matter (as well as the plaintiff’s case) in the round when dealing with such further evidence. 80.Further dealings up to the placing of the 1st Order in the evening of 21 March 2020 (including the early morning of 22 March 2020): As mentioned, the next day Hank, Kelly, and Mr Bults met for lunch and reached the Lunch Agreement. There is a dispute between Hank and the defendant over Hank’s title and capacity pursuant to the Lunch Agreement. Hank claimed in his testimony that pursuant to such he was acting as a “consultant” of the defendant, and explained his responsibilities in relation to such role. The defendant gave evidence denying this, with Mr Bults saying that Hank was merely paid an introducer’s fee and acted as the plaintiff’s agent, in support of which he inter alia questioned the relevance of Hank’s qualifications and ability to contribute to the defendant’s operations. 81.Mr Bults gave testimony (on which he was not challenged, and which portion I accept) that he explained to all present at the meeting (being Hank, Kelly, and Mr Bults) the large amount of work that would have to be done in order to secure a supply of facemasks for Toine involved, and that it would require input from Hank, Kelly, himself, and Sarah, hence a “50/50 division of workload between both couples would be the most logical way to proceed”. Other than that, there was little detailed testimony on what was actually said at the meeting. Both witnesses agree that a 50:50 split was agreed but, in seeking to characterise it differently, do so primarily with reference to evidence of matters (primarily subsequent matters including dealings with the 1st Order) other than what was actually discussed at the Lunch Agreement. With that said, there appears to be no evidence that the term “consultant” was actually used at that meeting, or indeed prior to the commencement of these proceedings (other than Toine’s evidence, on which portion he was not cross-examined by Mr Bults, that he was apparently told by Hank of such role at the time). 82.After lunch, Hank, Mr Bults, and Kelly first visited a Manufacturer/Supplier of masks (which identity none of the witnesses remembered). Mr Bults gave evidence in cross-examination (which portion was unchallenged and I hence accept) that he did not know this supplier, and it turned out to be a seller of face masks, which had agreed a prior commission with Kelly, and ultimately there was no discussion of pricing of masks at the time. There was discussion in the Chat Group as to the demand for and quality of those masks between Toine and Hank. In relation to such it is clear (as Mr Bults admitted in cross-examination) that Mr Bults gave his input to Hank on topics such as repackaging and/or boxing (including the possibility of the plaintiff making its own boxes for) the masks. He further explained orally that the latter possibility was raised as shipping masks in boxes would increase the shipping price. 83.That evening Hank, Mr Bults, Kelly, and Ms Hao visited King Year at the KY Address. The whole visit took around 3 hours and messages were only exchanged in the Chat Group, not in the Private Chat. Mr Bults’ oral testimony (which portion I accept) was that he and Hank were talking mainly to Mr Wu, Wendy Wu, and Mr Sun, and that Hank and Mr Bults inspected some samples of the FFP2/N95 masks manufactured by King Year. He also testified (which portion was not challenged and I accept) that the originals of some CE and FDA test reports were shown to Hank and Mr Bults, the latter of whom asked Sarah to verify them (or at least one of the CE report, and the FDA report) by downloading the original files of the reports from the relevant bodies’ websites, which she did. Some pictures of the masks were circulated in the Chat Group, with Hank mentioning that the masks were “CE and FDA approved”, and Toine expressing interest in ordering 550,000 masks. There followed a discussion of quality (including a comment by Mr Bults that the masks “are good”, on which I accept Toine’s oral evidence he had considered in deciding whether to place the 1st Order). The defendant also did not dispute Hank’s evidence that Hank and Mr Bults also had, at the time, a discussion amongst themselves about the quality, certification, boxes, and various things related to the order. 84.Later on, Toine asked in the Chat Group at around 10:15 pm on the evening of 21 March 2020 “Do you think it is possible for 1 euro”, in response to which Hank mentioned that (“We”) were negotiating. Mr Bults said, which portion of his evidence I accept, that the latter related to Hank and himself negotiating the price at which King Year would sell the masks. During cross-examination, Mr Bults said that it was between 10:18 pm and 10:27 pm that he and Hank finally concluded (after earlier negotiation) that the final ex works (“EXW”) price offered by King Year for its masks was RMB9.6 each, and that he had then discussed with Hank (as was also mentioned by Hank in his testimony) the adding of RMB0.4 per mask to cover shipping costs, making the total cost to the defendant RMB10 each. 85.Hank’s and Mr Bults’ testimony diverged as to exactly what happened next. While what is clear is that a phone call took place between Hank and Toine, after which Toine subsequently posted in the group that he agreed to pay EUR1.57 per mask, as to other matters that happened prior to (and on) that phone call:
86.There was then discussion in the Chat Group as to the need for the plaintiff to pay money into an account by Monday, and as to the total amount to be transferred to pay for the masks (using a total figure of 300,000 masks initially before it was corrected to 500,000), including advice from Mr Bults on the fastest way to transfer the money as well as provision of relevant bank account information, with confirmation that the plaintiff would transfer amounts to pay for the 1st Order. There was also discussion of the delivery schedule for April 2020. 87.An invoice was issued dated 21 March 2020 by KY HK (“KY HK Invoice”) specifying the “CLIENT” as “J.J. And Hank”, the parties agree and I find that EUR471,000 (which one can see is the equivalent of 300,000 x EUR1.57) was transferred by the plaintiff on Sunday 22 March 2020 to an account of Mr Bults which received such by Monday 23 March 2020, and that a further EUR765,250.00 was transferred by the plaintiff to the defendant between Monday 23 March 2020 and 30 March 2020 (SOAF paragraphs 7 to 11). As mentioned, transfers were also made by the defendant to private personal accounts of Mr Wu and 2 officers of King Year. 88.In assessing the parties’ cases up to and including the evening of 21 March 2020, and given the principles above, I have hence considered the events up to that day holistically, focusing firstly on what are the relevant terms of the Lunch Agreement, before turning to consider what was agreed that evening at the factory at the KY Address. 89.In relation to the Lunch Agreement, given my analysis and the evidence mentioned above, I have primarily given weight to the contents and effect of Hank and Mr Bults’ prior discussions in the Private Chat WeChat, as well as what had transpired in the Chat Group the previous day, in light of those also the portion of Mr Bults’ testimony referred to above on discussion as to workload and division, and Mr Bults’ evidence on how he had reached his calculations in D’s 9 May Spreadsheet, pursuant to which document (after some minor corrections due to Hank disputing certain amounts) the defendant transferred Hank USD37,203. 90.On the evidence before me, I find that at that lunch, Hank on one hand and Mr Bults (who was acting for the defendant) on the other, as part of the Lunch Agreement agreed that Hank was to be paid 50% of the defendant’s profits[51] in return for Hank “work[ing] together” with the defendant to source orders for PPE placed by the plaintiff. Such conclusion is further supported by Hank’s subsequent involvement in, and activities in relation to, the handling of the 1st Order (in circumstances which I have dealt with in some detail above) and at least the subsequent 2nd to the 5th Orders. Such involvement included, as relied on by the defendant and mentioned further below, creating the OneDrive and OneDrive Spreadsheets, and managing access to and the contents of such. It is also supported by Hank being paid US$37,203 pursuant to such. 91.In my view, it is not necessary for me to determine (and I hence do not do so) whether Hank in doing so acted and/or held the title of “consultant”[52]. The question that I need to determine is whether Hank’s actions and the facts relevant to such affect (and if so how) the parties’ respective cases relating to the Issues at hand, in particular allegations of the agency, in particular the defendant’s case as set out above. 92.In doing so, and before I turn to the events of the evening of 21 March 2020, I find that the fact of the Lunch Agreement is inherently inconsistent with any suggestion that there was some sort of understanding or term agreed between Hank and Toine that Hank would be compensated by Toine/the plaintiff, and does not support the defendant’s case that there was a contractual Hank Sourcing Agreement. Even if the latter were non-contractual, I also do not see how the Lunch Agreement is consistent with the notion that Hank had any authority to act for the plaintiff, or that there was an offer, acceptance, and agreement of a term that Hank had authority to act as the plaintiff’s agent. Indeed if anything, the fact that Hank sought to and did conclude a deal (the Lunch Agreement) whereby he would make money out of the defendant’s profits[53] is an objective and clear indicator that Hank was acting and would continue to act on his own (or at most, on behalf of Kelly), and not on behalf of the plaintiff or Toine. 93.Furthermore, and bearing in mind the approach set out in Hydrotech, and in Shanghai Tongji, if reliance is placed on Hank’s involvement and actions post-Lunch Agreement to establish a contractual Hank Sourcing Agreement, such involvement and actions have to be unequivocally referrable to such contractual Hank Sourcing Arrangement (which contract I should not in any event imply lightly). I have also considered this factor in assessing Hank’s subsequent conduct in the rest of this section, and in other sections below. 94.As for the events of the afternoon and evening of 21 March 2020, I have set these out in some detail above as they need to be seen in light of the background leading up to, and the terms of, the Lunch Agreement, all of which is inconsistent with the existence of a contractual Hank Sourcing Agreement and any suggestion that Hank was somehow representing the plaintiff’s/Toine’s interests. 95.Firstly, I find that what happened that afternoon and evening has to be seen in light of, and as the result of the parties’ prior dealings, namely the defendant’s role that it had envisaged for itself as a seller of PPE to the plaintiff pursuant to earlier discussions, but with the added formal involvement of Hank (working together with the defendant) as a result of the Lunch Agreement. 96.To that end, I do not see how such events and dealings, including the amount and extent of Hank’s communication/liaison with the plaintiff in the Chat Group, establish the existence of any prior Hank Sourcing Agreement (contractual or otherwise). They are not unequivocally referrable to a contractual Hank Sourcing Arrangement, given the existence of the Lunch Agreement. Nor do I see that they establish that Hank had express or apparent authority as an agent for the plaintiff (particularly in relation to entering into a contract such as the Service Agreement on behalf of the plaintiff), holding out by the plaintiff that Hank had any relevant authority to act on behalf of the plaintiff, and/or that there was an offer, acceptance, and agreement of a term of the Service Agreement that Hank had authority to act as the plaintiff’s agent and/or (as is apparently pleaded in RADefandCC paragraphs 10(2) to 10(4), 10(5)(j), and 10(6)) that Mr Bults negotiated the contract in accordance with the instructions of Hank and/or Toine, that Toine determined the key contracting terms, the defendant entered into the contract as the plaintiff’s agent, or the pleaded terms of payment/advance payment[54]. I also do not see how any causal link is established between any alleged representation of agency, and the defendant’s actions. 97.Rather, on balance, I find that such dealings are more consistent with the defendant acting as a seller, where Hank helped to liaise in circumstances where he and Mr Bults (the latter of whom had more experience sourcing and seeking to sell PPE) were visiting and negotiating details with Manufacturers/Suppliers, and where he Hank was incentivised to do so given the Lunch Agreement and relevant discussions thereto. 98.Secondly, and in relation to the question of which version of events to prefer in relation to how the EUR1.57 price was reached, I on balance prefer Hank’s evidence over that of Mr Bults. I find that Hank and Mr Bults discussed and agreed that the plaintiff would be charged EUR1.57 per mask before the phone call with Toine, and accept Hank’s evidence that he did not reveal or discuss King Year’s proposed price to Toine/the plaintiff at any time. I reject any submission by the defendant that I should infer to the contrary as apparently assumed by Mr Bults in his evidence (i.e. “I can only assume that Hank provided an update on the proposal from [King Year]”). I have reached these conclusions as:
99.Such matters are, in my view, inconsistent with the submission that Hank was an agent for the plaintiff in relation to entering into, and performance of, the Service Agreement and its terms as pleaded in the RADefandCC. They, along with Mr Bults’ admission in cross-examination that he did not personally disclose, to Toine, King Year’s price, or the underlying contract with KY HK (and later KY DG), and the other facts I have found above, are also inconsistent with the submission that there was a pleaded term to the effect that the defendant entered into the contracts as an agent for the defendant. Rather, the facts are more consistent, in the round, with a buyer-seller relationship between the plaintiff and the defendant (which was working together with Hank pursuant to the Lunch Agreement), and not an agency. 100.I add for the sake of completeness, that I do not see that there is sufficient oral and/or documentary evidence to suggest that the plaintiff represented or held out to King Year that Hank and/or the defendant were agents of the plaintiff, and/or were authorised to negotiate and enter into an agreement to buy and pay for masks on behalf of the plaintiff. Indeed, the terms of the KY HK Invoice (and indeed of the subsequent agreement terminating such (“KY Termination Agreement”) clearly contradict such. 101.The defendant submitted several reasons why it would not have agreed to contract in its own capacity with the plaintiff as a reseller to the plaintiff, and why it had no reason to believe that Hank/Kelly were facilitating the Hank Service Arrangement. I disagree that these are relevant to my conclusions above on the 1st Order (and hence the framework of the Service Agreement and its terms as alleged concluded by this date) primarily for the following reasons: (i) King Year as a Manufacturer/Supplier was found and introduced by Mr Bults via his contacts (ii) Inspection and verification as to the quality of the masks produced were carried out, at least in part, by Mr Bults and Sarah (iii) Hank’s involvement must be analysed in light of the discussions leading to, and in the context of, the Lunch Agreement (iv) It was in the aforesaid context that King Year as a supplier was raised (by Mr Bults) and approved via discussion in the Chat Group, and Hank played a role in the 1st Order (v) My earlier conclusions on the context in which the defendant had earlier mentioned its general margins (vi) My conclusion that the purchase price of the masks from King Year (and hence the exact margin) was not disclosed to the plaintiff at the time, which is consistent with the conclusions below that it was also not disclosed to the plaintiff via the OneDrive (vii) Although Kelly had previously found the first Manufacturer/Supplier, this and dealings with it were referred to and also visited by Mr Bults. (viii) It is clear that the negotiations and dealings up to this point took place in a fast-moving and high-pressure commercial environment. I also do not see how Mr Bults’ other complaints/factors which were not set out in the Chat Group are relevant to the principles above in relation to establishing terms of the alleged Service Agreement (including the contracting parties thereto), and/or any contractual and/or other agency. 102.In reaching the above conclusions I have considered not only the above (including the matters at paragraph 93 above), but also the following matters, which I deal with at this stage for ease of reference, but all of which (including the matters at paragraph 93 above) have also borne in mind in following sections. 103.Firstly, the defendant has criticised the plaintiff for originally pleading an incorrect figure of masks in relation to the 1st Order (namely, 300,000), and only resiling from such before the (originally scheduled) trial in November 2023. I do not see how this takes the defendants’ case any further on the issue of the terms of the Service Agreement, given the principles and analysis above. In any event, Toine was also not cross-examined on this by Mr Bults, or given an opportunity to explain the underlying reason for this change in stance, in spite of the defendant’s criticism via submissions. In any event, as explored below, I do not see how this makes any material difference in relation to other material matters relating to the KY Order, particularly given the volume of messages and dealings between the parties over this period. 104.Secondly, in reaching the above conclusions, I have found, and have regard to such finding, that the plaintiff had disclosed all such documents within its possession, custody, power, or control, which were the subject of the defendant’s specific discovery request for disclosure of:
105.I have made such finding as during Toine’s cross-examination he was asked if he had disclosed and put in evidence all of the text and voice messages exchanged with Hank as regards to this case, and Toine answered in the affirmative and said that Mr Bults had seen them all. While Mr Bults then commented he did not think so, there was no further questioning on the topic, nor was there any cross-examination on the contents of Toine Aff 1[56]. Also, and in any event no submissions were made by the defendant to the effect that (and if so why) (i) I should not accept Toine’s testimony on this topic (ii) I should find such requested documents existed which the plaintiff had failed to disclose. Nor were any made on the impact thereof, notwithstanding the other criticisms raised by the defendant of Toine’s evidence. 106.In summary, having considered all of the evidence set out above, and up to this stage in the round, I do not see how the defendant has established, on the evidence, that the framework of all of the pleaded terms (in particular, the core terms such as those relating to Hank/the defendant being agents for and/or acting on behalf of the plaintiff at RADefandCC paragraphs 10(2) to (6)) of the Service Agreement were finalised and entered into on 21 March 2020, or that the Hank Sourcing Agreement was entered into prior to such. I find that the evidence up to this date is more consistent with a buyer-seller relationship between the plaintiff and the defendant, and with a sale of goods contract having been entered into between the plaintiff and the defendant whereby the defendant was to supply the plaintiff with 550,000 FFP2/N95/KN95 face masks at EUR1.57 each, for which the plaintiff would advance and pay the defendant money in advance of receipt of the masks. 107.Since the plaintiff seeks to rely on post-21 March 2020 messages as evidence of the terms of the framework of the Service Agreement and its terms reached on that date[57], I shall consider such matters below. I will also consider those events given how the plaintiff has pleaded and argued the Agreement. VI.3 Events until and including 6:30pm on 2 April 2020 (as mainly relevant to Issues 1-3 and 5) 108.This section and period encompasses the matters I have summarised at paragraph 64(2) above. 109.Firstly, it is relevant as undisputed context, and I find on the evidence before me, that all of the dealings between Hank, Mr Bults, and Toine (and between Hank and Mr Bults) from 20 March 2020 onward continued to take place in a fast-moving and high-pressure commercial environment, where the defendant and Hank were (as with others at the time in the PRC) trying to find and assess Manufacturers/Suppliers, and to negotiate orders with them, in order to make deals which would satisfy incoming the plaintiff’s inquiries, demands, and orders for PPE, and in the context of the Lunch Agreement. As part of this process, over the period Mr Bults (and in some cases also Hank) in question visited many Manufacturers/Suppliers in various parts of mainland China[58], and as Mr Bult said in his testimony, the defendant was also sourcing PPE for other clients as well[59]. As Mr Bults stated in the Chat Group on 29 and 31 March 2020, his impression was that it as a “war economy”. 110.Secondly, there is the issue of who had what access to what portions of the OneDrive. Such was created during this period and it is relevant to my conclusions in relation to the 1st to 7th Orders given that:
111.I have considered all of the evidence to which I was referred on the topic, along with the parties’ submissions thereon. I do not see that there is sufficient evidence for me to conclude, on balance, that Toine, Nanny, or anyone acting on behalf of the plaintiff, had “full access” (i.e. access to all of the documents) in the OneDrive at the material time, that is, from 28 March 2020 onward until 28 August 2020. I also find that, on balance, they did not have access to the 594 OneDrive Spreadsheet, and that they did not have “full access” to all of the documents in the OneDrive at the material time. In doing so I have considered the following:
112.Thirdly, I have already made certain findings of fact in relation to the order for Xinle aprons which were eventually reformulated as the 2nd and 4th Orders at paragraphs 28 to 32 above, and in relation to the 3rd Order at paragraphs 32 to 34 above. I refer to such and will not repeat them here. Given those (up to 2 April 2020) and the context as I have set out above, I do not see that the dealings and matters cited in relation thereto and leading up to the placing of the order for 100,000 aprons (which effectively include the 2nd Order), or the placing of the 3rd Order change my conclusions as to the Service Agreement. In particular:
113.Fourthly, and further to the above as well as the context of the Lunch Agreement, I do not see that my conclusions on the earlier period are affected by further evidence of the circumstances during this period, as referred to by the defendant in these proceedings (apparently to support its case on, it would seem in particular, Agreed Issues 1-2) regarding (i) the attempt to buy surgical masks from the first factory visited on 21 March 2020 (ii) a discussion with Mr Bults on the prospect of Tracy assisting in relation to money transfers (iii) the attempt to order masks from LiJiang (iv) attempts to seek to introduce other suppliers (v) that he liaised with the plaintiff/Toine and provided prices to Toine for the 1st, 3rd, and original 100,000 Xinle aprons orders (vi) dealings concerning the ventilators (vii) the KY Termination Agreement and the recontracting for supply of the 2nd and 3rd Batch via a contract with KY DG (“the KY DG Supply Agreement”), and the Letter of Cooperation. 114.I consider that the relevant general context above provides a clear motivation and explanation for Hank’s liaison, involvement, and contributions (or attempted contributions) in relation to these orders, as well as the attempted orders, and any alleged attempts to introduce other suppliers. I do not find that such matters, particularly seen as a whole and in context of the parties’ other dealings during this period, are (as apparently claimed by the defendant) post-contractual evidence to establish, on balance, that there was a Hank Sourcing Agreement (particularly a contractual one, given the Lunch Agreement and the principles in Hydrotech) or the pleaded terms of the Service Arrangement. Given such context I do not think it matters even if Hank provided Toine with all of the final prices, to the plaintiff, of every product that was ordered. Indeed, if he provided such (and not the underlying price to be paid by the defendant to the Manufacturer/Supplier and the defendant’s margin) that would contradict the suggestion that he was acting for the plaintiff, whether via a Hank Sourcing Arrangement or the Service Arrangement. 115.I do not see how and why, and hence do not agree that, Hank’s attempt to explore using Tracy to assist with transfers of money is evidence supporting (as apparently submitted by the defendant) the terms of the Service Agreement, the Hank Sourcing Agreement, or rebutting the plaintiff’s case (in particular on agency). This is particularly so when the relevant contents of the Private Chat in the morning of 25 March 2020 indicate that such effort and discussion by Hank arose out of some prior common understanding between him and Mr Bults that there were “at first” constraints on the extent to which a contact of the latter could assist, and that by the time of the conversation such had changed and there was no need for “all this trouble with Tracy”. 116.As for the dealings relating to ventilators, from the Private Chat, the actual EXW prices payable by the defendant, including a commission payable to an agent, were far lower than what was mentioned in the Chat Group, and were not actually disclosed to the plaintiff/Toine. 117.I also do not see how the circulation of the License to Operate, and the process of creation and finalising of the Letter of Cooperation are evidence supporting (as apparently submitted by the defendant) the terms of the Service Agreement, the Hank Sourcing Agreement, or rebutting the plaintiff’s case (in particular on agency). In particular, I reject the defendant’s assertion that the Letter of Cooperation (even if, as the defendant submitted, seen alongside the License to Operate) amounts to a representation by the plaintiff, to the defendant, that the defendant was its agent. 118.I find that such were circulated due to concerns, as previously discussed in the Chat Group, regarding reports of masks from the PRC having been rejected in the Netherlands which caused King Year to fear that penalties would be imposed on it if it were to happen with their masks. It was in that context that (in the afternoon of 1 April 2020) Mr Bults (and Kelly) visited the KY Address, discussed the remaining batches of the 1st Order with Wendy Wu and Mr Sun (around which time that the License to Operate and two versions of the Letter of Cooperation[62] were circulated in the Chat Group), and the KY Termination Agreement was entered into. 119.As the process of drafting/concluding either or both versions of the Letter of Cooperation took place at around 5:17 to 6:05pm that day, I do not see how such (even if read alongside the License to Operate) can be sensibly read as a representation (as apparently submitted by the defendant) by the plaintiff that the defendant was acting as its agent, or clothing the defendant or Hank with express or apparent authority to act for the plaintiff, be that on or prior to 1 April 2020. Nor do I see that such subsequent conduct amounts to evidence in support of the agency-related terms of the Service Agreement. In reaching such conclusion I have taken into account the terms, contents, and timing of both documents (including Mr Bults’ comments on such, that the terms “collaboration” and “mutual cooperation” between parties are ambiguous at best, and also in the context of the known prior context of all dealings between the parties to that point[63], such as the Lunch Agreement. While given the objective test above I have doubts as to the utility of referring to Toine’s oral evidence (which he gave in the course of being cross-examined and on which reason he was not challenged) on why he had used the terms “co-operate”/ “collaborate” such seems to me, if I am entitled to take it into account, to be consistent with such conclusions. 120.In any event, even if the Letter of Cooperation (read alongside the License to Operate) were somehow a representation by the plaintiff of the defendant’s apparent authority, I do not see that there is sufficient evidence to establish a causal link between any such alleged representation, and the defendant’s subsequent actions in dealing with any Manufacturer/Supplier (or indeed any relevant Manufacturer’s/Supplier’s subsequent dealings with the defendant). I was not referred to any evidence that the Letter of Cooperation (whether on its own or in tandem with the License Agreement) was ever referred to, used, or considered in Hank’s, or the defendant’s subsequent dealings with any Manufacturers/Suppliers, including the next day’s recontracting of the 2nd and 3rd Batches via the KY DG Supply Agreement. 121.Further, on the evidence before me it did not appear that that Mr Bults, Hank, or anyone acting on behalf of the defendant had disclosed the KY Termination Agreement to Toine/the plaintiff. Given my observations above on the OneDrive, I do not see that there is sufficient evidence for me to find or infer (as opposed to impermissibly speculate) that on balance, Toine/the Plaintiff had access to such through the OneDrive. 122.I also do not consider that the circumstances of the order of masks from LiJiang (which was eventually cancelled on 3 April 2020), and the re-contracting with KY DG Supply Agreement, are consistent with the plaintiff’s case on the authority of Hank to enter into the Service Agreement, or indeed the agency terms of the Service Agreement.:
123.In summary, I do not see how such added matters (which are also subsequent conduct) materially support and mean that I should find that the defendant’s case that the framework of all of the pleaded terms of the Service Agreement (in particular those relating to agency) had hence been reached by the parties by the evening of 21 March 2020. Rather, such behaviour is inconsistent with the defendant’s case that Hank was at the material time authorised to act as an agent of Toine/the plaintiff, and that Hank/the defendant acted as the agent of the plaintiff. The evidence, viewed as a whole, remains more consistent with the existence of a buyer-seller relationship between the plaintiff and the defendant. 124.In relation to the reasons submitted by the defendant why it would not have agreed to contract in its own capacity with the plaintiff as a reseller to the plaintiff, and why it had no reason to believe that Hank/Kelly were facilitating the Hank Service Arrangement, up to this point I still do not see how they would cause me to change my conclusions above having regard to events during this period as, further to the matters above (i) The ventilator supplier, and Xinle as a Manufacturer/Supplier, were found by Mr Bults (ii) Mr Bults raised both Xinle and FYE as relevant Manufacturer/Suppliers via discussion in the Chat Group (iii) Mr Bults had visited and inspected the FYE/Foshan factory (iv) information on suppliers and products was provided to the plaintiff (which did provide descriptions of what was desired) to ensure that quality PPE could be sourced in a fast-paced environment. In any event, I do not see how Mr Bults’ complaints/factors, insofar as they were not set out in the Chat Group, are relevant to the principles above on establishing terms of the alleged Service Agreement (including the contracting parties thereto), and/or any contractual or other agency. 125.Finally, I also do not consider that the additional matters during this period (insofar as such are not covered above) which are set out in Bults 1 Appendix A, in the defendant’s written and oral submissions, and DSub Appendix 1 and 2 materially assist the defendant’s case on the existence and terms of the Hank Sourcing Agreement, or the pleaded terms as to agency in the Service Agreement. 126.The further evidence up to this time and date hence does not found a sufficient basis for me to change my views above as to whether there was a Hank Sourcing Agreement (particularly insofar as such is said to be contractual) or whether the framework of the pleaded terms of the Service Agreement (in particular those regarding agency) were allegedly reached on 21 March 2020. VI.4 Further dealings up to and including 28 August 2020 (as mainly relevant to Issues 1-3 and 5) 127.This section and period encompasses the additional matters that I have summarised at paragraph 64(3) above. 128.Xinle aprons and the 2nd and 4th Orders: As I have mentioned, on 6 April 2020 Mr Bults informed the Chat Group that Xinle could not supply the 100,000 aprons on the initially agreed terms, and the 2nd and 4th Orders were then entered into on terms set out therein by the end of April 2020. I find in relation to this period that:
129.5th Order: I have made findings in relation to such at paragraph 35 above. I do not consider that the facts relating to the treatment of this order are evidence supporting the defendant’s case that the Service Agreement was entered into over a month before the 5th Order, or that there was a prior Hank Sourcing Agreement:
130.Defendant’s order for masks which are the subject of the 6th and 7th Orders, and plaintiff’s knowledge relating to such: I have had regard to my findings at paragraphs 37 to 42 above on the 6th and 7th Orders. Further to such, I find on that each of the underlying orders for masks between the defendant and the relevant Manufacturer/Supplier was placed by the defendant of its own volition on 8 April 2020, without any order from the plaintiff, and that the defendant paid for both orders in the course of April 2020 before the plaintiff was aware that such orders had been placed[66]. 131.I also find in the circumstances that the 6th and 7th Orders were only agreed between the plaintiff and the defendant on or around 6 or 7 May 2020, and in any event after the date and receipt of the Letter of Termination. I will deal below with such negotiations and reasons for such. 132.I do not see how, and reject any submission that, such matters relating to the YuGuan/ProMask masks up to 6 May 2020 are evidence that is consistent with and that supports the existence of the Hank Sourcing Agreement, or the Service Agreement (and in particular that the defendant placed such orders as agent of the plaintiff). On the contrary, the following contradict the suggestion that the defendant (via Mr Bults) placed such orders as an agent for the plaintiff and are more consistent with the relationship between the parties being a buyer-seller relationship:
133.Handling of complaints re: masks delivered pursuant to the 1st Order, including instruction of T&C and W&H law firms: At this stage, I address this topic in relation to whether these matters constitute sufficient evidence for me to change my views above as to the Hank Sourcing Agreement and the Services Agreement. However, in doing so I set out some findings of fact as they also relate to other salient matters that I decide in other sections of this judgment. 134.Firstly, further to the findings of fact at Paragraph 27(2) above on relating to deliveries of the 1st, 2nd, and 3rd Batches, and as a matter of context, while it had been mentioned in the Chat Group that LCH had apparently approved the 1st Batch delivered on or around 30 March 2020, I find that it was only after these proceedings were commenced that Mr Boehmer orally clarified to Toine (which portion of such evidence was not challenged and I accept) that in March 2020 LCH did not have a proper test facility and relied on the plaintiff’s reputation as a trustworthy medical devices distributor[67]. 135.Secondly, during this period and as context, there was a series of correspondence circulated in the Chat Group relating to concerns, complaints, and reports on the 1st Batch (on 2, 8, 10, and 29 April 2020), the 2nd Batch (on 13 to 16 April 2020), and the 3rd Batch (2 June 2020). 136.On the 1st Batch, complaints and/or test reports were received by Toine (on behalf of the plaintiff) via email up to mid-April 2020:
137.As for the complaints received in relation to the 2nd Batch, after that batch had been delivered to a facility of LCH in Shanghai in April 2020, Mr Boehmer notified Toine (on behalf of the plaintiff) on 13 April 2020 that tests had been conducted, that the tested masks had failed LCH’s testing, and that LCH would reject the 2nd Batch. Toine mentioned this in the Chat Group, but did not suggest what action should be taken. Shortly afterward, Hank mentioned that he and Mr Bults had discussed the matter and that they would see a lawyer the next day to discuss how to reclaim the purchase amount from King Year, Mr Bults and Hank emphasised that a report was needed from the hospital, and while Toine said that one would be produced, he emphasised that he still had to supply 550,000 FFP2 masks to LCH “The sooner the better because I should have delivered them April 10th. And then finally I get paid.” Then on 14 April 2020, Mr Bults had a preliminary meeting with T&C to consider civil action against King Year. 138.On 16 April 2020 Toine received an email from Mr Boehmer regarding the 2nd Batch which was forwarded to Hank and Mr Bults. This contained a memo referring to tests carried out by Kalibra Company (“the Memo/Kalibra Report”). The Memo/Kalibra Report stated, in summary, that several masks as tested from the 2nd Batch did not meet the FFP2 or KN95 standards as they failed a filtration test, a fit test, the quality of the masks was not up to standard due to tears, and the quality was inconsistent even within one box. Portions of the Memo were later recast into what was known as the “VWS Report” in circumstances I consider below. 139.On 29 April 2020, an email complaint was received from St Trudo Hospital dated 29 April 2020 (“the St Trudo Email”), which the plaintiff sent to Hank and Mr Bults the next day. The agreed translation of the St Trudo Email records inter alia that masks from the 1st Batch had been “examined by approved inspection body IBEVE within the “IDEWE group” recognized by the federal government. Unfortunately, these were found to be inadequate as FFP2 masks and thus may not be used under any circumstances… Please let us know when you come back to collect these masks. Please credit back the [EUR3,900].” 140.Toine sent the contents of the St Trudo Email via WeChat and made suggestions on how to confront Wendy Wu as to what he said was “pure fraud” by King Year and asked how Mr Bults was going to solve this. Mr Bults replied that he had an appointment with the lawyer the next day. There were then proposals and discussion as to what course of action to take in light of such, with Mr Bults saying that but that he was “lagging behind” or “on the backfoot” “without an official report”. Toine said a report would not matter and suggested taking masks from the batch and getting them tested, but Mr Bults said that such approach would not work and that “friendly consultation” would be more helpful given LCH’s apparent prior approval of the 1st Batch. He also suggested pursuing LCH for compensation, with Toine replying he would “keep that trump up my sleeve to be able to deliver 550k good ones. So we can make some profit for once.” At trial, Toine was asked during cross-examination why on why he did not “go after” LCH as suggested. He explained that it was because the plaintiff had “no case”, given that LCH had tested and rejected the 2nd Batch and broadly referred to the results in the Memo/Kalibra Report. There was no further cross-examination on this evidence. 141.There is no dispute that after 2 May 2020, tests were carried out on masks that were part of the 3rd Batch by Jiangsu Textiles Quality Services Inspection Testing Institute, a CNAS[68] testing company, with the report on such (“Jiangsu Report”) being received by the defendant and circulated in the Chat Group on 2 June 2020. The defendant says that while it arranged for such, this was at the request of the plaintiff on or around 11 May 2020. It is not in dispute that the tests showed that the 3rd Batch met the KN90 standard meaning that they had particle filtration efficiency of 90%. However it is clear that they did not meet the GB2626-2006 and also (as admitted by the defendant in its closing submissions) the KN95 standards (and hence also, I find, the FFP2/N95 standards). The parties agreed that the Jiangsu Report should be given the most weight out of itself, the St Antonius Email and Report, and the Memo/Kalibra Report. 142.There were then some discussions by Mr Bults with T&C on proceedings against King Year in April 2020, and that after 2 May 2020, T&C and then W&H were instructed in the mainland by the defendant to initiate proceedings relating to the King Year masks subject of the 1st Order. 143.Thirdly, and with the above in mind, I consider that such matters (or evidence on such) relating to the 1st Order during this period do not constitute sufficient evidence for me to change my views above that the Services Agreement was not entered into (nor was its framework including the main terms pleaded as to agency agreed) on 21 March 2020, and that there was also no Hank Sourcing Agreement (as allegedly entered into prior to the Service Agreement). 144.As a matter of context, given the complaints and rejections by mid-April 2020 it was clear to the parties that the plaintiff could not rely on the 1st or 2nd Batch (and, it was likely, also the 3rd Batch) of the masks to satisfy its obligations to deliver FFP2-compliant masks to LCH to get paid. It was also known that the plaintiff had taken out bank loans to procure payment of MOA orders for PPE (as admitted by Mr Bults in his testimony, and evidenced from messages from Nanny in the Chat Group sent on 30 March and 29 April 2020). Hence the plaintiff naturally explored what could be done to sell or deal with the masks that were the subject of the 1st Order, many of which already had been rejected or returned, including selling them to parties other than those originally intended (eg to Luxembourg). Given that King Year had apparently been paid funds out of the plaintiff’s MOA transferred to the defendant, there were also attempts to explore negotiations with and/or potential legal redress against King Year (including possibly a refund to/claim by the defendant of all money paid), with Mr Bults expressing the view that such would be helped by a more official, or more formal, report than the Memo/Kalibra Report, as they were going back on earlier indications of approval of the 1st Batch. 145.It is pursuant to such that, for the following reasons, I do not consider that Hank’s or Toine’s involvement in these matters supports the existence of the Hank Sourcing Agreement or of the pleaded agency terms of the Service Agreement. 146.Dealing firstly with the Memo/Kalibra Report and reformulation of such by Hank into the “VWS Report” (on which the plaintiff has said it does not rely), I find that Hank did so as a result of his apparent understanding of what Mr Bults had suggested could be done to constitute a formal report that could be used to support his negotiations/dealings with King Year[69]. I do not see that the evidence supports the suggestion that Hank created such on the instructions of the plaintiff. I do not see that this is evidence of his acting as the plaintiff’s agent in relation to the Hank Sourcing Agreement (especially given the Lunch Agreement) and/or the Service Agreement. I also reject the defendant’s submission that the reformulation shows that Hank had a “propensity to misrepresent facts”, particularly when there is no apparent evidential basis for, or cross-examination of Hank on, the defendant’s claim that the “VWS Report” was “to be used in the criminal trial against [Wendy Wu] of King Year”. Nor do the circumstances justify my taking an adverse view of Hank’s credibility, reliability, and truthfulness on matters material to this action. 147.It does appear from the invoices relating to the Luxembourg Masks that the plaintiff had by 23 April 2020 had begun to sell, or to explore selling, 1st Order masks to other parties to other parties. Given the circumstances above, I do not see how such attempts and behaviour of the plaintiff (and of Hank if he somehow tried to sell the masks under the 1st Order from mid-April 2020) suggest that Hank (and/or the defendant) was the plaintiff’s agent under the Service Agreement allegedly entered into in the evening of 21 March 2020, the alleged agencies pleaded in relation to the Service Agreement, and the existence of the Hank Sourcing Arrangement. 148.I also do not see that any actions taken by Toine and/or Hank in relation to the defendant consulting and instructing PRC lawyers, Toine suggesting how the defendant deal with storage/delivery of the 3rd Batch, or that the defendant obtain what was eventually the Jiangsu Report on the 3rd Batch, support the defendant’s case on the Hank Sourcing Agreement, and the agency-related terms of the Service Arrangement (and hence the defendant’s counterclaim as based on such), any further. The same goes for Mr Bults’ actions in relation to such:
149.I also find and accept that the plaintiff (acting via Toine) and the defendant (acting via Mr Bults) had in mid-April 2020 renegotiated, over the phone, the price of the 2nd Batch to EUR1.24 per mask:
150.Other matters including discussions from the Letter of Termination until 28 August 2020: I also do not see that my earlier conclusions as to the Hank Sourcing Agreement and the agency-related pleas and terms of the Services Agreement should change in light of discussions between Hank, Mr Bults, and Kelly in April 2020 in an attempt to set up a mask factory, and (particularly given the April 2020 developments outlined above relating to the 1st Order) the issuance of the Letter of Termination and dealings thereafter, such as the manner in which the plaintiff placed, how the parties dealt with, the 6th and 7th Orders, and subsequent messages between the parties, or their lawyers. In particular:
151.Finally, I also do not consider that the additional matters during this period (insofar as such are not covered above) which are set out in Bults 1 Appendix A, in the defendant’s written and oral submissions, and DSub Appendix 1 and 2 materially assist the defendant’s case on the existence and terms of the Hank Sourcing Agreement, or the pleaded terms as to agency in the Service Agreement. A fortiori given the context that I have set out above. VI.5 The terms of the contract entered into between the parties (as mainly relevant to Issue 1-3 and 5) 152.Having considered all of the evidence in the round up to this point, and bearing in mind the aforementioned principles in Section V.2 (including those regarding weight and importance of subsequent words and conduct at paragraphs 60(8) and 62(3) above), I reject the defendant’s plea that there was a Hank Sourcing Agreement (let alone a contractual one). I also reject the defendant’s plea that the Service Agreement was entered into in the pleaded terms, in particular that Hank was an agent of the plaintiff in entering into or performing certain pleaded obligations under the Service Agreement, and that the defendant acted as an agent of the plaintiff in entering into contracts with Manufacturers/Suppliers thereunder. I hence also reject the defendant’s plea at RADefandCC paragraph 11 that there was an implied term that the defendant would be entitled to indemnification of expenses. 153.Having also considered all of the evidence in the round from 20 March to 2 May 2020, I find that such is on-balance more consistent with a framework and terms of a buyer-seller relationship and which contained, in particular, the terms that (i) the plaintiff would buy and the defendant would sell from time to time PPE from the defendant, at a price to be agreed between them and delivered to a place designated by the plaintiff (ii) the said agreed price would include the defendant’s margins (15% on its purchase price and 5% to reflect its shipping costs) (iii) advance payments[73] would be made by the plaintiff to the defendant as MOA from which the defendant would deduct the agreed price of such orders by the plaintiff and (iv) PPE was purchased from the Manufacturer/Supplier under a separate contract between the defendant and supplier. The terms were first implemented as, and became, a sale of goods contract between the plaintiff as buyer and the defendant as seller, on 21 March 2020 for the 1st Order of masks at EUR1.57 each, and on evidence of subsequent dealings, at least also the 2nd to 5th Orders. 154.As for the pleaded implied terms, I find that the contract reached between the parties contained an implied term that the balance of the MOA would be repaid to the plaintiff on demand by the plaintiff at any time, or upon termination of the agreement. I consider that such is necessary for reasons of necessity and business efficacy.[74] I have in the next section explained why I find that the agreement reached between the parties contained the pleaded implied terms as to merchantability and reasonable fitness for purpose relating to the 1st Order. VI.6 Implied terms and whether they were breached (as mainly relevant to Issues 2(2) and 6) 155.As the placing of the 1st Order constituted a sale of goods agreement, SOGO applies[75]. I also find that there was, as pleaded by the plaintiff, an implied condition that the masks in the 1st Order (which was in any event placed under and pursuant to the Agreement) would be of merchantable quality under s 16(2) SOGO, there being no plea raised in relation to the provisos thereto. 156.I also find that all of the masks placed under the 1st Order were not of merchantable quality within the meaning of s 2(5) SOGO, and that they were hence in breach of s 16(2) SOGO:
157.Although it is not necessary for me to address fitness for purpose in view of the above, I find that the defendant sold the same masks in the course of a business, and that the plaintiff as buyer made it known to the defendant that such masks would be used in Dutch hospitals at the time it placed the 1st Order with the defendant. I therefore find that there was an implied condition that such masks had to be reasonably fit for use in Dutch hospitals. Given my findings above on their particle filtration resistance and, in any event, in relation to the fit test[80], I also find that they were not reasonably fit for the purpose in question. I hence find that they were also subject to, and breached, the implied condition s 16(3) SOGO. 158.I do not see how the submissions at the section beginning with heading 2.(2) (i.e. attempting to deal with Issue 2(2)) on pages 4 and 5 of the defendant’s closing are relevant to or materially affect these issues. This is particularly so given that the portion at page 5 under sub-6) onward contains matters that are not pleaded in the RADefandCC (including in particular paragraphs 18, 20, and 22), contrary to RDC O 18 rr 8, and 12. VI.7 Entitlement to remedies (Issues 7 to 10) 159.Effect of the Letter of Termination dated 2 May 2020: The question is whether the breach in respect of one instalment entitles the plaintiff to treat the whole contract as being discharged/repudiated (which the plaintiff says it did and accepted by way of the Letter of Termination), in circumstances where “defective delivery” under s 33(2) SOGO includes cases where the seller (here, the defendant) fails to perform by making a particular delivery. Whether such breaches are a repudiation of the whole agreement, or merely a severable breach giving rise to a claim for compensation (but not the right to treat the whole contract as repudiated) is a question of fact depending on the quantitative ratio of the instalment to the whole and the likelihood of repetition of breaches. The apparent likelihood of such future breaches is overwhelmingly fact-sensitive. Furthermore, judging at the date of purported termination as to whether a contracting party has been deprived of substantially the whole benefit of the contract involves assessing both the likely future consequences of breaches that have already occurred, and the likely consequences of probable future breaches: see Benjamin §8-060 to 8-069[81], Maple Flock Co Ltd v Universal Furniture Products (Wembley) Ltd [1934] 1 KB 148 at 157. 160.I consider that the plaintiff was, here, entitled to terminate the contract reached between the parties and implemented via the 1st Order. The 1st Order was severable at the material time, namely 2 or 3 May 2020, as by performance it had been divided it into 3 batches. Also, and at the material time, the defendant had already breached its pleaded obligations under SOGO in relation to the 1st and 2nd Batches, and it was likely (as reflected in the parties’ actions up to that point) that the 3rd Batch would also be in breach. The plaintiff was hence entitled to reject the 3rd Batch. The plaintiff had also been deprived of substantially the whole benefit of the 1st Order. The likely future consequences of such past breaches, and of probable future breaches, were severe to the plaintiff given its financial position, as the plaintiff could not rely on the 1st and 2nd Batches (and was highly unlikely to be able to rely on the 3rd Batch) to fulfil LCH’s order for 550,000 FFP2 facemasks, and as the defendant was apparently unable (given the status of dealings with King Year) to offer the plaintiff a refund or compensation for such breaches. 161.On balance, and given the above, I consider that there had been a repudiatory breach by the defendant of the contract in relation to the 1st Order, which the plaintiff was entitled to and did accept by way of the Letter of Termination, which thereby terminated the agreement that had been reached between the parties and implemented via the 1st Order. By way of the same Letter of Termination and the implied terms of the same agreement, the plaintiff was also entitled to return of the remaining MOA between them (which the defendant soon afterward started to do by paying USD200,000 to the plaintiff). I next consider that amount below (Issue 8) before turning to whether and what damages are payable to the plaintiff for breach of contract (Issue 7(ii)). 162.The remaining balance of the MOA retained by the defendant (Issues 4 and 8): Given the above, I agree with the plaintiff’s submissions that this amount in question should reflect that there was a non-delivery and rejection of the 3rd Batch (as was pleaded within the AReplyandDefencetoCC). It also appeared to be common ground, and in any case I find, that the amount of the final remaining balance of MOA retained by the defendant and which should be paid to the plaintiff is to be assessed in the context of (i) all other payments made pursuant to the 1st to 5th Orders (ii) the payment by the defendant of US$200,000 in May 2020, and (iii) amounts to be paid to the defendant for the 6th and 7th Orders. 163.On this basis I find that the remaining balance of the MOA is the Retained MOA as pleaded by the plaintiff of EUR217,700.00[82]. I also find that pursuant to the terms of the contract reached between the parties, and the plaintiff’s demand for repayment, the plaintiff is entitled to be paid the Retained MOA, alternatively that the plaintiff is entitled to claim that sum against the defendant as loss and damage for breach of the contract. 164.Plaintiff’s claim for loss of profits in relation to the 1st Order, and the 6th and 7th Orders (Issue 7(ii)): As to damages claimed by the plaintiff for loss of profits relating to the 1st Order (ASOC paragraphs 13(a) claiming EUR13,091.00) and expenses (ASOC paragraphs 13(c)(i) to (iii)), in relation to disposal of the 1st and 2nd Batches of masks, I have checked each of the underlying documents to which the plaintiff referred and accept the plaintiff’s submission and Toine’s evidence (on which he was not cross-examined by the defendant) that:
165.I accept the plaintiff’s evidence (on which Toine was not cross-examined) that despite its efforts, it could not sell 99,840 masks (“the Unsold Masks”) and as to the underlying cost of storage of such masks until they were destroyed (EUR851.76), and the underlying cost of disposal of the Unsold Masks (EUR165.78). 166.However, I do not think that the plaintiff has established its claim for EUR165.78 expenses for disposal of the Unsold Masks (or indeed a portion of such). Toine fairly admitted in his testimony that such amount (which was supported by an invoice) included the plaintiff’s general garbage disposal, and there was no evidence before me as to how much of the EUR165.78 could be or was apportioned to disposal of the Unsold Masks. 167.I also do not think that there is sufficient evidential basis to establish the plaintiff’s claim for EUR1,000 shipping fees, as there was no underlying document to substantiate the amount claimed, or any explanation as to how, when, and what lot of mask(s) this arose. 168.I do not consider that Mr Bults is entitled to advance his criticisms, which he attempted to do by way of his testimony, of the calculations advanced by the plaintiff regarding the Other Sold Masks. The facts underlying such criticisms were not pleaded in the RADefandCC, contrary to RDC O 18 rr 8 and 12.[83]. In any event Toine was not cross-examined on such matters. 169.As for the 6th and 7th Orders, the plaintiff claims a loss of profit of EUR107,000 (ASOC paragraph 13(b)) which is said to be the difference between its expected profits on the sale of the 1st Order of 550,000 King Year masks to LCH (EUR676,500) and the agreed sale price to LCH of the 6th and 7th Order of masks (EUR569,500). As to the latter, I accept Toine’s evidence and find that such was the total final sale price to LCH of such masks, namely EUR2.80 per mask for the first 50,000 and EUR2.19 for the remaining 500,000. 170.It was common ground at the trial (in particular, during the course of the defendant’s opening) that at least 500,000 out of the 550,000 masks that were the subject of the 6th and 7th Orders were placed in order to fulfil the plaintiff’s outstanding obligations to LCH to deliver 550,000 FFP2 masks. Further to such, and also on the evidence before me (including Toine’s statements in the Chat Group to which I was referred), I find that all 550,000 masks 6th and 7th Orders were, in fact, ordered by the plaintiff from the defendant due to the issues or problems that had been encountered in relation to the 1st and 2nd Batches of the 1st Order, which gave rise to concerns at the time as to the quality of the 3rd Batch, and as the plaintiff needed to fulfil its outstanding obligations to LCH. 171.I find, having considered the submissions and evidence before me, that the plaintiff did suffer a loss of profit in relation to EUR107,000 (ASOC paragraph 13(b)) which it is entitled to claim and recover against the defendant. The defendant’s failure to provide masks in accordance with the implied terms of merchantability and fitness for purpose of the 1st Order led to a loss of custom of the plaintiff vis-à-vis its customer, reflected in the plaintiff being forced by its ultimate customer LCH (which had apparently in the interim been supplied with enough other masks such that it refused to pay the initially agreed price of EUR2.80 per FFP2 mask[84]), to accept a lower price in selling the 500,000 masks under the 6th and 7th Orders. I agree with the plaintiff that such type of loss was caused by the defendant’s breach of the implied terms, and falls within the tests for remoteness and foreseeability in Hadley v Baxendale (1854) 9 Exchequer, 341 (see GKN Centrax Gears Ltd v Matbro Ltd [1976] EWCA Civ J0414-1), and in particular that such loss was ordinarily and naturally in the contemplation of the parties as a consequence of the breach. 172.I do not consider that the defendant’s submissions are such that I should refuse to award such damages to the plaintiff as:
173.Given the above, the plaintiff is entitled to and I award it damages for lost profits of EUR13,091.00 and EUR107,000.00 (ASOC paragraphs 13(a) and (b) respectively) and expenses of EUR851.76 (ASOC paragraph 13(c)(i)). 174.Issues 9 and 10: On Issue 9(1), as I have mentioned, the defendant during trial the defendant dropped its claim for Shipping Costs as claimed within Annex V (see also RADefandCC paragraph 31). 175.In relation to Issues 9(1) and 10, I find that the defendant is not entitled to its claim against the plaintiff for the remaining expenses of RMB375,547.60 (or EUR50,073.013) in respect of orders placed under the contract reached between the parties (RADefandCC paragraph 31 and Annex V). My findings above on the contents of the contract between the parties leave no discernible basis for the defendant to claim legal expenses (for instructing T&C and W&H), testing costs (for the King Year masks, and for the Promask masks), and storage costs (for the King Year masks). I dismiss such counterclaims as advanced in the RADefandCC. 176.Other than the counterclaim made and dropped by the defendant as set out per paragraphs 21(2) and 22 above, no claim in the form of the defendant’s counterclaim for damages for breach of the Service Agreement to be assessed was made or advanced, and in any event no order was made or sought for a split trial. I hence dismiss that counterclaim. 177.As already mentioned, the defendant also abandoned its claim for additional commission and surcharge (Issue 9(2)). VII. OTHER MATTERS 178.During the course of the trial, I dealt with two applications in relation to the admission of additional, and previously undisclosed, documentary evidence in the proceedings and their insertion in the trial bundles. The first was made but was eventually withdrawn by the defendant on the first day of trial, and I orally conducted a gross sum assessment of costs. For reasons I gave orally at the time of each of the two later applications, I dismissed the second application (which was made by the defendant) on the third day of the trial, and the third application (which was made by the plaintiff) on day five of the trial. I have not considered the existence and contents of any documents sought to be adduced by the respective party in deciding any of the matters above. I had originally intended to hear from the parties on the costs of the latter two applications after conclusion of the evidence. However, in the course of the parties’ closing submissions I was informed that they had both reached agreement as to the costs thereof. I make no order as to the costs of those two applications. 179.An application was made by the defendant on the seventh day of the trial to insert, in the trial bundles, some documents that had been previously disclosed by the defendant and referred to in Jos 3, but which had through oversight of the defendant not been not inserted into the trial bundles. The plaintiff had said it was prepared to deal with such documents by way of submission. I granted that application and made no order as to costs, for reasons I gave orally at the time of that application. VII. ORDERS AS TO SUBSTANTIVE RELIEF SOUGHT 180.For reasons above:
IX. INTEREST 181.I have a discretion to award pre-judgment interest. In circumstances I make an order nisi awarding pre-judgment interest on the sums that I have awarded to the plaintiff at the rate of P+1% from the date of the writ up to the date of judgment. That rate is the usual rate of pre-judgment interest to represent loss of use of money to the successful litigant. Interest thereafter shall run at judgment rate until payment. X. COSTS 182.As the plaintiff has been substantially successful in this action, there seems to me to no reason why it should not have its costs thereof. 183.Mr Rompotis submitted in his written closing submissions that I should award the plaintiff its costs on an indemnity basis. I have read the reasons he advances in support, and I also note the concessions made by the defendant in the course of his closing submission as to its claims under the 1st to 7th Orders. However, I am not presently convinced that such an order is justified, given the nature of the parties’ conduct and dealings. There was also not enough time for the plaintiff’s submission to be addressed in the course of the parties’ oral closings. 184.I therefore make an order nisi that the defendant do pay the plaintiff’s costs of the action (including all costs previously reserved or ordered to be in the cause), such costs to be taxed if not agreed. Given the amount and volume of papers and issues before the court, I consider that this is an appropriate case for me to grant certificate for two counsel for the trial of the action, which I do. Such order nisi will become absolute if no application is made to vary such within 14 days hereof. 185.I thank the parties for their assistance.
Mr Philip Rompotis and Mr Lavesh Kirpalani, instructed by Tanner De Witt, for the plaintiff The defendant appeared in person [1] This was the term generally used in these proceedings, and which I will adopt, although on the evidence it was not disputed, and I find, that this referred to waterproof isolation gowns that are commonly used by medical workers as PPE. [2] The original Statement of Claim bore the name of another counsel. Mr Rompotis first appeared, without Mr Kirpalani, before the Court in this action close to the originally set-down trial dates in late 2023, and Mr Rompotis’ name appears on the Amended Statement of Claim (“ASOC”) dated 13 November 2023. [3] Which firm has at all material times been the solicitors for the plaintiff in this action. [4] Up until late October 2023, which was shortly before the original trial dates in November 2023, the defendant had been represented by Messrs Hill Dickinson Hong Kong, and also apparently also by counsel, whose name appears on the original Defence and Counterclaim. The said counsel appeared, as did the plaintiff’s original counsel (i.e. not Mr Rompotis or Mr Kirpalani) at the Pre-Trial Review before HH G Chan DDJ (as she was then). [5] As to which I also accept Mr Bults’ evidence that the defendant’s core business is design, development, and production of custom-made products in various sectors, based on specific requirements of the ultimate buyer. [6] The original Statement of Claim was dated 20 January 2021 and bore the name of another counsel. [7] The original Reply and Defence to Counterclaim bore the name of the plaintiff’s previous counsel. [8] As mentioned and dealt with below, the plaintiff’s case at trial was that the 6th and 7th Orders were entered into as a result of issues with the quality of the masks relating to the 1st Order. [9] Which was apparently on the instructions of Hank and/or Toine. I set out the detailed terms later. [10] In relation to the 1st to 7th Orders. [11] Being fees paid by the defendant to PRC lawyers T&C Law Firm (“T&C”) and W&H Law Firm (“W&H”) to pursue civil and criminal claims against the Manufacturer/Supplier of masks in relation to the 1st Order; [12] Relating to masks supplied by the Manufacturers/Suppliers of the 1st Order and the 6th Order. [13] Relating to masks supplied by the Manufacturer/Supplier of the 1st Order. [14] Which reflected all sums which the defendant said were due to it pursuant to the Service Agreement and the 1st to the 7th Orders. [15] Which inter alia led to the defendant’s suggestion in its Written Opening that such had rendered Issue 3 irrelevant. [16] This was relevant to, in particular, Issues 1 to 5, 8, 9, and 10 of the Joint Statement of Issues. [17] In doing so I also include and consider the relevant portion that took place shortly after midnight, and hence in the early morning of 22 March 2020. [18] Mr Bults gave evidence, including in cross-examination, that based on his experience in sourcing, these are not considered “surgical” masks (i.e. masks meant to be used in a hospital for medical use), but rather that these terms refer to masks intended for industrial use with at least 94% to 95% filtration of particles that were approximately the size of the COVID-19 virus/bioaerosols (and which masks were hence used as PPE during the pandemic), and that the relevant standards (which related to different jurisdictions) had been harmonised: see eg Jos 1 Paragraph 67. The plaintiff did not challenge such evidence, and indeed accepted that it had not by way of the 1st Order sought “surgical” masks but rather FFP2 and/or N95 masks. [19] This was the entity which had issued a proforma invoice 20200321-5 dated 21 March 2020 (“the KY HK Invoice”) to the “CLIENT” being “J.J. And Hank”, with deliveries were to take place in batches on 27 March, 4 April, and 9 April 2020. [20] At trial, the defendant appeared to initially be running a case to the contrary, having pleaded and included in its claim a claim for shipping costs in relation to the 3rd Order. However, as explored elsewhere in this judgment, Mr Bults eventually conceded such under cross-examination and in the course of the defendant’s closing. I hence make findings of fact as set out in SOAF paragraphs 101 to 102. [21] I do so on the basis of Mr Bults’ evidence that the defendant entered into a contract with FYE on 25 March 2020 to buy masks for a different customer in America (which is the first moment in time at which FYE is mentioned within the evidence), that the next mention of FYE (and the first in the WeChat messages) is by Mr Bults in any of the Chat Group on 26 March 2020, that the defendant did not traverse the plaintiff’s assertion that Toine (i.e. the plaintiff) did not introduce any relevant suppliers, and the defendant’s failure to suggest at any point (including in cross-examination or in Mr Bults’ evidence) that FYE was introduced by Toine/the plaintiff, by Hank to the defendant, or that Hank had any role in the introduction of FYE to the defendant. I also find, as is apparent from the Private Chat, that Mr Bults apparently visited its factory on 27 March 2020. [22] That is, not pursuant to the Agreement and without the plaintiff’s knowledge or approval. [23] Alongside an Alvin Fang who worked with the associated trading company of YuGuan which was responsible for selling masks to YuGuan. [24] I do so on the basis of Mr Bults’ evidence on how and when he started considering YuGuan as a supplier, and of his factory visit to YuGuan on 8 April 2020, that the defendant neither traversed the plaintiff’s assertion that the plaintiff did not introduce any relevant suppliers, and the defendant’s failure to suggest at any point (including in cross-examination or in Mr Bults’ evidence) that YuGuan was introduced by Toine/the plaintiff, by Hank to the defendant, or that Hank had any role in the introduction of YuGuan to the defendant. Insofar as may be necessary, such conclusion is also supported by how the first mention of YuGuan via any WeChat messages was from Mr Bults to Hank on 11 April 2020 in the Private Chat (including introduction and explanation of the identity of Alvin and YuGuan to Hank, which are consistent with Mr Bults’ testimony), which was before any mention of YuGuan in the Chat Group. [25] I do so on the basis of Mr Bults’ evidence on how and when ProMask emerged (via Hong Kong Tanso) as a supplier and his and Sarah’s review of ProMask’s due diligence documents (which, insofar as necessary, is also consistent with the first mention of ProMask via any WeChat messages by Mr Bults in the Private Chat on 16 April 2020). Moreover, the defendant did not traverse the plaintiff’s assertion that the plaintiff did not introduce any relevant suppliers, and the defendant did not suggest at any point (including in cross-examination or in Mr Bults’ evidence) that ProMask was introduced by Toine/the plaintiff, by Hank to the defendant, or that Hank had any role in the introduction of ProMask to the defendant. [26] This was a document which did not apparently contain figures in relation to the 5th to 7th Orders. [27] Which instances I have set out above. [28] In the paragraph of the RADefandCC following the pleas relating to the Hank Sourcing Agreement: “Accordingly, Hank approached [the defendant] for assistance in the execution of the Hank Sourcing Agreement”. [29] Being the date on which the defendant responded, via its then-solicitors, to prior letters from the plaintiff, and first claimed that an agency had arisen. [30] The defendant’s submissions also contained various assertions that Hank was “in charge” of procurement for the plaintiff, quoting prices, setting conditions, the cooperation with the defendant, took decisions, instructed Mr Bults, and that the defendant was subordinate to Hank and Toine’s decisions. [31] As the defendant said in its oral closing, the messages “… demonstrates that the core description of the items in the conditions of the service agreement, as mentioned in the defence, had more to it than just -- that they were not limited in scope,” and “… the different activities that had to be performed under the services agreement are evidenced in those messages. That does not mean that that formed or changed the agreement.” That stance also appears to be consistent with Paragraph 16(4) of the RADefandCC, which pleads that the KY DG Contract Order (i.e. the replacement contract under the 1st Order) was entered into “By a written contract dated 2 April 2020, pursuant to the Service Agreement…”, which implies that the terms of the Service Agreement were concluded by then, and Mr Bults’ testimony in paragraph 15 of Bults 2 whereby he mentioned (in the context of discussing the plaintiff’s License to Operate, which for reasons below the defendant has apparently accepted and I find he only became aware of on 1 April 2020) that the defendant “entered into the Service Agreement on or around 20 March 2020”. [32] Citing Hydrotech and Shanghai Tongji for the proposition that the burden of establishing the inference of a binding contract from the conduct of the parties is on the person asserting its existence, that the Court will not imply such a contract lightly, and that the conduct relied upon must be unequivocally referable (plaintiff’s emphasis) to the contract sought to be inferred. [33] Chitty §§4-004 to 4-005, Ho & Hall §2-218 to 2-231, the latter citing inter alia Shanghai Tongji. [34] See Chitty §§4-033. FN147 of the same refers to §4-167 which comments that it may be possible for the parties to begin to act on the terms of an agreement before it has contractual force, such that when it is given such force, the resulting contract may (if provided expressly or by implication) have retrospective effect so as to apply to work done or goods supplied before it was actually made. [35] See Bowstead & Reynolds on Agency, 23rd Edition (2023) §3-007 citing, in particular, Tuke v JD Classics [2018] EWHC 855 (QB) at paragraph 76. [36] See Ho & Hall §§2-155 and 2-157, Chitty §§4-147 to 4-148. [37] See Bowstead §1-001, Garnac Grain Co Inc v HMF Faure and Fairclough Ltd [1968] AC 1130 at 1137, and Munday, Agency Law and Principles, 4th Edition (2022) §§1.27 to 1.28 [38] Garnac Grain, supra at 1137 as also cited in First Good International Ltd v Kin & ors [2005] HKCFI 329 at paragraph 26 [39] Bowstead, §§1-006, 1-008, 110-14, 2-030 to 2-032. [40] See Garnac Grain, supra at 1137D-F; Bowstead §3-007 (which suggests that the approach regarding weight to timing applies primarily to actual authority) citing Garnac Grain and Tuke v JD Classics [2018] EWHC 855 (QB) at paragraph 76. [41] See Munday §3.01, Freeman & Lockyer (a firm) v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QC 480 at §§502-503, Halsbury’s Hong Kong §§15-024-16-026 [42] The other species are usual authority (derived from the title or position of a director or staff member), or customary authority (from customs and trade usages that apply in the market within which the agent operates). The defendant did not submit that it was relying on these in relation to the issues in this case, and in any event I do not see how they are relevant to determining the issues raised in its pleadings as to agency, or on the facts of this case. I have hence excluded such from consideration. [43] See Chitty §1-051, Munday §4.40, Glorious Motors Ltd v Zhou Meiling [2017] HKDC 566 §§92-113; Barrett v Deere (1828) Mood & M 200; Gurtner v Beaton [1992] 2 Lloyd’s Rep 369; Honor Engineering Ltd v Hing Fat Machinery & Amp [2015] HKDC 346 §§32-43; OBG Ltd v Allan [2005] QB 762 §§88; Auxil Pty Ltd v Terrannova (2009) 260 ALR 164 §176; Armagas Ltd v Mundogas Ltd [1986] AC 717 at 777; ING Re (UK) v R & V Versicherung AG [2006] 2 All ER 870 at 128. [44] See for example Thanakharn Kasikorn Thai Chamkat (Mahachon) v Akai Holdings Ltd (No 2) (2010) 13 HKCFAR 479 §§49-62, Albright & Wilson UK Ltd v Biachem Ltd & Ors [2001] 2 All ER (Comm) 537 §16, Critereon Properties Plc v Stratford UK Properties LLC [2004] 1 WLR 1846 §31. [45] These are, in particular, that evidence, when properly assessed, has to be capable of justifying a reasonable inference, such that it is not enough merely to raise suspicious circumstances, and that if a conclusion is to be drawn from circumstantial evidence, any such inference must be properly grounded in the primary facts found, for the court must guard against indulging in conjecture under the guise of drawing an inference where the primary evidence does not logically and reasonably justify the particular inference in question. It is also not permissible merely to choose what may be considered to be the more likely of two guesses if neither is properly justified by the primary facts found, as one does not pass from the realm of conjecture into the realm of inference until some fact is found which positively suggests (that is to say provides a reason special to the particular case under consideration) for thinking it likely that in that actual case a specific event happened or a specific state of affairs existed. [46] Which is just before a complaint was received in relation to the 1st Batch, which are dealt with in the following section. [47] In particular, the pleaded terms relating to agency, and where much of the defendant’s evidence contained assertions that Hank was acting on behalf of the plaintiff throughout the Services Agreement based, it was said, on certain actions taken by Hank and/or Toine, and that the defendant’s actions were undertaken on behalf of the plaintiff. [48] The same underlying material were submitted as Appendices to both the defendant’s opening and closing, but with different numbering for the Appendix. For convenience I have used the numbering and titles thereto set out in the defendant’s written closing [49] Particularly given the contents of Hank’s and Mr Bults’ earlier discussions in the Private Chat where they both explored commercial opportunities for the trading of PPE, and even agreed a commission for Hank in the case of a deal in the event that it went through (which it did not). [50] Which mentions no messages from this period in relation to the term pleaded in RADefandCC paragraph 10(4), and only 2 inconclusive ones I relation to paragraph 10(2) and (3). [51] Given Mr Bults’ cross-examination and the defendant’s concession, these profits were to be calculated by deducting, from the amount charged to the plaintiff by the defendant (i) the price paid by the defendant to the Manufacturer/Supplier and (ii) other costs including (as conceded by Mr Bults in cross-examination, and which claim was ultimately also conceded in the defendant’s closing) shipping costs. [52] I consider that the fact that Hank may well have perceived this to be so is unsurprising given that (whatever the extent of his qualifications and background, on which he gave evidence in cross-examination which was not challenged by the defendant) he was – as is admitted and relied on by the defendant – clearly involved in and worked on the process of the 1st to 5th Orders. Given my overall observations in Section IV. above which apply to the testimony of all of the witness testimony before me, I do not consider this to be a matter which justifies my rejecting his evidence on the Lunch Meeting, or treating it with less or no weight when compared to Mr Bults’ evidence on the Lunch Meeting, or on other matters such as his phone call with Toine. [53] And, I would add, even if my findings are erroneous on how the split in profits was to be calculated between Hank and the defendant. [54] Bults 1 Appendix A mentions no further messages from this period in relation to the term pleaded in RADefandCC paragraph 10(2), and none are referred to in relation to the term pleaded in RADefandCC paragraph 10(4). I have also considered all of the messages referred to within this timeframe as pleaded, and as set out in Bults 1 Appendix A, in relation to the terms pleaded in RADefandCC paragraphs 10(2), (3), and (6). [55] It is Mr Bults’ evidence that it was Hank who called Toine. This is also consistent with Hank’s message in the Chat Group “Can you answer the phone please?” [56] Where in relation to this request, Toine had confirmed inter alia that no further documents that existed and were within the parameters which are disclosable existed, and that the plaintiff had disclosed all such documents within its possession, custody, power, or control. [57] And in its submissions, apparently, also as subsequent evidence of the Hank Sourcing Agreement that it says was reached even before the Service Agreement. [58] For example, the KY Address was visited again by Mr Bults on 26 March 2020 (and again on 1 April 2020 by him, Ms Hao, and Kelly), the FYE/Foshan factory was apparently visited by Mr Bults on 27 March 2020. On 1 April 2020, the LiJiang factory was visited by Mr Bults, Hank, and Kelly on 1 April 2020 (at which Tracy and Lao Yang were also present), as was the factory at the KY Address by Mr Bults and Kelly. [59] Including, evidently, 2 orders totalling several million of masks from FYE/Foshan for the customer in America in mid-March 2020. [60] Which prior contract was disclosed by the defendant, but was not eventually included in the trial bundles. [61] Mr Bults did (on 26 March 2020) of his own volition disclose an initial EXW price of USD2.27 to 2.38 per apron (depending on quantity) in the Chat Group. The defendant also submitted that some Chat Group discussions on 31 March 2020 related to how EXW apron pricing was USD4.00 per apron. However, even if the latter referred to the 100,000 aprons ordered by the defendant from Xinle, there were also subsequent further negotiations between the plaintiff and the defendant on the price that the plaintiff might buy them for, and it was only near the end of such negotiations on 1 April 2020 that the plaintiff was told that the price had been negotiated downward (by Sarah earlier on 28 March 2020), and agreed to (pursuant to the “guise” agreed between Hank and Mr Bults in the Private Chat) buy the aprons for EUR2.55. It would have been apparent to Toine that he was unaware of the final margin or the final, lower price per apron paid by the defendant. [62] The first version of which was commented on by Mr Bults in the Chat Group before the second version was circulated. It was the defendant’s case, which did not seem to be seriously disputed by the plaintiff, and I so find in any event on balance, that the version at B3/p591 was the final version rather than that at B3/p592. [63] It appears and I find that the plaintiff did not know, at the time of the Letter of Cooperation, whether or that the KY Termination Agreement had been entered into, since apparently Hank only confirmed such (or at least of the cancellation by KY of the remaining parts of the 1st Order) at around 10:13 pm in the evening of 1 April 2020. However I do not see that my conclusion would be any different even if the plaintiff had such knowledge at the time. [64] Firstly, the underlying margin, compared to Hank’s earlier quoted price of EUR3.55 per mask, does not appear to be far off the agreed margin, as an underlying price of USD3.20 FOB (using the defendant’s pleaded exchange rate) would reflect a margin of around 22%. Secondly, I bear in mind that even as a seller, the defendant would have had an incentive to try and close a deal on such given the fast-paced environment, the upward trend in pricing of Xinle masks, and might have chosen to do so by demonstrating that its prices were justified, given the margin, and particularly when the plaintiff had only a few days prior agreed to pay EUR2.55 per apron. [65] I have also applied this general approach in relation to various other instances, up to 2 May 2020, where the defendant has referred to “prices” being quoted in the group, as I do not see that I can or should accept that the mere mention of prices, even if they are “EXW” or “FOB” in the Chat Group refers to the underlying prices paid by the defendant. This is particularly given the parties’ admissions and the discussion in the Chat Group relating to the circumstances of the ventilator order (as mentioned above), and also given that in the Chat Group, Mr Bults mentioned in relation to the Mask Clips (5th Order) a “EXW SZ [EUR] 0.19” price in circumstances where he agreed that the underlying price paid by the defendant was EUR0.14 per mask clip, and that the price the defendant ultimately charged to the plaintiff was EUR0.20 per mask clip. [66] In doing so, I have primarily had regard to the basis of Mr Bults’ concession in the course of his cross-examination that there was no such order from the plaintiff in relation to the 6th Order, and the fact that neither the YuGuan or ProMask orders were included in P’s 2 May Table (which, as Mr Bults agreed in cross-examination, was because the plaintiff had not actually placed the 6th and 7th Orders at the time). Such matters, and the contents of the Chat Group on 6 May 2020, are also consistent with the portion of Toine’s evidence (which I accept, particularly given his reaction in the Chat Group) that he was surprised to hear on 6 May 2020 that the defendant had ordered those masks. [67] I also do so on the basis that it is inherently likely that this is, in fact, what happened, given the evidence before me as to how complaints were raised in relation to the 1st Batch, and the parties’ questioning of such. Also, I have not been referred to any evidence that this was known to the plaintiff, defendant, or Hank at the material time. [68] China National Accreditation Service, which on the evidence was the notified body in the mainland for accrediting and assessing conformity. [69] In particular, in discussing the Memo/Kalibra Report, and Hank’s question on how to solve such issues, Mr Bults said “Yes, I indicated earlier this morning. Strip, leave essential information and have it printed on some official letterhead and with stamps on it.” and “A big thick red stamp from the embassy shouts louder than anything here. And a letter from the embassy or consulate.” I have also considered the discussion in the Chat Group subsequent to circulation of the VWS Report [70] I do not see that I should reject or decline to rely on such table due to Mr Bults’ testimony in Bults 4 that his table was “drafted under pressure and before having all cost details”. The subject matter here is the price at which the 2nd Batch was renegotiated to be sold to the plaintiff, not costs. [71] As already mentioned, Toine was also not examined on the defendant’s stance in this action prior to late 2023 that the 1st Order concerned 300,000 masks. I also do not see how, given the matters and submissions before me, this could be relevant to the issue of this renegotiation. [72] Having unsuccessfully explored the setting up of a mask factory with Mr Bults. Insofar as necessary, such can also be seen (as submitted by the defendant) from the plaintiff’s request in the Letter of Termination that part of the MOA be paid to Brilliant Fire Technology Co Ltd, a company apparently associated with Lao Yang. [73] This included, taking into account the fast-paced commercial environment in which the parties were operating and the evidence over the period, payments made in advance of receipt of the goods (in particular relating to the 1st Order), and payments made in advance/anticipation of potential firm orders from the plaintiff, hence the reference on 1 April 2020 that “Nanny transfers buffer money again today” (emphasis added). [74] The existence of the term is also consistent with the defendant’s admission (albeit with reference to the pleaded terms of Service Agreement) at RADefandCC paragraph 14, and in circumstances where the defendant did not submit that I should not imply such term into the Agreement. The existence of such a term also appears to be entirely consistent with the defendant’s behaviour, after the Letter of Termination, in agreeing to and repaying USD200,000 (which description, translated into English, is “Refund Part 1”) what Mr Bults at the time considered to be part of the balance of the MOA. [75] The plaintiff sought to run a case in its written opening and closing submissions that the KY Masks were also in breach of the implied term in SOGO requiring that they comply with their description, even though (as the plaintiff properly and frankly acknowledged in its closing submissions) no such claim was explicitly pleaded in the ASOC. There was also no application made to amend the pleadings to include such. Given the state of affairs, and despite Mr Kirpalani’s skillful attempts to persuade me that I should entertain and rule on the merits of such claim, I decline to do on the basis of procedural fairness. [76] I have reached these conclusions without having placed any weight on the conclusions set out in the StTrudo Email, even though the contents of the report mentioned in the latter (which report is not before me) seem to be consistent with the contents of the other reports mentioned. [77] Per the Memo/Kalibra Report “It was also tested by tying the elastics with a clip behind the head. This generally gives a better fit.” [78] The Memo/Kalibra Report also stating inter alia that “A fit factor of 100 means that the mask fits very well on the subject. Within this study, a less optimal and more practical limit of 33 was used for at least 2 or 3 measurements. An even lower fit factor gives too much edge leakage and insufficient protection for many employees.”, that “The fit factor is probably so low in most cases, because it has been tested with Dutch people, who generally have a different face shape than Chinese people”, and “It makes sense that the fit factors can vary greatly from person to person. After all, it is about how the masks connect to someone's unique face. Nevertheless, it is important to do the fit test, because if too many subjects do not have a good fit, this will also be the case in practice and employees are not sufficiently protected.” (emphasis added) [79] For the sake of completeness, I do not consider that there was sufficient evidence before me to establish that all, or each, of the batches of the 1st Order masks had, on-balance, issues with the construction (in terms of tearing resistance) of the masks, or the straps (in terms of looseness/solidity). This is because the tests in the Steden Email and the StAntonius Emails and Report lack sufficient detail on the tests performed, the Memo/Kalibra Report only criticised the durability of certain types of masks tested within the 2nd Batch, and as the Jiangsu Report contained no testing on the tearing resistance and recorded that a “Head harness” test was passed. [80] In relation to which the Memo/Kalibra Report had also stated, before explaining the use of the clip in the test, that “The fit factor is probably so low in most cases, because it has been tested with Dutch people, who generally have a different face shape than Chinese people”. [81] It has also been said that the further the parties have proceeded with the performance of the contract, the less likely it is that one party will be entitled to claim that it has been discharged by a single breach, and that the degree to which delivery of one instalment is linked to another is a relevant factor. [82] I find and accept that the figures as pleaded within reflect the total MOA paid by the plaintiff to the defendant, subtracting the amounts paid for the 1st and 2nd Batches, the 2nd to 7th Orders, and the defendant’s repayment. As for the repayment, I have used the sum of EUR183,000, rather than the slightly lower sum credited into the plaintiff’s bank account as a result of the defendant’s transfer of USD200,000, as the former is apparently the basis on which the plaintiff claims EUR217,700. I do not see that there is sufficient evidential basis for me to apply the defendant’s pleaded higher sum of EUR186,000.00. The other underlying calculations and figures are agreed in the SOAF paragraphs 7 (total MOA paid by plaintiff to the defendant), 77-79 and 88 (2nd and 4th Orders), 101-102 (3rd Order), 139 (5th Order), 115 (6th Order), 128 (7th Order), and/or have been found in the course of my judgment above. [83] In any event, even if it were proper for me to consider such, I do not see that such are relevant to my findings above, which are based on my consideration of the underlying documentary evidence, and I disagree with the defendant’s suggestion that there is any inflation of amounts, unreliability of the plaintiff’s evidence, or indeed that there is a discrepancy (let alone in the amount as claimed by Mr Bults). I do not see anything in the complaint that one invoice for a small batch out of the Other Sold Masks was dated three days after the date on which Toine said some masks had been destroyed, given that there are inherently many ways and times in which parties may invoice and deliver goods, and particularly given the lack of any cross-examination on such or these other matters. [84] I find that such was the originally agreed price, even if one excludes the invoices attached to the email at Item 85A of the Trial Bundle as discussed below. Toine was not cross-examined on the assertion that the plaintiff had planned to sell all 1st Order masks at EUR2.80 per mask, and it is also inherently likely, based on the contemporaneous evidence and especially that of LCH’s role vis-à-vis hospitals, that all of the 1st, 2nd, and 3rd Batches were originally to be sold at EUR2.80 per mask. [85] Which, for reasons above, are in any event unnecessary for me to reach the conclusions that I have done and which underlie my reasoning above as to loss of profits. They are, obviously, consistent with the conclusion if and insofar as there is no issue as to their authenticity. [86] Given the contents and context of the email and the dispute, I do not consider that the latter materially affects my other conclusions above, which are based primarily on other contemporaneous evidence, or that they should cause me to change the approach above which I have adopted regarding Toine’s evidence. | |||||||||||||||||||||||
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