Kwee Si Thiam t/a K.T. Trading Co v. Fookloon Ltd and Another

HCA002074/1977

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ACTION NO. 2074 OF 1977

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Coram: Hon. Mr. Justice Penlington

Date of Judgment: 21st January 1981

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JUDGMENT

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1. This is a claim which the plaintiff alleges that he entered into an oral contract with the 1st defendant in 1963 under which, in consideration of the plaintiff placing an order with the 1st defendant for the supply of 70 metric tons of pine cones, the 1st defendant would not sell such cones to anybody else. The 1st defendant, acting through the 2nd defendant who is the Managing Director and majority shareholder, agreed that the plaintiff would become the sole distributor of the 1st defendant's pine-cones in Hong Kong. It is also alleged that this verbal contract provided that if an intending purchaser was to approach the 1st defendant he would be referred to the plaintiff.

2. These pine-cones are supplied from the Peoples Republic of China and are used in the manufacture of Christmas decorations. These pine-cones are gathered in China and are sent to Hong Kong through the Chinese Government Trading Corporation at Shum Chun.

3. The claim against the 2nd defendant is based on a letter to the plaintiff which he wrote on the 22nd November 1976. In this letter the 2nd defendant acknowledges that at the time of the signing of the contract he verbally promised that he would sell only to the plaintiff and goes on to say that he would be responsible for any losses the plaintiff may have suffered as a result of the contravention of that agreement.

4. The 1st plaintiff gave evidence and produced a considerable volume of documents in support of his claim. He said that he had a friend who was a manufacturer of plastic Christmas decorations and as a result of the conversation with his friend he approached the Tak Shun Trading Co. to obtain a supply of pine-cones from China. Tak Shun is a very substantial corporation dealing in a wide range of products from China. They told him that they did not import pine-cones and referred him to the 1st defendant. He said that he then bought a small quantity pine-cones from the 1st defendant but was told in about September 1973 that if he wished to purchase more cones he would have to buy a substantial quantity as the Chinese authorities were not interested in small amounts. He said that this was to him by the 2nd defendant and he was also told that he would have to buy 100 tons. However he said that the 2nd defendant also said that if he did buy this large amount the plaintiff would become the sole distributor for the 1st defendant's pine-cones and that the 1st defendant would not sell to anybody else. He said he discussed this matter with his wife and told the 2nd defendant that he would purchase 70 tons on the basis of being given sole distributor's rights. He said that he took delivery of the 70 tons in various batches and resold them at a good profit. He said that the following year he entered into a similar contract with the 1st defendant. However only about 40 tons of the second contract were delivered and when he approached him the 2nd defendant said that supplies from China were uncertain. He said that in 1975 some cones were supplied but he discovered that the 1st defendant had been supplying customers direct and in particular a firm called Kar Po. He said he approached the 2nd defendant about this and wrote him a letter. He received a letter in reply and he again wrote in reply to that. These letters have been produced. He said that he went to Tak Shun Hong and they took no notice. On the 22nd November 1976, he again went to see them and the 2nd defendant happened to be present. He had a discussion with the 2nd defendant and told him he wanted to go to the Police. They then left the premises of Tak Shun Hong and in the street the 2nd defendant said he would compensate the plaintiff for the losses he had suffered. The plaintiff said that the 2nd defendant told him that while he was the proprietor of the 1st defendant the people under him did not know that the plaintiff had been appointed as sole agent. Plaintiff said that he again suggested they go to the Police but the 2nd defendant said he would prefer to go back to his own office and he would compensate the plaintiff. The plaintiff said that he was not prepared to do that and they went to a book store where he bought a pen, some paper and had a discussion. He said the 2nd defendant then wrote something and gave it to him. This is the note which had been produced. He said that if he had not been given this note by the 2nd defendant he would have gone to the Police. He said he was not aware of the difference between criminal and civil litigation. He denied threatening or assaulting the 2nd defendant cither at the office of Tak Shun Hong or in the street.

5. The 2nd defendant also gave evidence and he denied that there was ever any agreement between him and the plaintiff whereby the plaintiff was appointed sole distributor of pine-cones imported by him from China. He said that he had entered into a contract with the Chinese authorities in 1972 for supply of 70 tons of pine-cones which were stored in his own godown. He said he did not have the exclusive right to import cones from China, that deliveries were irregular and that he had to take whatever was offered. This might be more than what he wanted or it might be less. If it was more he would store the surplus in his godown. He said that while there was no agreement as to the plaintiff being the sole distributor at the time of signing the contract, later on the plaintiff being the sole distributor at the time of signing the contract, later on the plaintiff did approach him and told him that he was having difficulty in competing in the market and he asked to be made the sole distributor. The 2nd defendant said that he refused this request.

6. Again a substantial amount of documentary evidence was produced by the defendant including his own contracts with the suppliers in China.

7. The 2nd defendant gave evidence relating to the making by him of the letter in which he acknowledged the existence of the verbal contract. He said that he met the plaintiff at the offices of Tak Shun Hong and that an argument developed between them. He said that he was threatened and assaulted by the plaintiff in the offices of Tak Shun Hong and that he then left. He at this stage adamantly refused to acknowledge that he had given the plaintiff sole distribution rights. He said that the plaintiff followed him and when they were in the street he again pushed him and threatened him with violence. He said he became frightened and eventually they reached a book store and the plaintiff purchased a pen and a pad. He said that the plaintiff then told him to write out a letter acknowledging that he had the sole distribution rights and that the 2nd defendant began to write such a letter. He said that however after writing two lines the plaintiff took the pen from him and completed a draft. He then told the 2nd defendant to write out a letter on the basis of that draft. The 2nd defendant said that he did so but he kept the draft and that he did not incorporated into his letter the final sentence of the draft which was to the effect that the letter was written by the 2nd defendant of his own free will. He said he did not put that in because the letter was in fact written under duress and while he was prepared to avoid any further trouble he was not prepared to put in that line. He also said that at this stage he had agreed that if the plaintiff was to purchase further goods from him he would allow him discount of $2,000. He said that this was the amount the plaintiff complained that he had lost due to the 2nd defendant's actions. The 2nd defendant said that the plaintiff appeared to be satisfied with such arrangements. Because of this he said he did not report the matter to the Police that day but after a discussion with his family of that evening he did go to the Central Police Station in Hollywood Road the following day and there they made a report. He said that he was told that as he had not been injured the police regarded this matter as a civil dispute and that no criminal investigation would follow.

8. Having considered the evidence and the documents produced I am quite satisfied that there was no verbal contract entered into between the plaintiff and the 1st defendant in 1973 or at any other time under which the plaintiff was to be given the sole distribution rights for the 1st defendant's cones in Hong Kong. It seems to me that if this was an important matter to the plaintiff, as it obviously was, it is most surprising indeed that the first mention of it in writing is in the later of July 1976. I also accept the 2nd defendant as a witness of truth. I was impressed by the manner in which he gave his evidence and I was not impressed with the plaintiff. The plaintiff, in endeavouring to prove a verbal contract entered into some 7 years ago, set out upon a very difficult task indeed. His case has been argued and presented by his Counsel with all his customary skill and thoroughness. However I am satisfied that he has failed to prove such a contract.

9. So far as the action against the 2nd defendant is concerned based on the letter of the 22nd November 1976 I accept his evidence that he wrote this letter because he had been threatened by the plaintiff and in order to avoid further trouble. It seems to me that the fact that he did not include in the letter the final line of the draft, that is that the letter was written of own free will, is most significant. It would again have been a most surprising if at that stage the 2nd defendant had done a complete volt face and acknowledged the verbal contract and agreed to indemnifying the plaintiff. The 2nd defendant is the Managing Director and majority shareholder of the 1st defendant and there was no reason whatever why firstly he should not have told the other members of his company that the plaintiff was to be the sole distributor or, if he was, why the 1st defendant should not have paid him any damage he had suffered rather than the 2nd defendant personally.

10. The claim of the plaintiff against both the 1st and 2nd defendants must be dismissed. The 1st and 2nd defendants are entitled to their costs, to be taxed in accordance with the Legal Aid Regulations. At the end of the evidence given by the 2nd defendant I informed Counsel that I accepted him as a witness of truth. On that basis some 4 witnesses who had been waiting to give evidence for the defendants were not called. However those witnesses who had been subpoena are entitled to expenses for the days which they have been in attendance.

Representation:

Mr. Ronny Tong instructed by John Ku & Co. for plaintiff

Mr, Daniel Fung instructed by Peter C. Wong & Co. for defendants