Pacific Millennium Co Ltd v. Manhorn Ltd t/a Yuen Fung International Paper Co
Read the full judgment text of HCA 3760/1994 on BabelCite. This High Court CFI judgment.
1. This case is effectively an accounting dispute between a Plaintiff wholesale supplier of paper products and a Defendant purchaser of such products. When the case came before me it became clear that what had started out as a debt of not insignificant proportions due from the Defendant to the Plaintiff had shrunk to $27,187.45 by virtue of a series of repayments by the Defendant both prior to and after the issue of the writ on 21st April, 1994. On hearing at the outset that the pleadings had ef
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HCA003760/1994
IN THE SUPREME COURT OF HONG KONG HIGH COURT -----------------
Coram: Deputy Judge William Stone Q.C. in Court Dates of Hearing: 29th - 31st May, 3rd - 4th June, 1996 Date of Delivery of Judgment: 5th July, 1996 ----------------- JUDGMENT ----------------- 1. This case is effectively an accounting dispute between a Plaintiff wholesale supplier of paper products and a Defendant purchaser of such products. When the case came before me it became clear that what had started out as a debt of not insignificant proportions due from the Defendant to the Plaintiff had shrunk to $27,187.45 by virtue of a series of repayments by the Defendant both prior to and after the issue of the writ on 21st April, 1994. On hearing at the outset that the pleadings had effectively been overtaken by events, and that this figure only remained in issue, I was incautious enough to express the view that it was surprising that the parties wished to spend four days in the High Court, the period for which the case had been set down, arguing about $27,000. With the benefit of hindsight, this view was in error. The hearing took five days. The case itself is larded with detail sufficient to satisfy even the most dedicated number-cruncher. However, the diligence of both counsel, to whom I am indebted, has served to provide a sensible shape to the proceedings, and to identify the twin issues for decision. 2. It is common ground that in the period April to October 1993 the Plaintiff sold paper products to the Defendant: the face value of the 40 invoices involved amounted to $2,955,440.31. This is the base figure from which all else proceeds. The Defendant encountered cash flow difficulties in the running of its own retail business, which, as I have said, involved the onsale of those paper products purchased from the Plaintiff - I gather, although nothing turns on it, that its problems arose as the result of a warehouse fire in June 1993 and consequent delay in obtaining appropriate insurance compensation - and as a consequence normal repayments were disrupted. In any event, it remains common ground that the base indebtedness figure of $2,955 million was reduced in tranches, and I am grateful to Miss Wong, who appeared for the Plaintiff, for her helpful itemisation of such repayments, which in broad terms took place as follows:
3. Although the foregoing categories of repayment all occurred prior to the issuance of proceedings on 21st April 1994 I have rehearsed them individually because, in part at least, they are of relevance to one of the issues for decision, and also because in my view such repayment provides an insight into the way in which the parties were then attempting to sort out their mutual affairs in a commercially sensible manner. I regret that this spirit of co-operation subsequently evaporated, resulting in a hardening of attitudes and position which ultimately found their expression in this court at the cost, one may think, of not inconsiderable expense in terms of legal fees and executive time. 4. Be that as it may, by the date of the issue of the writ, 21st April, 1994, the amount at issue stood at $701,389.34. There is no significance in the difference between this sum and the initially pleaded figure of 716,949.43; agreed adjustments have been made by Counsel, and it is the former figure which is accurate. 5. Matters did not stand still with the commencement of proceedings, however, and the Defendant continued to make repayments against the sum of $701,389.34 which then remained outstanding. There is again agreement between the parties as to the amount which was in fact paid back; what divides the parties, with, unfortunately, a certain degree of bad feeling, and that which forms a main focus in this case, is the reason behind the form of such repayment. 6. As earlier outlined, and again as is common ground, from the date of the issue of proceedings the Defendant repaid the sum of $674,201.89 by virtue of 13 cheques each in the sum of 50,000, and a 14th and final cheque in the sum of $24,201.89. On any basis this left outstanding, from the sum due and owing at the commencement of these proceedings, the sum of $27,187.45, which was, as I have said, the particular sum which prompted my observations at the outset of this trial. This sum, claimed by the Defendant, represented the precise figure claimed to be due and owing by the Plaintiff to the Defendant in the form of "rebates" allegedly agreed to be payable under 8 purchase invoices. So that, on the Defendant's case, the last of the cheques paid (for $24,201.89) had cleared the sum admittedly due to the Plaintiff after making allowance for this relatively small contra figure in the form of the alleged rebates. 7. So far so good, at least in terms of the broad shape of the case. The Plaintiff alleged short payment in the sum of $27,187.45 and wished recovery thereof, together with interest and costs; indeed, at the outset Miss Wong for the Plaintiff was frank enough to tell me that this case was effectively about costs. The Defendant for its part denied liability for any further monies, alleging that, in addition to the monies repaid, the sum of the agreed rebates had wiped the slate clean. Moreover, said the Defendant, not only had it repaid all that was owed, but it further maintained that these proceedings ought not to have been brought by the Plaintiff at all, relying on an alleged repayment agreement reached between the Plaintiff and Defendant in or around early December 1993 by which a payment schedule had been agreed between the parties, and, indeed, as the Defendant asserted, put into practice by the Defendant. 8. Accordingly, the two main issues for decision at this trial, as both counsel agreed at the beginning of the case, were first, the issue of the alleged repayment agreement, and second, the entitlement of the Defendant to rebates in the sum claimed. Between them, these issues have been the almost exclusive focus of the viva voce evidence led on behalf of both parties. In this regard I asked for evidence on the particular issues themselves, rather than permit reliance on witness statements; given their usual method of preparation, such statements generally are unlikely to be repositories of the unvarnished truth, and are not of great assistance in cases where, as here, there are conflicts on primary factual matters. I now turn to these issues in reverse order, given that my decision on the rebates question determines whether, at the end of this case, the Plaintiff is entitled to recover any monies from the Defendant representing the balance of the original claim. The Rebates Issue 9. First, a matter of housekeeping. As Mr. Ng, Counsel for the Defendant, accepted, an analysis by Miss Wong of the claimed figure of $27,187.45 revealed an element of double-counting, with the result that, as Miss Wong submitted and as I accept, the Defendant had in any event over-claimed under this head by the amount of $7,207.20, the rebate sum accepted by the Plaintiff to be due to the Defendant on two invoices, Nos. 3435 and 3436, but erroneously double counted by the Defendant by attribution of the like figure to two non-existent invoices. On this basis, therefore, the Defendant's claim to rebate entitlement was reduced to $19,980.25, this sum comprising claimed rebates on the remaining 6 invoices, namely 3391, 3398, 3692, 3907, 3771 and 3772. 10. The purpose of such rebates upon the invoice price was explained to be no more than a marketing device whereby the actual price the Plaintiff was charging in the market remained effectively unrevealed on the documents; the way it worked was that once a sales person of the Plaintiff had agreed with the purchaser a rebate at so much per metric ton, a system was in place within the Plaintiffs' administration whereby this obligation would be formally recorded. In this connection, Miss Yip of the Plaintiff gave evidence, which I accept, both as to the nature of the system and to the effect that no record had been located within the Plaintiff's documentation which established the Defendant's claims in this regard. But clearly the system in place was only as good as the data which went into it, and Miss Yip herself had no knowledge of what had actually transpired between Plaintiff and Defendant. The evidence in this regard was that of Madam Chan Yip Chun Chu of the Plaintiff and Mr. Kwok Kui Lim of the Defendant. 11. Mr. Kwok, although no longer employed by the Plaintiff, had been the Plaintiff's Sales Manager at the relevant time, and had dealt extensively with Madam Chan of the Defendant. As will become apparent in the context of the evidence relating to the alleged repayment agreement, I found Mr. Kwok to be a far from impressive witness, although on the subject of the alleged rebates he was considerably more straightforward, and in this regard at least I am not inclined to disbelieve him. As to the rebates, Mr. Kwok's evidence was that, whilst he was pressed to concede the possibility of agreement as to such rebates, he did not think that there was such an agreement, and believed that had there been he would have put the normal process in train for the recording, and crediting, of such rebates. 12. Unsurprisingly, given the lapse of time, Mrs. Chan had no independent recollection as to the rebates claimed on the six invoices, and gave evidence with reference to annotations on a document, Exhibit "D3", which was first disclosed during this trial. "D3" was a three page extract from a ledger kept by Mrs. Chan detailing business activities of the Plaintiff and also a sister entity, Yick Fat, and from the annotations therein she said that she could tell that the 6 invoices in question attracted rebates. 13. I am unconvinced, and after weighing all the evidence I find that the Defendant has failed to discharge its undoubted (and accepted) burden of proof as to its entitlement to these rebates. It seems to me, from all the circumstances, that the Defendant's case on this matter necessarily involved a detailed reconstruction of events. It is noteworthy that this crucial ledger extract, "D3", was not even discovered and produced until the second day of the trial; equally, there was no mention of, nor claim to, such particular rebate entitlement (which allegedly accrued due by the end of June 1993) until the amendment to the Defence in March 1995, notwithstanding the inter-solicitor correspondence dealing with the Defendant's primary indebtedness. Nor was I greatly impressed with the intrinsic reliability of the ledger annotations relied on by Mrs. Chan, given that the ledger in question was used to record all Letters of Credit (upon which the rebates were claimed) issued by the Defendant and its sister company to all suppliers of these two companies, and the fact that, according to Mrs. Chan, a time lapse occurred between her oral agreement as to rebate with Mr. Kwok and the arrival of the goods attracting the rebate, at which point, and only at that point, the relevant rebate annotation was made. Moreover, even on her own case one of Mrs. Chan's annotations (that with a star, as opposed to the figure of "$5") was subject to admitted uncertainty as to the rebate position on that transaction, given that these particular goods were returned by the Defendant to the Plaintiff for resale under an agreement whereby the Plaintiff would itself shoulder half the loss accruing on such resale; indeed, in so far as this particular rebate item is concerned (in the amount of $3,667.40) I was inclined to think that the point was unarguable. 14. On any basis therefore, the Defendant had overclaimed in terms of rebate entitlement by the amount of $10,874.60; what then is the situation as to the balance? After taking all the evidence into account, and after some reflection, I am minded to dismiss the Defendant's claim to the entire sum of $27,187.45, and to find, which I now do, that the Defendant owes the Plaintiff this said sum and that the Plaintiff is entitled to judgment therefor. I add only that I find nothing sinister nor untoward in the advancement of this claim in this form; at the end of the day the decision on this issue is one made solely upon the burden of proof, which in my judgment the Defendant has failed to discharge upon the balance of probabilities. The Agreement Issue 15. The existence or otherwise of an agreement whereby the Defendant was permitted to repay its indebtedness by instalments is the element which clearly has severely exercised the parties in this case; indeed, I suspect that it is the basis of the current antipathy between them. At the outset of the trial this primary factual issue was supplemented when I granted leave to Miss Wong, for the Plaintiff, to amend her Reply so as to argue that not only was there no agreement as alleged but that if there was, such agreement was unenforceable in that it was unsupported by consideration. This aspect of the case, therefore, requires consideration under these two heads.
Consequential Orders 16. In their final addresses both counsel at my request made helpful preliminary observations as to costs, although I think it fair to say that both Miss Wong and Mr. Ng were of the view that such submissions could not be exhaustive and would necessarily be contingent upon such findings of fact as were to be made; also, although naturally I have not been told, I think it possible that consequent upon such findings of fact other relevant matters may be placed before the Court, in particular upon the issue of costs. Accordingly, upon delivery of this judgment I will hear Counsel further as to costs and interest, and thereafter I will add to this judgment a note of my reasons for such orders as I make in this regard.
Representation: Miss Lisa Wong instructed by Anthony Chiang & Partners for the Plaintiff Mr. Lawrence Ng instructed by David Ravenscroft & Co. for the Defendant Consequential Orders: Costs and Interest ----------------- Date of Additional Argument: July 5th, 1996 Date of Handing Down Decision: July 19th, 1996 ----------------- 1. After delivery of judgment in this case, I heard further argument upon the issues of costs and interest. Costs 2. As the result of this trial, the Plaintiff has judgment in the sum of $27,187.45, and Miss Wong on behalf of her client asks for costs of this action on the High Court scale. Mr. Ng for the Defendant does not agree. He says that, whilst he has lost the rebates issue, and has judgment against him, he has succeeded on what he submits is the main point in the case, namely, that of the settlement agreement, and that he should be awarded costs referable to that issue, which he says are in any event a significant part of the costs expended. Once again, therefore, the positions of the respective parties are diametrically at odds. 3. With the consent of counsel, during argument on costs I was handed a bundle of correspondence containing what are generally referred to as Calderbank letters. I am satisfied, in the circumstances of this case, that it is open to me to have regard to the content of these letters in considering the costs position, the strictures of the proviso to 0.62 r.14(2) notwithstanding. In summary, the Calderbank sequence is thus:
4. A further factor relevant to the costs argument is that in July 1995, and at the stage when the sum allegedly due in rebates was the sole amount outstanding between the parties, the Defendant had mounted an application to transfer the case to the District Court. The Plaintiff successfully resisted this application, although it is unclear why it chose to do so, given the potential costs protection afforded by s.43 of the District Court Ordinance, Cap. 336. In any event it was dismissed and Miss Wong, who did not then represent the Plaintiff, now argues that such dismissal, and the lack of appeal therefrom, vindicates her submission that costs should be awarded to her client on the High Court scale. She resiled, I think, from her initial stance that this earlier decision not to transfer the case served to fetter my discretion in the matter of costs, but nevertheless maintained that it was a significant factor in support of her argument regarding the scale of those costs. 5. The foregoing is an outline of such other matters as I consider relevant to the award of costs in these proceedings in addition to the specific findings in my judgment; as I indicated during the course of argument, the question of the appropriate costs order, in the face of the able and conflicting submissions of both counsel and the somewhat unusual facts of this case, has given me pause for reflection. 6. At the end of the day, however, and after considering all the circumstances, the inescapable point to which I return in the costs analysis is that the Plaintiff has been placed in the position of having had to come to court in order to recover that sum which I have found to be due and owing by the Defendant, together with the costs of such recovery. This, of course, reflects on the drawback within the Defendant's offer of November 1995; had that offer included costs to be taxed, or, as I have earlier indicated, had it been in the form of a payment into court, that would effectively have been the end of any costs argument such as is now before me. It follows, therefore, that the Plaintiff is to get all or some of its costs; the questions are, how much and on what scale? 7. Despite her attractive submission, I am unable to agree with Miss Wong that she should recover costs on the High Court scale, and I certainly do not regard the Plaintiff's success in preventing the transfer of the case to the District Court as a matter which should weigh heavily upon the exercise of my discretion. I have found that there was indeed a settlement agreement in the terms alleged by the Defendant, and notwithstanding its strict lack of enforceability (a point taken by Miss Wong at the outset of the trial) the fact remains that in terms of the necessary expenditure of costs it was not until May 1995, when the alleged rebates entitlement was all that separated the parties, that the Plaintiff was in the position of having to pursue these proceedings to court to recover a sum which, by that stage, was near to the floor of the District Court jurisdiction (the Small Claims Tribunal, I am told, now has a claim ceiling of $15,000.00). Accordingly, in my judgment such costs as are to be awarded to the Plaintiff are to be taxed (if not agreed) and paid upon the District Court scale. 8. This brings me to the next issue: is the Plaintiff to recover all or a proportion of such costs, or should then be an apportionment of costs between the parties? Nr. Ng, for the Defendant, submits with some feeling that in terms of the dispute as to the issue of the settlement agreement he has been successful; indeed, until Miss Wong's eleventh hour amendment, with regard to its enforceability, the only live issue was as to the existence of such an agreement, and a significant part of the case, both before and at trial, was taken up with dealing with this question, and upon this he has succeeded. Ergo, he says, he should, at the least, have his costs referable to that issue. 9. This argument has its attractions, but ultimately I am unpersuaded that I should apply it in this case, not least because of the Defendant's own offer of November 1995, when it was then prepared in effect to concede the disputed rebate sum, and also because at that stage it had it in its power not only to safeguard its position as to costs but also to render unnecessary any argument as to the existence or otherwise of the agreement. I also bear in mind the content of the parties' correspondence, detailed above, which took place on the first two days of the trial. 10. At the end of the day, in my view the broad justice of the case is served by awarding the Plaintiff a proportion only of its costs of this action. What then should be the correct proportion? Whilst disputing the underlying principle, Miss Wong suggested a ratio of 50:50 in terms of time taken in argument upon the two main issues which were in contention at trial, whilst Mr. Ng wished to vary this ratio, submitting, I think probably correctly, that at least from the point of view of the trial, the agreement issue took a greater amount of time than that referable to the question of the rebates. In this connection I also bear in mind, however, that an assessment of relative time spent upon the separate issues at trial is not necessarily a valid indicator of the pre-trial position in terms of the drawing of pleadings, witness statements and so on, and that since, as I have observed, the Plaintiff had no choice but to come to court, certain expenses would have been incurred in any event. These matters are not, of course, susceptible to measurement as if by micromometer, and having made a decision upon the relevant principle, I must now opt for a percentage figure that I think is fair and appropriate in all the circumstances. I also wish, if possible, to avoid a costs order which serves to fragment the proceedings, and at the same time to adopt a workable formula readily comprehensible by both parties and taxing master. Accordingly, in the exercise of my discretion and after weighing all the material before me, I consider that the appropriate order, which I now make, is that the Plaintiff is to recover from the Defendant fifty per cent (50%) of its costs of this action, such costs to be taxed and paid, if not agreed, upon the District Court scale. Interest 11. In all the circumstances of the case, and in the exercise of my discretion, I am not minded to award interest on any sum other than the sum actually recovered by the Plaintiff, that is, $27,185.45, notwithstanding Miss Wong's request for interest on the reducing balance from the date of issue of the writ. In any event, Miss Wong also suggests that an interest calculation could appropriately be based on a formula of prime plus 1%, and Mr. Ng does not demur with this general approach. Accordingly, I also award the Plaintiff interest on the judgment sum of $27,185.45 at the rate of prime plus 1% from 1st June 1995 to the date of judgment.
Representation: Miss Lisa Wong instructed by Anthony Chiang & Partners for the Plaintiff Mr. Lawrence Ng instructed by David Ravenscroft & Co. for the Defendant |