Bsl Electronics (HK) Co Ltd v. Chi Lik Enterprises Plastic Products Ltd and Another
Read the full judgment text of DCCJ 1464/2004 on BabelCite. This District Court judgment.
1. The Plaintiff claims against the Defendants herein for US$ 12,402 or in its equivalence HK$96,487.56 being commission the Defendants have agreed to pay the Plaintiff.
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DCCJ1464 / 2004 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 1464 OF 2004
BETWEEN
Before: Deputy District Judge Tracy Chan in Court Date of hearing: 8 - 10 & 15 March 2005 Date of handing down judgment : 24th March 2005
JUDGMENT 1.The Plaintiff claims against the Defendants herein for US$ 12,402 or in its equivalence HK$96,487.56 being commission the Defendants have agreed to pay the Plaintiff. Background 2.The Plaintiff is a company engaging in the trading of audio products whereas the 1st Defendant operates a factory in China for the production of audio products. It is not disputed that the Plaintiff has all along been selling products of the 1st Defendant. As the relationship of the key persons of the two had been very close, the Plaintiff has been operating like the sales and marketing department of the 1st Defendant although the Plaintiff also has its own business with other factories. 3.The key person of the 1st Defendant is a Mr. Ho Chi Keung (“Mr. Ho”) and the key persons of the Plaintiff is a Ms. Serene Leung (“Ms. Leung”) and her husband (“Mr. Wong”). Mr. Ho came to the acquaintance of Ms. Leung and a Miss Betsy Bau (“Miss Bau”) when the two ladies were working in a trading company with Mr. Ho as client of that company. 4.Mr. Ho, Ms. Leung together with Miss Bau subsequently set up a company (the Plaintiff) in February 2001 which was to sell the product of the 1st Defendant. Due to some threatened legal proceedings, their spouses, Mr. Wong and Mrs. Ho were appointed as the only shareholders and directors in March 2001. Mrs. Ho was a housewife who had never participated in the operation of the Plaintiff throughout, but she held 30% shares of the Plaintiff. Both couples were signatories of the Plaintiff’s bank account with one person from each couple to sign cheques. 5.It is not disputed that the Plaintiff would make a profit from selling products for the 1st Defendant. 6.Parties began to have differences since early 2003. There were negotiations in May 2003 for Mrs. Ho to become a majority shareholder by acquisition of 51% shareholding of the Plaintiff but that did not work out and eventually Mrs. Ho sold all her shares to Mr. Wong for HK$1 in mid-September 2003. 7.The 2nd Defendant is also a trading company set up on 14 May 2003 by Mr. Ho for sales and marketing of some of the products of the 1st Defendant. It was set up around the time the relationship between him and the Wong’s couple had turned sour. 8.The present claim arose out of the Defendants’ refusal to pay commissions as agreed over the transfer of orders placed by a client of the Plaintiff, Gemex, to the 1st Defendant. The Plaintiff’s Case 9.It is the Plaintiff’s case that in late May 2003 or early June 2003, an oral agreement was concluded between Ms. Leung on behalf of the Plaintiff and Mr. Ho on behalf of the Defendants (“the May Agreement”) that:-
It is the Plaintiff’s complaint now that the Defendants had failed to pay those commissions as agreed. The Defendants’ case 10.The 2nd Defendant says that no agreement has ever been concluded between it and the Plaintiff. For the 1st Defendant, it denies there was agreement reached in May 2003. Mr. Ho concedes that Ms. Leung of the Plaintiff and himself for the 1st Defendant had reached an agreement in August 2003 (“the August Agreement”). The Defence counsel however contends that the August Agreement is not enforceable in law. Issues 11.The issues that have to be resolved at trial are:
Was there Agreement concluded in May 2003 12.The Plaintiff called two witnesses at trial, Ms. Leung and Mr. Wong. I shall focus on the part of their evidence relevant to the issues to be tried. The Defendant also called two witnesses, Mr. Ho and Miss Bau. Ms. Leung for the Plaintiff 13.According to Ms. Leung, she said that since the breakdown of relationship between the Plaintiff and the 1st Defendant, the 1st Defendant indicated in May 2003 that it would not take further order from the Plaintiff including order of a product known as CD300. Although the 1st Defendant did take further order later on, the payment terms were different in the sense that shorter credit period was allowed. 14.In paragraph 5 of her witness statement, she said that as a result of the change in payment terms, there was discussions between herself and Mr. Ho that the orders of Gemex be transferred but commission at the rate of US$0.26 would be paid to the Plaintiff. She said that this had been agreed. She further said that after the 2nd Defendant was set up, Mr. Ho agreed that both Defendants would pay commission to the Plaintiff for those orders transferred and he expressly said that “I, Ho Chi Keung will definitely honour my promise.” 15.In cross-examination, Ms. Leung was asked about the financial position of the Plaintiff and whether by end of 2002, the Plaintiff was indebted to the 1st Defendant for about HK$3 m. She said she could not remember. She was shown a monthly statement at page 147-39 and 147-40, she still disagreed to the suggestion. But she later conceded that at one stage the Plaintiff owed HK$ 3 m to the 1st Defendant without any guarantee. She further denied that Mr. Ho asked to be the majority shareholder because the debt owed by the Plaintiff to the 1st Defendant was growing. She said Mr. Ho wanted to become majority shareholder as he could see that the business of the Plaintiff was prosperous. 16.On the agreement allegedly made in May 2003, she gave an account on how the agreement was concluded. She said Mr. Ho asked her to make a request to Gemex for him to be paid directly under the name of Chi Lik (the 1st Defendant). In reply she said she did not know whether Gemex would agree, it was not reasonable if she was to take liabilities on the terms with Gemex, but Mr. Ho would be the one to take money, this was not the practice, she might as well transfer the orders to him. She went on to say how the agreement was reached. Her evidence in Punti is as follows:
17.She denied she was present at the meeting attended by Mr. Wong and Mr. Ho at the Plaintiff’s office on 2 June 2003. She denied that it was only by end of June 2003 that she mentioned about US$0.26 for the first time. She also denied that Mr. Ho had rejected that proposal of US$0.26. Mr. Wong for the Plaintiff 18.In his witness statement dated 12 October 2004, he said in paragraph 10 that “ In or about June 2003, we had several meetings with Ho Chi Keung and the representative of Gemex on 2 and 11 June 2003 concerning order transfer. In or about July 2003, it was mutually agreed between BSL and Chi Lik/Bosonic that BSL would transfer the existing orders of Gemex to Bosonic and that Chi Lik and Bosonic would accept and agree to pay US$0.26 as commission for each and every piece of audio products transferred notwithstanding whether Chi Lik/Bosonic could successfully complete all the orders by taking up the necessary follow-up action (“the Agreement”)” 19.In court he said that at the meeting with Mr. Ho on 2 June, the rate of commission was not mentioned, but he understood from Ms Leung that it had earlier been agreed at US$0.26. Mr. Ho for the Defendants 20.He said there were no discussions on commission in May 2003 although there were discussions on transfer of Gemax’s orders. It was on 2nd June when he had a meeting with Mr. Wong the question of commission was mentioned vaguely for the first time. In that meeting, he mentioned that the 1st Defendant might pay commission to the Plaintiff. The response of Mr. Wong on that was inconclusive. Nonetheless, the Plaintiff agreed to transfer those orders of Gemex to the Defendants on 11 June 2003 when parties had a conference on this subject at the office of Gemex. Upon undertaking given to Gemex by the 2nd Defendant on 7th July 2003, Gemex began to pass on the necessary documents to the 2nd Defendants for the latter to process. 21.In fact, since mid-June, the Plaintiff started to demand for payment of commission at the rate of US$0.26 per unit for all the goods duly delivered. Mr. Ho maintained his position that the 1st Defendant might pay, but he disputed the rate quoted by the Plaintiff. He insisted that the commission rate should be worked out on the basis of the actual number of units delivered (after deduction of the number of units cancelled by Gemex). Further commission payment should be made after all the units were duly delivered. 22.He relied on his reply to the fax from the Plaintiff dated 17 July 2003 [p 483] that he had never agreed to pay a commission at the rate of US$ 0.26 per unit before that day. In gist he said in that reply that (1) it was orally accepted but Ms. Leung had failed to mention that there would be discount from buyer, and (2) the price had not been fixed, for US$0.26, the 1st Defendant would have to follow up the order, it should be negotiated depending on whether there were discounts made by the buyer. 23.He referred the court to a document at p484 which was a reply from Ms Leung dated the same day echoing on what he said. In that letter, Ms. Leung said in gist that Mr. Ho should not be worried about the matter, she was only hoping that he would give her commission. As to the actual arrangement, it should be calculated after all goods were delivered. 24.Further by a debit note date 18 August 2003, the Plaintiff demanded commission at the rate of US$0.26. When Mr. Ho protested, Ms Leung added a remark on it saying that the charge was only a small one that she charged casually due to the long standing partnership (因合作伙伴關係, 隨意收0.26佣金). 25.Mr. Ho said that from the content of the correspondence quoted above, it showed there was never any agreement reached in May or June 2003 for the Plaintiff to be paid US$0.26 per unit as commission. Whether there was an August Agreement Ms Leung 26.When being cross-examined by Mr. Ho, counsel for the Defendants, Ms Leung categorically denied that there was a phone call on 26 August 2003 between herself and Mr. Ho and both reached an agreement that commission would be calculated on the basis of US$0.15 per unit duly delivered. She was shown a draft agreement setting out like terms and she said that it was handled by Mr. Wong and she could not offer any comments. Mr. Wong 27.He denied there was an agreement reached between Ms. Leung and Mr. Ho on 26 August that the rate would be at US$0.15 and to be paid after delivery. He said that he had all along rejected the proposal of making payment after all goods were duly delivered. He relied on the fax he sent to the 1st Defendant [492] on 27 August saying that the payment term was not acceptable because US$0.15 was already a very low price. He said that this was the reason why he did not sign the draft agreement. 28.He then said that he refused to sign a second draft agreement in September for the same reason. He was asked under cross-examination that whether it was fair to say that although the two draft agreements had not been signed, all terms in both draft agreements had been carried out except the one concerning commission. He agreed. Mr. Ho 29.As mentioned in paragraph 20 above, Mr. Ho’s evidence was that there was no agreement reached in May or June 2003, negotiations regarding commission went on in August 2003. After much discussions and negotiations, Mr. Ho had reached a “global settlement” with Ms. Leung over the phone on 26 August 2003. In the said global settlement, it was agreed, among other things, that the commission would be US$0.15 per unit of product accepted by Gemex. Mr. Wong of the Plaintiff however did not sign on the draft agreement prepared by the 1st Defendant sent on the same day. He said the agreement between himself and Ms. Leung was denied by Mr. Wong, who asked that payment should not be made on condition of delivery of goods [492]. 30.After that, on or about 10th September 2003, Mr. Ho spoke with Mr. Wong again, and a global agreement including other matters between the Plaintiff and the 1st Defendant was reached between the Plaintiff and the 1st Defendant. The terms on commission were, according to Mr. Ho, same as what had been agreed between himself and Ms. Leung. On the same day, he sent to the Plaintiff a second draft agreement listing out what had been agreed between the Plaintiff and the 1st Defendant. Again this was not signed by the Plaintiff. 31.According to Mr. Ho, in reply to his draft agreement, Mr. Wong agreed and said, amongst other things, that there should be a separate document for the issue on commission (有關 GEMEX訂單的佣金問題, 請另立文件). He said that this was evidence of Mr. Wong’s acceptance on the agreed terms made between himself and Ms. Leung on 26 august 2003. 32.After all the goods were duly delivered and accepted by Gemex, Mr. Ho was to work out the commissions to be paid. It was at this time that some disputes between the Plaintiff and the 1st Defendant took place over the intellectual property rights of the product of the 1st Defendant. As a result, the payment of commission to the Plaintiff was withheld. Evaluation of evidence and Finding of Facts 33.After viewing all the evidence, I find it quite obvious that the set up of the Plaintiff was a scheme for Ms. Leung and Mr. Ho to advance their career or business. Ms. Leung used to be a sales manager of a trading company with a list of customers in hand joined Mr. Ho to set up a company (the Plaintiff) to suit the purpose for both. Ms. Leung could have her own business whilst Mr. Ho could have a trading firm with some of his control and he could make additional profit from this trading firm. It was a happy union at the beginning. The co-operation was on the basis of gentleman agreement, to borrow the term used by Mr. Ho for the Defendants, until a day when Mr. Ho realised that the credit granted to the Plaintiff had accumulated to HK$ 3 m. He came to the awareness that he should protect his own interest in the Plaintiff. There came the negotiation for his wife to become the majority shareholder and the credit terms should be changed. 34.I find both Mr. Wong and Ms. Leung had not been truthful when giving the account of why Mr. Ho wanted to increase the shareholding in the Plaintiff. They both said that it was because Mr. Ho saw that the Plaintiff was prosperous. That cannot explain why eventually Mr. Ho would give up all shareholding in a prospering company. 35.On the existence of the May Agreement, which is the cardinal issue of the claim, the evidence from the witnesses of the Plaintiff was not satisfactory. There was discrepancy in Ms Leung’s two witness statements. Her first witness statement was dated 12 October 2004. In paragraph 5 she said that:
36.Then in her supplemental witness statement dated 23 February 2005, she said the agreement was in fact reached in May 2003. She sought to explain the discrepancy in paragraph 3(21) in the supplemental witness statement by saying that there was in fact an oral agreement reached in May, but when she referred to an agreement in July she meant to refer to the occasions when Mr. Ho confirmed the parties agreement in relation to the payment of commission. In my view, one can hardly reach the same conclusion by reading paragraph 5 of the 1st witness statement. 37.Further, when being cross-examined, she gave evidence on how the May Agreement was reached, her evidence was vague. She said when she asked for US$ 0.26 as commission per unit, “Mr. Ho did not say anything, he did not object, he gave silent approval, he agreed at the end by saying let the order be transferred first, ….” It is obvious that she was making it up as she went along, from Mr. Ho saying nothing, to did not object, to giving a silent approval then to an express agreement. She was trying to make her case stronger. Nowhere in her witness statements she gave similar account on how the May Agreement was reached. Further even in her own word, Mr. Ho never unequivocally agreed to pay US$0.26 as commission. She was evasive over the outstanding payment due to the 1st Defendant. 38.Mr. Wong’s evidence was not of much value as he did not take part in the discussions in May. He said the agreement was reached in July in his first witness statement. In his supplemental witness statement he gave similar explanation on the discrepancy in the time the agreement was reached. The version in his 1st witness statement (paragraph 18 hereinabove) to some extent supported Mr. Ho’s saying that there had been discussions on transfer of order since May 2003, but no agreement was reached in Man and June 2003. 39.The Plaintiff relied heavily on a document dated 17 July 2004. The Plaintiff said this was evidence of an agreement reached earlier and they said it was in May and June 2003. In my view, it was an exchange of ideas in the course of negotiation. In the fax, Ms. Leung said (in her own choice of words) that :
40.In reply Mr. Ho said bluntly that there was no agreement on rate of commission. 41.It is plain from this exchange of documents that up to that point in time, there was no agreement reached. Nowhere in the document the word “agreement” was used, nowhere in the document the word “agree” was used. On the contrary, in the first sentence, the words “mentioned” and “ verbally accepted” were used. Further Ms Leung in this document said she “hoped” that Mr. Ho could “accept” payment as quoted was to be made after delivery of goods. These all showed that no concrete agreement had been reached. At best, it showed that there were some discussions and preliminary indication. 42.As said before, Mr. Wong’s evidence was not of much value as he did not take part in the discussions in May. And he said in June when he met with Mr. Ho, he did not mention any rate. 43.For the reasons aforesaid, I find that there was no agreement in May or June 2003. 44.The next issue for me to decide is whether there was any agreement in August 2003. I find that Mr. Ho was telling the truth when he insisted that there was an agreement reached between himself and Ms. Leung. I see no reason not to accept his such saying. His such saying was supported by documents. Mr. Wong’s fax dated 12 September 2003 was ambiguous. But to read the document in its entirety, one would not get the impression that he opposed to the terms set out in the draft agreements, it was just that he asked for a separate document. Had he refused those terms, I believe he would either say so clearly or set out terms which he liked to have in the separate document. I accept Mr. Ho’s saying that Mr. Wong had accepted those terms set out in the draft agreements when he asked for separate documents.find that his such saying amounted to acceptance of the terms set out in the draft agreements. In any event, I find that an agreement had been reached on 26 August 2003 between Mr. Ho and Ms. Leung. 45.To conclude I find that there was an agreement made in August 2003 on the terms that the Plaintiff would be paid US$0.15 per unit for those which had been duly delivered. The issue on who were the parties in the August Agreement will be dealt with later. 46.It is argued by Mr. Ho, counsel for the Defendant, saying that such agreement would not be enforceable for lack of consideration. It is contended by Mr. Ho that by the time the same was agreed upon, the Plaintiff had already effected the transfer of Gemex’s order. In his submissions, he says that it is trite law that past consideration is no consideration. 47.In reply, Mr. Wong, counsel for the Plaintiff, says that not all contract with past consideration is unenforceable. A passage in paragraph 3-029 in Chitty on Contracts (Vol. 1) 29th edition is cited and he says that if three conditions were fulfilled, an agreement with past consideration could still be enforceable. Condition 1 being that the act must have been done at the request of the promisor, in this case the Defendants. Condition 2 is that it must have been understood that payment would be made; and condition 3, the payment if it had been promised in advance must have been legally recoverable. 48.It is submitted on the Plaintiff’s behalf that all 3 conditions had been satisfied in the present case. He says that by a letter dated 10 June 2003, Mr. Ho expressly requested Mr. Wong to sign two letters on behalf of the Plaintiff to signify the Plaintiff’s consent to authorise the 2nd Defendant to handle the Gemex’s orders previously placed with the Plaintiff (1st condition). Even on Mr. Ho’s evidence, Mr. Wong clearly understood that commission would be paid to the Plaintiff upon the transfer of the Gemex’s order (2nd condition). There is no suggestion that had the commission of USD0.15 per unit been agreed prior to the transfer of the Gemex’s orders, the same would not have been recoverable by the Plaintiff. 49.I accept the submission of Mr. Wong. I find that the August Agreement is enforceable. On the question of whether both Defendants are liable, I see that the two draft agreements were prepared in the name of the 1st Defendant, I also accept Mr. Ho’s evidence that he had always discussed with Ms. Leung or Mr. Wong on behalf of the 1st Defendant. Even according to Ms. Leung, when Mr. Ho made the request for direct payment from Gemex, he asked it to be paid in the name of Chi Lik, (the 1st Defendant ) (see paragraph 16 above). 50.For the aforesaid reasons, judgment is entered for the Plaintiff to the extent of US$5,625 or in its equivalent HK$43,762.50 (i.e. US$0.15 for 37,500 units) against the 1st Defendant. The claim against the 2nd Defendant is dismissed. The 1st Defendant is to pay US$5,625 or in its equivalent HK$ 43,762.50 to the Plaintiff . There should be interest from day of writ at half judgment rate until judgment and in full judgment rate until full payment of the same. 51.To adopt the approach that costs should follow the event, the Plaintiff should get costs from the 1st Defendant. On the other hand the 2nd Defendant should get costs from the Plaintiff. As the award is of a relatively small amount, I find it inappropriate to grant certificate for counsel. 52.I make an order nisi that the 1st Defendant do pay the Plaintiff costs, and the Plaintiff do pay the 2nd Defendant costs, to be taxed if not agreed. The order nisi is to be made absolute after expiration of 14 days from the date of handing down of this judgment.
Representative Mr. Anson Wong instructed by Messrs. K.C. Ho & Fong for Plaintiff Mr. Ho C.C. Jimmie instructed by Messrs. Fung Wong Ng & Lam for 1st and 2nd Defendants. |