Bowlstar (HK) Ltd v. Ho Kwai Po and Another
Read the full judgment text of HCA 4703/2003 on BabelCite. This High Court CFI judgment was delivered on 30 March 2006.
1. These are two actions for damages for breach of contract which are tried together. The plaintiff in HCA 4703 of 2003 is Bowlstar (HK) Limited (“Bowlstar”). The plaintiff in HCA 4704 of 2003 is Leva International Trading Co (“Leva”). The defendant in both actions are Ho Kwai Po and Ho Kwai Tat trading as Concord Enterprises. The contracts which formed the subject matters of these actions were in identical terms except as to the identity of the purchasers. Mr Ho Siu Fan Nelson (“Nelson”) o
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HCA 4703/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 4703 OF 2003 __________ BETWEEN
__________ HCA 4704/2003 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 4704 OF 2003 __________ BETWEEN
__________ Before: Deputy High Court Judge To in Court Dates of Hearing: 18-20 January 2006 Date of Judgment: 30 March 2006 ______________ J U D G M E N T ______________ Background 1.These are two actions for damages for breach of contract which are tried together. The plaintiff in HCA 4703 of 2003 is Bowlstar (HK) Limited (“Bowlstar”). The plaintiff in HCA 4704 of 2003 is Leva International Trading Co (“Leva”). The defendant in both actions are Ho Kwai Po and Ho Kwai Tat trading as Concord Enterprises. The contracts which formed the subject matters of these actions were in identical terms except as to the identity of the purchasers. Mr Ho Siu Fan Nelson (“Nelson”) on behalf of Bowlstar and Leva as purchasers negotiated with Ho Kwai Po Paul (“Paul”) and Ho Kwai Tat George (“George”) on behalf of Concord Enterprises as seller. In both actions, the Defendant counterclaimed for damages. Hence the two actions are tried together. Though the evidence was taken in Chinese, most of the documents were in English. It is therefore more convenient to adopt English as the language of the Court and to deliver judgment in English. 2.Nelson is the general manager of China Rare Metals Industries, Inc (“China Rare”) in China and the general manager of Leva in Hong Kong. China Rare manufactures and processes selenium products in China. Leva sells and purchases selenium products. Leva also purchases and supplies raw materials at cost to China Rare. Sometimes, Leva would finance its purchases by arranging for a third party to make purchases on its behalf and to apply to a bank for letters of credit. Then Leva would reimburse the third party of all bank charges incurred. Concord Enterprises carries on a trading business in Hong Kong. 3.The Plaintiffs’ case is that on 4 August 2003, Nelson entered into two identical contracts, one on behalf of Leva and one on behalf of Bowlstar, for the purchase from Concord Enterprises of ten metric tons of selenium metal powder of 99.9% purity at the price of Euro 12.60 per kilogram (“kg”) but Concord Enterprises failed to deliver the products. The defences are, firstly, that the contracts were made between Leva and Bowlstar with the supplier in Germany and not with Concord Enterprises who acted as agent of the supplier and is not liable as agent and, secondly, that both Leva and Bowlstar repudiated their contracts by failing to provide the necessary letters of credit within the time limit stipulated in the contracts. Concord Enterprises also counterclaims for breach of the contract by Leva and Bowlstar. 4.The issues raised in these actions are:
The facts 5.The evidence relied on by both sides are mainly documentary evidence, such as e-mail correspondence and fax. Save for a couple of correspondence, the receipt of which is disputed by Nelson, those documentary evidence are incontrovertible. In respect of those disputed correspondence, I shall make the necessary finding of fact at the appropriate stage. 6.At the material time, there had been a strong demand for selenium and the price of selenium was on the rise. Leva had been buying and reselling selenium. Nelson used to buy direct from major suppliers in Japan and Germany and not from small suppliers or agents as he had heard about non-deliveries by small suppliers or agents. Though his major suppliers make timely deliveries, Nelson had difficulties in obtaining the quantities he ordered from them. Hence, Nelson started to expand his net of suppliers. 7.In July 2003, Nelson discovered the name of Concord Enterprises in Metal Bulletin’s Traders of the World. He made enquiries with Concord Enterprises on behalf of China Rare via e-mail. Initially George responded, but later Paul took over the communication with Nelson. At the same time, Paul contacted his supplier Concret Orgachem GMBH Chemische Produkte (“Concret Orgachem”) in Germany for price of selenium. On 22 July 2003, Paul obtained an offer from Concret Orgachem for selenium of 99.9% purity at Euro 12.40 per kg inclusive of 2% commission for Concord Enterprises. On 28 July 2003, Nelson made a bid on behalf of China Rare for 20 metric tons of 99.5% selenium at US$14.50 per kg. 8.On the same day, Nelson wrote to George by fax on the letterhead of Leva specifying the documentation he required and suggested the goods be delivered by two shipments, the first shipment on or before 8 August 2003 and the second shipment on or before 22 August 2003. Nothing material turned on whether Nelson wrote to George or Paul. He might have confused their identities. Both George and Paul acted for and on behalf of Concord Enterprises. But this fax suggested for the first time that Leva and not China Rare was going to be the purchaser. Presumably, either George or Paul had a subsequent conversation with Nelson. Nelson wrote further that afternoon asking for confirmation of the price to be US$14.50 per kg for 99.9% selenium in two shipments of 10 metric tons each instead of 99.5%. He offered payment by bank draft against shipping documents in Hong Kong. 9.On the same day, European time, which was about eight hours behind Hong Kong time, Concret Orgachem informed Concord Enterprises that it was unwilling to accept any currency risks and insisted payment in Euro currency at the rate of Euro 12.40 per kg inclusive of 2% commission for Concord Enterprises. It required payment by letter of credit at sight, payable in Germany free of any bank charges. Later that day Concret Orgachem agreed to sell at US$14.55 per kg. 10.On 29 July 2003, Nelson wrote to George on behalf of China Rare. He explained that Leva was a sister company of China Rare and confirmed his price of Euro 12.6 per kg for 20 metric tons to be delivered by two shipments on or before 8 August 2003 and on or before 22 August 2003. 11.On the same day, Paul informed Concret Orgachem that he had persuaded his buyer to agree to payment by Euro at the rate of Euro 12.40 per kg. Concret Organchem issued a sales confirmation dated 29 July 2003 to Concord Enterprises for sale of 20 metric tons of selenium at Euro 12.85 per kg. The contract number for that sales confirmation was “COR 729/03”. 12.On 1 August 2003, Paul wrote to Concret Orgachem referring to the sales confirmation dated 29 July 2003 which contained the following message:
On the same day, Concret Orgachem faxed a sales confirmation dated 31 July 2003 to Concord Enterprises, but the rate was stated to be Euro 12.40 per kg. 13.It is Paul’s allegation that on 2 August 2003, he sent a fax to Nelson which reads:
Nelson denied having received this fax and the sales confirmation referred therein. But he admitted having issued a fax to Concord Enterprises on the same day at 12:11 pm on the letter head of Leva confirming the purchase of 20 metric tons of selenium at Euro 12.60 per kg and requesting Concord Enterprises to prepare a sales contract between Leva and Concret Orgachem so that he could proceed with application for letters of credit. Nelson’s fax reads as follows:
14.According to Paul, he had secured an offer from Concret Orgachem for sales of selenium at Euro 12.40 per kg on 28 July 2003 (paragraph 9 above), though there were some further correspondences about the currency to be used for the sale. Upon securing agreement from Nelson to pay by Euro currency at the rate of Euro 12.40 per kg, he wrote to Concret Orgachem asking it to issue a sales confirmation at an inflated price of Euro 12.60 per kg and to refund Concord Enterprises the difference of Euro 0.20 per kg plus a 2% commission (paragraph 12 above). However, Concret Orgachem only issued a sales confirmation at the price of Euro 12.40 per kg. Paul said that on 2 August 2003 he sent the fax which I quoted at paragraph 13 above with the sales confirmation showing the rate of Euro 12.40 per kg to Nelson. 15.In his evidence in chief, Nelson’s first reaction upon being shown Paul’s fax of 2 August 2003 was that he had received the fax. However, when asked about the sales confirmation attached to that fax, his immediate reaction was that that sales confirmation had nothing to do with his case as the price stated therein was Euro 12.40 per kg. Then he withdrew his evidence about having received Paul’s fax of 2 August 2003. He said that had he been shown Concret Orgachem’s sales confirmation quoting a price of Euro 12.40 per kg, he would have directly dealt with Concret Orgachem instead of through Concord Enterprises, which would bring him a saving of Euro 4,000 for 20 metric tons. On the other hand, Paul argued that there was nothing secret about the price and that Nelson had no objection to Concord Enterprises profiting on the price difference. He also argued that if the sales confirmation had not been sent to Nelson, Nelson could not have responded requesting for a contract to be prepared for Leva and Concret Orgachem. To that argument, Nelson’s reply was that it was Paul who told him on the telephone to prepare letters of credit in favour of Concret Orgachem and hence he made the request for the contract to be prepared for Leva and Concret Orgachem as the contract was a necessary supporting document for application for letters of credit. 16.I find Paul’s account inherently incredible. The copy of his fax dated 2 August 2003 was produced by Paul and not by Nelson. As such, it did not bear any machine printed date and time of receipt of the fax. However, on the heading of the fax was an entry of the date and time at which it was allegedly sent, which was “2003/8/2 at AM 10:54:56”. I have compared other entries of faxes sent by Paul. There was no consistency in the style of the entry. The fonts were not consistent. Sometimes, the words “AM” and “PM” were missing. Sometimes the date was printed in British style and sometimes it was printed in American style. These suggest to me that the entry was manually typed and not generated by the fax machine. I find it odd that a typist would put down the time to the second. I have doubts if that fax had actually been sent on the date and time as indicated. Despite Nelson’s request for a contract to be made between Leva and Concret Orgachem, Concord Enterprises never produced such a contract. It is obvious that Paul would not wish to disclose to Nelson the contact details of Concret Orgachem. It is highly unlikely that Paul would have attached a copy of the sales confirmation from Concret Orgachem to his fax of 2 August 2003. 17.On the other hand, I find Nelson a credible witness. He was obviously careless in his initial response when being asked by his counsel about the fax of 2 August 2003. That is understandable because the terms of the fax was along the lines of the contract he had in mind. However, when he was shown the sales confirmation showing the price of Euro 12.40 per kg, it immediately struck his mind that he had actually never seen the sales confirmation and hence he recalled he had never seen Paul’s fax of 2 August 2003. I am satisfied from his demeanour that he was telling the truth. And as he said, had he seen the sales confirmation from Concret Orgachem, there was no reason why he should not directly make the purchase from Concret Orgachem, which apparently was a more direct supplier if not manufacturer of selenium and which would result in a saving of Euro 4,000. Thus, I reject Paul’s evidence and accept Nelson’s. I find that Paul’s fax dated 2 August 2003 had never been sent to Nelson and that Nelson was informed by Paul to put down the name of Concret Orgachem as the beneficiary of the letters of credit. 18.Continuing from where I had left, upon receipt of Nelson’s fax dated 2 August 2003, Paul signed the fax, impressed it with the chop of Concord Enterprises and fax it back to Nelson. Pausing here at this stage, it would appear that Leva anticipated contracting with Concret Orgachem through Concord Enterprises as agent. Hence it requested for a contract between Leva and Concret Orgachem. Leva’s request to Concord Enterprises for signature and confirmation must be for Concord Enterprises to sign as agent of Concret Orgachem. But this finding is unnecessary as events took a turn from here. 19.Presumably, Leva had difficulties in funding the purchase of 20 metric tons of selenium and had to seek assistance from Bowlstar. Thus on 4 August 2003 Nelson requested Concord Enterprises to split the 20 metric ton agreement into two contracts of 10 metric tons each with Leva and Bowlstar and he gave Concord Enterprises the particulars of Bowlstar. On the same day, Concord Enterprises faxed two sales confirmations each for 10 metric tons of selenium, one with Leva and one with Bowlstar, to Nelson. Those sales confirmations were signed by Paul below the words “For and on behalf of CONCORD ENTERPRISES”. Nelson amended the date of shipment in the sales confirmation from September to August. These sales confirmations were then signed and returned to Concord Enterprises respectively with the signatures and chops of Leva and Bowlstar. The payment terms under the two sales confirmations were: “irrevocable letter of credit at sight in favour of Concret Oregachem GMBH Chemische Produkte, 22052 Hamburg PF 760205 confirmed by Hyfovereinsbank Hamburg.” The sales confirmation also contained the following remark “All refer Concret Orgachem Chemische Produkte Confirmation Cor 729/03.” These sales confirmations formed the basis of Leva’s and Bowlstar’s claims in these actions. 20.Pausing again here, I have a number of observations. Firstly, the contracting parties under these two sales confirmations were Leva and Bowlstar on the one part and Concord Enterprises on the other. There is nothing on the sales confirmation to show that Concord Enterprises was acting otherwise than as principal. Secondly, Concord Enterprises raised no objection to the amendment on the date of shipment to August. It conducted its business with Leva and Bowlstar on the footing of the amended date of shipment. It must be taken to have affirmed the amendment. Thirdly, the sales confirmation were prepared by Concord Enterprises. The payment terms were not identical with those under the sales confirmation dated 29 or 31 July 2003 between Concret Orgachem and Concord Enterprises, which included the following additional terms: “free of any bank charges in Germany and China, free of rembours charges and free of confirming charges, transferable, partial shipment allowed, shipment from West European Main Port”. On the fact, Leva and Bowlstar had no knowledge of the payment terms agreed between Concret Orgachem and Concord Enterprises and could be bound by those terms. 21.Upon receipt of the signed sales confirmations, Paul wrote to Concret Orgachem referring to the confirmation, COR 729/03 and requesting Concret Orgachem to issue two separate sales confirmations each for 10 metric tons of selenium to Leva and Bowlstar and quoting the price of Euro 12.60 per kg. Paul also sent two commission agreements to Concret Orgachem for its execution, one in respect of each sale. The commission agreement provided for payment by Concret Orgachem of 2% commission on the total invoice price and a refund of the price difference of Euro 0.20 per kg between the contract price quoted in the sales confirmation with Leva and Bowlstar and the price as agreed between Concord Enterprises and Concret Orgachem. Concret Orgachem did not respond or sign the commission agreements. 22.In the meantime, Leva applied to the Bank of China (Hong Kong) Limited (“BOC”) for letter of credit with Concret Orgachem as beneficiary and asked George to book shipment. Presumably, Leva’s application was based on BOC’s standard terms which did not meet with the requirements of Concret Orgachem. On 5 and 8 August 2003, Concret Orgachem complained about the letter of credit application to Concord Enterprises. On 12 August 2003, Concret Orgachem wrote to Concord Enterprises setting out four complaints, namely that the letter of credit was not transferable, that Concret Orgachem was required to pay negotiation charges, that the port of discharge was not specified and that it was not payment at sight but after five working days. It should be noted that only the last item amounted to a breach of the payment terms under the sales confirmation between Leva and Concord Enterprises. In addition, Concret Orgachem also complained that Bowlstar had not yet issued any letter of credit. 23.Paul forwarded the complaints to Nelson. On 13 August 2003, Leva applied to BOC for amendment. BOC explained that it was its instruction to the claiming bank that when presenting sight draft for payment, the claiming bank must allow five working days to BOC in Frankfurt to arrange for the Euro currency to be remitted to the sight draft presenting bank. Paul forwarded the amended letter of credit and Nelson’s explanation to Concret Orgachem. On 14 August 2003, Concret Orgachem replied to Concord Enterprises that Bowlstar’s letter of credit was still outstanding. It seemed to have accepted BOC’s explanation. 24.On 15 August 2003, Concret Orgachem again reminded Concord Enterprises that Bowlstar’s letter of credit was still outstanding. Concret Orgachem also declined to sign the commission agreement which Concord Enterprises had been repeatedly reminding it to sign. 25.Later that day, Concret Orgachem wrote to Concord Enterprises to request further change of the letter of credit issued for Leva. It requested the beneficiary under the letter of credit be changed to Alfa Aesar Johnson Matthey (Deutschland) Management GMBH & Cokg, Zeppelinstr 7 (“Alfa Aesar”). The reason for the amendment was not because of any non-compliance of the terms of payment by Leva, whether under the sales confirmation between Leva and Concord Enterprises or under the sales confirmation between Concord Enterprises and Concret Orgachem but because Concret Orgachem was advised by its own bank that the bank charges for the transfer of the letter of credit was more expensive than the charges for changing the beneficiary. Concret Orgachem made no more complaints about any other non-compliance of the letter of credit issued for Leva. It also requested Bowlstar to make similar amendment to its letter of credit. Thus as at 15 August 2003, there was no acceptance by Concret Orgachem of any breach of the terms of the sales confirmation and there was no acceptance by Concord Enterprises of any breach by Leva or Bowlstar. 26.On 16 August 2003, Concret Orgachem wrote to Concord Enterprises in respect of the letter of credit for Bowlstar as follows:
It should be noted that while the alleged non-compliance may be breaches of the payment terms of the sales confirmation between Concord Enterprises and Concret Orgachem, those terms never formed part of the terms of the sales confirmation between Concord Enterprises and Bowlstar. The change of the beneficiary was, of course, a new amendment proposed by Concret Orgachem. Even as at 16 August 2003, Concret Orgachem had not accepted the breach, if there was any breach. Instead, it gave further time to Bowlstar or Concord Enterprises for performance. 27.There was some confusion as regards what held up the issue of the letter of credit for Bowlstar. It appears that a Mr Lai of Bestsign from Dongguan, a Mr Kwan and a Ms Lin of Bowlstar became involved with Paul in connection with the issue of the letter of credit, in place of Nelson. There is no need for me to make finding as to what held up the issue of the letter of credit. Suffice it is to say, no letter of credit had been issued for Bowlstar as at 19 August 2003. Concret Orgachem confirmed later that day receipt of the amendment as to the name of the beneficiary for Leva’s letter of credit and chased for Bowlstar’s letter of credit. Thus, as at 19 August 2003, Concret Orgachem accepted Leva’s letter of credit and though it had not yet received Bowlstar’s letter of credit, it had not accepted Bowlstar’s failure as a repudiatory breach. 28.It appears that Bowlstar’s letter of credit was eventually issued. On 25 August 2003, Paul wrote to Concret Orgachem seeking its confirmation of receipt of the letters of credit from Leva and Bowlstar and asking for shipment schedule for the 20 metric tons of selenium. Paul also asked for a quotation for a new lot of 10 metric tons of selenium. Concret Orgachem replied that the ultimate supplier, Alfa Aesar, would give shipping schedule and quotation for the new order. There was no complaint by Concret Orgachem that the letters of credit were not in order. 29.Paul kept chasing Alfa Aesar and Concret Orgachem for the shipping schedule. There was no reply from Alfa Aesar. But Concret Orgachem replied on 8 September 2003 as follows:
Thus as at that date there was no complaint by Concret Orgachem of any breach of the terms of payment whether by Concord Enterprises or Leva or Bowlstar. There was also no complaint by Concord Enterprises of any breach of payment terms by Leva or Bowlstar. 30.On 9 September 2003, Concret Orgachem informed Concord Enterprises that “the case is in hands of management and a decision will follow soon.” Paul kept on chasing Alfa Aesar. On 22 September 2003, Concret Orgachem wrote to Concord Enterprises that it received “information from Alfa Aesar that they would not supply the goods on the old price level.” Paul kept on writing e-mails to Concret Orgachem and Alfa Aesar. Eventually on 24 September 2003, Alfa Aesar replied to Paul as follows:
In short, Alfar Aesar was not going to ship the selenium under the sales contract between Concord Enterprises and Concret Orgachem but offered to sell only on the new prices it quoted. 31.On 29 September 2003, Nelson wrote to Paul and threatened to take legal action. Paul then sent a copy of the letter to Concret Orgachem. Concret Orgachem replied that it had no further information and would not supply the selenium. It also reminded Concord Enterprises that the new quotation given by Alfa Aesar would expire by the following day. Presumably Paul had a telephone conversation with someone in Concret Orgachem. Concret Orgachem replied later that day repeating its refusal to supply the selenium because Alfa Aesar refused to supply them at the old price. It wrote:
Thus, Concret Orgachem was refusing to supply the selenium at the contract price and putting the blame on Leva and Bowlstar for their failure in placing order with Alfa Aesar. It also alleged to have faxed copies of its letters to Leva and Bowlstar advising them to place order with Alfa Aesar direct. But Concret Orgachem made no complaint about the letters of credit. 32.Paul wrote again on 2 October 2003. Concret Orgachem replied as follows:
It should be noted that this was the first time that Concret Orgachem complained about delay in the issue of the letters of credit. In these proceedings, Concord Enterprises adopted this allegation of delay in the issue of the letters of credit as a defence. 33.I now turn to analyse Concret Orgachem’s letter dated 29 September 2003. Before doing so, it should be recalled that the request for amending the name of the beneficiary to Alfa Aesar was made by Concret Orgachem on 15 August 2003 for the purpose of saving its bank charges in transferring the letters of credit to meet its payment obligation towards Alfa Aesar. So far as Leva’s letter of credit is concerned, Concret Orgachem had no complaint about any delay. The fact that it requested amendment of the name of the beneficiary must meant all previous delays, if any, were spent and any breach of payment terms prior to the request were condoned or affirmed by Concret Orgachem. Indeed, on 19 August 2003, Concret Orgachem thanked Concord Enterprises for the amendment. As for Bowlstar’s letters of credit, there was no doubt a delay. But, for the same reason, the delay was spent and the breach affirmed when Concret Orgachem replied to Paul’s e-mail of 25 August 2003 saying that Alfa Aesar would provide the shipping schedule for the two lots of selenium. 34.In the meantime, despite Concord Enterprises was chasing for delivery, Concret Orgachem made no complaint about the delay in the letters of credit. The only reasonable inference must be that even if there were any delay in providing the letters of credit, it was immaterial and the allegation of delay made more than a month later was not made bona fide. 35.Then on 29 September 2003, Concret Orgachem for the first time mentioned about the delay and referred to two letters allegedly sent to Leva and Bowlstar asking them to fax their order directly to Alfa Aesar. Nelson denied ever receiving those letters. Concret Orgachem had no dealing with either Leva or Bowlstar. It is inconceivable that it would have asked them to place order with yet a fourth party. In all the correspondences between then and 15 August 2003 when it first requested amending the name of the beneficiary, it never mentioned that Leva or Bowlstar should place order with Alfa Aesar. If indeed it was necessary to do so, it should have informed Concord Enterprises. But it did not. Copies of those letters were not even sent to Concord Enterprises until 29 September 2003. The allegation about sending the letters and Leva’s and Bowlstar’s failure to place orders with Alfa Aesar were lame excuses. I accept Nelson’s evidence that Leva and Bowlstar never received the letter dated 20 August 2003. Those letters were blatant fabrications. 36.Paul submitted that the delay was such that Concret Orgachem could not have been able to ship the selenium in accordance with the sales confirmations in August as amended by Nelson. Quite apart from the fact that the ultimate delay was occasioned by Concret Orgachem in order to save its own banking charges, the duly amended letters of credit arrived in time for shipment to be effected in August if only Alfa Aesar was willing to deliver or Concret Orgachem was serious in discharging its obligation. In fact, Concret Orgachem never complained that it did not have enough time to effect the shipment. Hence, I reject this argument. 37.Summing up this part of my fact finding, I find as a fact that it was Concret Orgachem and hence Concord Enterprises who requested a last minute change in the name of the beneficiary in the letters of credit on 15 August 2003. Any delay in providing the letters of credit prior to that day was spent. Leva and Bowlstar must be given reasonable time to effect the amendment. Leva did effect the amendment within reasonable time. Though Bowlstar was late in providing the letter of credit before the request of amendment, there is nothing to suggest that the amended letter of credit was not provided within reasonable time of the request for amendment. Even if there was a delay by Bowlstar that breach was affirmed by Concret Orgachem and hence by Concord Enterprises on 26 August 2003 when Concret Orgachem replied that Alfa Aesar would provide the shipping schedule for the two lots of selenium. The letters dated 20 August 2003 allegedly sent by Concret Orgachem to Leva and Bowlstar were fabrications. Concret Orgachem’s allegation of delay was not genuine. Concord Enterprises’ adopting that allegation as a defence must also fail for the same reason. Parties to the contracts 38.On my finding of fact, Nelson had been liaising with Paul of Concord Enterprises about the purchase of 20 metric tons of selenium. He had no knowledge that the ultimate supplier was Concret Orgachem until 2 August 2003 when Paul informed Nelson over the telephone to issue a letter of credit in favour of Concret Orgachem. It was in that setting that Nelson asked Paul to prepare a sale contract between Leva and Concret Orgachem. On these facts, there were two possibilities. Firstly, it is open to infer that Nelson intended to trade with Concret Orgachem as principal through Concord Enterprises as its agent. This inference would have been reinforced by Paul’s fax dated 2 August 2003 in which he informed Nelson that he had received a sales confirmation from its principal. But I have rejected this evidence from Paul. The second possibility is that Concord Enterprises was trading as principal on its own right in a sub-sale from Concret Orgachem. In a commercial transaction, there is nothing unusual for a sub-purchaser to pay the first seller. 39.However, the first possibility is excluded by two facts. Firstly, Paul responded to Nelson’s request to prepare a contract between Leva and Concret Orgachem by signing the sale confirmation for and on behalf of Concord Enterprises. He never indicated that Concord Enterprises did so as agent of Concret Orgachem. Secondly and more importantly, there is no dispute that Concord Enterprises was to make a profit of Euro 0.20 per kg out of the transaction in addition to the 2% commission it would receive from Concret Orgachem. Even though Concret Orgachem was aware of the profit as it agreed with Concord Enterprises to refund the price difference to Concord Enterprises, the arrangement was more consistent with a sub-sale than with an agency agreement. This contract did not materialise as Nelson requested to split the contract into two, one with Leva and the other with Bowlstar on 4 August 2003. That was the setting in which the subsequent contracts came into existence. 40.On 4 August 2003, Concord Enterprises issued two sales confirmations instead of arranging for them to be issued by Concret Orgachem. The parties stated on the sales confirmations were Leva and Concord Enterprises in one contract and Bowlstar and Concord Enterprises in the other. These sales confirmations were signed by Paul for and on behalf of Concord Enterprises. The formula ‘for and on behalf of’ is a well-known one indicating agency. But the context in which this formula was used indicated that Paul was signing as agent of Concord Enterprises and not as agent of Concret Orgachem. There is a very strong presumption that if a contract is signed by an agent in his own name without qualification, he is deemed to have contracted personally: see Transcontinental Underwriting Agencies SRL v Grand Union Insurance Co Ltd [1987] 2 Lloyd’s Rep 409. This presumption would be displaced if contrary intention plainly appears from the other parts of the document: see Concordia Chemische Fabrik auf Actien v Squire (1876) 34 LT 824. The absence of any indication on the two sales confirmations that Concord Enterprises was acting for and on behalf of the ultimate seller or of Concret Orgachem must give rise to a very strong inference that it was entering into the contract in its own capacity as principal and not for and on behalf of another. Thus on the face, these two sales confirmations are contracts in which Concord Enterprises entered into as principal. This is so despite the background that it was known to Nelson that Concret Orgachem was the ultimate supplier of the selenium and despite that Concret Orgachem was named as the beneficiary of the letters of credit. Furthermore, there is of course the very important inference that could be drawn from the profit which Concord Enterprises was to make. The whole arrangement was, in my view, a sale between Concret Orgachem and Concord Enterprises and a sub-sale between the latter and Leva and Bowlstar respectively. In view of this conclusion, it is not necessary for me to consider the second issue. 41.Even if I were to hold that Concret Orgachem was the contracting party and Concord Enterprises only contracted as agent, it would not have absolved Concord Enterprises from liability. The law is that an agent can be liable at the same time as his principal unless he can show he has expressly or impliedly negatived his personal liability. In Stanley Yeung Kai Yung v Hongkong & Shanghai Banking Corp [1981] AC 787 at 795, Lord Scarman delivering the opinion of the Privy Council said:
On the facts as I have found, there was simply nothing to show that Concord Enterprises had indicated that it is not to be held liable for any breach of the contracts or that Leva or Bowlstar should look to Concret Orgachem for remedy for breach. Breach of payment terms 42.When I make my finding of the facts leading to the non-delivery of the selenium under the two contracts, I have found that there was no delay on the part of Leva and Bowlstar in providing the letter of credit and even if there had been delay on the part of Bowlstar, the breach was affirmed by Concret Orgachem and Concord Enterprises. I have also found that the allegation of delay and failure to place order with Alfa Aesar by Leva and Bowlstar were just convenient excuses by Concret Orgachem for non-delivery. They were not bona fide excuses. It is most unfortunate that Concord Enterprises should have adopted those excuses as their defences. Such defences are only to be dismissed and so too must Concord Enterprises’ counterclaim. Measure of damages 43.The damages recoverable by a purchaser against a seller for non-delivery of goods purchased is the difference between the market price of the goods at the time of delivery and the contract price, subject to the purchaser’s obligation to mitigate. In principle, the purchaser may also recover all bank charges, commission and other incidental charges incurred in obtaining the substituted goods. 44.Leva purchased five lots of selenium between 4 September 2003 and 27 February 2004 at the average price of Euro 18.60 per kg, incurring a loss of Euro 6.00 per kg. I consider the price reasonable as compared with Concret Orgachem’s quoted price of Euro 23.00 per kg via its letter dated 29 September 2003. It has adequately mitigated its loss. Leva also incurred bank charges for the five transactions in the amount of HK$9,272.85. Therefore, I assess the damages suffered by Leva to be Euro 60,000 (i.e. Euro 6.00 x 10,000) and HK$9,272.85. 45.There is no evidence that Bowlstar made any purchase to make up for the non-delivery or incurred any further bank charges. I therefore assess Bowlstar’s damages to be Euro 60,000 only. Conclusion 46.Accordingly, I enter judgment in favour of the plaintiff in HCA 4703 of 2003, i.e. Bowlster (HK) Limited against the defendant, Concord Enterprises, in the amount of Euro 60,000 with interest from the date of the writ and costs to be taxed if not agreed. 47.I also enter judgment in favour of the plaintiff in HCA 4704 of 2003, i.e. Leva International Trading Co, against the defendant, Concord Enterprises, in the amount of Euro 60,000 plus HK$9,272.85, together with interest from the date of the writ and costs to be taxed if not agreed. 48.The Concord Enterprises’ counterclaims in both actions are dismissed with costs.
Mr Kenneth Shum, instructed by Messrs Terry Yeung & Lai, for the Plaintiff The Defendants, in person Appeal dismissed: see CACV156/2006 and CACV157/2006 (heard together) dated 9 February 2007 |
Further hearings and rulings under HCA 4703/2003