Southwest Product Development Ltd and Another v. Cheung Rong Plastic Mirror Co, Ltd
Read the full judgment text of DCCJ 4708/2003 on BabelCite. This District Court judgment.
1. The 1 st Plaintiff and the 2 nd Plaintiff are two closely connected business entities. Ma Chung Hon (“Ma”) is a director of the 1 st Plaintiff and a shareholder of the 2 nd Plaintiff. The 2 nd Plaintiff operated a factory at Dongguan, Mainland China (“the Dongguan Factory”).
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DCCJ 4708/2003 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 4708 OF 2003 -------------------- BETWEEN
-------------------- Coram : H.H. Judge Chow Dates of Hearing : 18th, 19th and 22nd May and 19th July 2006 Date of Handing Down Judgment : 14th September 2006 ___________________ JUDGMENT __________________
1.The 1st Plaintiff and the 2nd Plaintiff are two closely connected business entities. Ma Chung Hon (“Ma”) is a director of the 1st Plaintiff and a shareholder of the 2nd Plaintiff. The 2nd Plaintiff operated a factory at Dongguan, Mainland China (“the Dongguan Factory”). 2.In this application the 1st and/or 2nd Plaintiffs claim for loss and damage suffered by them in the respective sums of $277,642.17 and $280,000, as well as other damages, due to the supply of defective goods by the Defendant pursuant to the 5th and 6th Contracts. The Defendant refutes the claim and counterclaims against the 2nd Plaintiff for non-payment of the fees for the delivery of goods in the total sum of HK$42,778.20. 3.On 21 February 2002, a Miss Peggy Lee sent a fax to the Defendant, asking for quotation of fogless mirrors. She faxed her name card in which the name of both Plaintiffs appeared. On the same day, a Miss Lana Li of the Defendant faxed a written quotation to the 1st and the 2nd Plaintiff, stating that the unit price of a fogless mirror of rectangular size at 1.0 mm thickness was HK$2.49. The subject matter of all subsequent purchase orders is of the same type of fogless mirrors. Subsequently a total of 8 contracts/orders were concluded by the Defendant for the sale of such fogless mirrors. The 5th and the 6th contracts form the subject-matter of the Plaintiffs’ claim, whereas the 6th, 7th and 8th contracts form the subject-matter of the Defendant’s counterclaim. The 5th Contract 4.On 11 April 2003, Trends International Limited (“Trends”) placed a purchase contract with the 1st Plaintiff (as supplier) for the purchase of 7,040 pieces of fogless mirrors, at HK$6.75 per piece, for the amount of HK$47,520. On the same day, the 1st Plaintiff placed a purchase order with the 2nd Plaintiff. On this purchase order the 2nd Plaintiff is named as “vendor”. The quantity of fogless mirrors to be purchased is 7,040 pieces, at a unit price of HK$5.35. On 14 April 2003 the 2nd Plaintiff placed a purchase order with the Defendant for 7,050 pieces of fogless mirrors, at a unit price of HK$2.49. On 21 April 2003, the Defendant delivered 7,050 pieces of fogless mirrors to the Dongguan Factory. On 24.4.2003, the Defendant issued an invoice to the 2nd plaintiff, asking for payment of 7050 pieces of fogless mirrors. On 8 May 2003, the 2nd Plaintiff issued an invoice to the 1st Plaintiff for payment of 7,040 pieces of fogless mirrors at the price of HK$5.35 per piece, in the total sum of $37,664. On 9 May 2003, the 1st Plaintiff issued an invoice to Trends, requesting payment of 7,040 pieces of fogless mirrors at HK$6.75 per piece, at the total amount of HK$47,520. The 6th Contract 5.On 22 April 2003, Trends placed a purchase contract with the 1st Plaintiff for the purchase of 8,000 pieces of fogless mirrors, at HK$6.75 per piece, for the amount of HK$54,000. On 23 April 2003, the 1st Plaintiff issued a purchase order to the 2nd Plaintiff, for 8,000 pieces of fogless mirrors, at HK$5.35 per piece, for the total amount being $42,800. On this purchase order, the 2nd Plaintiff is named as “vendor”. On the same day, the 2nd Plaintiff issued a purchase order to the Defendant for 8,030 pieces of fogless mirrors at HK$2.49 per piece, for a total amount of HK$19,994.70. On 25 April 2003, the Defendant issued a delivery note to the 2nd Plaintiff, for delivering 8,030 pieces of fogless mirrors to the Dongguan Factory. On 30 April 2003, the Defendant issued an invoice to the 2nd Plaintiff for payment of 8,030 pieces of fogless mirrors at the amount of HK$19,994.70. On 13 May 2003, the 2nd Plaintiff issued an invoice to the 1st Plaintiff for payment of the 8,000 pieces of fogless mirrors at HK$5.35 for each piece, in the total of $HK$42,800. On 14 May 2003, the 1st Plaintiff issued an invoice to Trends, demanding for payment of HK$54,000 in respect of the delivery of 8,000 pieces of fogless mirrors. 6.The Plaintiffs argue that by virtue of what happened on 21st February, 2002 between Miss Peggy Lee and Miss Lana Li, there was a prior contractual arrangement that pursuant to and following quotation given by the Defendant to the Plaintiffs, and upon the Defendant’s agreement to deliver the fogless mirrors to the Plaintiffs’ Dongguan Factory, the Plaintiffs agree to place purchase orders of the fogless mirrors with the Defendant from time to time at the unit price of HK$2.49. The Defendant was given to know and indeed was well aware that right from the beginning they were dealing with both Plaintiffs in the supply of fogless mirrors, but not just the 1st Plaintiff or the 2nd Plaintiff. The Plaintiffs also argue, inter alias, that for all the purchase orders the logo of the 1st Plaintiff, and the name “Southwest” appeared on them. This signifies that the purchase orders were placed by the Plaintiffs. 7.The issue is: regarding the 5th and the 6th Contracts, were the purchase orders placed with the Defendant made by the 2nd Plaintiff alone, or by both 1st and/or 2nd Plaintiffs? Each of the purchase orders bears the full name of the 2nd Plaintiff and its address, namely Room 702A, as well as the logo of the 1st Plaintiff. There are no particulars of the 1st Plaintiff set out on these documents for the purpose of communication. But the purchase orders and the invoices issued by the 1st Plaintiff to Trends only bear the 1st Plaintiff’s logo, its full name and its full address (namely, Room 702, TCL Tower). It is quite clear from this piece of evidence that the documents for placing the purchase orders belonged to the 2nd Plaintiff. 8.For the 5th Contract, before the placing of the orders with the Defendant, the 1st Plaintiff had already placed an order for buying 7,040 pieces of fogless mirrors from the 2nd Plaintiff. It is illogical that together with the 2nd Plaintiff it would place a purchase order with the Defendant for the same quantity of goods, because it had already purchased the same quantity of goods from the 2nd Plaintiff. For the 6th Contract the position is the same. 9.Pursuant to the purchase orders, the Defendant was to deliver the fogless mirrors to the Dongguan Factory, where the 2nd Plaintiff would manufacture the plastic frame. Suction cups would be procured from another company. The plastic frame and the suction cup would then be fixed to the fogless mirrors. The final products would be sold to the 1st Plaintiff for delivery of the same to Trends. Therefore it is reasonable and natural for the Defendant to sell the fogless mirrors to the 2nd Plaintiff, which, as vendor, would manufacture the final products, and then sell and deliver the same to the 1st Plaintiff, pursuant to a prior contract of sale with the 1st Plaintiff. The Plaintiffs argue that both of them placed purchased order with the Defendant. But the 1st Plaintiff had already placed an order with the 2nd Plaintiff for the finished product. There is no reason why together with the 2nd Plaintiff it had to place an order for the unfinished products with the Defendant. If that really is the situation, then what is the amount of goods it was to take up in the order and what is the amount of goods to be taken up by the 2nd Plaintiff? There is no evidence to show the amount of goods to be taken up by each of them. 10.The logo of the 1st Plaintiff on the purchase order with the Defendant by itself cannot give rise to an inference that the 1st Plaintiff is also a party to the contract between the 2nd Plaintiff and the Defendant. When the 2nd Plaintiff asked the 1st Plaintiff to make payments of the fogless mirrors pursuant to the orders placed by the 1st Plaintiff with the 2nd Plaintiff, the documents used for this purpose also bear the logo of the 1st Plaintiff. If that logo represents the 1st Plaintiff, then a curious situation will arise, namely, the 1st Plaintiff and the 2nd Plaintiff together ask the 1st Plaintiff for payment. I find that that cannot be the situation. . 11.There is no reason why the 2nd Plaintiff should act for the 1st Plaintiff. If the 2nd Plaintiff really acted for the 1st Plaintiff, then there is no need for the 2nd Plaintiff to sell to the 1st Plaintiff the finished products. In his witness statement dated 4 July 2005, Ma said:-
It cannot be the case that the 2nd Plaintiff signed the agreement on behalf of the 1st Plaintiff. I find that the 2nd Defendant signed the agreement in its own right, in order to get hold of the fogless mirrors in question, so that additional work would be done to them, and then they were sold to the 1st Plaintiff, which would in turn deliver them to Trends. There is simply no evidence to support the allegation that the agreement was signed by the 2nd Plaintiff on behalf of the 1st Plaintiff. This is not the Plaintiffs’ pleaded case in their re-re-amended Statement of Claim. 12.I conclude that the 1st Plaintiff is not a party to the 5th and 6th Contracts. Therefore it has no legal status to sue for breach of these two contracts. The loss and damages claimed by the Plaintiffs are those suffered by the 1st Plaintiff, as indicated in the letter dated 28 July 2003 issued by Huen & Partners, the solicitors for the 1st Plaintiff, to the Defendant. In that letter Huen & Partners made out a claim for compensation. The letter reads:-
In this letter Huen & Partners was acting for the 1st Plaintiff, and claims against the Defendant for the losses and damages suffered by the 1st Plaintiff. 13.There is no evidence to show that the 2nd Plaintiff suffered any loss or damage. Even if the alleged breach of contract is substantiated, the 2nd Plaintiff did not in fact suffer any loss or damage simply because it is entitled to seek payment from the 1st Plaintiff in respect of the purchase orders in its capacity as vendor. The 7th Contract 14.On 6 May 2003 and 15 May 2003, Trends placed 2 purchase orders with the 1st Plaintiff for 4,960 and 3,040 pieces of fogless mirrors at HK$33,480 and HK$20,520 respectively. On 9 May 2003, the 1st Plaintiff issued a purchase order to the 2nd Plaintiff (as vendor) for the purchase of 8,000 fogless mirrors at HK$42,800. On 12 May 2003, the 2nd Plaintiff issued a purchase order to the Defendant, to purchase 8,030 pieces of fogless mirrors. On 23 May 2003, the Defendant delivered 8,030 pieces of fogless mirrors to the Dongguan Factory. On 27 May 2003, the Defendant issued an invoice to the 2nd Plaintiff for payment of these 8,030 pieces of fogless mirrors in the sum of HK$19,994.70. 15.The 7th Contract is independent of the 5th and the 6th Contracts. There is no evidence to show that the fogless mirrors delivered under the 7th Contract were defective. Therefore the Defendant was not in breach of the 7th Contract. Hence it is entitled to the payment for this contract. The 8th Contract On 28.5.2003, the 2nd Plaintiff placed a purchase order of 1,120 pieces of fogless mirrors with the Defendant, for a total sum of $2,788.80 The Defendant duly delivered the goods to the Dongguan Factory on 29.5.2003, and issued an invoice in the sum of $2,788.80 to the 2nd Plaintiff on 31.5.2003. But the 2nd Plaintiff did not make any payment for these goods. 16.The Plaintiffs allege that the goods delivered under the 5th and the 6th Contracts were defective. But the tests carried out by the 1st Plaintiff’s expert do not provide any assistance to this court. The water used for the tests was heated to a temperature of 90°C. This is not a normal bathroom temperature. In a bathroom, the normal water temperature would not reach 90°C. Hence the results of the tests do not have any probative value. The water temperature that should be used in the tests should be the normal bathroom temperature, under which the function of the fogless mirrors could be properly tested. The Plaintiff cannot rely on the results of these tests to prove that the fogless mirrors delivered by the Defendant under the 5th and 6th Contracts are defective. Counterclaim 17.The Defendant made a counterclaim against the 2nd Plaintiff for the total amount of $42,778.20, in respect of the fogless mirrors delivered to the 2nd Plaintiff pursuant to the 6th Contract (8,030 pieces at $19,994.70), the 7th contract (8,030 pieces at $19,994.70) and the 8th Contract (1,120 pieces at $2,778.80). The 2nd Plaintiff has not paid these sums. There is no justification for doing so. For the reasons set out above, I dismiss all the Plaintiffs’ claims. I enter judgment for the Defendant in respect of its counterclaim against the 2nd Plaintiff in the amount of HK$42,778.20. I order that the 2nd Plaintiff do pay this amount of HK$42,778.20, with interest thereon, at judgment rate, from 5 September 2003 until satisfaction. Costs 18.I make an order nisi, to be made absolute in 14 days’ time, that the Plaintiffs do pay costs of this action to the Defendant, to be taxed, if not agreed, with certificate for Counsel.
The Plaintiff: represented by Miss Yanky Lam, instructed by Messrs. Huen & Partners, Solicitors. The Defendant: represented by Ms. Winnie Tsui, instructed by Messrs. Winston Chu & Co., Solicitors. |