Tsui Po Hing and Another v. Sk Kaken Co., Ltd and Another

HCCL 42/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 42 OF 2004

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BETWEEN

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Before : Hon Stone J in Court (Open to public)

Dates of Hearing : 15-19, 22 and 24-26 January 2007

Date of Judgment : 6 March 2007

INDEX TO JUDGMENT

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J U D G M E N T

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Introduction

1.This is a dispute of some age, and revolves around the alleged grant to the plaintiffs of a sole agency agreement – it is said for a period of 50 years – to make and to market the defendants’ architectural paint products in Shanghai.

2.The plaintiffs are brothers : the 1^st plaintiff, Stanley Tsui, is the younger brother of the 2^nd plaintiff, Benjamin Tsui.

3.Together the Tsui brothers run a business called Protech Industrial Company; this is a partnership.

4.The 1^st defendant, SK Kaken Co. Ltd, is a publicly listed Japanese company, which was founded some 30 years ago by Mr Minoru Fujii, of Osaka, Japan, who is its President.

5.Mr Stanley Tsui and Mr Fujii are the main players in this saga; both have given evidence to this court.

6.The 2^nd defendant, SK Kaken (HK) Ltd, is a Hong Kong company, of which Mr Fujii, the Group President, also is a director.  Although now named as 2^nd defendant, it is in fact the entity against whom proceedings initially were instituted by the plaintiffs. 

7.This company, which I shall hereafter refer to as ‘SKK Hong Kong’, is the wholly-owned subsidiary of ‘SK KK Japan’ – henceforth the title I shall adopt for the 1^st defendant – which was added, by re-amendment, on 13 April 2002.

8.This has been litigation distinguished by its longevity. 

9.This case first saw the light of day, almost a decade ago, as HCA 9602 of 1998, the writ herein having been issued on 12 June 1998.

10.Since its inception, the plaintiffs’ claim has undergone several manifestations, and I refer below to the development of the pleaded case; for introductory purposes suffice to say that, by the time of this trial, the pleadings were in violet, the final Statement of Claim being in Re-re-Amended form.

11.By Order of this court, dated 29 June 2004, this action was transferred to the Commercial List as from 1 August 2004 – hence the current action number – and accordingly this is the judgment consequent upon the trial of this action some 31 months after such transfer.

12.At the outset it is worth bearing in mind that this case is not the only litigation currently extant between these parties.

13.Another case, HCA 16850 of 1998, remains outstanding and awaits trial.  I shall refer to this as ‘the collateral action’.  In this, however, the roles are reversed, the plaintiff therein being SKK Hong Kong, with the brothers Tsui, trading as Protech Industrial Company, the defendants thereto, and wherein SKK Hong Kong is claiming the sum of some HK$8.16 million, together with interest thereon, arising from that which is alleged to be the unpaid value of goods sold and delivered to the Tsui brothers’ firm, Protech Industrial.

14.This collateral action is not before this court, although in the course of these proceedings there has been frequent cross-reference to the matters therein in issue, in particular in the context of why certain actions (eg. non-delivery of goods) were said to have, or to have not, occurred. 

15.I note that an earlier (and opposed) application for consolidation on the part of SKK Hong Kong was dismissed by a Master, and that this decision remained unappealed.  In this regard I do not wish to criticize – it is fair comment that at the stage of such earlier consolidation application the pleadings in this action were certainly not in the state they now have attained – but the fact remains that the procedural demarcation of these two cases has not assisted the court in its overall view, wherein this court has been placed in the unfortunate position – albeit with the knowledge and consent of the parties – of judging this case absent complete knowledge of the full background of the trading between SKK Hong Kong and Protech Industrial, which in the ‘collateral action’ has mounted a counterclaim against SKK Hong Kong; this counterclaim, in its latest manifestation of August 2006, asserts a claim in the order of some 11 million, a dramatic increase upon the initial 1998 formulation of HK$1.1 million.

16.I am far from convinced that it has been helpful to adjudge the present action to the exclusion of the other, and with the benefit of hindsight better may well have been to have followed the initial instinct of the court and to have ordered consolidation, and thus immediately to have adjourned the present trial to a subsequent consolidated hearing.  However, no application was made to this effect by either party – indeed I suspect that this course would have been resisted – and as matters transpired this action now has been tried, in its current terms, on the dates appointed therefor.

The pleaded development of this case

17.Like many commercial disputes, this case is larded with detail, although in principle it remains tolerably straightforward.

18.As earlier observed, this is a claim which now rejoices in pleadings which have attained violet hue : the present state of play is that the operative pleading is in re-re-amended form, and so colourful (and distracting) were the engrossed copies of the pleadings that at a pre-trial review the court ordered that a ‘clean’ copy of the Statement of Claim be produced for use at trial.  One downside of this procedure, however, is that whilst undoubtedly convenient for practical purposes, such a ‘clean’ copy of the pleadings in final form serves to obscure the somewhat convoluted (and in my judgment, revealing) manner in which the plaintiffs’ case has developed.

19.As with the current plaintiffs’ counterclaim in the ‘collateral action’, this is a case which in its present incarnation bears little resemblance to the form in which it started life. 

20.The original Statement of Claim, as attached to the writ of 12 June 1998 in what then was HCA 9602 of 1998, started out as a simple claim for loss of profit on certain orders (Orders A and B) of paints which were not delivered to the plaintiff; no particulars of loss and damage were vouchsafed.

21.This pleading recites the existence of a sole agency agreement made between the plaintiff, Protech Industrial, and the defendant, SKK, Hong Kong.

22.It is averred that this agency agreement has come into existence by virtue of a written Agency Agreement dated 1 January 1995, various provisions of which specifically are pleaded, and also by conduct, by virtue of a course of dealing in the defendant’s products commencing “in or about the latter part of 1997”.

23.It is further averred, inter alia, (at paragraph 16), that by the failure to make the deliveries of paint products complained of (‘Orders A and B’) “the Plaintiff, as they were entitled to do, accepts the Defendant’s repudiation of the Agency Agreement by the issuance and summons of this writ” – and thus, on this pleaded basis, the agency agreement terminated on 12 June 1998.

24.This initial pleading was first amended, some 6 weeks thereafter, on 30 July 1998, albeit this amendment – the insertion of a new paragraph 16A, pleading ‘Particulars of Property’ – appears to bear no relation to any narrative part of the existing pleading.

25.Be that as it may.  The case in something resembling its present form first took shape pursuant to a substantial re-amendment dated 21 February 2002, whereby there was a radical overhaul of the initial claim.

26.Pursuant to this re-amendment, SKK Japan, a new party, was added as 1^st defendant, whilst the pre-existing defendant, SKK Hong Kong, the wholly-owned subsidiary of SKK Japan, became 2^nd defendant.

27.The most salient changes in terms of the pleaded case were that it was averred that the acts of the 2^nd defendant, SKK Hong Kong, should be treated as the acts of the 1^st defendant, SKK Japan, which had held out the 2^nd defendant as its agent, and there was now pleaded, some 40 odd months after the original writ, a claim that the Agreement in question between the parties was for a 50 year sole agency : it is said that Protech, the plaintiff, was prepared to bring SKK Japan into the Shanghai market pursuant to the plaintiff setting up a joint venture with a Shanghai partner “for the purpose of manufacturing and selling and otherwise dealing only with the SKK products”, with the proviso that there should be a 50 year sole agency and that the defendant should supply the products “and all necessary technical back up and assistance” in manufacture of those products.

28.The sole agency agreement is said to have come into being orally and by conduct, and is said to have originated “from about mid-1992 to about Mid-November 1992”, commencing with an oral agreement in a Causeway Bay restaurant between the Tsui brothers and Mr Fujii on behalf of the 1^st defendant; the provenance of the 1 January 1995 written agreement thereafter is set out, with reference to a draft coming into being “in or about May 1994”.

29.So far as the relevant breaches of the agreement are concerned, that which is specifically pleaded is twofold : first the failure to supply SKK raw materials and products, and second, the entry by the 1^st defendant of a sole agency agreement of a similar nature “with other companies both in Hong Kong and in mainland China starting from the year of 1996”.

30.The small mystery of the ‘unnarrated particulars of the property’ (at paragraph 16A) within the first amendment is further solved, with the plea, at paragraph 28 in the re-amended claim, that in pursuance of the agency agreement the plaintiff had pledged or charged the property thus particularized; it is averred that in light of the matters alleged, this charge should be released.

31.Whilst the claim in the re-amended pleading substantially is revamped, it is also plain that this was drafted by counsel, although counsel’s name does not appear thereon; clearly, however, someone had applied brain to problem in terms of the reformulation thus pleaded.

32.In light of the detailed repleading in the ‘green’ version of the Statement of Claim, it is therefore a little surprising that this version was itself the subject of further substantial reformulation within the ‘violet’ version, that is, the Re-re-Amended Statement of Claim dated slightly over 2 years later, on 2 April 2006; it is this pleading, on this occasion settled by 3 counsel, led by Mr Daniel Fung SC, the plaintiffs’ leading counsel at this trial.

33.Since it is this version of the claim which now has been tried at the hearing the subject of this judgment, I do not intend to do anything other than make brief reference to the main changes in terms of the make-up of the plaintiffs’ case.

34.In this further revision there is greater condescension to detail, in particular a ‘Letter of Intent’ dated 21 August 1992 (of which more later), and references to a series of ‘5 representations’ said to have been made by the 1^st defendant, SKK Japan to the plaintiffs, with details of the circumstances thereof, as a result of which it is said that the plaintiffs, inter alia, constructed a factory in Shanghai, through a joint venture established for the purpose, in order to manufacture under licence SKK products.

35.Detailed reference to the monies thus expended are pleaded, as is a ‘Letter of Appointment’ dated 28 December 1992, under which the defendants are said to have appointed Protech their sole agents “to manufacture under licence and to sell SKK products in Shanghai”, and further details follow of a meeting on 8 March 1993 in Osaka, leading to the ‘4^th representation’, which “compounded” the first 3 representations as made to the plaintiffs, and thereafter the background to the written Agreement dated 1 January 1995, in particular to a meeting in Osaka to discuss the then draft of this agreement on 2 June 1994 at the headquarters of the 1^st defendant.

36.The nature of the sole agency agreement, as constituted in partly oral and partly written terms, is maintained, and in addition an estoppel is raised, wherein the defendants are said to be estopped from denying the grant of a sole agency to the plaintiffs for a term of 50 years, whilst particulars of undelivered orders remain, and a claim is maintained for loss of profit.

37.Particulars of repudiatory breach, in addition to the allegations of non-delivery of goods, consist of the allegation that the defendants have entered into agency agreements of a similar nature with entities other than the plaintiffs, and a substantially new allegation (at sub-paragraph 13d) to the effect that the defendants had failed or refused to commission any of the SKK machines which had been purchased from the 1^st defendant, the consequence of such refusal being that none of the machines, as installed at the Shanghai factory, could actually be used to produce SKK products.

38.Consequent upon this further amendment, a separate and independent claim in fraudulent misrepresentation is added (at paragraph 16 et seq), it being said that “but for the 1^st to 5^th Representations or any or any combination of them” that the plaintiffs would not have entered into the joint venture that they did in China, incurring in the process substantial costs in building and equipping the joint venture factory, expenditure now sought to be recouped in terms of damages.

39.The claim that the property charge be released is not now proceeded with, but the pleading does claim rectification of the written Agreement of 1 January 1995, whereby it is sought to replace the written term of 3 years with a term which specifies 50 years.

40.The sums of money sought in damages, both general and specific, are very significant – it appears to be envisaged that they run into some tens of millions – but fortunately the parties have agreed that this court first is to try the issue of liability and that, upon liability being established, the issue of damages is to be tried separately before a Master : see the Order dated 1 December 2006.

41.In addition, by agreement of counsel, there is to be no determination of that element of liability relating to damages for non-delivery to the plaintiff of various orders (now denoted as ‘Orders A, B and C” in the re-re-amended Statement of Claim); in this context I note also that whilst ‘Orders A and B’ were pleaded in this case from the outset, the failure to fulfil ‘Order C’ is solely a creature of the 4^th version of the pleading in this case.  It is, I am told, now anticipated that application will be made to the court seized with the ‘collateral action’ to transfer/inject this aspect of the claim into the subject-matter of this action.

The matters arising : a summary

42.In light of the tangled nature of the pleadings to-date, and in particular the significant overhauls to the pleaded case the subject of the re-amendment of February 2002 and the re-re-amendment of March 2004, it would assist, perhaps, if this court now were briefly to indicate the issues which it perceives are before it for decision.

43.It seems to me that the case, at least in the ‘umbrella form’ in which it now is run, logically breaks down into the following liability issues/sub-issues :

(i)      Who were the parties to the sole agency contract?

(ii)      What was the form of that sole agency contract?

(iii)     What was the duration of such contract?

(iv)     Can the Agreement of 1 January 1995 be rectified?

(v)     Were actionable representations made?

(vi)     Can an estoppel by convention/representation be founded against the defendants, and, if so, can such an estoppel standing alone found a cause of action?

(vii)    Has there been repudiatory breach of that contract, and if so, what action(s) constituted such breach or breaches?

(viii)   Has there been acceptance of such breach, or breaches, and if so, when?

(ix)     What remedies, if any, flow from such contractual breach(es) and/or such actionable misrepresentation(s), if any?

(x)     Upon what basis should a damages assessment, if any, be conducted?

44.This broad formulation of the issues arising represents the court’s attempt (I hope successfully) to afford some logical shape to its judgment in a case which had been pleaded in very different ways at different times, and which factually is larded in detail, much of which, it must be said, is of somewhat less significance than hitherto seems to have been appreciated.  Whilst this formulation does not entirely represent the manner in which counsel have approached the matter within their detailed final submissions, nevertheless it strikes me that the foregoing ten points encompass the relevant issues of substance as they arise in this action.

The evidence

45.Before considering these particular issues individually, however, I should say a little about the evidence which has been led.

46.In addition to the usual profusion of box files containing hundreds of documents – as to which, not unusually, relatively few individual documents in fact have been referred to – 4 witnesses gave viva voce evidence.

47.For the plaintiff, 3 witnesses were called, namely, the two plaintiffs Mr Stanley Tsui Po Hing and his elder brother, Mr Benjamin Tsui Po Cheung, in addition to Mr Pak Kong Ming, the current Deputy Chairman of the Board of Directors of the joint venture entitled ‘Shanghai Jia-Bao New Decoration Materials Company Limited’ – hereinafter ‘Shanghai Jia-Bao’ – which is the joint venture vehicle which was set up, with Chinese partners, by the Tsui brothers in Shanghai, pursuant to the sole agency agreement which is said to have come into existence between the parties in order to service the manufacture, sale and distribution of SKK Japan products in Shanhai.

48.For the defendant, but one witness ultimately gave evidence : he was the President and founder of SKK Japan, Mr Minoru Fujii.

49.A number of other witness statements had been prepared, by both the plaintiff and the defendants, although in the event no other witness was called. 

50.As is customary in such situations, this court has paid no attention to such other witness statements as have been filed, and further specifically has declined the request of Mr Fung SC formally to admit into evidence the witness statement of Mr Toru Eguchi, the head of SKK Hong Kong; Mr Eguchi is a gentleman with whom Mr Stanley Tsui in particular had extensive dealings, and with regard to whom the plaintiff had issued a subpoena ad testificandum, albeit such subpoena went unanswered by reason, I am told, of the fact that Mr Eguchi now resides in Japan, and apparently has declined to attend this trial.

51.In effect, therefore, in terms of witness evidence this case revolved around the testimony on the one hand of Mr Stanley Tsui, the prime mover of the relationship initiated and enjoyed by his firm, Protech Industrial, with SKK Japan and SKK Hong Kong, and Mr Minoru Fujii on behalf of SKK on the other, the now ageing and distinguished, and (if I may say so) obviously acute President of SKK Japan, and director of its Hong Kong subsidiary, who took ample opportunity to drive home the point that (as is the case) there was no written document of any sort which supported the plaintiffs’ primary case.

52.I make mention of aspects of the evidence of these two gentlemen later in this judgment; for present purposes suffice to say that each of these witnesses gave evidence, and was extensively cross-examined, as to the development of the relationship between Protech Industrial/the Tsui brothers of the one part and SKK Japan and Hong Kong of the other, with each offering firm but disparate views as to the status and incidents of such commercial relationship.

53.I am bound to say that I did not form a particularly favourable view of either of these principal witnesses, each of whom struck me as having a clear and discernible agenda in terms of the desired result to be achieved in this litigation, although having said that I did not think that either Mr Stanley Tsui or Mr Fujii were attempting positively to mislead the court, but merely that so clearly were they tailoring their evidence, and their recollections/perceptions of what in fact had happened, to the perceived merits of their respective cases, that in general this court has been disinclined to prefer one view to another; accordingly, in its assessment of this case of necessity the court has been thrown back upon such contemporaneous documentation as exists, together with viewing the broad factual matrix through the prism of commercial probability. 

54.I would add, also, that little if anything turned on the evidence of Mr Benjamin Tsui, who was far less directly involved in this venture than his younger brother Stanley, nor that of Mr Pak, who seemed to me, with respect, to be less than sure of why he had been asked to testify at all, and who did little more than formally to affirm the witness statement which had been prepared for his adoption. 

55.In terms of the evidence as a whole it is fair to say that the broad sequence of events, ranging from the introduction of Mr Stanley Tsui to the SKK organization and his concept of a sole agency, to the various meetings pursuant thereto, culminating in his trip to Osaka in June 1994 to meet with Mr Fujii to discuss the written agreement between the plaintiff and the SKK Hong Kong, largely is undisputed, although that which is most certainly not the subject of agreement is the interpretation to be accorded to that which occurred and/or was said at such meetings.

56.Similarly, the relatively few documents prayed in aid in this case speak for themselves; it is not said, for example, that any of these documents are other than authentic.

57.It follows therefore, that there is little of substance in this case by way of conflict of primary fact, the judicial determination of which is, or may turn out to be, clearly dispositive of this dispute.  In short, the general pattern of that which transpired is tolerably clear, and the debate, such as it is, centres upon the legal ramifications to be accorded to these events.

58.I turn, therefore, to consider the issues arising in this case, resolution of which will, I hope, be responsive to the many and various arguments which have been placed before the court at this trial; for convenience of reference I adopt the like order to that set out in the summary at paragraph 43 above.

The issues for decision

59. One of the curiosities of a case which is not short thereof is that whilst invoking – it may be thought somewhat ambitiously, given the complete absence of documentation on the point – the existence of a 50 year sole agency agreement to manufacture/market SKK Japan architectural paint products in Shanghai, for a considerable period during the life of this litigation the plaintiffs appear to have been uncertain as to whether the contractual counterparty to such alleged sole agency agreement is the Japanese head, SKK Japan, or its Hong Kong subsidiary, SKK Hong Kong.

60.As the increasingly convoluted pleadings serve to demonstrate, the initial stance regarding the SKK contracting party was that this was the Hong Kong company : this is pleaded in terms in the Statement of Claim indorsed on the writ when issued on 12 June 1998 (when SKK Hong Kong was the sole defendant), and this remained the position until the re-amendment on 21 February 2002, at which point it is alleged that the 1^st defendant, SKK Japan (which is introduced as a party by the amendment of that date) is the contractual counterpart, although an alternative allegation is maintained that the 2^nd defendant, SKK Hong, also is the counterparty.

61.It is also clear on the face of the correspondence in this case that at the outset at least Stanley Tsui himself took the view that the agreement was between Protech Industrial and SKK Hong Kong : see the letter before action sent by M/s Day & Chan, the plaintiffs’ solicitors, dated 22 January 1998, to SKK Hong Kong, which reads, inter alia, “We are instructed to remind you that our client has been retained as your sole agent for the sale of your products within the Shanghai area by an agreement dated 1^st January 1995, which agreement is still valid and subsisting and, certainly, is binding on our client as well as your goodself…”.

62.There followed a letter dated 21 March 1998, from Mr Stanley Tsui to Mr Fujii, President of SKK Japan, which apologized for the solicitor’s letter : “…we are sorry to send the solicitor letter to SKK(H.K.) and this letter is only concerned with the Agreement between SKK (H.K.) and Protech…”, which letter thereafter contained details of various complaints about the behaviour of SKK Hong Kong, and concluded thus :

“All the above cases are obviously breaking the Agreement between SKK(H.K.) and Protech, damaged the reputation of Jia-Bao and Protech, and this created the loss of confidence to our staff and therefore many staff left our company.

Eventhough, we still hoping to continue marketing and selling SKK products.  In the past, as requested by your company, we had already opened L/C to SKK for purchasing materials since last year (the opened L/C amount is HK$1.55 million) under the company name of Indoor Housewares Group Ltd.

In the future, we will reform company structure for marketing and selling SKK products.  We sincerely hope that we shall continue for SOLE AGENT in Shanghai area, and we can make this business directly with SKK Japan and not with SKK(H.K.)….”

63.So far as Mr Tsui then was concerned, therefore, in his view there appeared little doubt but that his sole agency agreement was with SKK Hong Kong, although he clearly was anxious, local difficulties notwithstanding, to maintain good relations with the ultimate supplier of product, that is, the architectural paints/coatings, which of course was SKK Japan.

64.Nor is it surprising that Mr Tsui should have been of this view.  The hard fact remains that the relevant documentation in this case makes it entirely clear that it was SKK Hong Kong which was in a direct contractual relationship with Protech Industrial : see the written Agreement dated 1 January 1995, (about which there is more to say later in this judgment), which commences :

“SKK (H.K.) CO., LTD (hereafter referred to as SKK) and PROTECH INDUSTRIAL CO. (hereafter referred to as PROTECH) hereby enter into the following contract regarding the licensed sale of SKK products by PROTECH within the stipulated geographical area defined in Clause 1 of the contract.

Under clause 1, the definitions clause, the geographical area is defined as ‘Shanghai city in the People’s Republic of China’, SKK products are defined as ‘those SKK painting materials for construction use’ as listed in a separate attachment, SKK Hong Kong’s parent company, SKK Japan, is defined as an ‘Associated Company’, whilst the Chinese joint venture vehicle, ‘JIA BAO’ is defined as ‘SHANGHAI JIA-BAO NEW DECORATION MATERIALS CO., LTD.’, a joint venture company established by PROTECH’ in the New Territories and Shanghai ‘for the purpose of manufacturing and selling SKK products.”

65.Thus far, the position appears straightforward.  Indeed, if reinforcement for this view is necessary one has only to look at another document which predates the signed Agreement by two full years; this is a Letter of Appointment, dated 28 December 1992, which is from SKK Hong Kong and is addressed to Protech Industrial, at its Fo Tan address, for the attention of Stanley and Benjamin Tsui, which reads :

“Dear Sirs,

AUTHORIZATION OF SOLE AGENT OF SKK PRODUCTS IN SHANGHAI, CHINA

We, SKK (H.K.) CO., LTD. whose registered office is at [address in Gloucester Road, Wanchai] herewith would like to appoint PROTECH INDUSTRIAL COMPANY whose registered office as the above mentioned, as the SOLE-AGENT in SHANGHAI, CHINA with effective from the date of signing of this letter.

All the conditions and terms should be referred to the AGREEMENT.                       

For and on behalf of

SKK (H.K.) CO. LIMITED

Authorised Signature(s)

TORU EGUCHI

General Manager ”

66.This letter is in plain terms; moreover, in its final paragraph it provides internal cross-reference to that which ultimately became the formal Agreement of 1 January 1995.  I also note that the signatory to this document is Mr Eguchi, whose name has figured large in this case, and who clearly had a good deal to do with Mr Stanley Tsui when the relationship between Protech and SKK was being established.  Regrettably, however, this court has not had sight of Mr Eguchi, nor, as earlier indicated, has the court acceded to the request of Mr Fung to admit/consider his witness statement in his absence, although the fact remains that the plaintiffs appear at one stage to have secured his cooperation.

67.Notwithstanding that which seems to be a plethora of cogent evidence as to the identity of the SKK contracting party to the Shanghai sole agency agreement, Mr Fung SC is undaunted, and on behalf of the plaintiffs he has drawn the attention of the court to several matters which, he says, are consistent with the plaintiffs revamped case that in fact it is SKK Japan, and not its Hong Kong subsidiary, which remains the counterparty to the contract upon which suit now is founded by the plaintiffs.

68.In this regard, he prays in aid the evidence of Mr Stanley Tsui, who was minded to express the bold view in the circumstances that in fact all along it had been SKK Japan which was his contracting partner, and also to several documents, chief among them being an open letter on SKK Japan letterhead, dated 19 April 1997, addressed ‘To Whom It May Concern’, which states :

“RE: EXCLUSIVE AGENCY FOR THE SKK PRODUCT

This is to certify that the SHANGHAI JIA-BAO NEW DECORATION MATERIAL CO., LTD. has been appointed by the SK KAKEN CO., LTD. through its wholly owned subsidiary Messrs. SKK (H.K.) LTD. as the Exclusive Agent for the SKK architectural coating product in the Geographical Shanghai Area since the year of 1993.”

69.This letter bears a signature of a Manager of SKK Japan – thought to be Mr Morita – but save as aforesaid there is no indication of the provenance of this document, nor the purpose for which it came into being; certainly there is no evidence on the point, and this appears to be no more than a random document which has been the subject of discovery.

70.Moreover, its impact, if any, is lessened by sight of a like form of document, dated some two months later, on 23 June 1997, which on this occasion appears on the letterhead of SKK Hong Kong, and which certifies – once more ‘To Whom It May Concern’ – that Shanghai Jia-Bao New Decoration Material Co Ltd is the exclusive agent for the SKK Architectural Coating products “in the Geographical Shanghai which is being appointed by the president of the SKK Group, Mr M Fujii since 1993”, this document being signed by Mr Bernie Yuen, the then Deputy General Manager of SKK Hong Kong.

71.In addition, in terms of his primary submission as to the relevant contracting party, Mr Fung also has relied upon the Minutes of a meeting with SKK Japan and SKK Hong Kong officials, including Mr Fujii and Mr Eguchi, on 8 March 1993, and also the content of an SKK Japan newsletter dated October 1994, wherein, under the legend ‘SKK Worldwide Network’ appears the name of Shanghai Jia-Bao.

72.As to these two straws in the wind, I take the view that they are little more than that, and do not come near to substantiating Mr Fung’s bold proposition as to the identity of the other contracting party.  In particular, I do not consider that the form of the newsletter is probative of anything, given that it is entirely understandable that the SKK Group would wish to advertise what amounted, via its subsidiaries, to widespread world coverage, whilst so far as the Minutes of the March 1993 Osaka meeting are concerned, it is hardly surprising that relatively early in what clearly at the outset was a relatively co-operative and amicable relationship, the parties were discussing (as in fact they were doing at this meeting) who was going to supply what to whom, how and when; in addition, of course, on any basis both these matters pre-date the formal written agreement, dated 1 January 1995, with SKK Hong Kong.

73.Accordingly, when the evidence on the point is looked at in the round, I am unable to, and do not, accept Mr Fung’s submission that it is SKK Japan, and not SKK Hong Kong, which is the contractual counterparty to the sole agency contract with Protech Industrial, and thus, should liability otherwise be established, that it should be the mother company to which the present plaintiffs should look for satisfaction of any monetary judgment.  It seems that a concern as to potential problems in judgment execution provides the explanation for the intellectual gymnastics in which the plaintiffs now seem prepared to indulge in the effort to make good the contention that it is the Japanese parent, and not its Hong Kong subsidiary, which is the relevant contracting party.

74.With due respect to Mr Fung’s efforts in this regard, this is not an effort which I have found persuasive, and, on the evidence before this court, such a contention in my view is very difficult to sustain.  Nor do I see any logical difficulty in the fact that, as appears clear, the SKK product as was supplied, in terms both of finished product and raw materials, originated from the Japanese parent of SKK Hong Kong (and may, or may not, have been directly invoiced by SKK Japan) pursuant to the contractual relationship between Protech Industrial and SKK Hong Kong. 

75.I thus find (and have little hesitation in so finding), that the party to the sole agency contract with Protech Industrial is SKK Hong Kong. 

76.This accords in fact with the 2^nd defendant’s position on the issue throughout, although, of course, there is no acceptance on the part of the 2^nd defendant that the plaintiffs are correct in their contention as to the form/content of the operative agreement between them.

77.As a postscript, I also note that in the ‘collateral action’ – with which, it will be recalled, this court is not seized, although court documents relevant thereto nevertheless have been included in a designated bundle – SKK Hong Kong itself is the plaintiff, and the pleaded operative agreement is that of 1 January 1995 between itself and Protech. 

78.Thus there is in the ‘collateral action’, at least, a consistency of approach on the part of SKK Hong Kong and also, on the part of the Tsui brothers (the defendants therein under the style or name of Protech Industrial), whose Defence to the Statement of Claim admits the agreement of 1 January 1995, and further, in their amended Defence and Counterclaim of 16 September 2003, maintains the position that with regard to this suit for the price of goods sold and delivered, and the counterclaim by Protech for commission earned on the sale of such goods, that it is SKK Hong Kong which is the relevant contracting party under the Agreement of 1 January 1995.

79. This is an argument in relatively short compass.

80.Mr Fung SC submits that the sole agency agreement in question – which I now have decided was between the Tsui brothers/Protech and SKK Hong Kong – is in partly oral and partly written form.  He is bound to say this because, of course, such written Agreement as does exist does not begin to substantiate his contentions.

81.To the contrary Mr Chan for the defendants says (I think) – albeit I am unsure if he really addressed this issue – that the relevant agreement solely is that which is enshrined in the document which bears the date of 1 January 1995.

82.For my part I do not consider that in the final analysis that this debate matters a great deal, although it is fair to record thatthe written Agreement of 1 August 1995 contains no ‘complete agreement’ clause of the type often inserted in commercial agreements in order to obviate doubt upon precisely such a point.

83.It is as plain as a pikestaff that a commercial relationship was in place between the SKK Group and Protech Industrial from a date considerably earlier than the date of the written Agreement of 1 January 1995, and thus, in so far as it matters, it seems evident that over the period prior to 1 January 1995 in which the parties (by which I mean the SKK Group on the one hand and the Tsui brothers/Protech Industrial on the other) had commercial dealings (and thereby legal relations), that the contractual relationship during this period fairly may be categorized as one partly written and partly oral and/or evidenced by conduct.

84.It further strikes me that although the parties have argued this aspect on the basis that the contractual relationship either is exclusively with SKK Japan or SKK Hong Kong, on the facts there is a distinct possibility that there were in existence separate contracts at different times and that, for example, whilst the appointment as sole agent for Shanghai has as the contractual counterparts SKK Hong Kong and the Tsui brothers/Protech Industrial, on occasion there also may have been a de facto contractual relationship in existence between SKK Japan and Shanghai Jia-Bao and/or Protech in terms, for example, of the provision of orders for certain paint products sent from Japan to the joint venture company, albeit I recognize that in this regard the ‘collateral action’ posits a contractual relationship solely between SKK Hong Kong and Protech.

85.For present purposes, however, I do not seek to rule on the point, but simply to observe, on the basis of a tangled factual matrix which was ongoing in the early 1990’s prior to 1 January 1995, that in real terms I doubt if the matter can be as definitively pigeon-holed as the parties now forensically wish to categorise the position.  For present purposes, however, I focus exclusively on the ‘sole agency’ agreement, which is the predominant focus of this litigation.

86. Without doubt this issue lies at the heart of the present action.  Absent this contention, it is difficult to imagine this case being pursued to trial in the manner which now has occurred, given that it is the alleged breach of an alleged 50 year contractual term which provides the impetus for these proceedings, and which, no doubt, constitutes the anticipatory pot of gold at the end of this litigation rainbow.  Some idea of the ambit of this can be gleaned from the final submission of Mr Fung SC, who posited a primary case that would have involved a damages assessment for the period August 1994 (alleged failure to commission machines) or December 1996 (alleged appointment of other agents) to 27 December 2042 (being 50 years from 28 December 1992, the date of the initial Letter of Appointment).

87.It is fair to point out that the plaintiffs put forward alternative cases in terms of contractual duration, but clearly it is necessary to begin with the high watermark for which they contend.

(a)     50 years?

88.It is the plaintiffs’ primary contention that it was agreed with the 1^st and/or 2^nd defendants that there would be a sole agency in Shanghai for 50 years for the plaintiffs/Protech Industrial to market/deal in SKK architectural paint products.

89.I have earlier commented that this may be thought to be an ambitious contention.  I repeat that view.  It is a rare case, I should have thought, in which an assertion of such significance is sought to be made good in the absence of any contemporaneous documentation whatever on either side – precisely the position in these proceedings – which may be relied upon to establish such a case to the requisite standard of proof.

90.To the contrary.  Despite the relative longevity of the association between the Tsui brothers and the SK Kaken Group, the sole document that exists is the Agreement dated 1 January 1995, which on its face is made between Protech Industrial and SKK Hong Kong, and the terms of which manifestly do not substantiate the plaintiff’s case in this regard.

91.Clause 10 of this Agreement, entitled ‘Term of the Contract’, reads thus :

“This contract shall remain in force for a period of three (3) years from the date of its signing.

At the completion of the term of the contract, the contract shall automatically be renewed for one year unless either one of the two parties provides, at a date no later than three (3) months prior to the completion of the term of the contract, written notification to the other party of an intent not to renew the contract.

However, in the event that extensive political or economic changes take place, or in the event that a marked decrease in PROTECH’S sales occurs, either party can implement a revision of the dealing procedures, suspend dealings, or cancel the contract by submitting such a proposal to the other party.”

92.Clearly, therefore, that which actually was executed between these parties does not come near to making the plaintiff’s case, nor, as I have observed, is there so much as a single piece of paper emanating from the plaintiffs or from either SKK Japan or SKK Hong Kong which sounds to the point.

93.How, then, is this ‘50 year case’ advanced?

94.It is at this juncture that, on the facts, the plaintiffs’ pleaded case in damages for breach of agreement elides with its parallel pleaded case in terms of damages for misrepresentation and/or fraudulent misrepresentation. 

95.The plaintiffs, and in particular Stanley Tsui, say that virtually from the outset a promise was made, inter alia by Mr Fujii on behalf of SKK that, if and in so far as Protech sank money into China, and established a factory in Shanghai, that the SKK ‘sole agency’ commitment to Protech would be for a period of 50 years.

96.The factual backdrop of SKK having tried, and failed, to establish a joint venture presence in China in the 1980’s – it is not in dispute that this had been the case – means, it is said, that SKK now was only too prepared irrevocably to throw in its lot with Protech/the Tsui brothers for fully 50 years – an assertion which most definitely is in dispute – since it appeared that in potential joint venture terms the Tsui’s would be likely to achieve that which SKK hitherto had not been able to do.

97.Thus, say the plaintiffs, there was a meeting of minds as to duration, and that this transpired as a consequence of the so-called ‘5 Representations’, as they have been generally referred to during this case.

98.Mr Fung SC, in his persuasive closing address, maintained that the plaintiffs’ primary position was that their sole agency agreement – he suggested with the 1^st defendant, with or without the 2^nd defendant as the 1^st defendant’s agent – was made partly orally and partly in writing.

99.As to the oral element of this contract, this was evidenced by these ‘5 representations”, and in so far as the contract was in writing, by the ‘Appointment Letter’ of 28 December 1992 and by the 1 January 1995 Agreement.

100.I have earlier referred to the two documents which have been prayed in aid as constituting the written part of this equation, in which regard I have little to add, save to note that the ‘Appointment Letter’ was on SKK Hong Kong letterhead, and made no reference whatever to the duration of the sole agency – it is completely silent on the point – whereas the 1995 Agreement contains, as we have seen, an entirely contrary position on its face, with an express term relating to the duration of the contract between the plaintiffs and the 2^nd defendant.

101.Clearly, therefore, if Mr Fung is to get home on his contention – which as earlier noted, did not figure at all within the initial pleaded formulation of this claim – there is a need to refer specifically to the so-called ‘representations’ upon which reliance is placed, which representations historically interfaced with the execution of the two documents also prayed in aid in this regard.

102.I further bear in mind at the outset of this exercise, as Mr Chan for the defendants has pointed out, that the 1^st to the 4^th representations, and the acts allegedly performed in reliance thereon, first were pleaded in this case by means of the 2004 amendments, whilst the 1^st, 2^nd and 5^th representations were allegedly made by, or through, the medium/interpretation of Mr Eguchi, the main contact of Mr Stanley Tsui within SKK Hong Kong; Mr Eguchi, as we have seen, was not called to give evidence, notwithstanding the subpoena issued by the plaintiffs in an attempt to compel the same, and, as earlier noted, this court specifically declined Mr Fung’s invitation to read and (subject to weight) formally to take into account Mr Eguchi’s witness statement as filed on behalf of the plaintiffs.

103.Nor did I fully grasp, or agree with, Mr Fung’s contention in his final submission that the defendants bore a ‘tactical’ and ‘evidential’ burden to call Mr Eguchi (or, for that matter, Mr Bernie Yuen also), and that failure on the part of the defendants to do so in some way damaged, or reflected adversely upon, the defendants’ case, and thus (I assume the argument went) enabled or assisted the plaintiff to get home in its contentions.  I have to say that this line struck me as a bit rich in circumstances in which the plaintiffs themselves clearly had envisaged calling Mr Eguchi, going so far as to obtain a witness statement from him, only for this gentleman to decline to co-operate.

104.It seems to me, with respect, that in this submission Mr Fung is purporting to reverse the burden.  Whom the parties do, or do not, call, is entirely a matter for them, and the defendants’ omission to call any particular witness person cannot redound in some way to the plaintiffs’ advantage, or otherwise assist the plaintiffs in discharging their probative burden in terms of the issues to be decided.  I appreciate, of course, that if the plaintiffs’ evidence otherwise is prima facie believable/probative, the fact that Mr Eguchi was not called to contradict the case thus put up may be worthy of emphasis and comment, but at the end of the day it is up to the plaintiffs themselves to discharge the burden upon them and to raise their case to the requisite standard of proof; the fact that in the event the defendants have not chosen to call a particular person is not to be regarded as a form of ‘positive negative’, if I may use that phrase, thus enabling the plaintiffs to raise a case they otherwise have not been able to raise.

105.To revert, however, to the ‘5 representations’ upon which the plaintiffs place such reliance.  These are itemized as such within the Re-re-Amended Statement of Claim, commencing at paragraph 4C thereof.

106.The ‘1^st Representation’ is pleaded as occurring within a telephone conversation of “in or around early September 1992” between Mr Eguchi representing the defendants and Mr Stanley Tsui representing the defendants, wherein it is said that Eguchi told the plaintiffs that the 1^st defendant agreed to grant a sole agency to manufacture under licence and to sell SKK products in Shanghai, and instructed the plaintiffs to “go ahead”, which the plaintiffs “understood to mean to proceed to implement the plaintiffs’ obligations under the Sole Agency”.

107.It is further said that in reliance upon such representation, the plaintiffs trading as Protech on 28 September 1992 executed a written agreement with its Chinese joint-venture partner “to implement the joint venture with the object of implementing the Sole Agency, namely, manufacturing under licence and selling SKK products in Shanghai for a term of 50 years”, and that in or around November 1992 the plaintiffs, as Protech, obtained the necessary permits and business licences from the relevant authorities in the PRC.

108.There is something startlingly unreal in purporting to invest the colloquial expression “go ahead”, as said to have been uttered by the General Manager of SKK Hong Kong (which on the plaintiffs’ present case is not even the contracting party) within an undocumented telephone conversation of some 14 years ago, with the juridical character of a representation which now may be said to give rise, inter alia, to a binding legal obligation of the type presently asserted. 

109.Be that as it may.  Looked at on its face, I do not think that this exchange materially assists the plaintiffs in terms of the contention as to a 50 year contractual duration, nor, for that matter, is the phrase ‘go ahead’ within doubtless one a number of telephone conversations in itself illuminative of the supposed obligations that the plaintiffs are supposed to have undertaken pursuant thereto.

110.The ‘2^nd representation’ is said to have occurred “in or around mid-November 1992” at a Japanese restaurant in Causeway Bay.  It is common ground that this was the first occasion in which the Tsui brothers – who by this stage obviously had had preliminary contact/discussions with Mr Eguchi of SKK Hong Kong – were able to meet with Mr Fujii, the President of the SKK Group, and his other senior officials, including Mr Nakayama, a director of SKK Japan’s Overseas Department, and also Mr Morita, the Manager of the 1^st defendant’s Overseas Department.

111.The undisputed evidence is that this was a Japanese dinner with, I apprehend (as is not unusual in these affairs) a significant amount of sake imbibed on all sides.  This also was the first meeting with Mr Fujii, who by all accounts was regarded by all as the ‘big boss’, the founder and President of the SKK organization, and not surprisingly Mr Stanley Tsui was using the occasion to introduce him to his ideas in terms of his proposed Shanghai investment, both as to a sole agency and the construction of a factory; I have no doubt whatever that in the course of this conversation that Mr Tsui indeed did make reference to the plaintiffs’ aspiration to a sole agency commitment of 50 years.

112.So far, so good.  What I find hard to accept is that, at such an introductory – and doubtless amicable and animated dinner meeting – that a mere nod by Mr Fujii in the context of the 50 year reference by Mr Tsui and the passing comment “Oh, I know, 50 years”, seriously may be invested with the significance of a binding representation going either to a term of contractual duration and/or to a cause of action in misrepresentation or fraudulent misrepresentation.

113.I reject this contention as risible.  I find that at this dinner the matter generally was being ventilated and discussed, but that no binding commitment or representation made; to the contrary, it would have been astonishing if such a huge commitment had been made at an introductory meeting of this type, and in totally undocumented form at that.

114.Put bluntly, the fact that (as is pleaded) the plaintiffs, allegedly acting on the basis of the 1^st and/or 2^nd ‘representations’, proceeded subsequently, via the joint venture with Shanghai Jia-Bao, to build a factory in Shanghai, in itself is not conclusive of the representation issue, although it starkly illustrates that the Tsui brothers seemingly were prepared to take a commercial ‘punt’ in the hope ultimately of securing the agreement of SKK to a lengthy relationship, of which 50 years no doubt was the most desirable aim, not least because, I am told (and it is not disputed), that Chinese property rights are granted for a 50 year term.  I make no comment as to the commercial wisdom of choosing to proceed in such manner, absent any documentary exchange whatsoever, which was entirely a matter for the Tsui brothers’ commercial judgment.

115.So I reject the apparently serious contention that a passing nod and comment by Mr Fujii indicating that he was aware of the aspiration of the Tsui’s/Protech for a 50 year relationship thereby imports any binding obligation upon the 1^st or 2^nd defendants.  In my view there was no question of any confirmation or binding agreement thus arising as to a 50 year sole agency, which on any basis represents a serious commitment not lightly undertaken, and certainly not in the entirely offhand manner for which it is now contended.

116.This latter exchange sets the stage for the ‘3^rd Representation’, which is pleaded to be the ‘letter of appointment’ dated 28 December 1992, which earlier I have reproduced verbatim in this judgment. 

117.It is averred that by this letter the 1^st and/or 2^nd defendant “reinforced and/or compounded the 1^st and/or the 2^nd Representation by appointing in writing the Plaintiffs trading as Protech their sole agent to manufacture under licence and to sell SKK Products in Shanghai as from the date of the said letter”.

118.This strikes me as a fine example of creative pleading which, if I may say so, upon analysis does not amount to very much.

119.What this letter of appointment does not do, and pointedly so, is to make any reference whatever to contractual term.  The parties clearly have entered into legal relations, and, from the evidence, by this stage the plaintiffs are engaged in the sale of SKK products in Shanghai, in addition to building their factory infrastructure.  However quite how or why this should be thought to translate into evidence of a 50 year contractual commitment is not vouchsafed.  Suffice it to say that I am not impressed by the argument, and do not consider that this so-called ‘3^rd Representation’ advances the plaintiffs’ case one jot; to the contrary, the objective observer might think that the manner in which the ‘letter of appointment’ is framed is positively contrary to the allegation of a 50 year commitment as now adumbrated on the plaintiffs’ behalf.

120.By this stage, therefore, all that is in place in support of the plaintiffs’ ‘50 year’ term is Mr Eguchi’s evocative two word phrase, and a passing acknowledgement at dinner by Mr Fujii, in addition to a ‘letter of appointment’ (which, on the plaintiffs’ case at least, is issued by a non-contracting party), and which does no more than make a bland statement to the Tsui brothers as to the existence of a sole agency, with no reference to term, and with the significant rider (in the final paragraph) that “All the condition (sic) and terms should be referred to the AGREEMENT”, which it is common ground is a reference to the forthcoming written document, dated 1 January 1995, which thereafter was executed between the plaintiffs and the 2^nd defendant. 

121.Thus far, it seems to me that the plaintiff’s case has substantial difficulty in getting off the ground.

122.Nor does the alleged ‘4^th Representation’ materially assist.  It is pleaded that at a meeting held at the 1^st defendant’s headquarters in Osaka on 8 March 1993, attended by the Tsui brothers and Messrs Fujii, Morita and Eguchi of SKK that “the defendants further reinforced and/or compounded” the first three representations “by particularizing the plaintiffs’ obligations under the Sole Agency (in terms recorded by the written minutes of the said meeting”).

123.It is common ground, on the evidence before the court, that there was such a meeting, upon the date and at the place asserted; the problem, however, is that the Minutes thereof, which it is thought were produced by Mr Morita of SKK Japan, make no mention whatever of any 50 year period, and, as appears on the face of this document, largely focus upon technical matters, such as the delivery by SKK of a ‘mixing plant’ to Shanghai – at this stage it being anticipated that at Protech’s joint venture factory in Shanghai that some of the SKK architectural finishes would be mixed on site, in addition to the sale by Protech/the joint venture of the finished products imported from Japan – and aspects relating to technical supervision and finance. 

124.So once again, in the commercially highly improbable scenario of SKK at this stage being prepared to peer into (and actually to trust) what it could divine from its crystal ball in order contractually to grant an untrammelled 50 year sole agency to Protech Industrial, it is telling in my view that the only contemporaneous document relating to this March 1993 meeting again is totally silent on the ‘50 year’ point; as Mr Chan, for SKK, pointed out, the fact that obviously there were discussions relating to aspects of business co-operation between plaintiffs and defendants is, in the circumstances then prevailing, entirely to be expected.  He also made the valid related point that there could be no question of certain orders of SKK goods being made in reliance on the 4^th and 5^th representations, because these orders actually commenced in February 1993 when, on the plaintiffs own case, by this time the 4^th and 5^th ‘representations’ had not even been made.

125.Thus far, therefore, in terms of these so-called ‘representations’, from the viewpoint of the plaintiffs’ case the probative cupboard is pretty bare, and matters do not improve in terms of the 5^th, and final, ‘representation’.

126.This represents an important aspect of the case, impacting on several of the arguments mounted on behalf of the plaintiffs, because this final ‘5^th representation’ deals with the immediate background to the Agreement between SKK Hong Kong and Protech, which Agreement, as earlier noted, bears the date 1 January 1995.

127.The 5^th representation is pleaded to have emerged at a meeting held in the SKK Japan office in Osaka on 3 June 1994 attended by Mr Stanley Tsui and Messrs Fujii and Eguchi of SKK.

128.The background to this meeting was that a draft of the Agreement of 1 January 1995, which had been prepared by SKK Japan in or around May 1994, had been sent to the plaintiffs for signature.

129.Mr Stanley Tsui’s evidence was to the effect that after he had received the draft of the Agreement, which as to duration contained the 3 year period contained within Clause 10 thereof, that he had demanded to see Mr Fujii in Japan, and duly had gone to Osaka with Mr Eguchi, who is said to have been ‘embarrassed’ by this development given the discussions between the parties which had taken place to-date.

130.At this meeting on 3 June 1994 Mr Tsui said that he had confronted Mr Fujii and queried why the draft agreement contained as to term only Clause 10, and that Mr Fujii had responded that he wanted to do business with him “as long as he lived” (which phrase imported, it is said, reference to Mr Tsui’s longevity, not to that of Mr Fujii), and that the three year term within Clause 10 of the draft meant only that other conditions and terms of the agreement would be revisited every 3 years, but not the duration of the sole agency.  Or, as Mr Fung’s written submission puts it, “Clause 10 of the 1995 Agreement applies only to the other terms and conditions of the sole agency, and does not apply to provide for the duration of the sole agency.”

131.It is difficult to know what to make of that which, taken on its face, appears to be a fundamentally illogical assertion, given that it now appears to be contended that the very clause relating to duration of the contract is said not to mean what clearly it says; in hard commercial terms this submission possesses a certain ‘Alice in Wonderland’ quality. 

132.Be that as it may.  There is nothing within the Agreement as executed which would substantiate such a strained construction – it would be odd indeed if there was – and whilst I am prepared to accept that Mr Fujii, who clearly was aware of the aspirations of the plaintiffs in terms of a lengthy sole agency, and who specifically denied making the ‘representations’ alleged, would and no doubt did make soothing noises in this regard to Mr Tsui – including the remark that the defendants intended to do business with the plaintiffs for life – I do not find that whatever was said at this undocumented meeting almost 13 years ago can or does amount to the nature of a binding ‘50 year’ representation, as now is asserted. 

133.In short, whilst I have no doubt but that SKK may well have hoped to maintain a business relationship with the plaintiffs for a very lengthy period – not least because, if it transpired that both parties were making good profits it would be entirely in their mutual interests to continue to trade together for as long as such a situation prevailed – in my view there can be no serious question of SKK, be it SKK Japan (as the plaintiffs would have it) or SKK Hong Kong (the actual signatory to the Agreement of 1 January 1995), committing itself at this early stage to a 50 year sole agency, or unequivocally representing this to be the case. I would go further.  From a commercial viewpoint I would be astonished if any prudent businessman would thus commit to such a period at so early a stage, and particularly, if I may say so, when such an agency involved trading within China, with the future uncertainties that such activity then would have been thought to import.

134.Accordingly, whilst I would accept that precatory words may well have been uttered by Mr Fujii to Mr Stanley Tsui, I decline as firmly as I may to accept that such words comprised, or imported, or seriously could be taken to import, any binding representation or obligation, whether in terms of SKK Japan or SKK Hong Kong, as to a 50 year commitment.

135.The hard fact remains that the Agreement of 1 January 1995 was executed by the plaintiffs and by SKK Hong Kong, and that such Agreement bears within it, unamended, Clause 10 in the terms of which complaint now belatedly is made.

136.The fact also remains that at this trial had the plaintiffs not been running the equitable remedy of rectification, it seems to me – and I apprehend that Mr Fung SC accepted this proposition – that this evidence, the precise purport of which is to ‘vary or contradict’ the Agreement as executed, clearly would have fallen foul of the ‘parol evidence’ rule.

137.It further seems to me, and I so find, that the execution of the Agreement of 1 January 1995 enshrined the then-prevailing contractual rights and obligations of the parties – which until that date appear to have been conducted upon a relatively unstructured (perhaps month to month) basis – and that after 1 January 1995 such rights and obligations solely were governed by this contractual document; it would seem odd if, notwithstanding the obvious effort undertaken to reduce their agreement into writing, that there continued to co-exist unwritten aspects of the contract referable only to the conduct of the parties.

138.There remains, however, residual disagreement between the parties as to the correct meaning of Clause 10 of this contract, and at this stage, perhaps, I should turn to the issue of its construction.

139. Clause 10 of the Agreement dated 1 January 1995, and executed between the plaintiffs and SKK Hong Kong, earlier has been set outverbatim (at paragraph 91 herein).

140.Putting to one side for present purposes the representation and rectification arguments, there are divergent views as to the import of Clause 10 as it stands.

141.For the plaintiffs, Mr Fung SC adopts what he terms as essentially his ‘secondary position’ as to contractual term, which is that if this court (as it now has) rejects his primary stance as to contractual duration of 50 years, then Clause 10 of the Agreement as entered into means that after the initial 3 year period, the agreement “would roll over annually unless terminated by the required 3-month’s advance notice”; in other words, that this would be a self-perpetuating annual renewal, subject always to appropriate notice. 

142.To construe this clause otherwise, Mr Fung maintained, would be to “flout business common sense”, when this contract is considered against the backdrop of negotiations between SKK and Stanley Tsui wherein it was clear that what was being envisaged was a far lengthier period of sole agency than that provided for in the Agreement as executed.

143.For the defendants Mr Chan disagreed.  His position, perhaps unsurprisingly, was that Clause 10, when properly construed, meant that this is a ‘3 plus 1’ situation, and no more than that, subject always to the written notice provision if issued “on a date no later than three months prior to the completion of the term of the contract” in terms of an intent not to renew the contract.

144.This is not an issue which is susceptible to lengthy discussion.  At the end of the day this provision means what it says, and says what it means, and the view of the court is that it means simply that, at the completion of the three year term of the contract, the contract automatically is renewed for one year, subject to the 3 month’s notice provision. 

145.To construe it otherwise, it seems to me, would be to read the word ‘each’ into the opening clause of the second paragraph of Clause 10, so that (if Mr Fung is correct in his construction submission) the clause should be construed as “At the completion of [each] term of the contract, the contract shall be automatically renewed for one year…”, and in my view there is no mandate or justification for so doing.

146.Nor, with respect, do I accept the ambitious contention that the construction of this clause “must be made to yield to business common sense”, echoing the celebrated words of Lord Hoffmann in Investors Compensation Scheme Ltd v. West Bromwich Building Society [1998] 1 All ER 98, at 114, on the basis that such a construction is consistent with Mr Fujii’s statement that he hoped to continue to do business within Stanley Tsui’s lifetime, and further that it was not then envisaged on the part of SKK that this would be an agreement for only three years, and that it was anticipated that the agreement would be a continuing one.

147.Whatever the general intention or aspiration as to the ultimate longevity of the sole agency as was being granted pursuant to this Agreement, in my view the manner in which Clause 10 is couched, and its construction on a ‘3 plus 1’ basis, cannot validly be criticized as commercially improbable or inept, and certainly does not fall within the enticing rubric of the ‘flouting of business common sense.’  To the contrary.  I should have thought that from a purely commercial viewpoint the way in which it is framed is not to be viewed as other than prudent and sensible, given the imponderables generally perceived in terms of trading in China, and for my part I do not think that a construction which limits the duration, absent due notice, to a period of 4 years, can be characterized as strained; the added advantage is that such a construction remains consonant with the words actually used.

148.Accordingly, I hold that the defendants’ construction of Clause 10 represents the correct construction, and that this contract, as contained within the Agreement of 1 January 1995, was for an effective period of 4 years (that is, 3+1), absent the issuance of any relevant notification of an intention not to renew (and there was none).

149.It follows, therefore, that subsequent analysis in this case must be viewed against the backdrop of this conclusion as to specific contractual duration.

150. At this juncture it may be convenient briefly to consider the issue of rectification of the 1 January 1995 Agreement, which is one of the remedies sought by the plaintiffs, and an issue that remains outstanding for decision.

151.The specific rectification required by the plaintiffs is pleaded (at paragraph 5 of the prayer for relief in the Re-re-Amended Statement of Claim) as “Rectification of Clause 10 of the said written agreement replacing the term ‘three(3) years’ with the term ‘fifty(50) years’”.

152.I do not here intend to rehearse the stringent principles governing the grant of the equitable remedy of rectification of written contracts; these principles are well-known, and have been reviewed and applied in earlier judgments of the Commercial Court, which have recognized the heavy burden upon a party seeking rectification : see, for example,Tiken Ltd & Paul Y-ITC Construction Holdings Ltd v. BIL International Ltd, HCCL 87 of 2000, Judgment dated 18 July 2005, wherein this court reminded itself of the necessity to be satisfied to a standard which Mustill J (as he then was) in The Olympic Pride [1980] 2 Lloyd’s Rep 67, at 73, described as “a high degree of conviction”.

In the circumstances of this case, I do not consider that the plea of rectification in this case so much as rears its head, much less hits the requisite benchmark; to be fair, it is clear that Mr Fung SC, whilst not abandoning the point, certainly chose not to place it at the forefront of his argument, not least, I surmise, because of his awareness of the conceptual difficulties posed by this remedy.

153.Suffice it to say that the grant of rectification depends either upon a proven common intention to which proper effect clearly is not given in the terms of the document which is intended to give effect to such common intention (the so-called ‘common mistake’ cases), alternatively, in instances (often referred to as ‘snapping up’ or ‘unilateral mistake’ cases) wherein one party to a contract realizes that his counterparty is labouring under a mistake or misapprehension, and takes advantage of, or ‘snaps up’, such mistake, with the result that the contractual document embodies that mistake, and thus fails to give effect to the agreed position.

154.How, it may be wondered, can the instant facts properly be made to fit into the category either of common or unilateral mistake in the undisputed factual situation wherein the parties actually discussed the particular provision in issue and, notwithstanding the queries raised, and the discussion arising therefrom, nevertheless still chose execute the document in its original form, which is the form now sought to be rectified?

155.This plea, it seems to me, is a non-starter in terms of rectification.  The fact that Mr Stanley Tsui apparently was content to sign this document in the form of which he was only too well aware – the content of Clause 10 had formed the raison d’etre of his June 1994 trip to Osaka to see Mr Fujii and to raise the matter with him – and in precisely the form which had precipitated his queries, in my view sounds the death-knell of any argument that this written contract now should be rectified in order to represent that which he clearly wished it had said, although patently it did not.

156.Nor do I accept that the argument mounted by Mr Fung SC as to the existence of a ‘unilateral mistake’ on the part of Mr Stanley Tsui regarding the meaning of Clause 10 of the Agreement of 1 January 1995, which mistake, presumably it is said, was appreciated and ‘snapped up’ by Mr Fujii of SKK; this strikes me as an ambitious classification of the facts which I cannot, and do not, accept.  So far as Mr Fujii was concerned it seems plain that he and Mr Tsui had had a conversation on the day in question, and on the evidence it seems that Mr Tsui was content to sign the document unrevised.  Why that it should be said that Mr Fujii must have known or appreciated that Mr Tsui was labouring under a mistake is not clear, and I reject the proposition.

157.Accordingly, I dismiss the plea of rectification, which in my view, on the evidence before the court, is fundamentally unsound, and which most certainly does not enable the court to achieve the “high level of conviction” necessary before granting rectification, in the terms sought by the plaintiffs, of the Agreement of 1 January 1995.

158. Earlier in this judgment I have spent some time describing the so-called ‘5 representations’, which in this case are made to fulfil a dual function, that is, as part and parcel of the alleged contractual terms, or alternatively (I presume) as constituting a separate cause of action based upon such alleged misrepresentation.

159.Be that as it may.  I will not repeat the detail of these alleged ‘representations’, which in my view it is abundantly clear do not constitute actionable representations sufficient to constitute a case in misrepresentation/fraudulent misrepresentation; accordingly I reject any such case as is alleged on this basis.

160.Precatory words and expressions of intended goodwill plainly are insufficient.  If, as earlier observed, Mr Stanley Tsui seemingly was prepared to proceed with his plans for Shanghai, including the building of a factory, with nothing more concrete to avail him than the mere spes that this would eventuate in a longterm and profitable relationship with SKK, then I repeat that this was entirely a commercial judgment for him to make.  What he does not have, in my view, is a valid case in misrepresentation enabling the plaintiffs to recoup the capital investment and expenses which it is alleged were incurred as the result of such ‘representations’.

161.Indeed, had the parties not fallen out over the alleged issue of unpaid invoices – the subject-matter of the ‘collateral action’, which, I repeat, is not being tried together with this action, and which remains pending within the general High Court list – then possibly his carefully-laid plans ultimately would have come to fruition, and his investment would have achieved the dividends he envisaged at the time of becoming involved with SKK Japan and SKK Hong Kong.

162.However, that is as may be.  For the avoidance of doubt I have no idea, and express no opinion upon, the rights and wrongs of the debt issues raised in the ‘collateral action’, and for present purposes merely reject as unacceptably vague and unsubstantiated the plaintiffs’ alternative case framed in misrepresentation, which I note in itself achieves a mere one paragraph mention within the plaintiffs’ final written submissions.

163. The plaintiffs’ case on estoppel by convention becomes relevant at this point.  The pleading on the issue is at paragraph 10 of the Re-re-Amended Statement of Claim, wherein the agreement to grant a sole agency for a 50 year term is prayed in aid, and it is averred that in consideration of the such grant, the plaintiffs agreed to establish the joint venture in Shanghai, to “construct the SKK factory in Shanghai”, and to sell SKK products in Shanghai under the sole agency, and thus that the 1^st and/or 2^nd defendants “are estopped from denying the grant of the Sole Agency to the Plaintiffs for a term of 50 years”.

164.Given that, save for the written document of 1 January 1995, I have found no agreement in the terms alleged by the plaintiffs, and given also that I have divined the existence in this case of no actionable representation(s), it seems to me that the only way in which such a plea of estoppel would be able to assist the plaintiffs would be if it were to be held that this court was incorrect in its conclusions as to the ‘5 representations’ and, further, that it was possible for an estoppel by convention in itself to found a cause of action available to the plaintiffs.

165.As at the date of the final submissions in this case there was, or appeared to be, no binding authority on the latter point in this jurisdiction, albeit a dissenting judgment in the Court of Appeal in the recent case of Unruh v. Seeberger & Eganagoldpfeil Holdings Ltd, CACV 297 & 298 of 2004, Judgment dated 5 October 2005, had held, (following the traditional English approach and not following significant contrary developments in the Australian High Court) that any holding that an estoppel by convention alone was sufficient to found a cause of action – in colloquial parlance, to constitute the metaphorical ‘sword’ and not merely a ‘shield’ – was to “stretch the doctrinal envelope too far”.

166.Before this court Mr Fung SC argued that if he was correct in his submission as to the presence of an agreement between these parties which was partly oral and partly written, the existence of such a agreement rendered moot the issue of whether an estoppel on its own was sufficient to get his clients home, but that in the event that an agreement in the terms for which he contended was not established (as indeed is the case), that the dissenting judgment on this point in the Court of Appeal in Unruh, op cit, was incorrect, and that the preferable approach was to follow the Australian developments in this field.

167.Happily, however, the issue has now been clarified in this jurisdiction in the judgment of Ribeiro PJ (with which the remaining members of the court concurred) in the Court of Final Appeal in Unruh v. Seeberger and Eganagoldpfeil (Holdings) Ltd, FACV Nos 9 & 10 of 2006, Judgment dated 9 February 2007.

168.Ribeiro PJ observed (at page 65, paragraph 152 thereof) that “it is clear that, unlike equitable estoppels which create enforceable equitable rights, an estoppel by convention is not a source of legal obligation” albeit “such an estoppel may, in the circumstances of the particular case, result in an otherwise ineffective or incomplete cause of action being made viable”, citing in this context Brandon LJ (as he then was) in Amalgamated Investment & Property Co Ltd v. Texas Commerce International Bank Ltd [1982] QB 84, at 131, to the effect that the “true proposition’ was that “while a party cannot in terms found a cause of action on an estoppel, he may, as a result of being able to rely on an estoppel, succeed on a cause of action on which, without being able to rely on that estoppel, he would necessarily have failed”.

169.In this context Ribeiro PJ further quoted with approval a dictum of Brennan J in the Australian High Court in Waltons Stores (Interstate) Ltd v. Maher (1987-88) 164 CLR 387 at 414, wherein the learned judge in that case noted that that which he termed an ‘estoppel in pais’ is merely a rule of evidence and not a cause of action, although that proposition needed some explanation, succinctly expressing the position thus :

“…If the estoppel relates to the existence of a contract between the parties, the legal relationship between the parties is ascertained by reference to the terms of the contract which has been assumed to exist.  If, in the assumed state of affairs, the contract confers a cause of action on the party raising the estoppel, the cause of action may be enforced.  The source of the legal obligation in that event is the assumed contract; the estoppel is not a source of legal obligation except in the sense that the estoppel compels the party bound to adhere to the assumption that the contract exists.”

170.Moreover, as Ribeiro PJ further pointed out, an estoppel by convention is ‘transaction-based’ and thus only applies for the purpose of the particular transaction for which the convention was adopted; in other words, that the object of the estoppel is to prevent the detriment which is caused to a party to the transaction by the counterparty resiling (or purporting to resile) from the common assumption upon which the transaction is based.

171.To return, therefore, to the instant case, in light of the determination by this court that the plaintiffs’ primary case as to a ‘50 year sole agency agreement’ has not been established, and thus that there can be no question of any such ‘common assumption’, it seems to me that the estoppel by convention argument propounded on behalf of the plaintiffs must fail in limine : first, because there is no assumed state of affairs with which to inform any such agreement as in fact was entered into, and second, because it now has been confirmed by the territory’s highest court that, absent any such agreement, an estoppel by convention (even were such otherwise to be established), in itself does not provide a source of legal obligation, and thus (I take it to mean) without more cannot constitute an independent cause of action.

172.In the circumstances, therefore, Mr Fung’s arguments on the estoppel by convention issue must fail also.  I so hold.

173. I turn now to the issue of repudiatory breach of the sole agency contract, which I have found is evidenced by, and contained in, the Agreement of 1 January 1995 between the plaintiffs and SKK Hong Kong.

174.For the plaintiffs, Mr Fung SC pitches his case in this regard upon two bases : first, the appointment by SKK of other agents in Shanghai; and second, the failure by SKK to commission the SKK machines which had been installed in the plaintiffs’ Shanghai factory but which, it is said, were not made to function as had been promised by SKK.

175.Both, he says, are matters clearly evincing an intention on the part of SKK to repudiate the contract.  Is this contention correct?

176. The case as put up is that the defendants evinced the intention not to be bound by the sole agency agreement by relegating the status of the plaintiffs, during the subsistence of the agreement, from sole agent to mere ‘authorized’ agent; and further, in insisting upon an ‘exception’ being granted to one Shanghai Housing and Land (Group) Corporation.

177.In terms of the change from ‘sole’ to mere ‘authorized’ agent, the plaintiffs pray in aid the alleged appointment of two entities : one China Profit Company and one Golden House. 

178.So far as I can see, the sole piece of documentary evidence relating to the assertion that China Profit, a Hong Kong company, was appointed by SKK in breach of the sole agency agreement between SKK Hong Kong and the plaintiffs is in the form of a discovered minute of a shareholders’ meeting of China Profit held on 18 December 1996, which refers to the Chairman of that meeting informing shareholders that “China Profit Company had successfully become the China Sole Distributor of SKK residential painting products of Japan SK Kaken for a period of one year.  Further negotiation will take place after six months…”

179.In terms of oral evidence, Mr Stanley Tsui had little of substance to say about this aspect of the case – in fact, it was not touched upon in his witness statements, and until Mr Chan decided, I assume for good reason, to raise and to cross-examine on the point, there was no viva voce evidence led on this aspect by the plaintiffs at all.

180.On behalf of SKK, Mr Fujii denied that this was the position regarding China Profit, noting that this was the “first time” that he was aware of this, and that he “did not trust” the minutes now relied upon by the plaintiffs.  I am minded to accept this evidence.

181.No witness was called to testify to China Profit’s involvement, and so far as this court is concerned this allegation as thus raised is unsatisfactory in evidential terms.

182.It emerged in the scant evidence on the point that Mr Bernie Yuen, hitherto Mr Eguchi’s deputy at SKK Hong Kong, was one of the shareholders/prime movers within China Profit, and Mr Chan suggested that China Profit was a vehicle for his own ‘covert action’ absent authorization from SKK.  In this connection Mr Fujii further opined that he had learned that the girlfriend of Stanley Tsui, one Karen Yip (also a shareholder of China Profit and a director and shareholder of Chief Arts (HK) Ltd (which it is undisputed was used to replace the plaintiffis for the purpose of placing orders with SKK Hong Kong after the plaintiffs’ relationship with SKK had broken down), had requested business dealings with the defendants, and that this had been granted, although it is fair to record that Mr Tsui specifically denied this (and also, no doubt, the proposition that he had a girlfriend at all).

183.In my view, the background to this allegation is somewhat murky, and I decline to dignify evidence of this flimsy quality with further detailed attention.  Suffice to say that in my view this allegation is not established to the requisite standard, and I have a strong feeling that this allegation is no more than a prejudicial ‘makeweight’ thrown into the evidential pot in the hope that something will stick.

184.There is no evidence whatever that China Profit actually did any agency business with SKK Japan, or with SKK Hong Kong – which, I have found, is the contractual counterparty to the sole agency agreement with the plaintiffs – nor is there any evidence that even if this was the case that China Profit was involved in Shanghai; to the contrary, the minute relied upon, for the little that it is worth, refers specifically to Tsingdao.

185.As for the claim relating to Golden House, this allegation strikes me as even more tenuous and artificial – indeed, Mr Chan points out that it is not even pleaded in terms, although Mr Fung insists that he is in position to submit in this regard by reason of the general plea that the defendants “entered into sole agency agreements of a similar nature to the Agreement with other companies or firms in Hong Kong as well as on the Chinese mainland”.

186.The case as now put forward appears to derive from a letter dated 7 January 1998 from Mr Bernie Yuen of SKK Hong Kong to Mr Fujii of SKK Japan, wherein Mr Yuen was reporting that Mr Stanley Tsui had informed him that the plaintiffs “have already sued the Golden House for their interference in a project in Shanghai”, and that Mr Fujii had responded, by letter of the following day, that “we will cancel agency of Golden House”.

187.From this exchange it appears to be inferred by the plaintiffs that the defendant must have appointed Golden House before January 1998, and that, in response to the plaintiff’s complaint, Mr Fujii not only did not deny responsibility, but had responded by saying that he would cancel the agency of that company.  When taxed about this matter in the witness box, Mr Fujii noted that Golden House was an agent in China and that “They were operating outside of Shanghai, in fact, they were supposed to operate in Hangzhou”, and that he had cancelled the agency, although he was “not too sure about the details”, and that he had “heard about the cancellation afterwards”.  Once again, I see no reason not to accept this evidence.

188.I reject this line of argument by the plaintiffs as firmly as I rejected the China Profit allegation.  This element of the case relating to Golden House specifically is unpleaded (as Mr Fung ultimately accepted), and was not dealt with in terms in any of the plaintiffs’ witness statements.

189.Once again, in my view this is nothing more than ‘bricks without straw’, and I decline to hold that any activity of Golden House has been established to constitute a repudiatory breach on the part of the contractual counterparty, SKK Hong Kong, nor (if I be wrong in terms of the identity of such counterparty) has it been established to the requisite standard to constitute a repudiatory breach on the part of SKK Japan. 

190.With respect, on this highly tenuous evidential base, I am surprised that it was seen fit to pursue this element of the case. In this context I also have sympathy with Mr Chan’s passing comment that if indeed there were breaches on the part of the defendants with regard to Golden House, it is difficult to understand why the plaintiffs apparently had chosen to sue Golden House, but not the defendants, when such alleged breaches were discovered.

191.I turn finally under this head to the allegation which has been raised in terms of Shanghai Housing and Land (Group) Corporation, which I shall refer to simply as ‘Shanghai Housing’.

192.In this connection, the plaintiffs argue a case which is based upon a letter dated 6 January 1998 from Mr Fujii to Mr Stanley Tsui whereby the suggestion was made that the joint venture, Shanghai Jia-Bao, would act as an authorized agent in Shanghai, not as sole agent, and that Shanghai Housing would also have business in Shanghai with SKK Japan, so that – as Mr Fujii put it in a letter dated 8 January 1998 to Mr Tsui, who was objecting to the proposed course – “Jia Bao could be practically sole agent in the territory of Shanghai with an exception of Shanghai Housing and Land (Group) Corporation.”

193.From this the plaintiffs infer that by December 1997 at the latest, the 1^st defendant had business dealings with Shanghai Housing, in that SKK products were supplied to Shanghai Housing, which was allowed to sell the same in Shanghai, and that this duly constituted interference with the plaintiffs/Jia-Bao’s sole agency rights for SKK products in Shanghai.

194.This aspect of the case once more is vague and unsubstantiated.  There is no hard evidence, inference apart, that there actually was an appointment of Shanghai Housing as SKK Japan agent – far less appointment qua agent of SKK Hong Kong, which I have held to be the plaintiffs’ contractual counterpart – and Mr Fujii’s oral evidence, which was not challenged, and which in the circumstances must be accepted, was that the plaintiffs’ response to the suggestion was that if deliveries of SKK product was made from Japan there would be no objection.  Mr Chan pointed out, also, that there is nothing about Shanghai Housing in the plaintiffs’ witness statements, and that Mr Stanley Tsui gave general evidence relating to Shanghai Housing only when the 50 year issue was put to him.

195.Once again I decline to find that the activity, if any, of Shanghai Housing amounted to a repudiatory breach of contract, and I so hold.

196.It follows, therefore, that the plaintiffs’ assertions regarding contractual breach in terms of infringement, by appointment of competing agents, of the 2^nd defendant’s sole agency in Shanghai have not been established, and thus are rejected.

197.I turn now, therefore, to the other limb of the alleged repudiatory breach.

(b)     Failure to commission SKK machines

198.This element of repudiatory breach appears as an incidental (and new) subparagraph, at paragraph 13(d) of the Re-re-Amended Statement of Claim, which reads :

“The 1^st and/or 2^nd defendants have failed and/or refused despite repeated requests orally and/or in writing to commission any of the SKK machines purchased from the 1^st defendant as particularized in paragraph 4F(b) above and installed at the plaintiffs’ expenses at the SKK Factory in Shanghai, failing which none of the SKK Machines could start producing any SKK products.”

199.Paragraph 4F(b), which is specifically incorporated into this plea, relates that acting in reliance on the 1^st and/or 2^nd representation, the plaintiffs “purchased from the 1^st defendant as from around February 1993 various machines specifically designed for the manufacture of SKK products, and installed the same in the SKK Factory and, in the course of so doing, expended the sum of HK$613.072.20”.

200.There then follows a list of some 29 pieces of machinery, with names as diverse as ‘Hydraulic Life Type Disper’, ‘Roller Truck for Packing’, ‘Sewage Disposal Machine’, ‘Polymer Floculent Hose’, ‘M-16 Oar Anchor Bolt’, and so forth.

201.I have no idea of the relevance/meaning of these pieces of equipment, nor, for that matter, what parts of what machines needed to be ‘commissioned’, as now is alleged.  I have the distinct impression, I suspect well-founded, that the list at paragraph 4F(b) has just been blindly copied from an invoice, and that the pleader has no better idea than the court as to what all this is about; certainly no attempt has been made to enlighten on the point.

202.I have set out the pleaded background because it assists, I hope, to place into perspective that which I further suspect has been injected into this case as an additional evidential makeweight in an attempt to bring home a case of repudiatory breach.

203.There has been little or no attempt in evidence at trial, save for the most general and sweeping assertions, to explain how or why the necessity for commissioning of these pleaded items arose, although Mr Stanley Tsui asserted that, absent this process, the machines, as installed (and there seems to be no question but that SKK technicians indeed did participate in such installation) could not be used.

204.Curiously, Mr Tsui’s witness statements do not appear sound to this element of the case at all, notwithstanding that in his ‘Supplemental Witness Statement’ of 3 November 2004 there is a section (at paragraphs 36-41) devoted to ‘Alleged breaches of the Agreement by the Plaintiffs’, and such evidence as there was at trial about this matter was, once again somewhat surprisingly, eventually extracted from Mr Tsui by Mr Chan electing to cross-examine on the point at all.

205.The result of this ‘hotch-potch’ and highly unstructured approach was that no sense emerged in such evidence as to the true scope and content of this issue : Mr Tsui insisted that “the machines” (no detail was vouchsafed) would not work without ‘commissioning’, and for his part Mr Fujii referred to the fact – which appears to be backed up by an accommodation invoice – that the defendants had provided ‘training’ for an employee of the plaintiffs, one Hu Ming Hai, at the defendants’ factory in Singapore, to which suggestion Mr Tsui asserted that such training was “not for running” the machine already sent to Shanghai (whatever that was) but “only in relation to the part that a computer was used to tune the colour”, which was “a completely different matter”.

206.I regret that as a result the court was none the wiser on the substance of this intended issue.  Nor did contemporaneous documents assist in understanding the position, which, on the ground at least appears to have been that these machines, pleaded to be worth in excess of HK$600,000, had been left idle for some one and a half years post-installation before a letter dated 30 September 1996 was sent by Protech to Mr Morita of SKK Japan; this letter, which was written by Mr Stanley Tsui, advises that the Shanghai factory has been completed and is ready for machine commissioning, and the hope is expressed by Mr Tsui that “the machines will be commissioned for colour mixing from 28 October 1996 to 1 November 1996” (the court has no idea as to the relevance, if any, of these particular dates), whilst Mr Morita is requested to “arrange one technical staff from Singapore” and to provide suggestions for “preparation works.”

207.This letter of 30 September 1996 – to which there appears to have been both no response from SKK Japan and no follow-up by the plaintiffs – concludes with the observation that “…we will settle the outstanding balance of the cost of machine just after the commissioning completed”, which I assume is a yet further reference to the financial differences between these parties which very obviously appear irrevocably to have clouded/soured their ongoing relationship, with SKK claiming non-payment for goods delivered and Protech counterclaiming for damages for non-delivery – matters which remain the subject of the ‘collateral action’, but which, as earlier observed, also should have been before the court at this trial in order for a complete picture to have emerged in terms of the trading relationship between SKK and the plaintiffs; indeed, as earlier noted, Mr Fung SC has indicated that the pleaded element of the present case in terms of damages for non-delivery of ‘Orders A, B and C’ will, if so permitted by the court seized with the ‘collateral action’, now be injected into such action.

208.Putting to one side such evidence as there is (and which I accept) to the effect that the defendants in fact did send an engineer to Shanghai to help set up the facilities, and that an employee of the plaintiffs was sent to Singapore for training (at least in colour mixing), the legal underpinning of this particular assertion as to repudiatory breach also remains unclear.

209.In this context, Mr Chan points out that the plaintiffs have framed their case in terms of the sole agency contract being partly oral and partly written.  However, he says that the oral terms pleaded (at paragraph 10 of the Re-re-Amended Statement of Claim) contain no reference to the commissioning of the machines as one of the obligations of the defendants, whilst the written Agreement of 1 January 1995 – which earlier in this judgment has been held to be the only relevant agreement between the plaintiffs and SKK Hong Kong subsequent to that date, and thus in the present context is of greater significance – contains no term relating to the commissioning of machines.

210.Clause 2.6 of this Agreement is the only relevant provision, and reads :

“SKK shall provide JIA BAO with technology for the manufacture of painting materials for construction use.  In order to do this, SKK shall separately conclude a “Technical Assistance Contract” and a “Service Provision Contract” with JIA BAO.  In addition, in principle, JIA BAO shall purchase all raw materials from SKK.”

211.There is no dispute but that there are no such “Technical Assistance” or “Service Provision” contracts in existence – it is unclear why, and I do not intend to speculate – and in this regard I do not accept the contention put forward by the plaintiffs in submission that this fact is “irrelevant for present purposes” in light of the circumstances, whereby it was obvious that the machines should be made to work.  This latter proposition may be so, but if this case is to depend (as it now seems so to depend) upon establishing both obligation and the breach of that obligation on the part of the contractual counterparty, it seems to me that the court has good reason to expect that so apparently significant a matter would be approached in linear and detailed fashion, and, at the very least, the contractual basis for the claim would be established, together with cogent evidential support for such claim.

212.With respect, manifestly this has not occurred. 

213.In my judgment, the plaintiffs have not succeeded in establishing their case in this regard to the required standard of proof, and it follows, therefore, that I decline to arrogate to this allegation the status of a repudiatory breach of the Agreement between (as now has been held) the plaintiffs and SKK Hong Kong.

(viii)   Acceptance of repudiatory breach

214.Given the conclusions to which I have arrived in terms of the failure to prove repudiatory breach, there is no necessity to decide the issue of precisely when the plaintiffs could be said to have accepted any such breach, which of course begs primary questions as to the nature of the contractual obligation and the issue of breach itself.  However, lest I be wrong in terms of my primary conclusion, I should perhaps indicate what my view would have been on this point.

215.Mr Fung SC submits that from this perspective there are two choices : either that by service of the writ on the 2^nd defendant on 12 June 1998, alternatively by service of the Re-re-Amended Statement of Claim on the 1^st and 2^nd defendants on 21 January 2002, the plaintiffs accepted repudiation of the sole agency agreement.

216.As I have indicated, in the event this particular debate is of no consequence, but if and in so far as it may be held to be relevant, in my view the operative date of such putative acceptance by the plaintiffs against the 2^nd defendant – which I have held to be the contracting party – by means of the operation of the ‘relation back’ doctrine would be the date of service of the writ, namely 12 June 1998.

217.Accordingly, I would so have held.

(ix)     Available remedies

218.Once again, by reason of the conclusions reached in this judgment, this does not arise.

219.Suffice it to say that if I be wrong, in my view the sole remedy available to the plaintiffs in this case would have sounded in damages; there is no question, in my judgment, of the grant of the equitable remedy of rectification.

220.Moreover, as Mr Fung SC made clear, his clients do not in this case now seek the release of the charge on the plaintiffs’ property which is in place as security in favour of SKK, and thus there is no need further to consider this aspect.

(x)      Basis of any damages assessment

221.Had damages been relevant in fact, the assessing Master thus would have been seized with a damages assessment in terms of the plaintiffs’ consequential loss for the period of some 6 months accruing between the date of expiry of the contract of the plaintiffs with the 2^nd defendant (adjudged to have been on 31 December 1998, that is, 4 calendar years from 1 January 1995) and the date of acceptance of breach (now adjudged, if such in fact had arisen, to have been 12 June 1998 the date of issue of the writ).

222.In the event, of course, there is no necessity for such assessment in light of the result herein, whereby the plaintiffs have failed to make out any case sounding in an award of damages, or at all. 

Order

223.On the basis of the foregoing judgment, therefore, the Order of this court is as follows :

The plaintiffs’ claim against the 1^st and/or 2^nd defendants is dismissed.

I make an order nisi that the costs of this action are to be paid by the plaintiffs to the defendants, such costs to be taxed if not agreed.

Mr Daniel Fung SC, leading Mr Thomas Au and Mr Johnny Ma, instructed by Messrs Day & Chan, for the plaintiffs

Mr Kenneth Chan, leading Mr Raymond Tsui and Mr Freddy Chu, instructed by Messrs TC Lau & Co, for the defendants

(I) Appeal dismissed:see CACV101/2007 dated 27 November 2010 (II) Please refer to CACV167/2009 for the relevant appeal(s) to the Court of Appeal.