Ever Harvest Tobacco and Liquor Bonded Warehouse Ltd v. Force 8 Cellars Ltd

DCCJ 1945/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1945 OF 2007

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BETWEEN

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Hearing dates: 19^th March, 2009

Date of handing down Decision : 3^rd April, 2009

Decision

1.This is the Defendant’s application for leave to appeal against the judgment (“the Judgment”) handed down by this Court on 6^th February, 2009.  In the Judgment this Court entered judgment in favour of the Plaintiff in the sum of $52,808.41, and dismissed all the Defendant’s counter-claims.

2.The intended grounds of appeal are that:-

(1) this Court was wrong in finding that the Written Agreement was terminated and substituted by the Oral Agreement.  Consequently this Court erred to conclude that the invoices in dispute were accurate and reject the Defendant’s counterclaims,

(2) this Court erred in failing to deal with the Defendant’s counter-claim for the Plaintiff’s wrongful retention of the Defendant’s wines.

The first intended ground of appeal

3.The Defence Counsel submits that the finding that the Oral Agreement existed was wrong and against the weight of the evidence for various reasons. 

4.Firstly, the existence of the Oral Agreement is contradicted by the Plaintiff’s own contemporaneous letters.  (1) By way of letter dated 7 December 2005, the Plaintiff wrote to the Defendant to terminate the agreement between them.  It states as follows:-

“This letter serves as official notice that Part 1 (Duty Paid warehouse), Part 2 (Delivery Services) and Part 3 (Incoming shipments and transfers from bonded and other warehouse) of the agreement, dated 7 October, 2005…. shall be hereby considered terminated effective on 7 February 2006.”

The Defendant argues that on the Plaintiff’s case, the Written Agreement was supposedly terminated by the parties and replaced by the Oral Agreement at the end of October, 2005.  If this is true, then why did the termination notice of 7 December 2005 explicitly refer to the Written Agreement.

5.The Oral Agreement was reached between Mr. Liang Jin Sheng (“Liang”, a director of the Plaintiff) and Miss Laura Budlong of the Defendant.  The letter dated 7 December 2005 was signed by Man Ho Keung, an employee of the Plaintiff, and not by Liang.  Man Ho Keung did not testify.  It is not known on what basis he referred to the date of 7 February 2006 in the letter.  No evidence was elicited in this respect during the trial.  The Defendant’s argument would have carried more force if this letter had been signed by Liang, because he was the one who personally reached the Oral Agreement with Laura Budlong.  But this is not the situation here.

6.The Defendant refers to the letter dated 28 March 2006, issued by Messrs. Ford Kwan & Co., the Plaintiff’s former solicitors.  The letter stated:-

“……our client denies all deduction agreements and waiver of charges as allege by your client.  Your attention is drawn to Clause 5 and exhibit B of the Warehouse and Delivery Agreement dated 5 October 2005.  We reiterate that our client has never whether orally or in writing waived or given reduction of the said charges, the failure to make due payment of which amounts to a breach of the Agreement.”

The Defence Counsel submits that if the Written Agreement had already been terminated by  the parties at the end of October 2005, then why would the Plaintiff’s solicitors demand payment in March 2006 in reliance on the terms of the Written Agreement?

7.In the letter of 28 March 2006, the Plaintiff’s solicitors denied the existence of deduction agreements and waiver of charges.  Regarding the sentence “Your attention is drawn to Clause 5 and exhibit B of the Warehouse and Delivery Agreement dated 5 October 2005”, the Plaintiff’s solicitors did not elaborate on the connection between the Plaintiff’s denial and this sentence.  This sentence was referred to, quite unnecessarily, in the context of denying the Defendant’s allegations of the existence of deduction agreements and waiver of charges.  It was not relied on in the context of demanding payment as alleged by the Defendant.

8.Secondly, the Defence Counsel submits that on 5 April 2006, the Plaintiff filed its claim form in the Small Claims Tribunal.  In its own calculations of its claim, the Plaintiff evidently referred to the Written Agreement.  Examples are as follow:-

(1) Schedule 1, Invoice 2005/12/019 refers to Clause 2.4 of the Written Agreement.  That column is set out below:-

(Underline provided)

In the description of calculation method, this invoice only says that if according to the stipulations of the Agreement, the Defendant provides at lease 120 orders, totaling $5,400 (120 x $45).  This is not a statement of fact.  This description only refers to a hypothetical situation.  In doing so, it refers to the Agreement.  The implication is that the Plaintiff’s calculations are not based on the terms of the Agreement.  So it was not relying on the Agreement.  The situation is hypothetical; it cannot be a piece of evidence adduced to show that the Written Agreement was still in existence at the time the Plaintiff instituted its action in the Small Claims Tribunal.

(2) Schedule 5, Invoice 2006/02/016 has similar contents as those of invoice 2005/12/019.  So the same rationale applies.

9.Thirdly, the Defence Counsel submits that on 11 April 2007, the Plaintiff filed a statement in the Small Claims Tribunal disputing the Defendant’s counterclaim.  Nowhere in this statement is the Oral Agreement mentioned.  In fact, the Plaintiff explicitly refers to the Written Agreement in disputing the Defendant’s counterclaim.  This is a statement of reply to the Counterclaim.  The Counterclaim does not touch on the Oral Statement.  So naturally the reply statement would also not touch on the Oral Statement.  The Defence Counsel has not demonstrated how a reference to the Written Agreement in the context of the reply statement would prove the existence of the Oral Agreement at that time.  In any event, no question was put to the Plaintiff’s witness under cross-examination in the trial to clarify this point.  It is unsafe to make a finding of fact that because there is no referral to the Oral Agreement in the statement the Oral Agreement did not exist.

10.Fourthly, the Defence Counsel relies on Annexure 1, Invoice 2005/12/019 and Annexure 2, Invoice 2006/02/016 of the Statement of Claim dated 12 July 2007, in which the Plaintiff expressly referred to the Written Agreement in its own calculations of its claim.

11.The contents of Invoice 2005/12/019 and Invoice 2006/02/016 are as follows:-

Date of Invoice	Invoice No.	Details	Amount (HK$)
2005/12/31	2005/12/019	Delivery charges from 2005.10.18 to 2005.11.30.  Per clause 2 of the Agreement, Plaintiff can charge a minimum of 120 deliveries x $45 per month.	$9,950.00
2006/02/08	2006/02/016	Delivery charges from 2005.12.01 to 2006.02.07.  Per clause 2 of the Agreement, Plaintiff can charge a minimum of 120 deliveries x $45 per month.	$14,717.00

(Underlines provided)

12.The Plaintiff says that it “can charge” a minimum of 120 deliveries x $45 per month, implying that it can do so.  But it does not say that it did charge a minimum of 120 deliveries x $45 per month, as per Clause 2 of the agreement.  These 2 invoices are the same 2 invoices mentioned before.  Obviously, the Plaintiff were not relying on the Written Agreement in calculating the charges.

13.Fifthly, the Defence Counsel submits that during the period the Defendant’s wines were stored with the Plaintiff, the Defendant wrote numerous letters to the Plaintiff and made consistent references to the Written Agreement.  It is most telling that the Plaintiff did not on any of these occasions respond to the Defendant by pointing out that the Written Agreement had already been terminated in late October 2005.

(1) On or about 14 December 2005, the Defendant wrote to Ever Harvest complaining about the Plaintiff’s failure to properly manage the Defendant’s inventory of wines.  Such complaints must have been implicitly based on the Written Agreement, since under the Oral Agreement, the Plaintiff had no responsibility for inventory management.

This letter says, inter alias,

“We have encountered serious difficulties with initial operations due to the management systems at Ever Harvest since we moved in.  Reasons for these problems are related to Ever Harvest’s management system and implementation:-

· The warehouse was several weeks late being set up…..

· Based on this organization, we experienced daily problems with picking wines and seriously delayed and wrong deliveries.  There was limited management supervision of the picking and delivery.

……………

……………

It appears that this letter aimed to make adverse comments on the management systems of the Plaintiff generally.  The Defendant referred to the serious difficulties it faced with initial operations.  There is no evidence to show why the Plaintiff did not respond to these complaints.  The Defendant has to show the lack of response must have necessarily reflected that the Oral Agreement was non-existent.  There is no such evidence.

(2) On 14 December 2005, the Defendant sent a fax to the Plaintiff, setting out the Defendant’s concern about the quality of the Plaintiff’s inventory management services and offering suggestions for improvement.  The Defence Counsel submits that this letter must have been implicitly referring to the Written Agreement since under the Oral Agreement the Plaintiff had no responsibility for inventory management.

(3) On 20 February 2006, the Defendant wrote to the Plaintiff disputing the amounts of the issued invoices, and referring to “our agreement signed on October, 2005”.  This is plainly a reference to the Written Agreement.  Regarding (2) and (3) the reason for the Plaintiff not making response to the Defendant’s fax and letter is unknown.  It is unsafe to draw any inference of fact by premising on the suggestion made by the Defence Counsel that the Plaintiff should in its response say that the Written Agreement had been terminated in late October, 2005.  This court should not speculate the way the Plaintiff would make response.

(4) On 10 March 2006, Minter Ellison, on the Defendant’s behalf, wrote to the Plaintiff disputing the amounts of the issued invoices, and making references to the “Warehousing and Delivery Agreement dated 5 October 2005”.  The Plaintiff’s solicitors’ letter of 28 March 2006 did not deny but instead referred to the Written Agreement.  In its letter the Plaintiff’s solicitor was addressing specific issues raised by the Defendant.  The specific issues did not address the issue on the existence or non-existence of the Oral Agreement.  It is unsafe to draw any inference from such a letter that because the Plaintiff’s solicitors fail to point out that the Written Agreement had already terminated in October 2005, then it could be inferred that the Oral Agreement did not come into existence at all, because that is not the subject matter dealt with by of this letter.

14.Sixthly, the Plaintiff’s Counsel submits that the supposed abandonment of the Written Agreement in favour of the Oral Agreement is wholly contrary to common business sense and inherent probabilities.  Such submission is based on a presumption that the parties considered all the matters submitted by the Defence Counsel, and then based on common business sense reached a decision.  There is no evidence to show this is the case here. 

15.Seventhly, the Defence Counsel submits that, leaving aside miscellaneous fees such as gate and tunnel fees, the delivery charges claimed in the Disputed Invoices display notably consistency with the basic rates stipulated in the Written Agreement.  Similarly, the storage and loading fees for the Plaintiff bonded warehouse No. 11142 (which is apparently separate from the warehouse in respect of which HK$8,000 per month is claimed) are consistent with the basic rates stated in the Written Agreement.  This strongly suggests that the Written Agreement was not abandoned by the parties.  The mere fact that the rates charged display notable consistency with the basic rates stipulated in the Written Agreement is not proof that the Oral Agreement was non-existent.  During the trial no question was asked regarding the basis on which the rates were charged.  It is simply unsafe to draw a conclusion that because of the said consistency, the Oral Agreement was non-existent.

16.In the Judgment, I gave a detailed analysis of the evidence as to why I found that the Oral Agreement was in existence.  In particular, under paragraphs 13 and 14 of the Judgment, I gave reasons as to why I accepted the Plaintiff’s evidence that it was charging the Defendant $8,000 per month for renting out the Warehouse to the Defendant to store its wines.  There are no adverse comments on the analysis of the evidence in this regard by the Defence Counsel.  Regarding paragraph 13 of the Judgment, I stress that the Defendant went through each and every invoice item.  Miss Laura Building is a meticulous and careful person.  She could not have made any mistake when she agreed to “nil” deduction for the figure of $24,000.  Liang’s evidence is clearly and strongly supported by evidence.  It would be wrong for me to disturb the finding of fact regarding the existence of the Oral Agreement.

Accuracy of the Plaintiff’s invoices

17.The Defence Counsel submits that this Court accepted the accuracy of the “Disputed Invoices” with little explanation or analysis.  Such acceptance was based on this Court’s finding as to the existence of the Oral Agreement.  Looking at the Disputed Invoices themselves, it is apparent that many of the items would not have been payable under the terms of the Written Agreement.

(1) The Plaintiff’s invoices claimed charges for “waiting time” or overtime charges.  But the Written Agreement contained no provision for such charges.

(2) Many of the invoices claimed tunnels and other toll fees in respect of deliveries.  But under the Written Agreement, they were generally not payable by the Defendant.

(3) Many of the invoices claimed gate and parking fees in respect of transfers from other warehouses.  But under the Written Agreement they were not payable by the Defendant under the Plaintiff presented original receipts for such charges.  No such receipts have been adduced by the Plaintiff in evidence.

(4) The Plaintiff claimed a storage fee of $8,000 per month in the invoices.  But under the Written Agreement, the storage fee is $90 per cbm per month.

18.The Defence Counsel submits that this Court was wrong in finding that the Oral Agreement existed, and ought to have held instead that the parties were all bound by the Written Agreement.  Therefore this Court should not have accepted the accuracy of the invoices.  This Court will not disturb the finding of fact that Liang entered into the Oral Agreement with Laura Budlong.  Therefore the above submission cannot stand.

19.The Defence Counsel submits that this Court was wrong to dismissed all the Defendant’s Counterclaims on the grounds that the Written Agreement was abandoned by the parties and replaced by the Oral Agreement from November 2005 onwards: see paragraphs 23-26, 29, 32-33 of the Judgment.  The reasons for the dismissal of the Counterclaims are not just confined to the non-operation of the Written Agreement.  The Counterclaims were dismissed on other grounds as well.

The second intended ground of appeal

20.The Defence Counsel submits that part of the Counterclaim relates to a claim that its wines were wrongfully retained by Ever Harvest from 7 February to late March 2006, and that in the Judgment this Court did not deal with this contention by the Defendant.  This Court erred in failing to do so, and ought to have held that the Defendant’s wines were wrongfully retained by Ever Harvest.

21.The particulars set out in the Counterclaims are as follows:-

i  HK$622,691.93

The calculation is laid out in detail in the letter of M/S. Minter Ellison dated 20 June, 2006.

ii  HK$68,230

Invoice 943754 from Minter Ellison on 30 June, 2006.

iii  HK$26,040

(The Defendant abandoned this claim in the course of trial.)

iv  The Defendant also claims all future legal fees recovering the above claim and interest on the claims in to or in handling any related claims against the Defendant.

v  The above counterclaimed amounts do not include interest but the Defendant would like to claim interest and reserves the right to amend its counterclaim.

22.Under item i, in its letter dated 20 June 2006 Minter Ellison set out in details the claims of the Defendant against the Plaintiff.  There is not a single item of claim relating to an alleged wrongful detention of wines.

23.Under item ii, Invoice 943754 (dated 15 November 2006) was a demand note issued by Minter Ellison.  The value is $68,230.  That demand note merely bears the description “50-5165736 – Ever Harvest Tobacco and Liquor Bonded Warehouse Limited Contact: Laura Budlong”, and nothing else.  It is in fact a bill charging the Defendant.  It is a demand for legal fee for services rendered to the Defendant by Minter Ellison.  So the demand of $68,230 is a demand for the legal fee already spent by the Defendant.  It is in the same nature as item iv.  It should be considered under the ambit of “costs”.

24.According to the Defence Counsel’s submission, the wrongful retention of wines covers 7 February 2006 to late March 2006.  The possession of the Warehouse in question was passed from the Plaintiff to another limited company on 16 February 2007.  This is evidenced by a litigation between that limited company and the Defendant in the Small Claims Tribunal (SCTC 10987/07 & 73664/06 & 65082/06).  In any event the Defendant did not make a claim against the Plaintiff for any “retention” of wines.

25.All the Defendant’s submissions cannot stand.  The Defendant will not have a chance of success in its appeal to the Court of Appeal.  I therefore dismiss its application, with costs to the Plaintiff, to be taxed, if not agreed, with certificate for Counsel.

The Plaintiff: represented by Mr. Brian Wong instructed by Messrs. Chan & Tsui, Solicitors.

The Defendant:   represented by Mr. Wilson Leung instructed by Messrs. Richard Butters, Solicitors.