Et Net Ltd and Another v. Hani Securities (HK) Ltd
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DCCJ 2129 & 2117/2007 IN THE DISTRICT COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO. 2129 OF 2007 (Consolidated with DCCJ 2117 of 2007 by the Order of -------------------- BETWEEN
-------------------- Coram : H.H. Judge Chow Date of Hearing : 3rd, 4th & 5th March, 2009 Final date of filing in of written submission: 9th April., 2009 Date of Handing Down Judgment : 24th June, 2009
-------------------- JUDGMENT --------------------
1.Since 1995, the 1st Plaintiff has been a provider of real time price information on securities and derivatives, and was, from 2004 until about July 2002, a provider of an electronic and internet trading system, marketed as “eTrade”, to banks and brokerage firms. Since July 2002, the 2nd Plaintiff has been a provider of the said “eTrade” services. The parent company of the Plaintiffs is the Hong Kong Economic Times Holdings Limited. The Defendant, a company engaged in securities trading, received the above services from the Plaintiffs. 2.This case is concerned with 2 separate sets of transactions between the parties:-
The Defendant denies the claim on various grounds, and counterclaims for： (1) an overpayment of $33,750.53 and (2) damages in the sum of $362,332.13 for wrongful termination of the eTrade Service. The eTrade Service Claim 3.The sum of $684,288 is made up of:-
4.There are 2 types of charges under the eTrade Contracts, namely: (1) the initial set-up cost of the service; and (2) the monthly subscription fees under various eTrade contracts. 5.The Framework Agreement for the eTrade Service was signed some time in late 2000. Clause 4 of this Agreement sets out the pricing formulation:-
Item (1) is not in issue. Items (2) and (3) are in issue. The supplemental agreements and the set-up costs 6.The parties entered into 6 supplemental agreements for installing more terminal stations for the eTrade Service. In each of these supplemental agreements, the monthly charges were stated to be $500 per set per month; there was an initial set-up cost of $2,800 for each terminal station. On 12.4.2001 the eTrade system came into operation. Monthly charges at the rate of $500 per terminal became chargeable from this date according to the Framework Agreement and the supplemental agreements. The 1st statement of account dated 25.7.2006 7.The 1st Plaintiff sent to the Defendant a statement of account dated 25.7.2006 (the 1st Statement of Account) for a total outstanding sum of $1,116,023.32, with a bundle of invoices attached. By a letter dated 26.7.2006, Mr. KK Cheung (“Cheung”) of the Defendant denied the claim and made the following points:-
The Plaintiff’s solicitors Messrs. Tang, Wong & Chow (“TWC”) issued a demand letter dated 22.1.2007, stating that as at 31.12.2006, an amount of $978,288 was due, and that no waiver had been made as alleged by Cheung. A bundle of invoices, copied agreements were attached to a Statement of Account dated 31.12.2006 (the 2nd Statement of Account). Some corrections had been made in the previous invoices. Hence the outstanding sum was reduced from $1,116,023.32 in the 1st Statement of Account to $978,288 in the 2nd Statement of Account. The Defendant’s solicitors Messrs. Robertsons replied by letter dated 31.1.2007, claiming that the Defendant was not obliged to settle the invoices issued in or before November 2003 because of a settlement agreement. 8.By a letter dated 3.5.2007, the 2nd Plaintiff informed the Defendant that because of the long outstanding balance, it would put the Defendant’s account in suspension and no supporting service would be provided until the outstanding invoices were settled. By a letter dated 4.5.2007 the 2nd Plaintiff proposed a settlement plan for a total sum of $996,118 to be paid by 3 instalments:-
The sum of $996,118 was made up of:-
9.The 2nd Plaintiff stressed that unless the 1st instalment of $476,588 was paid on that day, the Defendant’s account would be put in suspension and no supporting service would be provided. The Defendant sent in a cheque of $123,530 to settle the subscription fee for 2007. By a letter dated 4.5.2007 Messrs. Robertsons claimed that since the Defendant had not failed to pay any annual maintenance fee, the 2nd Plaintiff was obliged to continue to provide service to the Defendant. It demanded the 2nd Plaintiff to send a person to be present at a connectivity test scheduled to be conducted on 5.5.2007. TWC by letter dated 4.5.2007 pointed out that the Defendant had to pay the full sum of $476,588 under its proposed settlement plan. 10.The Defendant by a letter dated 4.5.2007 informed the 1st Plaintiff that it agreed to settle the monthly subscription fees for 2004, 2005 and 2006 in the total sum of $294,000. A cheque in the sum of $294,000 was attached to the letter. TWC by letter dated 8.5.2007 replied to Messrs. Robertsons’ letter dated 4.5.2007, stating that the Plaintiffs would treat the sum of $417,530 ($123,530 + $294,000) paid by the Defendant as partial settlement of $476,588 under the proposed settlement plan. 11.The 2nd Plaintiff did not send any person to attend the connectivity test. By a letter dated 10.5.2007, the Defendant complained of the 2nd Plaintiff’s failure to provide service as requested on 5.5.2007 and threatened to change to another service provider. 12.Messrs. Robertsons by letter dated 14.5.2007 replied to TWC that the sum of $417,530 was for settling the 3 specified invoices only. Since no service was provided for the connectivity test after the system’s failure on 8.5.2007, the Defendant accepted the 2nd Plaintiff’s breach and terminated the eTrade Service agreements. The Defence 13.Cheung confirmed that there was no oral waiver in respect of the one-time cost. He agreed that in the supplemental agreements, the Defendant was liable to pay a one-time installation fee at the unit price of $2,800. The defence in respect of these one-time installation fees is the settlement agreement made in 2005. 14.Cheung alleged that John Ng (“Ng”) orally agreed to waive the monthly subscription fees. But he could not recall if the waiver was repeated when the supplemental agreements were signed. He said that after signing the Framework Agreement, the oral promise was made. But in paragraph 27 of his witness statement he said,
When asked to explain the inconsistency, he said that the conversation took place on the same day. Then he said that he could not recall. When asked why the Framework Agreement retained the terms requiring the Defendant to pay those charges, despite the oral waiver. He said that this would enable Ng to show the misleading agreement to other potential customers. 15.The Framework Agreement was made in late 2000. According to Cheung, around this time, he started to receive messy and mistaken invoices about the HV Service which did not reflect the oral waiver. Then he should have recorded the oral waiver in respect of the eTrade Service in writing. But he replied that he had not thought of doing so. 16.The monthly subscription fee is the main source of income in respect of the eTrade Service. The oral waiver, if true, would deprive the Plaintiffs of their main source of income indefinitely. This is incredible. 17.The Defendant argues that there is no “credible evidence” that the Defendant was ever invoiced for the monthly subscription fees at any time before 25.7.2006. Cheung said that he only received the invoices for the first time when he received the 1st Statement of Account. On the other hand, Fanny Chan of the Plaintiff said that no hard copies of the invoices were kept as soft copies would be stored in the computer system; hence, no hard copy of the original invoice could be reproduced. The invoices sent with the two statements of accounts were reprints. According to the computer system, the invoices should have been sent. The Defendant submits that the Plaintiffs were not able to produce “official copies” of the original invoices. There is no conceivable reason why all such invoices had mysteriously disappeared other than that they had never been issued. The absence of any demand for payment shows that the Plaintiffs well knew that the monthly subscriptions were not payable. I do not accept this argument. It is simply incredible that the Plaintiffs made invoices and kept numerous soft copies of the invoices; yet they did not send out the invoices. It is simply incredible that the Plaintiffs would make and keep numerous soft copies of invoices in the computer system, even though the monthly subscriptions were not payable. The Defendant simply fails to prove that the Plaintiffs did not issue invoices to demand for payment. I accept the evidence of Fanny Chan. Her evidence is credible. As soft copies of the original invoices could be stored in the computer system, then it would be pointless to store numerous hard copies. The Defence of the Settlement Agreement 18.It is not disputed that there was a lunch meeting attended by See, Chan and Cheung in 2005. See and Chan were adamant that it took place on 8.3.2005. See could remember that because it happened to be the International Women’s Day. 19.The Plaintiffs’ case is that the settlement was only related to the outstanding HV charges up to November 2003. The Defendant’s case is that Chan assured Cheung that there was no outstanding charge in respect of the eTrade service up to November 2003. Cheung said that by 2005, he had received invoices relating to both and the HV Service and the eTrade Service. He set up the meeting in order to discuss the problematic invoices issued by the ET Group. But in paragraph 40 of his witness statement, he only referred to the Statement of Accounts and invoices relating to the HV Service and stated that the meeting was set up to discuss these invoices. He could not explain why he had omitted to mention the eTrade Service. He just said that he had forgotten to do so. 20.The 1st Plaintiff sent to the Defendant statements of accounts dated 8.7.2005, which did not refer to the settlement. On 29.7.2005, Cheung wrote to Chan:-
This letter did not state that the settlement covered the sums due in relation to both the HV Service and the eTrade service. Cheung said that there was no reference to the eTrade Service because he had forgotten to do so. 21.After receiving the 1st Statement of Account, Cheung stated in his letter dated 26.7.2006:-
22.It was agreed that the statement of account referred to the HV Service only. This letter does not refer to the oral assurance by Chan that no sum in respect of the eTrade Service was outstanding; hence the settlement did not cover both the HV Service and the eTrade Service. Cheung said that he was shocked to receive the 1st Statement of Account. Then it would be natural for him to state the full scope of the settlement in this letter in order to refute the Plaintiff’s allegation that there was still an outstanding sum payable by the Defendant. At first he said that he had forgotten to put this down. Subsequently he said that it was not necessary to do so. In re-examination he said that the phrase “all the outstanding balances” referred to the outstanding sums regarding both the HV Service and the eTrade Service. The fact remains that this letter contains no reference to Chan’s assurance that there was no outstanding sum for the eTrade Service. Cheung’s evidence that he had forgotten to the state full scope of the settlement is just unbelievable. I reject his evidence in this respect. The Defence of the Limitation period 23.The Defendant claims that some of the claims are statute barred. The Plaintiff pleads that this was a running account in respect of the charges payable under the eTrade Service, and so the limitation period has not expired. In the case of a running account there is one entire single balance although there are numerous debits and credits. The Defendant argues that there was no running account. The parties’ relationship was governed by the Framework Agreement and the subsequent agreements. Each contract and each invoice was assigned a distinct number, without an account number. No periodic statements of account were issued by the 1st Plaintiff. In the 1st Statement of Account, distinct sums were shown against different invoices and contracts. 24.In Airservices Australia v Ferrier (1996) 185 CLR 483, the High Court of Australia held:-
25.The parties’ relationship was governed by the Framework Agreement. The supplemental agreements came into existence when computer terminals were added. These agreements were renewed periodically. Charges were levied on a periodic basis. Clearly the parties contemplated a continuing relationship of service provider and client. Both parties anticipated that further debits and credits would be created, and they expected their business relationship to continue. In respect of the charges payable under the eTrade Service, there was a running account. Hence, the limitation period has not expired. 26.By reason of the matters set out above I rule that all the defences fail, and the Defendant is liable to pay the sum of $684,288. The HV Service Claim 27.The 1st Plaintiff is claiming a total sum of $70,506 in the consolidated Statement of Claim. The claim of 70,506 consists of 2 items under the HV Agreements: equipment rental fees and software maintenance fees. The Defence of waiver 28.The Defence is that officers of the 1st Plaintiff orally agreed to waive the equipment rental fees and the software maintenance fees. Cheung said that the oral waiver was made on 3 occasions:
29.Cheung claimed that Ng expressly told him that those charges would be waived as long as the Defendant subscribed for the HV Service, irrespective of how many computer terminals the Defendant was going to subscribe for. But he was not able to provide the particulars of the alleged oral promise made by Ng. His oral testimony is fundamentally inconsistent with his witness statement. In paragraphs 13 and 14 of his witness statement, he said that Ng made the oral promise in 1995:-
30.When testifying Cheung said that the oral promise was not related to the FV Service. It was only made in 2001 for the first time when the HV Service was introduced because there was no equipment rental fee and software maintenance fee in respect of the HV Service. According to the Plaintiff’s witnesses, in 1995 there were no equipment rental fee and software maintenance fee. 31.Under Paragraph 14 of his witness statement, Cheung claimed that:-
But in Court, he said that the oral promise was made on 3 occasions only. 32.He said that Yeung was present in the meeting with Ng when Ng made the oral promise. But in his witness statement, he did not refer to the presence of any third party when the oral promises were made. 33.In his witness statement he never mentioned that Lo had made any oral promise. Only Ng and Chan made the oral promise. 34.In paragraph 14 of his witness statement he said that the oral waiver was given as part of the plan to promote the FV Service. But in Court he said that the oral promise was not related to the FV Service at all; so what he said under paragraph 14 cannot be true. 35.He testified that the Defendant was among the first lots of customers to be charged from using the FV Service to the HV Service. The HV Service was more expensive than the FV Service. But the Defendant was not prepared to pay more. So he asked Ng to charge the same amount as before. But this is not the explanation given in his witness statement. 36.As to why the written agreements still contained the terms requiring the Defendant to pay those charges, Cheung said that Ng would like to show the Defendant’s agreement to other potential customers, pretending that the Defendant had to pay those charges and then offered to them that those charges would not be imposed on them, so that they would feel they had made a better deal than that obtained by the Defendant. But he agreed that the Defendant’s agreement with the 1st Plaintiff was a confidential document which should not be shown to other people. The Defendant would not get any benefit for agreeing to do this, and he did not know Ng beforehand. Why would he agree to do this? This is simply inexplicable. 37.As to why the oral waiver was not recorded in writing, Cheung said that he had thought about the potential problems, namely, the 1st Plaintiff might refuse to honour the oral promise if Ng, Chan or Lo left the employment of the company. But he did not take any action although he had such concerns and it would be very easy for him to do so. 38.The written waiver notices signed by both parties recorded waivers agreed between the parties regarding both the equipment rental fees and the software maintenance fees up to 31.5.2004. These documents were inconsistent with Cheung’s allegation that the waiver would last for as long as the Defendant subscribed for the HV Service. Furthermore, the 1st Plaintiff was prepared to record the waiver agreements in writing. Then why is it that Cheung did not ask the 1st Plaintiff to make a written agreement recording the oral promise? 39.By virtue of the oral promise, the charges would be waived indefinitely, irrespective of how many computer terminals the Defendant was going to subscribe for. To the 1st Plaintiff, this would mean unlimited loss. It is inherently improbable that a commercial entity would agree to do that. Further, in the HV agreements, it was expressly stated that the software maintenance fee at the rate of $750 / set / year was waived for the first year. This waiver clause was inconsistent with the oral waiver alleged by Cheung that as long as the Defendant subscribed for the HV Service, the waiver would last. 40.In paragraphs 19 and 20 of his witness statement, Cheung complained that, since 2000 to 2002, the 1st Plaintiff sent him invoices, charging him for items which had been waived. He made repeated complaints to Ng and Chan, but the 1st Plaintiff continued to send him the invoices. He did not think of making a written complaint by referring to the oral waiver. But in respect of problems relating to the computer system on 25th, 28th, 29th and 30th May, he did make a written complaint. If he had done this in respect of computer problems, no doubt he could have done the same regarding the oral waivers. But he did not do so. This is unbelievable. 41.Cheung’s evidence is incredible. I do not find that there was any oral waiver on the equipment rental fee or the software maintenance fee in respect of the HV Service. The equipment rental fee 42.In contract No. 5040, the unit price was stated to be $6500 per year. But in Appendix A, it was stated to be $200 per month. Chan said that the Defendant had never disputed the unit price of $200 per month. I accept his evidence. The software maintenance fee 43.The Defendant submits that in some of the HV Contracts (i.e. contract Nos. 4976, 5040, 5118, 5263, 5449, 5596), no software maintenance fee was stipulated. Hence there is no legal basis to make the charges totaling $30,318. In contract No. 5040, Remark clause (5) states “Software Maintenance fee will be charged in the renewed contract”. In these contracts, there was the same remark clause providing that software maintenance fee would be charged in the renewed contract. In subsequent agreements, the amount of the software maintenance fee was stated to be $750 per unit per month. The Defendant signed waiver notices in respect of the software maintenance fees regarding contract nos. 5040, 5118, 5263, 5449 and 5596. By doing so, it must have accepted that it was liable to pay such fees for these contracts. I rule that the Defendant’s argument only applies to contract No. 4976. Hence, the sum of $3,375 is to be deducted from the claim. The surcharge of $80 since 1.2.2007 44.The 1st Plaintiff imposed a monthly charge at a unit rate of $80 for the Basic Quote with full Chinese News Package. By a letter dated December 2006, the 1st Plaintiff stated that:-
45.The Defendant argues that there is no contractual basis to impose this increase in charges unilaterally. By a letter dated 23.1.2007, the Defendant stated that it did not need any China News Service and would like to opt out such service. But it continued to enjoy the full HV Service from 1.2.2007, up to the termination of the relationship between the parties. 46.The reason for the increase in fee was clearly stated in the above letter. The increase in fee was not solely related to the said Package. The introduction of the Full China News Package is part and parcel of the reason for the increase in the fee. The said package cannot be isolated. Unless the Defendant did not want to have the HV Services, otherwise it had to accept all the HV services as provided. By using the HV Services the Defendant accepted all the HV services; hence it had to pay all the related fees, including the increase in the fee. 47.By virtue of the reasons stated above, the 1st Plaintiff is entitled to the sum of $67,131 ($70,506 - $3,375). The Counterclaims 48.The Defendant is seeking a sum of $33,750.53 on the ground that it overpaid the monthly subscription for the eTrade Service for the years 2004 – 2007, as a result of a mistake of fact as to the quantity of computer terminals in use. 49.Fanny Chan stated that the invoices were issued by reference to the number of terminals provided by Scarlett Tsang (of the Defendant) in her email dated 28.11.2006. In that email, Scarlett Tsang stated that there were 20 terminals for eTrade Service. According to the Service Report dated 21.7.2007 (countersigned by Scarlett Tsang), 20 terminals were de-installed. Scarlett Tsang must have confirmed the content of the Service Report before she signed it. This number matched the number stated in the said email. 50.The burden is on the Defendant to show that it made an overpayment. The sum demanded to be paid is based on the number of computer terminals provided by the Plaintiff for the Defendant’s use. There is no mistake in the quantity of computer terminals. Hence the counter-claim in this regard must fail. The counter-claim for breach of agreement 51.The Defendant counter-claims a total sum of $362,332.13 because it had to engage AFE Solutions Ltd. to replace the Plaintiffs. This sum comprised set up costs in the sum of $70,860 and licence fees from 9.7.2007 to 31.12.2007 in the sum of $291,472.13. 52.By a letter dated 14.5.2007 Messrs. Robertsons purported to terminate the agreements on the ground that the Plaintiff refused to conduct the connectivity test on 5.5.2007 and to repair the system after an alleged failure on 8.5.2007. The Plaintiffs refused to provide maintenance service and to attend the connectivity test. By letters dated 3.5.2007 and 4.5.2007 the Plaintiffs stated that they would do so only if the outstanding sums were settled as requested. The Defendant did not settle the outstanding sum, apart from making a partial payment of $417,530. 53.By letters dated 4.5.2007 and 10.5.2007, the Defendant manifested its stance that since it had paid the annual maintenance fee and the monthly subscription fees for the year 2007, the Plaintiffs were obliged to continue to provide the service. 54.The Defendant did owe the Plaintiffs various sums as at 5.5.2007. The Defendant was liable to pay the outstanding sums, which it persistently refused to pay. This constitutes a repudiation of the agreements. 55.The Defendant raised an alternative argument that the Defendant’s non-payment did not justify the termination of the agreement because the Plaintiffs had lost the right to do so by having affirmed the agreements. But this was not pleaded in the Defendant’s pleading. So the Defendant cannot rely on this argument. Further, there is no evidence to show that the Plaintiffs would not exercise theirs rights to treat the contract as repudiated regardless of the breach. Their stance, as reflected in their letters to the Defendant, is very clear. The Counter-claim in this respect cannot stand. 56.I dismiss all the Defendant’s counter-claims. 57.I make the following orders:-
Costs 58.I make an order nisi, to be made absolute in 14 days’ time, that the Defendants do pay costs of this action to the Plaintiffs, to be taxed, if not agreed, with Certificate for Counsel.
The 1st and 2nd Plaintiffs : represented by Mr. Paul Lam, instructed by M/S J. Chan, Yip, So & Partners, Solicitors. The Defendant : represented by Mr. Ling Chun Wai, instructed by M/S Robertsons, Solicitors. |
Further hearings and rulings under DCCJ 2129/2007