Joyce T Ongsip t/a Lt Enterprises Co v. Pimatronics Ltd
Read the full judgment text of HCA 611/2010 on BabelCite. This High Court CFI judgment was delivered on 17 September 2014.
1. This was originally the trial of two actions which had been ordered to be tried one immediately after another. HCA 600/2012 has been settled between the parties. Hence, this is only the trial of HCA 611/2010.
Cited by 5 cases · Cites 1 case
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HCA 611/2010 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 611 OF 2010 __________________
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______________ J U D G M E N T ______________ Introduction 1.This was originally the trial of two actions which had been ordered to be tried one immediately after another. HCA 600/2012 has been settled between the parties. Hence, this is only the trial of HCA 611/2010. 2.In HCA 611/2010, the plaintiff by original action (“Joyce Ongsip”) has also settled with the defendant by original action (“Pimatronics”) on terms requiring Joyce Ongsip to pay to Pimatronics a total of HK$1,655,000.00. 3.Accordingly, what remains to be determined is only the dispute between Pimatronics and the 1st defendant by counterclaim (“Ocean Lee”) in HCA 611/2010. The Issues 4.As agreed between the parties on the first day of trial, the issues which require determination in this trial are as follows:
Factual Background 5.GTC Industries Limited (“GTC”) is a BVI company. 6.GTC wholly owns Pimatronics, which is a Hong Kong company. Pimatronics, in turn, wholly owns “Pimatronics Shenzhen”, a PRC company. 7.GTC, Pimatronics, and Pimatronics Shenzhen are collectively referred to as “the GTC Group”. 8.In these proceedings (ie HCA 611/2010):
9.GTC is wholly owned by one Kurtis Lam. Ocean Lee was at all material times a member of GTC Group’s senior management. 10.Kurtis Lam and one KT Yuen went to the same school and were good friends. In 2004, KT Yuen was working for one Computime Limited (“Computime”) engaged in the manufacturing and trading of electronic goods. 11.Ocean Lee was a subordinate of KT Yuen in Computime. 12.In 2004, KT Yuen persuaded Kurtis Lam to supply funds to set up a new electronic company, to be managed by KT Yuen and his staff. As a result, GTC, Pimatronics and Pimatronics Shenzhen were set up. 13.Pimatronics signed a Manufacturer Representative Agreement (“the MRA”) with Joyce Ongsip (trading as LT) dated 26 April 2005. 14.There is no dispute that the MRA was actually signed by the parties in October 2005 after Ocean Lee had started employment with the GTC Group in September 2005. But an oral agreement to the same effect had already been entered into in March or April 2005. 15.Under the MRA, Pimatronics was to pay Joyce Ongsip 10% of the net sales (“the Commission”) by Pimatronics to the customers specified in the MRA. 16.The case of Pimatronics is that in March or April 2005, Ocean Lee represented to Kurtis Lam that a sales agent (which Kurtis Lam subsequently understood to be LT) could assist in persuading and convincing a US manufacturer of backup alarms and warning lights for commercial vehicles called ECCO Electronic Controls Co (“ECCO”) and its UK subsidiary called Vision Alert Automotive Ltd (“Vision Alert”) to place orders of electronic parts and components (such as printed circuit board assemblies) with Pimatronics. 17.According to Pimatronics, Ocean Lee further represented that:
The aforesaid two representations are referred to as “the Representations”. 18.Induced by the Representations, Kurtis Lam authorized Ocean Lee to orally agree with LT in terms of the MRA. Later, the MRA was reduced to writing after Ocean Lee was appointed as General Manager of Pimatronics in September 2005. 19.The Representations were false in that Ocean Lee solicited and conducted the business with ECCO/Vision Alert directly without any involvement of LT, LT was not a sales agent recognized by ECCO/Vision Alert and that the commissions paid to LT were channeled (in whole or in part) to Kevin Pintar, an employee of ECCO/Vision Alert. 20.Pimatronics has paid Commission totaling HK$5,438,288.39 between May 2005 and March 2009. 21.Pimatronics avers that Ocean Lee made and maintained the Representations fraudulently. Alternatively, he failed to inform Pimatronics the falsity of the Representations in breach of his contractual and/or fiduciary duty. 22.On the other hand, the case of Ocean Lee, briefly stated, is as follows:
Credibility of the rival witnesses 23.Both Kurtis Lam and Ocean Lee gave evidence at trial. 24.From my observation of his demeanour, Kurtis Lam is an honest witness. I agree with Mr Bernard Man, counsel for Pimatronics, that Kurtis Lam answered questions in a straightforward and direct manner. His unchallenged evidence is that he invested a total of HK$12 million on the strength of his trust of KT Yuen and Ocean Lee. It transpired that Ocean Lee was not worthy of such trust. 25.Ocean Lee’s attempts to smear Kurtis Lam by suggesting that the claim against Ocean Lee was conjured up to avoid payment of the Commission to LT is obviously and wholly misguided.
26.I also agree that Ocean Lee, on the other hand, is a witness of little credibility. Hardly any weight can be placed on his evidence on the disputed issues. 27.First, Ocean Lee is a self‑confessed liar.
28.Secondly, Ocean Lee is a person who would deceive his own employer for his own purposes.
29.In short, I agree with Mr Man that Ocean Lee is not a person worthy of belief. His denials of his wrongdoings will have to be assessed in this light. Whether the Representations had been made by Ocean Lee 30.Ocean Lee denies having made the Representations to Kurtis Lam. 31.Ocean Lee accepts that, when Pimatronics was being set up, he had been asked by KT Yuen to present to Kurtis Lam what clients he was handling in Computime. He accepted that in this presentation of information, he had told Kurtis Lam that ECCO/Vision Alert was one of his customers, and that business with ECCO/Vision Alert was done through an agent, who charged a commission of 10%. Ocean Lee also said in cross‑examination that at that time he thought that it was necessary to go through LT if Pimatronics were to do business with ECCO/Vision Alerts. But he resolutely refused to accept that he had said, or had given an impression, to Kurtis Lam that it was necessary to go through LT. 32.I agree with Mr Man that Ocean Lee’s case is plainly incredible. It is obvious that he did make the Representations to Kurtis Lam. 33.Ocean Lee accepted that when he was presenting information about his customers to Kurtis Lam, he was presenting them as “potential customers” of Pimatronics. In answer to a question posed by the court, he further accepted that these customers’ information was presented to Kurtis Lam because there was a possibility of these customers becoming customers of Pimatronics. 34.Obviously he was at least giving an impression that the 10% commission was necessary and had to be paid. It would be nonsense for him to be presenting all this information to create an impression that the 10% commission was not necessary. 35.In this regard, Kurtis Lam’s case is obviously much more probable. His evidence is that he noted that the commission was rather high and had asked Ocean Lee whether it was necessary, to which the answer was yes. It is only natural for the necessity of the commission to have been discussed. It would be odd if the necessity of a commission as high as 10% was not to have been discussed. On a balance of probabilities, Ocean Lee must have represented in such discussion that the payment of the 10% commission was necessary, otherwise Kurtis Lam would not have agreed to pay it. 36.On the second Representation, ie that the agent would provide advice and assistance to Pimatronics for the purpose of soliciting, continuing and/or developing its business relationships with ECCO/Vision Alert, it follows from the above that in all likelihood Ocean Lee had made the Representation. 37.On any view, 10% was a substantial percentage which would, in all probability, have been discussed between Kurtis Lam and Ocean Lee. In all likelihood, it would have been discussed why LT would be able to charge such a 10% commission, and an answer would have been given by Ocean Lee. 38.For the reasons stated above, I find as a fact that Ocean Lee had, in March or April 2005, made the Representations to Kurtis Lam as alleged by Pimatronics. Whether the Representations were false 39.I agree with Mr Man that the falsity of the Representations is plain. From the evidence adduced at this trial, it is plainly unnecessary for LT to be interposed between ECCO/Vision Alert and Pimatronics. This is partly supported by the fact that LT had plainly not done anything meaningful towards the solicitation, continuation or development of the business. ECCO was not introduced by LT. It was the other way round: LT was introduced by Kevin Pintar of ECCO. 40.As Mr Man puts it, the best proof of the pudding is the eating. Ocean Lee said in oral evidence that from 2012 up to now, he (in his present capacity as the Marketing Director of one Adroit Electronics Ltd) has been doing business with ECCO/Vision Alert. He confirms that he is not doing business through LT, nor any “recognized sales agent”. 41.When asked why he would not need an agent now, but would need an agent then, he first said that that would be because in 2012, ECCO approached him first. But then he had to agree that in 2003 when ECCO first did business with Computime, it was also ECCO who first approached Computime. 42.Ultimately, the only reason Ocean Lee could provide for why he had to pay a commission of 10% to LT in 2003 but not in 2012 was that it was Kevin Pintar who asked LT to intervene. 43.But, as rightly pointed out by Mr Man, that is precisely the point. It is clear that the imposition of an agent was not a requirement of ECCO/Vision Alert. It was only done because Kevin Pintar and Ocean Lee had agreed that an agent should be appointed. 44.This is confirmed by the fact that ECCO did not stop giving business to Pimatronics after it stopped paying commission in September 2009. Nor did anyone from ECCO urge Pimatronics to pay commission to LT. Ocean Lee accepted that. When asked whether he felt that this was strange if LT was indeed a necessary and authorized agent of ECCO, he said he had never thought about it. 45.The fact that ECCO/Vision Alert did not require a sales agent to interpose between them and Pimatronics is amply confirmed by Brian Olsen’s e‑mail on 11 January 2013. When asked whether LT and Dennis Lim were “at no time an authorized sales agent of Ecco”, Brian Olsen answered “We buy raw PCB’s from LT enterprises. That is all we have ever purchased from LT.” This is an obvious denial of any “recognized sales agent” relationship between ECCO and LT. 46.Indeed, in an e‑mail dated 5 January 2010, Brian Olsen stated that “the main reason ECCO moved so much business to Pimatronics was because of the relationship with Ocean Lee. We trust him.” Two days later, Brian Olsen wanted an assurance that Ocean Lee was to remain in charge of ECCO’s accounts for a long time. 47.It is obvious that the reason why ECCO dealt with Ocean Lee was because they trusted him, not Dennis Lim nor LT. When this was put to him, Ocean Lee had to say that Brian Olsen did not mean what he said, and he would not know about the state of affairs in 2005 to 2009 because Brian Olsen had not joined ECCO yet. 48.I agree with Mr Man that this is nonsense. There is no reason why Brian Olsen would want to deliberately say something untrue. Nor is there any basis to suggest that he did not know what he was talking about simply because he was not working for ECCO in 2005 to 2009. As the Vice President of Operations at ECCO, Brian Olsen would obviously have the means to find out, from within ECCO, what ECCO’s position was in 2005 to 2009. 49.That LT was not an “authorized sales agent” of ECCO is also supported by the common ground that Ocean Lee knew Kevin Pintar way before Ocean Lee knew Dennis Lim. This “sales agent” was not someone who introduced ECCO to Ocean Lee. ECCO had already decided to do business with Ocean Lee before inserting the agent in between.
50.In short, from the evidence available at this trial, there is simply no legitimate reason why LT would have to be interposed between Pimatronics and ECCO (except to collect the 10% commission). 51.For the reasons stated above, I find as a fact that the Representations were false. It was not necessary to interpose LT to do business with ECCO. Nor had LT ever provided advice and assistance in soliciting, continuing or developing the business with ECCO. Whether the Representations were made by Ocean Lee fraudulently 52.Again, I agree with Mr Man that the evidence is overwhelming. 53.First, as discussed above, Ocean Lee knew that LT did not introduce ECCO. Rather, it is the other way round – LT was introduced by Kevin Pintar after he had decided to give the business to Computime/Pimatronics. 54.Also, as discussed above, at all material times, Ocean Lee enjoyed a good working relationship with Kevin Pintar and ECCO. Indeed, as mentioned above, Brian Olsen had said that the relationship with Ocean Lee was “the main reason ECCO moved so much business to Pimatronics”. 55.By 2005, it would have been clear to Ocean Lee that LT had done no useful solicitation or development of business. He would have known that he could have done anything that LT did himself. It would also have been clear to him that 10% was a very high commission. He would have known that LT was not necessary. I agree with Mr Man that, at the very least, Ocean Lee would have been reckless as to whether the Representations were true. 56.Indeed, Ocean Lee himself said, at paragraph 18 of his own witness statement that “. . . I did expressly told Dennis Lim that LT was not expected to assist in any specific way, in particular, in the aspects of technicality and product development, but I insisted that if the need arose in future, LT would be expected to assist in the way as requested”. 57.Clearly, Ocean Lee himself knew that LT was not going to do any solicitation or development work. Nor did Ocean Lee ever expect it to. 58.It is also clear that Ocean Lee knew that Kevin Pintar had a share in the commission to be paid to LT. He must have known that the payments to LT were not legitimate commission paid to a genuine sales agent. 59.Indeed, after Pimatronics stopped paying LT any commission in September 2009, Kevin Pintar sent an e‑mail dated 4 September 2009 to Ocean Lee asking him to help LT to recover the commission. 60.At trial, Ocean Lee was asked why Kevin Pintar would help LT to recover the commission. He could only say he did not know the reason. I agree with Mr Man that this is plainly untrue. It is obvious that Kevin Pintar asked after LT’s commission because he had a share – and he asked Ocean Lee for help because Ocean Lee knew about his share all along. 61.Ocean Lee’s involvement and knowledge of the scheme are also demonstrated by his ability to dictate the commission in fact paid to LT. Despite the fact that the MRA stated that the commission should be 10%, Ocean Lee accepted in cross‑examination that:
62.It is therefore clear that Ocean Lee was able to dictate to Dennis Lim how much LT could charge by way of commission. Dennis Lim never even attempted to negotiate and just followed Ocean Lee’s determination. I agree with Mr Man that this is wholly inconsistent with honest, arms‑length, dealings between a seller and an agent which was authorized by the buyer, and thought to be necessary. 63.For the reasons stated above, I find as a fact that Ocean Lee must have known that what he represented was untrue. Or at the very least, he was reckless as to whether it was true or not. What loss flowed from the misrepresentation 64.It is common ground that Pimatronics have paid a total of USD701,714.76 (or HK$5,438,288.39) to LT. 65.On my finding that the Representations had been made, such payments were clearly induced by the Representations. 66.Accordingly, it is clear that the loss caused by Ocean Lee’s wrongdoing would be USD701,714.76. 67.It would also follow that Ocean Lee should pay Pimatronics’ costs against him. 68.I also agree with Mr Man’s submissions that Ocean Lee should also be ordered to pay Pimatronics’ costs against LT. The claim by LT is the result of Ocean Lee’s wrongdoing. Ocean Lee should at least be jointly liable (alongside LT if there had been no settlement) for Pimatronics’ costs against LT. Whether Ocean Lee has a contribution claim against LT (or vice versa) will be a matter between them. Conclusion and Disposition 69.For the reasons set out above, I hold that Pimatronics has proved its counterclaim against Ocean Lee. 70.Accordingly, I make the following order in favour of Pimatronics against Ocean Lee:
71.The above order as to costs is nisi and shall become absolute in the absence of any application within 14 days to vary the same.
Mr Bernard Man, instructed by Anthony Siu & Co, for the defendant (by original action) and the plaintiff (by counterclaim) The 1st defendant (by counterclaim) was not represented and appeared in person | ||||||||||||||||||||||||||||||||||||||||||||||
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