深圳佳銳食品有限公司 v. WING TECH LTD

DCCJ 5436/2019

[2023] HKDC 1036

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 5436 OF 2019

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JUDGMENT

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In a Nutshell

1.  P’s claim herein arises from a sum of €24,380.77 (the “Sum”) it transferred to D in late March, through Guangzhou Lingda Import and Export Trading Co Ltd (“Lingda”), for payment of oysters supplied by Les Huitres Cadoret (“Cadoret”) to P.

2.  By 23 May 2019, as D had not remitted the Sum to Cadoret, P settled the payment separately with Cadoret and thus claims for a return of the Sum.

3.  D admitted on pleadings that it had received the Sum, albeit as part of a larger sum received from Lingda on 28 March 2019, and that P had directed D to remit the Sum to Cadoret.

4.  D however pleaded that there was an agreement made between Mr Chan Chung Wing Andy (“Andy Chan”) representing D and Mr Shen Jialin (“Shen”) representing both P and also 上海佳銳食品有限公司 (“SHJR”), whereby it was agreed that: -

4.1.  There was outstanding commission owed by P and SHJR to D;

4.2.  P and SHJR shall render an account, with documentary support, of the actual amount of oysters ordered from another supplier, F Helie & Fils (“Helie”), and D’s commission receivable from these orders;

4.3.  The Sum would be transmitted to Cadoret after P had done 4.2 above.

5.  P denied any such agreement, or that there was any commission due and owing by P to D.

6.  Further, D pleaded in counterclaim that P owed D commission on oyster orders made by P to Helie from April to September 2019, amounting to €9,719.18, as well as an account of all orders made by P to Helie from March 2019 to date. On that basis, a set-off against the Sum is contended.

7.  As to this, P’s pleaded case is that D’s failure to remit the Sum to Cadoret amounted to a repudiatory breach of the commission agreement between P and D, and P had accepted the breach by ceasing to order oysters from Helie through D.

Issues Arising and Analysis

8.  Dealing first with the claim for the Sum. It is common ground that it was not a payment to D and at least on pleadings D claims no entitlement to “pocket” the Sum as such. Hence, given now that P had directly paid Cadoret and no longer require D to remit the Sum to Cadoret, D is liable to return the Sum to P unless there is any valid and lawful justification.

9.  The only justification pleaded is apparently an antecedent condition, alleged to have arisen from the agreement between Andy Chan and Shen, namely that P and SHJR had first to render an account of oyster orders made by P and SHJR to Helie with documentary support and thereby also of the commission D would have been entitled to (para 23(e) AD&CC). Before that is done, as its pleadings suggest, D would be entitled to retain the Sum.

10.  The determinative issue is whether there was such an agreement as D alleged. The burden is on D.

11.  I note that there is an issue of timing: -

11.1.  On pleadings D’s case is that this agreement was made in or around mid-May 2019 between Andy Chan and Shen;

11.2.  In Andy Chan’s written statement, the timing was changed to mid-April, and still between Andy Chan and Shen;

11.3.  In D’s written opening submissions, the timing was originally stated to be 15 May 2019 but between Andy Chan and “Judy”;

11.4.  Then, on the first day of trial, D sought to correct that statement in its written opening submissions to 28 April 2019 and also crossing out reference to “Judy”;

11.5.  When in the box, Andy Chan sought to change the timing to prior to 28 April 2019.

12.  On this timing problem I am prepared to give D the benefit of doubt and not hold it to the pleaded timing of mid-May 2019. The main reason being that the timing was already changed to mid-April 2019 in Andy Chan’s written statement, filed at a time when D was still legally represented, but then D’s pleadings were left without corresponding amendment. This to me was a matter for D’s then legal representative to take up; the blame should not be on D.

13.  I shall therefore not find against D solely for reason that its evidence does not tally with its pleaded case in terms of timing.

14.  Timing aside, what remains to be analysed is whether there is sufficient evidence to prove on balance that, at some point in April 2019, there was an agreement made between Andy Chan and Shen in the terms as pleaded.

15.  I note that as pleaded, the alleged terms of the agreement did not contain any condition of payment of commission so ascertained after taking such an account.

16.  These terms were pleaded when D was still legally represented, and remained unchanged in the amendments made when D was acting in person. Further, the pleaded terms were repeated in Andy Chan’s written statement and also parties’ Joint Statement of Issues filed in November 2021.

17.  There is therefore no reason why D should not be held to at least this part of its pleadings, or why I should not analyse the evidence by reference to the plea and stance taken in Andy Chan’s written statement and the Joint Statement of Issue.

18.  Andy Chan’s evidence in the box was that the agreement was reached orally with Shen over the phone. Shen of course denied this in the box. As such I shall resolve this factual dispute by analysing the contemporaneous evidence and applying common sense.

19.  The first piece of contemporaneous evidence D relies on is the record of WeChat between Ms Wong Mee Sheung (“Michelle Wong”) and Shen on 28 April 2019. Such WeChat record was enclosed to Michelle Wong’s written statement. According to Andy Chan’s evidence (see para.11.5 above), this WeChat conversation must have taken place after the alleged agreement was made.

20.  The only 2 complete messages shown therein show that: -

20.1.  Michelle Wong refused to sign further agreement;

20.2.  She stated to Shen that “after you paid the commission ought to be paid, I will arrange SZJR’s remittance” (當你付妥應付的佣金後，我會同你安排sz jr的滙款);

20.3.  She then stated “then we owe each other nothing” (以後互不相欠);

20.4.  Shen then replied saying, in gist, he did not want to continue cooperation with D in respect of Helie oysters, and that “previous commissions I promised would pay I will pay, but I hope that you will sign the agreement, so that there is an end to both sides. I also thank Michelle for helping with remittance in the past, in the future I will not trouble you again” (之前的代理費我答應過給到你就一定會給，但希望你可以把協議簽了，這樣大家也可以有個了結。我也感謝michelle過去幫我們滙款，未來我也不會再來麻煩你。).

21.  To complete the context, which is not in dispute, the “agreement” mentioned by Shen in his message to Michelle Wong above was a proposed “Co-operation Termination Agreement” between P and SHJR as Party A and Andy Chan as Party B sent by Shen to Andy Chan previously, also in April 2019.

22.  These messages do not suggest that there was previously an agreement that D was to retain the Sum pending taking of an account; it was suggestive and more in line with Shen previously promising to pay “previous commission” and D pressuring Shen to do so by way of retaining the Sum.

23.  Then came the second and only other piece of evidence: record of WeChat messages between Andy Chan and “Judy”, representing Shen, on 16 May 2019. These messages show that: -

23.1.  Judy informed Andy Chan that a sum of RMB67,351.86 was owed to “you” (presumably meaning D) in respect of Helie orders;

23.2.  Judy asked whether the remittance to France for “Shenzhen” (presumably meaning SZJR) could be made after the above sum was paid to “you” (presumably meaning D);

23.3.  Judy further provided a breakdown table of how the above figure was arrived at;

23.4.  Andy Chan’s reply later that day, in relevant part and in gist, stated that: -

(a)  He refused to sign a termination agreement given to him by Shen;

(b)  He pointed out that there were 2 sets of statements for each order, he only received the set with the smaller amount;

(c)  He wanted an oyster supply contract be signed, not the termination agreement;

(d)  After Shen signed the supply contract, and the commission from October last year (i.e. 2018) to now (i.e. May 2019) is paid, he would arrange for remittance to France (presumably meaning the Sum).

24.  What is immediately clear is that at that point in time Andy Chan made remittance of the Sum conditional upon signing of a supply contract and payment of commission from October 2018 to that point, i.e. different conditions when compared to D’s pleaded case and also to what was stated in Michelle Wong’s messages.

25.  These 16 May 2019 messages further solidify the impression that retention of the Sum was being used by D to press P into meeting various and in fact changing demands, from payment of commission to even signing a supply contract.

26.  I therefore find that there was no such agreement, be it in May or April 2019, made between Andy Chan and Shen in the terms as pleaded by D.

27.  As such, there is no lawful justification for D to retain the Sum; it is liable to return the Sum to P.

28.  Turning next to D’s counterclaim for commission on Helie oyster orders made by P from, effectively, March 2019 onwards.

29.  The issue, as I see it, is whether such an entitlement to commission came to an end and if so when.

30.  Also for completeness, for Helie orders placed by P in the month of March 2019, there is no evidence before me that D had issued any “statement of account” to P or that P had made any such orders in that month. The former type of evidence simply stopped at orders made in February 2019 and the latter type only starts from the month of April 2019.

31.  In terms of objective contemporaneous evidence, the following are the only pieces of such evidence before me around that period: -

31.1.  A discussion among Shen, Michelle Wong and Andy Chan on 12 January 2019 recorded by Andy Chan (with transcript);

31.2.  A “Shareholding Transfer Agreement” (股權轉讓協議) dated 30 January 2019 executed between Shen and Andy Chan personally, with regard to transfer of Andy Chan’s shares in P to Shen;

31.3.  The unsigned “Co-operation Termination Agreement” sent by Shen to Andy Chan some time in April 2019 (see para.21 above);

31.4.  WeChat record between Shen and Michelle Wong on 28 April 2019 (see para 20 above); and

31.5.  WeChat record between Judy and Andy Wong on 16 May 2019 (see para 22 above).

32.  The discussion on 12 January 2019 encompassed various topics, among which were the price for transferring shares in P by Andy Chan to Shen and the co-operation on Helie oysters business between P/SHJR and D.

33.  From the transcript I gather that Shen and Andy Chan finally agreed on the share transfer price, i.e. RMB2.5m. This part of their agreement was of course carried into effect by way of the “Shareholding Transfer Agreement” executed later on.

34.  I pause to note here that the “Shareholding Transfer Agreement” had nothing to do with the Helie oyster business or commission arrangement between P and D; there was not a single term therein that even touched upon the issue.

35.  As to the Helie oyster business, Shen did say that “…250 and 10%, can do, this can totally be included in an agreement, let us do 2.5m and 10%, however much we can do then we just do…what I said today count, but I have to be honest, cannot promise a large volume…” (250加10個 %，可以呀，這個東西完全可以寫進一個協議裏邊的嘛，我們就做250萬加10個 %，能作多少就作多少…我今天講了就是[作]數的，但是我也說實話，不能夠包證是已經是做很大的量…).

36.  To this Andy Chan and Michelle Wong both expressed agreement.

37.  From the above it seems to me clear that there was a consensus between all of them that the Helie oyster business between P and D would continue, and continue on the basis of the existing 10% commission agreement. There was no separation between SHJR and P in so far as the entitlement to this 10% commission or the terms thereto at all.

38.  As such, there can be no serious dispute that commission was still payable for Helie orders made by P in February 2019, because in Judy’s table showing breakdown of commission payable to SHJR sent to Andy Chan on 16 May 2019, the breakdown went up to and included orders made by SHJR in February 2019. If commission was still payable for SHJR’s February Helie orders, then it would be payable for P’s February Helie orders too.

39.  The 10% commission was indeed levied by D on P’s February Helie orders, as can be seen in D’s “March statement of account” (3月對賬單) dated 23 March 2019, corroborating the fact that parties did agree to continue with the 10% commission arrangement.

40.  For completeness I shall mention that although Mr Chan in the box said that P had not paid the commission for Helie oyster orders made in February 2019 as per D’s “March statement of account” (3月對賬單) dated 23 March 2019, there is no pleaded counterclaim against P for outstanding commission for February 2019 Helie orders.

41.  What was not shown to be discussed on that occasion on 12 January 2019, however, was when and how such co-operation was to end or be terminated. It appears to me that parties’ mindset was just “let’s just see how it goes”.

42.  P contends that D had repudiated the commission agreement by failing to remit the Sum to Cadoret, i.e. remittance to Cadoret was a contractual obligation under the commission agreement. D denies and says remittance to Cadoret had been a gratuitous service instead.

43.  Looking at the evidence, I find that remittance to Cadoret was not part of D’s contractual duty under the commission agreement: -

43.1.  The “course of dealing” of course included D making the remittance to Cadoret over the years for P, but that would be consistent with also that being a “freebie” to P for goodwill and convenience, since D would have to arrange for remittance to Helie anyway, which was also based in France and to be paid in Euro;

43.2.  The fact that D incorporated such remittances into its proforma accounting documents such as its “statement of accounts” (對賬單) does not change the true nature of it; it would defeat the convenience if D were to separately issue accounts or chase for funds to make those Cadoret remittances each time;

43.3.  From the transcript of the 12 January 2019 discussion (“…if it was “Yung Kee Ah Chung”, not to mention remittance…we fundamentally do not want to” (…如果換了是勇記阿德，不要說打甚麼款了…我們根本就不願意…)) and Shen’s reply message to Michelle Wong on 16 May 2019 (“I also thank Michelle for helping with remittance in the past, in the future I will not trouble you again” (我也感謝michelle過去幫我們滙款，未來我也不會再來麻煩你。)), it is quite clear that remittance was something extra that D provided to P, for which Shen was specifically grateful, rather than being something D was obliged to do or paid to do.

44.  In any event, P’s case on purported acceptance of this alleged breach is unclear: there is no plea of when it was accepted and no evidence to show when either, not to mention how the purported acceptance was clearly and unequivocally communicated to D.

45.  There is also a fatal flaw in P’s case that the acceptance was by way of not making any Helie orders through D: on P’s evidence, it was not until mid-April 2019 that Shen learned of the fact that D had not remitted the Sum to Cadoret, hence logically P could not have accepted the breach (even if it was a repudiatory breach) in the latter half of April 2019, however, the objective evidence shows that P had at least since 1 April 2019 already been making Helie orders bypassing D.

46.  I therefore reject P’s pleaded case on termination of the commission agreement between P and D by way of repudiation and acceptance.

47.  As mentioned above, there is no evidence at all before me as to what happened with P’s Helie orders made in March 2019, or even whether any was made at all. I am therefore unable to make any finding regarding that particular month.

48.  The above said, has the commission agreement continued to now, as D seems to suggest by claiming an account from March 2019 “to date” in its counterclaim?

49.  The evidence shows that: -

49.1.  Firstly, in April 2019, by Shen sending a draft termination agreement to Andy Chan, it was clear that P wanted to put an end to the entire Helie oyster business with D, i.e. the commission agreement;

49.2.  On 28 April 2019, Michelle Wong, a director of D, messaged Shen and stated that “then we owe each other nothing” (以後互不相欠), to which Shen’s reply affirmed his promise to pay the previous commission, referred back to the termination agreement and stated that he wanted an end to both sides (這樣大家也可以有個了結);

49.3.  It was clear therefore both sides wanted to end the co-operation, it was just the other terms of the termination were not agreed, among which was the issue of unpaid commission for previous orders, by P and also SHJR, including the concealment issue arising from having 2 sets of shipping documents (admittedly a problem specific to orders by SHJR, not P);

49.4.  Secondly, upon cross-examination, it was put to Michelle Wong that as the business relationship between P and D collapsed after April 2019, D would no longer order Helie oysters for P and she answered that “I would consider” (我會考慮); this meant that she did not consider D bound by contract to do so;

49.5.  Coupled with the fact that there is no evidence of D carrying out any work in respect of Helie oysters D itself pleaded (see para 7(b)(i) – (viii) AD&CC), or chasing P for obligations on P’s part pleaded by D itself (see para 7(b)(ix) – (x)), circumstantially it is clear that all co-operation between P and D in respect of Helie oysters had in fact come to a complete halt.

50.  Objectively assessed, it was quite plain that in April 2019 there were “offer” and “acceptance” to end the co-operation (see Chitty on Contract (34^th ed 2021) §25-029 at p.1882): Shen by offering the “Co-operation Termination Agreement”, then Michelle Wong counteroffered by saying after settling previous commission issues “then we owe each other nothing” (以後互不相欠), lastly Shen accepted by affirming his promise to pay the previous commissions and also repeating his request to end the co-operation.

51.  I therefore infer that, by the end of April 2019, P and D, through Shen and Michelle Wong, had mutually agreed to abandon their commission agreement going forward.

52.  For completeness, Andy Chan’s message on 16 May 2019 does not alter the above analysis: it was just him trying to bring P and D into a new contractual relationship, in the terms of the supply agreement he proposed.

53.  That leaves the question of commission arising before termination, i.e. Helie orders made by P in March and April 2019.

54.  For March 2019, as I mentioned above, there is no evidence at all even on whether any Helie orders were made by P. This is part of D’s counterclaim and thus its burden to prove, since it had not procured any evidence from Helie as to any orders made in March 2019, I am unable to grant any relief, either by way of damages or account.

55.  As for April 2019, there is monthly statement evidence D procured from Helie showing that a total order of €17,463.50 was made by Lingda.

56.  P argues that such orders may be placed by Lingda for other companies, as Lingda was likely to have provided similar import service to other oyster businesses in the Mainland.

57.  I however find on balance that the Helie monthly statement does show orders made by P: Mr Chan’s request must have been made on the basis of orders made by P, and for that matter by SHJR; and for SHJR, the statements issued by Helie also only bear the importer’s name “Shanghai Xiongxing Import and Expoert Co Ltd”, not SHJR, and yet the figures match those provided by Judy in her breakdown sent to Mr Chan on 16 May 2019; there is no reason to even suspect that the 2 sets of monthly statements were issued on different basis by Helie.

58.  Hence, I find that D is entitled to commission of €1,746.35, being 10% of €17,453.50, for the month of April 2019.

59.  Given my findings above, there is no basis for D to claim specific performance of any agreement or an account beyond April 2019.

Interest

60.  Interest on the Sum should start to run from the time P made payment to Cadoret directly, reason being that it was from that point onwards that P started to suffer a loss of use of the Sum, as there is no evidence that Cadoret had levied any interest for the Sum on P. Loss of use of fund is usually measured by reference to the general cost of fund, i.e. the commercial rate of HSBC Prime Rate plus 1%.

61.  Interest on the April 2019 commission payable to D should also carry the same interest, as opposed to the overdue interest stated in its monthly “statements of account” because it was D’s evidence that such interest was never really levied on P. As commission for a particular month only appeared in the “statement of account” in about the end of the following month, interest on April 2019 commission should start to accrue from 1 June 2019.

Conclusion

62.  In summary: -

62.1.  D shall return €24,380.77 to P, together with interest at HSBC prime rate plus 1% pa from 23 May 2019 until full payment;

62.2.  P shall pay €1,746.35 to D, together with interest at HSBC prime rate plus 1% pa from 1 June 2019 until full payment;

63.  There should be equitable set-off of the above payments.

Costs

64.  Since P is successful in its claim for the Sum and D is only partially successful in its counterclaim, I make a costs order nisi that D shall pay 75% of the costs of this action to P, together with certificate for counsel, to be taxed if not agreed.

65.  As to the reserved costs on P’s Summons filed on 20 June 2023, I take the view that D should be liable for the costs thereof given the non-compliance with the Order permitting only consequential amendments and also the lateness in putting forth further evidence. I therefore make also a costs order nisi that D shall pay costs of the Summons to P, summarily assessed at HK$30,000.

66.  The above costs orders nisi shall become absolute after 14 days of the date hereof, unless either party apply by letter to vary the same before that, in which event I shall give directions as to disposal of the variation application on paper.