ONEONTA TRADING CORPORATION v. CHAN TAT CHEE AND CHAN YUN FAT both t/a HOI SANG LOONG FAT KEE (海生隆發記) /HOI SANG LOONG

HCA 1112/2019

[2022] HKCFI 144

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL ACTION NO. 1112 OF 2019

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J U D G M E N T

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1.  This is the trial of a goods sold and delivered action. The Plaintiff is a company based in Washington, USA and carries on business in exporting fruit worldwide. The Defendant carried on business in fruit and vegetable dealing and wholesale business with a principal place of business in the Western Wholesale Food Market in Sai Ying Pun.

2.  It is common ground that the Plaintiff had been a supplier of the Defendant since the 1970s.  While their commercial relationship over the years was largely without incident, there started to be unpaid invoices in late 2016 and early 2017.  The Plaintiff’s claim is in relation to 35 unpaid invoices between 29 November 2016 and 20 March 2017 with respect to apples and oranges ordered by, and shipped to, the Defendant by the Plaintiff from the USA.  The principal amount outstanding on these invoices is US$860,533.47, and the Plaintiff has a separate claim for interest on the overdue invoices at 3% per annum.    

3.  The Defendant was absent from trial and the PTR, but was previously legally represented in this action.  A Notice to Act in Person was filed by the Defendant in September 2021.  The address for service was stated to be the address in the Western Wholesale Food Market. 

4.  Since notice of this trial was given in June 2021 when the Defendant was still legally represented, I am satisfied that the Defendant would have actual notice of the trial in the ordinary course of events. 

5.  Moreover, the Plaintiff has filed affidavits of service to demonstrate that the relevant documents for trial have been served on the Defendant at the stated address for service in the Notice to Act in Person.  Despite the above, the Defendant did not appear at trial.  In these circumstances, I was satisfied that the trial should proceed in the absence of the Defendant.

6.  In view of the current restrictions on travel from the USA applicable in Hong Kong, I gave leave before trial to the Plaintiff’s witnesses to give evidence by way of video conferencing facilities due to their inability to travel to Hong Kong.  At trial, Mr Stephen Reinholt and Mr Brett Reasor gave evidence for the Plaintiff by video conference.  They were the Export Sales Manager and the Chief Executive Officer of the Plaintiff respectively, having joined the Plaintiff in November 2004 and August 2017.

7.  To substantiate its claim in this action, the Plaintiff has produced the relevant documentation in support, including the Sale Confirmations, Final Loading Invoices and relevant shipping documentation.  Moreover, Mr Brown, counsel for the Plaintiff has produced a Scott Schedule setting out the particulars of the invoices.    

8.  I have heard the evidence from Mr Reinholt and Mr Reasor, and I accept their evidence in full.  Since the Defendant did not appear at trial, their evidence was unchallenged.  They provided helpful and forthright answers to questions raised by the court at trial, and their accounts are supported by the contemporaneous documents.  They have given evidence regarding the shipments of the fruit, the past dealings between the parties, the attempts to reach a settlement, partial payments made by the Defendant, and their visits to Hong Kong to meet with Mr TC Chan.  I have no doubt that they are truthful witnesses.

9.  On the basis of the documentary evidence, I am satisfied that the Plaintiff has established that the relevant fruit under the 35 unpaid invoices were ordered by and shipped to the Defendant in Hong Kong.

10.  The Defendant’s case is that there were 3 modes of transactions with the Plaintiff, namely, (i) consigned sale, (ii) local sale and (iii) China Export.  For a consigned sale, the Plaintiff would make shipment to the Defendant and the Defendant would sell those consigned fruit on behalf of the Plaintiff.  The Defendant says that the Plaintiff would not be paid until the fruit were sold to the ultimate customers, and they had paid the Defendant for the consigned fruit.  In relation to a local sale, the Defendant says that the Plaintiff would provide a “tentative negotiable quotation” and the invoice and sales confirmation would be prepared based on that quotation.  The Defendant further says that the final payment was usually subject to variation based on the delivery speed, quality of fruit and the actual sale price of the fruit.  With respect to China Export, the Defendant’s case is that they only acted as an agent between the PRC customers and the Plaintiff, and that the Defendant would only pay the Plaintiff for these shipments only when the PRC customers had duly made payment to the Plaintiff.       

11.  In the present case, the Defendant’s case is that 31 out of the 35 unpaid invoices were for China Export, and the Defendant claims there was no liability to pay the Plaintiff because the PRC buyers never paid the Defendant.  With respect to the other 4 unpaid invoices, the Defendant says that these were either consignment sales or local sales, and says that these were in fact paid in full.   

12.  I am unable to accept the agency argument raised by the Defendant for the following reasons.  First, I accept the evidence of Mr Reinholt that the Plaintiff’s actual customer in all relevant transactions was the Defendant, and that the Plaintiff dealt with the Defendant as seller and purchaser.  Second, I also accept the Plaintiff’s evidence that it had instructed a different agent in the PRC, Mr Xue Lanjie, since around 2006 and that there was no need for the Defendant to act as the Plaintiff’s agent. Third, there is no contemporaneous evidence from the Defendant to dispute liability on the basis that it was not the true customer of the Plaintiff. This is the case despite numerous e-mails from the Plaintiff seeking payment on various invoices that remained unpaid.  This undermines any suggestion that there was any sort of agency relationship.  Fourth, the suggestion that there was an agency is also inconsistent with the Defendant’s making of partial payments to the Plaintiff.  The corresponding e-mails do not refer to or suggest the existence of any agency relationship.  Fifth, the Defendant did not provide any evidence of what money it earned as the agent of the Plaintiff in terms of agency fees or commission.  There was also no evidence in terms of what happened to the fruit in the PRC or to whom the fruit were actually sold to.  Lastly, I accept the Plaintiff’s submission that the fact that there were Certificates of Origin and Phytosanitary Certificates which showed that the fruit were bound for the PRC was to enable the Defendant to make an onward sale of the fruit to the PRC as it considered appropriate.  These documents do not, in themselves, show an agency relationship, and I think the same applies to the fact that PRC companies were named as the consignees in some of the Sales Confirmations.  After all, both the Sales Confirmations and Final Loading Invoices make it clear that the fruit were “sold to” the Defendant.  For these reasons, I do not consider whether the PRC customers eventually made payment to the Defendant has any bearing on the question of its obligation to pay the Plaintiff.

13.  I also find that the Defendant’s repayment of a total of US$52,000 on 31 May 2017 and 9 August 2017 was not in full discharge of Invoices E72115, E72116 & E72265 as alleged by the Defendant.  I accept the submissions of Mr Brown in relation to these invoices.

14.  The Defendant also raised a number of other defences which I shall turn to below. 

15.  I reject the Defendant’s case that there was a problem with the quality of the fruit shipped.  There are no particulars of this claim and no evidence was adduced by the Defendant to support it.  This was a bare assertion.  Further, this complaint was apparently only first raised by the Defendant in March 2018 when Mr Reasor and Mr Reinholt met with Mr TC Chan in Hong Kong.  This was over a year after the relevant fruit shipments took place.  In my view, the quality complaint is incapable of belief especially bearing in mind the perishable nature of the fruit ordered.      

16.  I also reject the Defendant’s case that the amounts set out in the unpaid invoices did not represent the sum owed to the Plaintiff since the price was subject to further negotiation.  There is certainly nothing in the invoices which suggests that this is the case.  I also find that this suggestion to be commercially incredible, and not supported by any documentary evidence.  Although there were times in the past when certain price adjustments were agreed after shipment, I accept the Plaintiff’s evidence that these were isolated examples done on a case-by-case basis.  They did not, in my judgment, reflect a general agreement that the sums stated in the invoices were not payable.    

17.  I also do not accept the Defendant’s case that the Plaintiff was estopped from commencing legal proceedings by reason of the payment of US$100,000.  In my judgment, this is yet another bare assertion not supported by the evidence.  As Mr Brown has pointed out, the Defendant does not specify when or with whom such an arrangement was made.  Further, in my view, it is contrary to commercial sense in the context where the Plaintiff had made repeated requests for full payment of the unpaid invoices.  Moreover, there is nothing in the e-mail correspondence from the Defendant relating to the US$100,000 payment, or other documentary evidence before the court, which suggests that such an agreement was never reached with the Plaintiff.

18.  Lastly, there remains the question of interest. According to the Plaintiff’s evidence, there was an understanding reached between Mr Reasor and Mr TC Chan by telephone on 9 November 2017 that any amount owing by the Defendant for more than 180 days would be subject to an interest rate of 3% per annum.  A similar confirmation was given verbally by Mr TC Chan to Mr Reinholt shortly afterwards.  I am prepared to accept their evidence in this regard. 

19.  There is a question as to whether this agreement is legally enforceable by reason of a lack of consideration because at the time when the agreement was reached the Plaintiff was no longer supplying fruit to the Defendant, and it could not be said that the overdue interest was in exchange for the continued supply of fruit. 

20.  However, it is unnecessary to resolve this dispute since I have a discretion regarding the rate and period of pre-judgment interest.  Given that I have accepted the Plaintiff’s evidence on interest on overdue payments, in the exercise of my discretion, I find that it would only be fair and reasonable for the Plaintiff to be awarded pre-judgment interest at 3% per annum even though this might be lower than the commercial rate normally awarded in Hong Kong.  In my judgment, this is fair because it reflected the realistic commercial expectations of the Plaintiff based on its discussions with the Defendant. 

21.  I will now hear Mr Brown on the terms of the judgment to be entered in favour of the Plaintiff.