TSUI PO HING AND ANOTHER v. SK KAKEN CO LTD AND ANOTHER

CACV 101/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 101 OF 2007

(ON APPEAL FROM HCCL NO. 42 OF 2004)

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BETWEEN

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JUDGMENT

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Hon Tang VP:

Introduction

1.  The plaintiffs are brothers and the only partners in Protech Industrial Company (“Protech”).

2.  The 1^st defendant, SK Kaken Co., Ltd (“SKK”) is a publicly listed company in Japan. Mr Minoru Fujii, who founded SKK, is its president. SKK is a manufacturer of architectural paint products.

3.  The 2^nd defendant, SKK (H.K.) Co., Ltd (“SKK (HK)”), is a wholly-owned subsidiary of SKK. Mr Fujii is also a director of SKK (HK). One Mr Toru Eguchi was the general manager of SKK (HK).

4.  The present action was commenced on 12 June 1998 as HCA 9602/1998. It was transferred to the Commercial List as from 1 August 2004.

5.  By judgment dated 6 March 2007, Stone J, after a 9-day hearing, dismissed the plaintiffs’ claim against the defendants.

6.  The parties are involved in another action, namely, HCA 16850/1998, which the learned judge has referred to as “the collateral action”. In that action, the plaintiffs are SKK (HK), the Tsui brothers trading as Protech, the defendants. There SKK (HK) is claiming the sum of some HK$8.16 million, together with interest thereon, for goods sold and delivered.

7.  Unfortunately, an earlier application for consolidation by SKK (HK) which was opposed was dismissed by a Master. As the learned judge noted in para. 15 of his judgment, in the collateral action, Protech has mounted a counterclaim against SKK (HK) which by August 2006 was in the order of some $11 million.

8.  Speaking generally, I believe it was common ground between the parties that the plaintiffs were the sole agent for the sale of SKK’s products in Shanghai. However, the parties disagreed over the identity of the contracting parties. It is the plaintiffs’ case that they were appointed by SKK as its agent. SKK’s case is that the plaintiffs were SKK (HK)’s agent. Another major area of disagreement between the parties concerns the duration of the agency. It is the plaintiffs’ case that the agency was for a period of 50 years commencing in 1992. The defendants’ case is that the duration of the agency was as provided by Clause 10 in the Agency Agreement dated 1 January 1995 (“the Agency Agreement”) signed by the plaintiffs and SKK (HK).

9.  A further important area of disagreement between the parties relates to whether, in any event, there had been repudiatory breach by SKK and/or SKK (HK) of the Agency Agreement (whether or not the duration was as therein provided).

10.  At first instance, the plaintiffs were represented throughout by Messrs Day & Chan, solicitors. At trial, Mr Daniel Fung SC, leading Mr Thomas Au and Mr Johnny Ma appeared for the plaintiffs. The defendants were represented by Mr Kenneth Chan, leading Mr Raymond Tsui and Mr Freddy Chu.

The plaintiffs’ pleadings

11.  The statement of claim, which was issued on 12 June 1998 and signed by counsel, had only one defendant, namely, SKK (HK). The statement of claim was relatively simple, it was based on the Agency Agreement. It was pleaded:

“2.  …

Clause 10  The Agency Agreement shall remain in force for a period of three years from 1 January 1995 and the Agency Agreement shall be automatically renewed for one year unless either party gives at least three months written notice prior to the completion of the original three years term to the other party of its intention not to renew the Agency Agreement.

3  Neither party gave notice pursuant to Clause 10 to terminate the Agency Agreement.  In the premises, the term of the Agency Agreement was extended for one year under Clause 10 and shall expire only on 1 January 1999.”

Thus, the plaintiffs’ claim was based on an agency which duration was 4 years expiring on 1 January 1999.

12.  In para. 4 of the statement of claim it was pleaded that insofar as the Agency Agreement was made by conduct, the conduct consisted of and was to be inferred from various matters, none of which has any direct relevance to the appeal.

13.  The statement of claim (para. 11) went on to allege repudiatory breach by the defendants to deliver what were described in the statement of claim as Orders A and B. The plaintiffs then claimed damages in respect of Orders A and B as well as damages for repudiation of the Agency Agreement.

14.  The 1^st amendment of the statement of claim was made on 30 July 1998. This amendment has no present relevance.

15.  On 13 April 2002, there was a substantial re-amendment. It was pursuant to this re-amendment that SKK was added as the 1^st defendant and that SKK (HK) became the 2^nd defendant.

16.  In the re-amended statement of claim, it was alleged that SKK (HK) was the agent of SKK and that:

“… all the acts of the 2^nd Defendant in dealing with the Plaintiff should be attributed to, and treated as the acts of the 1^st Defendant who should therefore be directly responsible for the same.”  Para. 3(b)(iv)

17.  It was also alleged that in the dealings with the plaintiffs, SKK had held SKK (HK) out as its agent and therefore SKK was liable to the plaintiffs in respect of the acts done to and contracts entered with the plaintiffs by SKK (HK) on the actual or apparent authority of SKK.

18.  It was also alleged that there was a 50 years exclusive sole agency, commencing in late 1992. It was pleaded in para. 5 that by an agreement made orally and by conduct between the plaintiffs and SKK and/or SKK (HK) acting on behalf of SKK and/or acting on its own behalf from about mid-1992 to about mid-November 1992, various terms and conditions were reached and agreed. Details were then given.

19.  The learned judge described the re-amended statement of claim thus:

“28.  The sole agency agreement is said to have come into being orally and by conduct, and is said to have originated ‘from about mid-1992 to about Mid-November 1992’, commencing with an oral agreement in a Causeway Bay restaurant between the Tsui brothers and Mr Fujii on behalf of the 1^st defendant; the provenance of the 1 January 1995 written agreement thereafter is set out, with reference to a draft coming into being ‘in or about May 1994’.

29.  So far as the relevant breaches of the agreement are concerned, that which is specifically pleaded is twofold : first the failure to supply SKK raw materials and products, and second, the entry by the 1^st defendant of a sole agency agreement of a similar nature ‘with other companies both in Hong Kong and in mainland China starting from the year of 1996’.”

20.  The statement of claim was re-re-amended on 2 April 2004. It bore the names of Mr Daniel Fung SC, Mr Bernard Yuen, and Mr Johnny K C Ma.

21.  Para. 3(b)(ii) of the re-re-amended statement of claim alleged that:

“In all its dealings with the Plaintiffs, the 2^nd Defendant’s role was that of messenger and implementer, passing messages to and from, taking instructions from, and implementing decisions of the 1^st Defendant, and as such acted as agent for and on behalf on the 1^st Defendant.”

22.  The plaintiffs then alleged that they had relied on five representations (or any combination of them) when they signed the Agency Agreement.

23.  This is what the learned judge said of the re-re-amended statement of claim:

“34.  In this further revision there is greater condescension to detail, in particular a ‘Letter of Intent’ dated 21 August 1992 (of which more later), and references to a series of ‘5 representations’ said to have been made by the 1^st defendant, SKK Japan to the plaintiffs, with details of the circumstances thereof, as a result of which it is said that the plaintiffs, inter alia, constructed a factory in Shanghai, through a joint venture established for the purpose, in order to manufacture under licence SKK products.

35.  Detailed reference to the monies thus expended are pleaded, as is a ‘Letter of Appointment’ dated 28 December 1992, under which the defendants are said to have appointed Protech their sole agents ‘to manufacture under licence and to sell SKK products in Shanghai’, and further details follow of a meeting on 8 March 1993 in Osaka, leading to the ‘4^th representation’, which ‘compounded’ the first 3 representations as made to the plaintiffs, and thereafter the background to the written Agreement dated 1 January 1995, in particular to a meeting in Osaka to discuss the then draft of this agreement on 2 June 1994 at the headquarters of the 1^st defendant.

36.  The nature of the sole agency agreement, as constituted in partly oral and partly written terms, is maintained, and in addition an estoppel is raised, wherein the defendants are said to be estopped from denying the grant of a sole agency to the plaintiffs for a term of 50 years, whilst particulars of undelivered orders remain, and a claim is maintained for loss of profit.

37.  Particulars of repudiatory breach, in addition to the allegations of non-delivery of goods, consist of the allegation that the defendants have entered into agency agreements of a similar nature with entities other than the plaintiffs, and a substantially new allegation (at sub‑paragraph 13d) to the effect that the defendants had failed or refused to commission any of the SKK machines which had been purchased from the 1^st defendant, the consequence of such refusal being that none of the machines, as installed at the Shanghai factory, could actually be used to produce SKK products.

38.  Consequent upon this further amendment, a separate and independent claim in fraudulent misrepresentation is added (at paragraph 16 et seq), it being said that ‘but for the 1^st to 5^th Representations or any or any combination of them’ that the plaintiffs would not have entered into the joint venture that they did in China, incurring in the process substantial costs in building and equipping the joint venture factory, expenditure now sought to be recouped in terms of damages.

39.  The claim that the property charge be released is not now proceeded with, but the pleading does claim rectification of the written Agreement of 1 January 1995, whereby it is sought to replace the written term of 3 years with a term which specifies 50 years.

40.  The sums of money sought in damages, both general and specific, are very significant – it appears to be envisaged that they run into some tens of millions – but fortunately the parties have agreed that this court first is to try the issue of liability and that, upon liability being established, the issue of damages is to be tried separately before a Master : see the Order dated 1 December 2006.

41.  In addition, by agreement of counsel, there is to be no determination of that element of liability relating to damages for non-delivery to the plaintiff of various orders (now denoted as ‘Orders A, B and C’ in the re-re-amended Statement of Claim); in this context I note also that whilst ‘Orders A and B’ were pleaded in this case from the outset, the failure to fulfil ‘Order C’ is solely a creature of the 4^th version of the pleading in this case.  It is, I am told, now anticipated that application will be made to the court seized with the ‘collateral action’ to transfer/inject this aspect of the claim into the subject-matter of this action.”

24.  The learned judge then listed issues which he had to decide:

“43.  It seems to me that the case, at least in the ‘umbrella form’ in which it now is run, logically breaks down into the following liability issues/sub-issues :

(i)  Who were the parties to the sole agency contract?

(ii)  What was the form of that sole agency contract?

(iii)  What was the duration of such contract?

(iv)  Can the Agreement of 1 January 1995 be rectified?

(v)  Were actionable representations made?

(vi)  Can an estoppel by convention/representation be founded against the defendants, and, if so, can such an estoppel standing alone found a cause of action?

(vii)  Has there been repudiatory breach of that contract, and if so, what action(s) constituted such breach or breaches?

(viii)  Has there been acceptance of such breach, or breaches, and if so, when?

(ix)  What remedies, if any, flow from such contractual breach(es) and/or such actionable misrepresentation(s), if any?

(x)  Upon what basis should a damages assessment, if any, be conducted?”

25.  On appeal, where the plaintiffs appeared in person, Mr Stanley Tsui (“Mr Tsui”), who was the main spokesman, highlighted five issues:

(i)  The form of the sole Agency Agreement;

(ii)  Its duration;

(iii)  Who were the parties to the sole agency contract;

(iv)  Has there been repudiatory breach of that contract?

(v)  Damages.

26.  The plaintiffs agreed that (v) damages have to be decided separately.

27.  Mr Tsui submitted that the learned judge erred in that he had concentrated on the Agency Agreement. He further submitted, rightly, that prior to the date of the Agency Agreement, the plaintiffs were already the sole agent in relation to SKK’s products in Shanghai. It is clear that the plaintiffs’ case as advanced on their behalf by Mr Fung SC was that the sole Agency Agreement was made partly orally and partly in writing. The oral element of the contract was basically evidenced by the five representations and the written parts included the appointment letter of 28 December 1992 and the Agency Agreement.

28.  The letter of appointment was dated 28 December 1992 and signed by Mr Toru Eguchi on behalf of SKK (HK) which reads:

“Dear Sirs,

AUTHORIZATION OF SOLE AGENT OF SKK PRODUCTS IN SHANGHAI, CHINA

We, SKK (H.K.) CO., LTD. whose registered office at Flat B, 21/F., Chekiang First Bank Building, 60 Gloucester Road, Wanchai, Hong Kong, herewith would like to appoint PROTECH INDUSTRIAL COMPANY whose registered office as the above mentioned, as the SOLE-AGENT in SHANGHAI, CHINA with effective from the date of signing of this letter.

All the condition and terms should be referred to the AGREEMENT.”

As the learned judge has pointed out as at that date there was no written agreement and that it:

“100.  … made no reference whatever to the duration of the sole agency. …”

29.  Mr Stanley Tsui also referred to a letter of intent dated 21 August 1992 signed by the plaintiffs and Shanghai Jia Ding County Moulding and Engineering Factory （上海巿嘉定縣鑄造機械廠）regarding a Shanghai and Hong Kong joint venture in the incorporation of Shanghai Jia-Bao New Decoration Materials Company Ltd. Mr Tsui relied in particular, on the fact that Clause 8 of the letter of intent stated that the term of the joint venture was to be 50 years. However, as the learned judge has pointed out:

“114. … Chinese property rights are granted for a 50 year term. …”

Moreover, if the permitted term of the joint venture were, say, 20 years, then a new application would have to be made when it ends, so in any event it would have made sense to provide for 50 years.

30.  The learned judge dealt with the question of duration in paras. 86 to 138 of his judgment, in the course of which he had considered carefully each of the five representations relied on by the plaintiffs. The learned judge said that was the plaintiffs’ primary contention. Mr Tsui complained that the learned judge referred to this as an “ambitious contention”.

31.  In the original statement of claim, the plaintiffs had not only pleaded and relied on Clause 10 of the Agency Agreement, as noted above, they actually relied on the fact that no notice had been given under Clause 10 so that the duration of the sole agency was extended for a fourth year. In cross-examination, Mr Tsui accepted that the statement of claim was issued on his instructions (T85) and that although he could not remember whether he had read it before it was issued he was sure that he had read it in 1998 (T-87). Mr Tsui was unable to provide any acceptable reason why if the sole agency was for 50 years, the claim should have been based on clause 10 and on a duration of 4 years.

32.  There was also the fact that the plaintiffs had signed the Agency Agreement, which is fatal to the plaintiffs’ case unless explained. The explanation took the form of the 5^th representation. Mr Tsui alleged that after a draft of what has subsequently become 1 January 1995 agreement was sent to the plaintiffs, he noticed Clause 10. He said he went to see Mr Fujii in Japan about it. Mr Fujii has denied that. There was produced a copy of a minute of a meeting between, amongst others, Mr Fujii and Mr Tsui in Japan on 3 June 1995, which contained no reference to any discussion over Clause 10. Mr Tsui submitted, however, that he arrived at Japan on 1 June and there was a meeting on 2 June. That was his evidence. Mr Fujii could not remember whether there was a meeting on 2 June but he was adamant that there was not the so-called 5^th representation.

33.  This is what the learned judge said about the 5^th representation:

“127.  The 5^th representation is pleaded to have emerged at a meeting held in the SKK Japan office in Osaka on 3 [sic] June 1994 attended by Mr Stanley Tsui and Messrs Fujii and Eguchi of SKK.

128.  The background to this meeting was that a draft of the Agreement of 1 January 1995, which had been prepared by SKK Japan in or around May 1994, had been sent to the plaintiffs for signature.

129.  Mr Stanley Tsui’s evidence was to the effect that after he had received the draft of the Agreement, which as to duration contained the 3 year period contained within Clause 10 thereof, that he had demanded to see Mr Fujii in Japan, and duly had gone to Osaka with Mr Eguchi, who is said to have been ‘embarrassed’ by this development given the discussions between the parties which had taken place to-date.

130.  At this meeting on 3 [sic] June 1994 Mr Tsui said that he had confronted Mr Fujii and queried why the draft agreement contained as to term only Clause 10, and that Mr Fujii had responded that he wanted to do business with him “as long as he lived” (which phrase imported, it is said, reference to Mr Tsui’s longevity, not to that of Mr Fujii), and that the three year term within Clause 10 of the draft meant only that other conditions and terms of the agreement would be revisited every 3 years, but not the duration of the sole agency.  Or, as Mr Fung’s written submission puts it, “Clause 10 of the 1995 Agreement applies only to the other terms and conditions of the sole agency, and does not apply to provide for the duration of the sole agency.”

131.  It is difficult to know what to make of that which, taken on its face, appears to be a fundamentally illogical assertion, given that it now appears to be contended that the very clause relating to duration of the contract is said not to mean what clearly it says; in hard commercial terms this submission possesses a certain ‘Alice in Wonderland’ quality.

132.  Be that as it may.  There is nothing within the Agreement as executed which would substantiate such a strained construction – it would be odd indeed if there was – and whilst I am prepared to accept that Mr Fujii, who clearly was aware of the aspirations of the plaintiffs in terms of a lengthy sole agency, and who specifically denied making the ‘representations’ alleged, would and no doubt did make soothing noises in this regard to Mr Tsui – including the remark that the defendants intended to do business with the plaintiffs for life – I do not find that whatever was said at this undocumented meeting almost 13 years ago can or does amount to the nature of a binding ‘50 year’ representation, as now is asserted.

133.  In short, whilst I have no doubt but that SKK may well have hoped to maintain a business relationship with the plaintiffs for a very lengthy period – not least because, if it transpired that both parties were making good profits it would be entirely in their mutual interests to continue to trade together for as long as such a situation prevailed – in my view there can be no serious question of SKK, be it SKK Japan (as the plaintiffs would have it) or SKK Hong Kong (the actual signatory to the Agreement of 1 January 1995), committing itself at this early stage to a 50 year sole agency, or unequivocally representing this to be the case. I would go further.  From a commercial viewpoint I would be astonished if any prudent businessman would thus commit to such a period at so early a stage, and particularly, if I may say so, when such an agency involved trading within China, with the future uncertainties that such activity then would have been thought to import.

134.  Accordingly, whilst I would accept that precatory words may well have been uttered by Mr Fujii to Mr Stanley Tsui, I decline as firmly as I may to accept that such words comprised, or imported, or seriously could be taken to import, any binding representation or obligation, whether in terms of SKK Japan or SKK Hong Kong, as to a 50 year commitment.

135.  The hard fact remains that the Agreement of 1 January 1995 was executed by the plaintiffs and by SKK Hong Kong, and that such Agreement bears within it, unamended, Clause 10 in the terms of which complaint now belatedly is made.”

34.  It is clear that Mr Tsui’s evidence relating to the 5^th representation was not accepted by the learned judge. It is equally clear that the learned judge was not prepared to find Mr Fujii had actually made the representation alleged. These are findings of primary facts by the learned judge. On such findings, unless we are satisfied that the learned judge’s conclusion was plainly wrong, we are not entitled to interfere. Ting Kwok Keung v Tam Dick Yuen and Ors [2002] 5 HKCFAR 336. With respect, far from being satisfied that the learned judge was plainly wrong, I am satisfied that he was clearly right.

35.  Mr Tsui submitted that the learned judge erred in that he had failed to find that one of the parties had lied. This is what the learned judge said:

“53.  I am bound to say that I did not form a particularly favourable view of either of these principal witnesses, each of whom struck me as having a clear and discernible agenda in terms of the desired result to be achieved in this litigation, although having said that I did not think that either Mr Stanley Tsui or Mr Fujii were attempting positively to mislead the court, but merely that so clearly were they tailoring their evidence, and their recollections/perceptions of what in fact had happened, to the perceived merits of their respective cases, that in general this court has been disinclined to prefer one view to another; accordingly, in its assessment of this case of necessity the court has been thrown back upon such contemporaneous documentation as exists, together with viewing the broad factual matrix through the prism of commercial probability.”

36.  I reject the submission that the learned judge should have found that either the plaintiffs’ witnesses or the defendants’ only witness (“Mr Fujii”) had lied. The court will not lightly find that a witness has lied. Very often, a witness is simply mistaken especially when trying to recount events which happened many years ago. Often, a witness misremembers an event and by a process of what is sometimes called “creeping determinism”, convinces himself that his recollection is correct.

37.  Be that as it may, it is clear from the paragraphs from the judgment quoted above that on the vital issue of the 5^th representation, the learned judge either preferred the evidence of Mr Fujii or was not willing to act on the evidence of Mr Stanley Tsui. In either event, since the burden of proof is on the plaintiffs, the 5^th representation was not made out. This is important because unless Clause 10 was explained away as Mr Stanley Tsui had tried to do, it provides starkly that the duration of the Agency Agreement was three years plus a possible one-year extension.

38.  I will not deal specifically with the other four alleged representations. The learned judge has dealt with them fully in paras. 106 to 125 of the judgment. Later in this judgment I will deal with Mr Tsui’s complaint about the strong language used by the learned judge regarding these representations.

39.  In all the circumstances, it is understandable why the learned judge described this part of the plaintiffs’ case as ambitious.

40.  I should mention the plaintiffs’ submission that they would not have entered into the joint venture agreement and made the substantial investments which they had without the security of a 50-year sole agency.

41.  Mr Benjamin Tsui, who spoke only briefly, apart from alleging that the learned judge was unfair, submitted that the learned judge had failed to have regard to the fact that it was common for Chinese people to conclude oral agreements. Indeed, as Mr Kenneth Chan has explained, at trial, the plaintiffs had tried to produce a report of an interview with a well-known Chinese businessman who had a long-term relationship with a Japanese manufacturer without any formal agreement. The learned judge rightly refused to admit the evidence. In Mr Stanley Tsui’s first witness statement dated 8 October 2003, he said:

“41.  … Also, as far as I understood, Japanese people had the tradition of honoring promises, and there were many examples of success of life-long partnership between a Japanese manufacturer and a foreign agent, so I was contented and accepted his explanation and trusted that the agency was for 50 years or even more if I live long enough.”

Be that as it may, the fact remains that the plaintiffs and the defendants disagreed over the duration of the agency.  The court can only act on the evidence.  On the evidence before the learned judge, I have no doubt that he has come to the correct decision.

Parties

42.  I turn to the question of who were the parties to the contract. As the learned judge has pointed out, when the claim was first brought (12 June 1998), SKK (HK) was the sole defendant and remained so until 13 April 2002. As the learned judge further pointed out, the letter before action sent by Messrs Day & Chan dated 22 January 1998 to SKK (HK) stated, inter alia:

“… (they were) instructed to remind you that our client has been retained as your sole agent for the sale of the products within Shanghai area by an agreement dated 1^st January 1995, which agreement is still valid and subsisting and, certainly, is binding on our client as well as your goodself …”

43.  That was followed by a letter dated 21 March 1998 from Mr Stanley Tsui to Mr Fujii, signed by both the plaintiffs, which included the following passages:

“All the above cases are obviously breaking the Agreement between SKK (H.K.) and Protech, …

……

In the future, we will reform our company structure for marketing and selling SKK products.  We sincerely hope that we shall continue for SOLE AGENT in Shanghai area, and we can make business directly with SKK Japan and not with SKK (H.K.).”

44.  The Agency Agreement itself is consistent with the defendants’ case. So was the letter of appointment dated 28 December 1992.

45.  The plaintiffs relied on two other documents. The learned judge said:

“68.  In this regard, (Mr Daniel Fung) prays in aid the evidence of Mr Stanley Tsui, who was minded to express the bold view in the circumstances that in fact all along it had been SKK Japan which was his contracting partner, and also to several documents, chief among them being an open letter on SKK Japan letterhead, dated 19 April 1997, addressed ‘To Whom It May Concern’, which states :

‘RE: EXCLUSIVE AGENCY FOR THE SKK PRODUCT

This is to certify that the SHANGHAI JIA-BAO NEW DECORATION MATERIAL CO., LTD. has been appointed by the SK KAKEN CO., LTD. through its wholly owned subsidiary Messrs. SKK (H.K.) LTD. as the Exclusive Agent for the SKK architectural coating product in the Geographical Shanghai Area since the year of 1993.’

69.  This letter bears a signature of a Manager of SKK Japan – thought to be Mr Morita – but save as aforesaid there is no indication of the provenance of this document, nor the purpose for which it came into being; certainly there is no evidence on the point, and this appears to be no more than a random document which has been the subject of discovery.

70.  Moreover, its impact, if any, is lessened by sight of a like form of document, dated some two months later, on 23 June 1997, which on this occasion appears on the letterhead of SKK Hong Kong, and which certifies – once more ‘To Whom It May Concern’ – that Shanghai Jia-Bao New Decoration Material Co Ltd is the exclusive agent for the SKK Architectural Coating products ‘in the Geographical Shanghai which is being appointed by the president of the SKK Group, Mr M Fujii since 1993’, this document being signed by Mr Bernie Yuen, the then Deputy General Manager of SKK Hong Kong.

71.  In addition, in terms of his primary submission as to the relevant contracting party, Mr Fung also has relied upon the Minutes of a meeting with SKK Japan and SKK Hong Kong officials, including Mr Fujii and Mr Eguchi, on 8 March 1993, and also the content of an SKK Japan newsletter dated October 1994, wherein, under the legend ‘SKK Worldwide Network’ appears the name of Shanghai Jia-Bao.

72.  As to these two straws in the wind, I take the view that they are little more than that, and do not come near to substantiating Mr Fung’s bold proposition as to the identity of the other contracting party.  In particular, I do not consider that the form of the newsletter is probative of anything, given that it is entirely understandable that the SKK Group would wish to advertise what amounted, via its subsidiaries, to widespread world coverage, whilst so far as the Minutes of the March 1993 Osaka meeting are concerned, it is hardly surprising that relatively early in what clearly at the outset was a relatively co-operative and amicable relationship, the parties were discussing (as in fact they were doing at this meeting) who was going to supply what to whom, how and when; in addition, of course, on any basis both these matters pre-date the formal written agreement, dated 1 January 1995, with SKK Hong Kong.

73.  Accordingly, when the evidence on the point is looked at in the round, I am unable to, and do not, accept Mr Fung’s submission that it is SKK Japan, and not SKK Hong Kong, which is the contractual counterparty to the sole agency contract with Protech Industrial, and thus, should liability otherwise be established, that it should be the mother company to which the present plaintiffs should look for satisfaction of any monetary judgment.  It seems that a concern as to potential problems in judgment execution provides the explanation for the intellectual gymnastics in which the plaintiffs now seem prepared to indulge in the effort to make good the contention that it is the Japanese parent, and not its Hong Kong subsidiary, which is the relevant contracting party.

74.  With due respect to Mr Fung’s efforts in this regard, this is not an effort which I have found persuasive, and, on the evidence before this court, such a contention in my view is very difficult to sustain.  Nor do I see any logical difficulty in the fact that, as appears clear, the SKK product as was supplied, in terms both of finished product and raw materials, originated from the Japanese parent of SKK Hong Kong (and may, or may not, have been directly invoiced by SKK Japan) pursuant to the contractual relationship between Protech Industrial and SKK Hong Kong.

75.  I thus find (and have little hesitation in so finding), that the party to the sole agency contract with Protech Industrial is SKK Hong Kong.”

46.  With respect, I agree. It may be, as the plaintiffs alleged, that SKK (HK) could not have granted the sole agency to the plaintiffs without the approval and authorization of SKK in particular Mr Fujii. But that does not mean that when the approval and authorization was given, SKK (HK) could not have entered into such an arrangement as principal.

47.  Moreover, the identity of the contracting party is only relevant because it appears from Annex TPH3 annexed to the 2^nd statement of Mr Stanley Tsui dated 8 October 2003, that the plaintiffs wanted to claim damages, on the basis of a 50-year sole agency, of hundreds of millions of dollars.

Prejudice

48.  Mr Tsui complained about the strong views expressed by the learned judge. He submitted that the learned judge was prejudiced against the plaintiffs. In the written submissions the plaintiffs submitted:

“E(c).  The learned Judge held prejudice against the Plaintiffs.

The learned Judge used in Para. 5 of his Judgment a word ‘Saga’ [0020] to describe the whole thing. According dictionary, the word Saga has the meaning of adventurous story. It seemed that the learned Judge was giving implicit indication that he thought the Plaintiffs were ‘too ambitions’ and prejudice against the Plaintiffs. Such prejudice would affect his rulings on evidence and his position in the trial, which was extremely unfair to the Plaintiffs.”

49.  It is true that the learned judge has expressed his views strongly. I take the examples quoted in a summary provided by Mr Chan, on the five representations:

“10.  The Representation:

a.  1st Representation: it is ‘startling unreal’ to invest the representation made in an undocumented telephone conversation made 14 years ago with a binding legal obligation [§108/ 49-50];

b.  2nd Representation: ‘I reject this contention as risible’ [§113/51]; ‘it would have been astonishing if such a huge commitment had been made at an introductory meeting of this type’ [§113/51];

c.  3rd Representation: ‘creative pleading’/ ‘upon analysis does not amount to very much’ [§118/52];

d.  4th Representation: ‘[SKK] could divine from its crystal ball in order contractually to grant an untrammelled 50 year sole agency to Protech Industrial’ [§124/54-55];

e.  5th Representation: ‘fundamentally illogical assertion’/ ‘Alice in Wonderland quality’ [§131/56];

f.  all representations: P's case ‘his substantial difficulty in getting off the ground’ [§121/53] ‘the probative cupboard is pretty bare’ [§125/55].”

50.  These are strong words but understandable in the circumstances. The plaintiffs’ case is uncommonly weak.

51.  Mr Tsui also complained that the learned judge had said during the cross-examination of Mr Fujii by Mr Fung:

“HIS LORDSHIP:  He really doubts whether he would have said anything so stupid and I don’t think we can take it much further.  They were all drunk anyway.  I wouldn’t mind coming to one of your dinners, Mr Fujii.

Righto, Mr Fung.”

52.  Complaint was made of the fact that the learned judge said:

“… I wouldn’t mind coming to one of your dinners, Mr Fujii.”

53.  The plaintiffs were represented by leading counsel at trial where there was no real risk of misunderstanding. No reasonable person would think that the learned judge was really interested in having dinner with Mr Fujii. No doubt the learned judge’s attempt at humour was meant to reduce tension in court. If it could have been taken as an indication of bias Mr Daniel Fung SC would not have failed to complain about it.

Repudiatory breach

54.  On the question of whether or not there had been a repudiatory breach on the part of the defendant, as the learned judge explained in para. 174 of the judgment, Mr Fung SC relied on two matters: First, the appointment by SKK of agents in Shanghai; and secondly, the failure of SKK to commission the SKK machines which had been installed in the plaintiffs’ Shanghai factory, but which, it was said, were not made to function as had been promised by SKK. On both issues, the learned judge held that the plaintiffs were unable to prove their case.

55.  I deal first with the alleged failure to commission the SKK machines. This was pleaded in para. 13(d) of the re-re-amended statement of claim and related to certain machinery said to have been purchased from SKK from around February 1993. Para. 13(d) (which was introduced in the Re-Re-Amended Statement of Claim filed on 2 April 2004) reads as follows:

“The 1^st and/or 2^nd defendants have failed and/or refused despite repeated requests orally and/or in writing to commission any of the SKK machines purchased from the 1^st defendant as particularized in paragraph 4F(b) above and installed at the plaintiffs’ expenses at the SKK Factory in Shanghai, failing which none of the SKK Machines could start producing any SKK products.”

56.  At the hearing of the appeal, I asked Mr Stanley Tsui to identify the evidence on which this issue was based.

57.  Mr Stanley Tsui had made three witness statements for the trial which he had adopted as his evidence-in-chief. According to Mr Stanley Tsui, the following paragraph in the first statement dated 8 October 2003 is relevant to this issue:

“35  We then started to build the factory.  In the course, the 1^st Defendant was actively involved since all specification of design of the factory and the installation of machine bought from the 1^st Defendant and many other matters had to obtain their approval or instruction.  The 1^st Defendant also arranged its subsidiary in Singapore to train our technician.”

58.  Mr Stanley Tsui gave evidence at trial. Apart from confirming the truth of the three witness statements that he had made, he said nothing further about this particular allegation. However, he was cross-examined about the letter by Mr Chan on whether the plaintiffs had paid the balanced payable in respect of the machines (T148).

59.  Mr Tsui also relied on a letter dated 30 September 1996 which reads:

“Re: Shanghai Factory - Machine Commissioning

Dear Mr. Morita,

Please be advised that our Shanghai factory has been completed and ready for machine commissioning. We hope the machines will be commissioned for colour mixing from 28 Oct, 1996 to 1 Nov, 1996. Please arrange one technical staff from Singapore and also please give us some suggestions for preparation works. Furthermore, we will settle the outstanding balance of the cost of machine just after the commissioning completed. Your full support is much appreciated.

Thank you for your attention!”

60.  Nothing was said by Mr Stanley Tsui in his evidence about this letter.

61.  Apart from this letter, there was no further correspondence on the point. The letter before action failed to mention it. In the statement of claim, when it was first issued, there was no reference to failure to commission the machines as a repudiatory breach of the Agency Agreement although in the statement of claim the plaintiffs did rely on the non-fulfilment of Orders A and B as a repudiatory breach of the Agency Agreement.

62.  On the basis of such evidence, the learned judge’s finding that the plaintiffs had failed to prove their case on this issue is perfectly reasonable.

63.  The other repudiatory breach relates to the alleged appointment by SKK of other agents in respect of Shanghai. The learned judge has dealt with this fully in his judgment. He was not satisfied that the plaintiffs were able to prove their case. I agree. I will not lengthen this judgment by attempting to review what the learned judge has said.

64.  The plaintiffs sought to rely on non-delivery of Orders A, B and/or C as repudiatory breach. But that was expressly not relied on as such by Mr Daniel Fung. See para. 41 of the judgment quoted in para. 23 above. It is not possible for this new point to be taken on appeal in the absence of any relevant finding of fact.

New evidence

65.  By summons dated 27 October 2009, the plaintiffs applied for leave to adduce further 21 items of further evidence. Items 6 to 21 relate to an earlier application by the plaintiffs by summons dated 20 December 2003 to restrain the defendants and Messrs T C Lau & Co., their solicitors, from:

“a.  approaching whether in Hong Kong or Japan in writing or orally or in any other way interfering or threatening Mr. Toru Eguchi in respect of his going to be a witness for the Plaintiff in the present proceedings on the basis of his witness statements already filed with the Court; and

b.  approaching whether in Hong Kong or Japan in writing or orally Mr. Toru Eguchi either directly or through his present employer Mr. Koruda with a view to persuading or pressurizing Mr. Tom Eguchi into withdrawing or even altering on his witness statements in this action.”

66.  After a hearing, on 30 April 2004, Deputy High Court Judge Jat, SC, dismissed the application. Those items of evidence were not produced at the trial.

67.  None of the conditions of Ladd v Marshall [1954] 1 WLR 1489 is satisfied. The conditions are:

“first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial; secondly, the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; thirdly, the evidence must be such as is presumably to be believed, or, in other words, it must be apparently credible though it need not be incontrovertible” (Ladd v. Marshall [1954] 1 W.L.R. 1489; [1954] 3 All E.R. 745, CA, per Denning LJ. at 1491 (WL.R.), 748 (All E.R.)

68.  As for the other 5 items, no attempt has been made to show that they satisfy the Ladd v Marshall conditions.

69.  Lastly, at trial, the plaintiffs had sought to rely on certain witness statements of Mr Eguchi, who was unavailable as a witness. The learned judge in exercise of his discretion refused to admit the witness statements. Mr Stanley Tsui submitted that the learned judge ought to have admitted Mr Eguchi’s affirmations under O. 38 r. 2. O. 38 r. 2 provides that:

“(1)  The Court may, at or before the trial of an action begun by writ, order that the affidavit of any witness may be read at the trial if in the circumstances of the case it thinks it reasonable so to order.”

70.  It is not clear whether, and if so, how seriously Mr Daniel Fung had urged the learned trial judge to admit these affirmations. Nor did the learned judge deal with it in his judgment. However, in relation to Mr Eguchi’s witness statements, he said:

“50.  As is customary in such situations, this court has paid no attention to such other witness statements as have been filed, and further specifically has declined the request of Mr Fung SC formally to admit into evidence the witness statement of Mr Toru Eguchi, the head of SKK Hong Kong; Mr Eguchi is a gentleman with whom Mr Stanley Tsui in particular had extensive dealings, and with regard to whom the plaintiff had issued a subpoena ad testificandum, albeit such subpoena went unanswered by reason, I am told, of the fact that Mr Eguchi now resides in Japan, and apparently has declined to attend this trial.”

71.  We see no basis on which to interfere with the learned judge’s exercise of discretion. Furthermore, having regard to the content of Mr Eguchi’s affirmations, I do not believe they would have affected the outcome of the proceedings.

72.  For the above reasons, I would dismiss the appeal with costs. Mr Tsui submitted that only one counsel should have been instructed. I am of the view that two counsel are justified. The matter is of some complexity. As noted, the plaintiffs were represented by three counsel below.

Hon Cheung JA:

73.  I agree.

Hon Yuen JA:

74.  I agree with the Vice-President’s judgment.