XCHRX EASY INDUSTRIAL LTD. v. DEUTSCHE LUFTHANSA AG

HCA 10239/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10239 OF 1997

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J U D G M E N T

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1. This is an appeal by the Defendant from the Order of Master Cannon made on 14th April 1998 giving final judgment to the Plaintiff as claimed under O.14.

2. The Defendant in this case is a German company incorporated in Germany which operates the well known airline of Lufthansa. The Plaintiff's claim is for the price of cosmetic goods supplied by the Plaintiff for use on the Defendant's planes and is based on 16 invoices which are listed in the Schedule to the Statement of Claim. The Defendant accepts that it is liable for the first five invoices, totalling the sum of HK$80,214.00. There is no dispute that all the goods, the subject matter of the Plaintiff's claim, have been supplied by the Plaintiff. These goods were supplied when the Defendant issued Purchase Orders 731/1492, 734/1847 and 734/1453. Pursuant to each of these Purchase Orders issued by the Defendant, the Plaintiff then issued Sales Contracts SC-894-6E1, SC-984-7E1 and SC-879-6E1 respectively.

The Defence

3. In a nutshell the defence can be summarised as follows. Apart from the first five invoices which were issued to the Defendant, all the other invoices sued on by the Plaintiff were issued to LSG Catering Logistik GmbH ("Logistik") which is a subsidiary of the Defendant but a separate legal entity from it. The Defendant's case is that these other invoices issued to Logistik, the goods in relation thereto were ordered by the Defendant on behalf of Logistik and that therefore the proper person for the Plaintiff to sue was Logistik and not the Defendant. The Defendant has also raised a counterclaim should it be found to be the contracting party with the Plaintiff. This counterclaim exceeds the amount of the Plaintiff's claim. In the circumstances, the Defendant also seeks to rely on the defence of set-off in respect of this counterclaim. In an O.14 application, it is for the Defendant to show that there is an arguable defence or triable issues of fact. I therefore turn to the Defendant's evidence.

Defence evidence

4. The Defendant accepts that prior to January 1996 all purchases were made directly by the Defendant with the Plaintiff. It is for this reason that the Defendant has accepted liability for the first five invoices which were issued between 30th November 1995 and 18th January 1996. However, the Defendant points to a letter dated 31st January 1996 which it wrote on standard form to all of its suppliers, including the Plaintiff, to inform them that because of internal restructuring, a new company has been formed as at 1st January 1996, namely Logistik, and that this new company will, with immediate effect, assume all rights and obligations of the Defendant. Moreover, until further notice, the purchasing function will be carried out by the Defendant's purchasing department on behalf of Logistik and that the previous contacts will remain the same.

5. The Defendant's case, therefore, is that after 31st January 1996 all purchases were made by the Defendant as agents for Logistik. The Defendant also points to the fact that two of the three Purchase Orders, namely, 734/1453 and 731/1492, were issued on 15th November 1996, and the 3rd purchase order, being Order No. 734/1847, was issued on 9th April 1997. In Purchase Order No. 734/1453, it contained the words in English : "We hereby order on behalf of LSG Catering Logistik GmbH", whereas in the other two Purchase Orders which contains words in the German language translated to read in English : "This order is made on behalf of and for the account of LSG Catering Logistik GmbH". In this respect, the Defendant also relies on the fact that a Mr Justus of the Plaintiff's company is, on his own admission on affidavit, well familiar with the German language. It was pursuant to these three Purchase Orders that the Plaintiff then issued the three Sales Contracts in respect of the same goods ordered. Each of the three Sales Contracts makes reference to the respective Purchase Orders by reference to the Purchase Order number, and although all of the Sales Contracts were signed by the Defendant, it is the Defendant's case that the Defendant signed on the Sales Contracts as agent on behalf of Logistik which was a fact well known to the Plaintiff in view of the wording contained in each of the Purchase Orders.

6. The Defendant further relies on the contents of a telephone conversation shortly after January 1996 between a Ms Daniela Platz of the Defendant with Mr Justus of the Plaintiff in which Ms Platz told Mr Justus that as from the end of January 1996 the Plaintiff would be contracting with Logistik through the Defendant's own personnel with whom the Plaintiff had previously been dealing. Furthermore, the Defendant had also by fax dated 5th March 1996 reminded the Plaintiff that it had been informed in January 1996 that all contracts would be with Logistik rather than the Defendant, and that both the telephone conversation and the fax reminder preceded all the Purchase Orders as well as the Sales Contracts which gave rise to the subject matter of the present claim.

7. The Defendant also relies on the fact that all these invoices sued upon were issued by the Plaintiff to Logistik. Moreover, part-payment of some of these invoices had already been made by Logistik, and that for those outstanding amounts of these invoices, requests for payment had been made by the Plaintiff by letters to Logistik. Three such requests for payments from Logistik made by the Plaintiff were dated 16th January 1997, 23rd January 1997 and 4th March 1997, all of which were produced into evidence.

Dispute as to facts

8. From the evidence before me, it is clear that there are at least two areas of disputed facts. The first is as to whether the Plaintiff actually received the letter sent by the Defendant to it at the end of January 1996 notifying the Plaintiff of the setting up of Logistik, and that in future Logistik would be taking over the Defendant's purchasing duties. The Plaintiff has denied receiving such a letter from the Defendant.

9. Secondly, it is also disputed as to whether Miss Platz did explain to Mr Justus over the telephone that the Plaintiff would be contracting with Logistik even though the Plaintiff would still be dealing with the same personnel of the Defendant.

Conclusion

10. These disputed facts would necessarily have to be resolved by the trial judge after hearing evidence before he would be in a position to come to a conclusion as to whether the Defendant was the contracting party with the Plaintiff or whether the Defendant was acting as agent for Logistik in each of the three contracts for goods. It follows therefore that there must necessarily be a triable issue of fact. Accordingly, there is no need for me to consider the Defence of set-off raised in the Defendant's counterclaim suffice it to say that the allegation in the counterclaim is that the Plaintiff was in breach of Purchase Order No. 734/1847. The Defendant must be given unconditional leave to defend that part of the Plaintiff's claim which is disputed by the Defendant in this case.

11. For the above reasons, the appeal is allowed and the Order of Master Cannon on 14th April 1998 giving final judgment against the Defendant in terms of the Re-amended Statement of Claim is set aside. In place of that Order of Master Cannon will be an Order that there be judgment for the Plaintiff in the sum of HK$80,214.00 with unconditional leave to the Defendant to defend the balance of the Plaintiff's claim. Since the counterclaim directly relates to that part of the claim for which judgment is given, there will be a stay of execution upon that judgment for HK$80,214.00 pending the trial of the Defendant's counterclaim.

12. I will further order that the sum of HK$379,812.01 paid into Court by the Defendant on 20th May 1998 pursuant to the Order of Mr Registrar Betts made on 8th May 1998 be paid out to the Defendant's solicitor.

Costs

13. This case, when it came before the Master on this O.14 summons, was woefully prepared by the Defendant. The Defence was so badly drafted that, not surprisingly, it drew the criticism of another learned Judge before whom this appeal was initially listed. Prior to the hearing, I was handed a copy of a draft Amended Defence and Counterclaim by Mr Smith on behalf of the Defendant, and no doubt the Defendant will be seeking in due course to replace the present Defence with that draft. Moreover, the affidavit evidence that was put before the Master was so lacking that it was hardly surprising that she made the Order giving summary judgment to the Plaintiff as she did. One example of that can be seen from the fact that the Purchase Order exhibited to the affidavit of Miss Platz did not contain the page on which were the words indicating that the Defendant had made that Purchase Order on behalf of Logistik - a matter which was strongly relied on by the Defendant in this appeal, and which undoubtedly played an important part in my decision. In the circumstances, and for these reasons, I shall make an Order nisi that firstly, the costs of this appeal be costs in the cause, and secondly, that the costs of the hearing below before the Master be to the Plaintiff in any event. I have no doubt that had all the necessary and relevant evidence been put before the Master by the Defendant as it was before me, the Master would not have come to the conclusion that she did.