MAXX MARKETING LTD v. PPM TOYS LTD

DCCJ 114/2023

[2026] HKDC 749

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 114 OF 2023

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BETWEEN

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JUDGMENT

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A. Introduction

1.  This is the trial of the plaintiff’s claim for the unpaid price of goods supplied.

B. Undisputed facts

2.  The plaintiff is a trading company engaged in the manufacture, sale and delivery of toy related products. The Chief Operating Officer and Director is Ms Ann Wong On Kee (“Ms Wong”).

3.  The defendant is a Hong Kong incorporated company. At all material times, it was represented by: (i) Mr Carlos Eugenio Iga Villarreal (“Carlos Junior”) who is a director and sales manager of the defendant; and (ii) Carlos Junior’s father, Mr Carlos Iga Saade (“Carlos Senior”), the Chief Executive Officer, director and a 30% shareholder of the defendant.

4.  On 18 March 2020, Ms Wong for the plaintiff and Carlos Senior for the defendant signed a Non-Exclusive Distributor Agreement (the “Distributor Agreement”). The salient terms of the Distributor Agreement are as follows:-

(1) It was expressly provided that the Distributor Agreement was entered into between the plaintiff and the defendant and their respective affiliates and subsidiaries. The effective date of the agreement is 18 March 2020.

(2) Under Clause 1.1, the plaintiff appointed the defendant[1] as its independent, non-exclusive distributor to purchase, sell, distribute and promote the plaintiff’s products which were set out in Schedule A to the agreement (the “Products”). Under Clause 2.1, the list of Products covered by the Distributor Agreement may be amended from time to time in the sole discretion of the plaintiff.

(3) According to Clause 1.2, the defendant shall sell the Products only in Mexico[2]. The defendant shall purchase and import, solely from the plaintiff or the plaintiff’s nominees and resell the Products on the defendant’s own account.

(4) Under Clause 2.2, payments for the Products purchased by the defendant shall be in US dollars via wire transfer on the terms and conditions as prescribed in the plaintiff’s invoices provided that the provisions of the invoices shall take precedence in the case of conflict between the terms of the invoices and the terms of the Distributor Agreement. Terms are FOB China (Incoterms 2010) at the best competitive price possible. Payment of 40% of the purchase price is due upon order confirmation and the balance is due upon presentation of a copy of the applicable Bill of Lading and Original Bill of Lading released to the defendant. Notwithstanding acceptance of an order, the plaintiff is not obliged to deliver the Products unless the defendant complies with the above payment terms.

(5) Under Clause 2.3, the defendant is required to purchase a minimum of US$250,000[3] in value of the Products during the Initial Term (which was defined to be from 18 March to 31 December 2020[4]) (the “Minimum Annual Purchase Guarantee”).

(6) Under Clause 3.2, it is provided that the defendant shall have complied with all the terms and conditions of the Distributor Agreement, including the satisfaction of the Minimum Annual Purchase Guarantee, the Distributor Agreement shall automatically renew at the end of the Initial Term on the same terms and conditions, save and except that the Minimum Annual Purchase Guarantee shall be increased in accordance with Clause 2.3 for successive terms of 5 years each (in each case a “Renewal Term”), unless either party shall have provided written notice to the other party that it does not intend to renew the agreement at least 60 days prior to the expiration of the Initial Term or any Renewal Term.

(7) As provided in Clause 8.1, the plaintiff reserves the right to terminate the rights granted to the defendant in the Distributor Agreement following (amongst others) any material breach or material default in the performance of any obligation under the Distributor Agreement.

(8) As provided in Clause 11.4, the defendant performed the Distributor Agreement was as an independent contractor and shall be solely and personally responsible for all of its employees and agents.

C. The plaintiff’s case

5.  In gist, the plaintiff’s case is that at all material times, PPM Mexico was the defendant’s agent. Similarly, Maxx Marketing Sa De CV (“Maxx Marketing Mexico”), a Mexican company which was 99.99% owned by the plaintiff, was acting as the plaintiff’s agent. Even before the execution of the Distributor Agreement, the plaintiff entered into its first transaction for sale of toy products to the defendant in January 2020 under sales confirmations no 20130101 and 20120102 both dated 13 January 2020. Under the defendant’s instruction, the said confirmations were invoiced to an entity named Processed Plastic de Mexico S.A.P.I. de C.V. (“PPM Mexico”), a Mexican company.

6.  The defendant paid for the goods purchased through sales confirmations numbered 20130101 and 20120102 from a bank account held in the name of the defendant.

7.  Further, the plaintiff claims that the Distributor Agreement contains the following implied terms:-

(1) For sales confirmation and invoices issued by the plaintiff or its affiliates or subsidiaries to any of the defendant’s affiliates or subsidiaries, including PPM Mexico, all the payment liability would be settled by the defendant as per the previous dealings, customs and practice between the parties.

(2) The defendant and its affiliates and subsidiaries are jointly and severally liable for any breach of the Distributor Agreement.

(3) After the expiry of the Initial Term on 31 December 2020, the plaintiff and the defendant had the common intention and by conduct had continued to perform the Distributor Agreement, and thereby renewed it.

8.  The plaintiff claims that the defendant has failed to pay for the goods delivered in the following transactions as evidenced by 3 sales confirmations (the “Sales Confirmations”):-

Sales Confirmation No/‌Date	Invoice No/‌Date	Bill of Lading Date	Price (US$)
SC-HK-210128 (5/7/21)	SI-HK-210579 (17/9/21) SI-HK-220016 (6/1/22)	18/1/22	28,268.52
SC-HK-210241 (5/7/21)	SI-HK-210703 (5/7/21) SI-HK-210805 (17/9/21, 23/12/21)	30/12/21	49,842.76
SC-MX-210003 3 (24/8/21) 2	SI-MX-210665 (17/8/21) SI-MX-210005 (24/8/21) SI-MX-210006 (25/8/21)	24/8/21	144,000.00 1
LESS – Deduction agreed by the plaintiff 4			10,000.00
Total Outstanding:			212,111.28

¹ The original invoice price was US$167,040 but the parties agreed to reduce the price to US$144,000, see: Ms Wong’s Supplemental Witness Statement at §27.

² The vendor named in this Sales Confirmation is Maxx Marketing Mexico.

³ Later changed to SC-MX-210687, see Ms Wong’s Supplemental Witness Statement at §32.

⁴ See Amended Statement of Claim at §5.

D. The defendant’s case

9.  The defendant denied liability on the following grounds:-

(1) As the defendant had failed to satisfy the Minimum Annual Purchase Guarantee, the Distributor Agreement was terminated on 31 December 2020 and was not renewed. At all material times, the plaintiff did not waive the said requirement.

(2) The defendant denied having ordered any Products from the plaintiff, whether pursuant to the Distributor Agreement or not.

(3) The Sales Confirmations were between the plaintiff and PPM Mexico only.

(4) The defendant denied having any direct or indirect affiliation, subsidiary and/or agency relationship with PPM Mexico.

E. The proceedings at trial

10.  The defendant was absent at the trial. I note that the defendant was legally represented until 8 August 2024, after which it had not taken any active part in these proceedings. The defendant was also absent at the 3^rd and 4^th case management hearings and the pre-trial review which took place on 12 September 2024, 31 October 2024 and 2 September 2025, respectively.

11.  As the plaintiff’s solicitors have produced an affirmation of service showing that the plaintiff’s opening submissions and other documents were served on the defendant at its registered office and last known address, I am satisfied that the defendant has sufficient notice of this trial and that the trial should proceed in its absence.

12.  The plaintiff then called Ms Wong as its only witness who adopted her witness statements as her evidence in chief. Pursuant to my direction, the plaintiff’s counsel also filed his written closing submissions on 2 December 2025.

F. The issues

13.  The primary issues to be determined are as follows:-

(1) Whether the Distributor Agreement has been renewed?

(2) Whether the defendant should be liable for the Sale Confirmations?

G. Issue (1) - Whether the Distributor Agreement was renewed?

14.  It is not disputed that the Minimum Annual Purchase Guarantee was not satisfied in the Initial Term. However, the plaintiff argued that it had waived the requirement so that the Distributor Agreement was renewed, and that it remained in force when the Sale Confirmations were concluded.

15.  It is trite that a waiver by estoppel can arise where a party (without any request) represents to another party that he will forbear to enforce or rely on a term of the contract to be performed or observed by the other party, and the other party acts in reliance of that representation, see: Chitty on Contracts (35^th Ed, 2025) at §26-043. What is material is that there must be evidence of the forbearance, which may be communicated orally or inferred from conduct, see: SNE Engineering Co Ltd v Chim Kee Machinery Co Ltd HCA 2025/2012 (unreported, 24 March 2016) at §20.

16.  Where a clause is inserted solely for the benefit of one party, he may, without the assent of the other, waive compliance with that provision and enforce the contract as if that provision has been omitted, see: Chitty at §26-049; Righttop Investment Limited v Yu Tsui Sheung and another HCA 2691/2001 (unreported, 10 March 2005) at §78.

17.  The effect of the waiver is that, the party seeking the forbearance will not be permitted to repudiate the waiver and to rely on the letter of the agreement. No consideration is required for establishing a waiver, see: Chitty at §§26-046 to 26-047.

18.  In the circumstances, I am satisfied that the issue of waiver has been properly raised in the pleadings even though the plaintiff did not expressly use the term “waiver” in its Amended Statement of Claim (“ASOC”):-

(1) The basic objective of pleadings is to fairly and precisely inform the other party or parties in the litigation of the stance of the pleading party (in other words, that party’s case), see: Kwok Chin Wing v 21 Holdings Ltd (2013) 16 HKCFAR 663 at §21.

(2) It has been expressly pleaded in the ASOC (at §2N) that the parties (and their affiliates) had the intention to continue to perform the Distributor Agreement after the lapse of the Initial Term on 31 December 2020 by, amongst others, entering into the Sales Confirmations.

(3) There is no question of unfairness or ambush as the defendant was clearly aware of the issue of waiver being raised, as it is expressly pleaded in the Defence (at §5) that the plaintiff did not waive the requirement on the Minimum Annual Purchase Guarantee and hence the Distributor Agreement was never renewed.

19.  I am also satisfied that, by entering into the Sales Confirmations, the Distributor Agreement had been extended as the plaintiff did not take issue with the defendant concerning its inability to satisfy the Minimum Annual Purchase Guarantee.

20.  On a plain reading of Clauses 2.3 and 3.2, it is clear that the Minimum Annual Purchase Guarantee requirement was inserted for the plaintiff’s benefit as the obligation is solely on the defendant on making the requisite amount of purchase. Hence, it is not strictly necessary for the defendant to agree to the waiver.

21.  In any event, I am satisfied that the Sales Confirmations amounted to unequivocal conduct by the parties which could give rise to an acknowledgment of the waiver of the Minimum Annual Purchase Guarantee:-

(1) The Sale Confirmations were clearly transactions for sale and purchase of the Products which would have fallen under the scope of the Distributor Agreement[5].

(2) There was no suggestion of any separate distributor agreement or arrangement governing the distribution of Products to PPM Mexico or even discussions to enter into any new distributor agreement in respect of the Products.

(3) There is no indication from the plaintiff in any of the correspondence that it would require the defendant to meet the Minimum Annual Purchase Guarantee.

22.  However, whether the Sales Confirmations can amount to a waiver which is attributable to the plaintiff and the defendant as parties to the Distributor Agreement depends largely on whether PPM Mexico was acting as an agent of the plaintiff. This will be considered in Section H below.

23.  Accordingly, subject to the agency issue as described above, I find that the Distributor Agreement was extended by reason of mutual conduct of the parties in entering into the Sales Confirmations.

H. Issue (2) - Whether the defendant could be held liable for the Sales Confirmations as principal of PPM Mexico?

24.  Irrespective of whether the Distributor Agreement was extended (so as to apply to the Sales Confirmations), it is clear that each of the Sales Confirmations is capable of being regarded as an individual contract given that each Sale Confirmation contains the essential terms (including terms of payment, description and quantities of the relevant products sold and the terms of delivery). Hence, the crucial issue to be determined is whether the defendant can be held liable even though it was not named as a party to the Sales Confirmations.

25.  On the face of it, the Sales Confirmations were between the plaintiff as vendor[6] and PPM Mexico as buyer. However, this is not the end of the matter as the plaintiff argued that PPM Mexico is the defendant’s agent. Hence, the defendant should nevertheless be held liable as principal. As said in Bowstead & Reynolds on Agency (23^rd Ed, 2025) at §8-001[7]:-

“A disclosed principal, whether identified or unidentified, may sue or be sued on any contract made on the principal’s behalf by an agent acting within the scope of the agent’s actual authority or whose acts are validly ratified.”

26.  Even where the principal is not named in the contract, it is possible that the party to the contract may act as an agent where the contractual matrix surrounding the agent’s dealing with a third party gives the third party reason to know that the agent dealt only as the principal’s representative, see: Bowstead at §8-002.

27.  Applying these principles, I agree with the plaintiff that, in the circumstances, PPM Mexico entered into the Sales Confirmations as agent for the defendant.

28.  First, I accept that on the evidence, it is clear that PPM and PPM Mexico are affiliates which acted through the same individual(s) in their dealings with the plaintiff:-

(1) Both PPM and PPM Mexico were under common management and control. According to the company searches conducted by the plaintiff, Carlos Senior held 30% shares in the defendant and 99.98% shares in PPM Mexico. he was also a director of both PPM and PPM Mexico.

(2) According to the client questionnaires provided by the defendant to the plaintiff in April 2020, the defendant and PPM Mexico shared the same representative/‌contact person in their dealings with the plaintiff, namely Carlos Senior.

(3) The email correspondence shows that the main person who communicated with the plaintiff’s representatives for the sale and purchase of the Products (including those pursuant to the Sales Confirmations) was Carlos Junior.

(4) Both the defendant and PPM Mexico share the same internet domain name “ppmtoys.com”. At all material times, irrespective of whether he was purportedly communicating with the plaintiff on behalf of the defendant PPM Mexico, Carlos Junior would use the same email address with this domain name “ceiga@ppmtoys.com” with the same office telephone number and the same title of “Sales Manager”.

29.  It follows that Carlos Junior is capable of having the actual authority to act for the defendant or both the defendant and PPM Mexico in dealing with the plaintiff concerning the Sales Confirmations. As Carlos Junior did not attend court to give evidence at trial, the court would have to consider the objective evidence, such as the contract itself, pre-contractual as well as post-contractual words and conduct of the parties and the surrounding circumstances (particularly that of the agent and the supposed principal regarding their assertions as to what their intentions were at the time) to decide which principal(s) he acted for at the material time[8].

30.  Second, I am satisfied that it was the defendant’s practice to use PPM Mexico as a nominee in purchase transactions with the plaintiff by reference to parties’ prior course of dealing.

31.  As mentioned above, on or about 13 January 2020, when the plaintiff first began to sell products to the defendant, two order confirmations were sent in the name of defendant (numbered 20130101) and PPM Mexico (numbered 20130102) respectively to the plaintiff. As shown from a subsequent email dated 2 April 2020 (at 4:05 am) from Connie Tseung of the plaintiff to Carlos Junior, the shipment destination of order numbered 20130101 was Liverpool, the UK whilst the destination of order numbered 20130102 was Mexico.

32.  Notwithstanding the different contracting entities used in the confirmations no 20130101 and no 20130102, the purpose of using two different entities was explained in Carlos Junior’s cover email dated 13 January 2020 (at 10:44 am) as follows:-

“As discussed please see attached order confirmation for the first shipment to PPM Toys and the order confirmation for the FOB Liverpool shipment as well.

Please note the first shipment will be invoiced to our company in Mexico and the FOB Liverpool will be invoiced to our company here in Hong Kong. As it will be shipped directly to customer from factory…” (emphasis added).

33.  It is clear from the above that for the purpose of the “first shipment” (ie order numbered 20130102 bound for Mexico), the reference to the contracting party was to the defendant’s company in Mexico (which must be a reference to PPM Mexico, a Mexican company). In the same email, Carlos Junior also explained to the plaintiff this “first shipment” was in fact a shipment for “PPM Toys” (ie the defendant) even though the contracting entity is PPM Mexico. The term “PPM Toys” in the email must be a reference to the defendant rather than PPM Mexico as it is the only entity which contains the words “PPM Toys” in its name. This is further illustrated by Carlos Junior’s careful distinction between “our company in Mexico” (ie PPM Mexico) and “our company in Hong Kong” (ie the defendant) in his email.

34.  It follows that, even though PPM Mexico was named as the contracting party for the purpose of sales confirmation numbered 20130102, the defendant was intended to be the actual principal. This is further fortified by the undisputed fact that the purchase price for sales confirmation numbered 20130102 was ultimately settled by the defendant but not PPM Mexico.

35.  The use of affiliates as contracting entities involved in the purchase transactions with the plaintiff was also envisaged in the Distributor Agreement given the various express references to the parties’ affiliates as parties to the distributorship[9], in particular that the defendant’s affiliates and subsidiaries were also appointed as “Distributor” of the plaintiff (and its affiliates and subsidiaries).

36.  The above practice of the defendant in using PPM Mexico as its nominee had continued at least up to October 2021 (ie after the Sales Confirmations were entered into):-

(1) On 16 August 2021, the plaintiff issued an invoice (no: SI-HK-210578)[10] for sale of certain products to PPM Mexico. Delivery is evidenced by the issuance of a Bill of Lading dated the same date with PPM Mexico named as the consignee.

(2) After the plaintiff chased for payment, on 30 September 2021 at 5:28 am, Carlos Senior sent an email offering to pay the outstanding sum from the Hong Kong bank account of the “PPMTOYS company” (ie the defendant) but claimed that he was unable to do so due to daily transfer limits.

(3) By email from Carlos Junior dated 1 October 2021 at 1:36 am, he expressly confirmed that it was the defendant which made payment to settle invoice SI-HK-210578:-

“Please see attach [sic] the payment confirmation from PPM Toys Limited, this is to be deducted from the SI of Processed Plastic SI-HK-210578.”

(4) As indicated in the above emails, payment was ultimately made in tranches from the defendant’s bank account with HSBC to the plaintiff on 1, 4 and 5 October 2021.

37.  There is also no suggestion that there has ever been any transaction where PPM Mexico had independently made payments to the plaintiff on its own account for any of the transactions concluded under its name, or that the defendant was somehow acting as payment agent for PPM Mexico.

38.  Finally, the argument that PPM Mexico (rather than the defendant) is liable for payment under the Sales Confirmations appears to be an afterthought, as t this was not raised by Carlos Senior or Carlos Junior in contemporaneous communication when the plaintiff chased for payment.

39.  In the circumstances, I am satisfied that the defendant used PPM Mexico as its agent in its course of dealings with the plaintiff and its affiliates including those in respect of the Sales Confirmations.

40.  It follows that, as principal, the defendant is liable for any sum outstanding under the Sales Confirmation. Since it is not disputed that (i) the plaintiff had made deliveries of the relevant sold under the Sale Confirmations (which are supported by the bills of lading produced by the plaintiff); and (ii) no payment was ever made for the Sale Confirmations, I am satisfied that the defendant shall be liable for the total purchase price of the Sale Confirmations as set forth in §8 above.

41.  For completeness, it is noted that for Sales Confirmation SC-MX-210003, the named seller was Maxx Marketing Mexico rather than the plaintiff. Nevertheless, I am satisfied that the plaintiff is entitled to claim under SC-MX-210003 as principal of Maxx Marketing Mexico:-

(1) As noted in §25 above, a disclosed principal, whether identified or not, may sue on any contract which was made by an agent on its behalf. Even in the case of an undisclosed principal, the principal can sue on the contract where the agent entering into it must have intended to act on the principal’s behalf. Where the contract is entered into without reference to agency, external evidence is admissible to entitle the principal to sue on the contract, see: Bowstead at §8-068.

(2) I accept the plaintiff’s case that Maxx Market Mexico was the plaintiff’s agent[11]. Maxx Marketing Mexico is a 99.99% owned subsidiary of the plaintiff. It is also supported by Ms Wong’s undisputed evidence that Maxx Marketing Mexico was under the direct and complete control of the plaintiff at all material times[12]. None of this is disputed by the defendant.

42.  In light of the analysis above, it is not necessary for me to consider whether the defendant should be held liable under the alleged implied term of the Distributor Agreement as set out in §7 above.

I. Interest

43.  The plaintiff is entitled to contractual interest of 2% per month for overdue payments as set out in the invoices for the Sales Confirmations. According to Clause 2.2 of the Distributor Agreement, such terms in the invoices shall govern the terms of sale and payment and are binding on the defendant.

44.  As provided in the purchase orders, sales confirmation and invoices issued for the Sales Confirmations, the plaintiff is entitled to full payment by the date of issuance of the relevant bills of lading[13].

45.  I allow the plaintiff’s interest for the periods starting on the dates[14] as proposed by the plaintiff up to the date of judgment as follows:-

Sales Confirmation	Starting Date	Daily rate (US$)	Interest up to judgment (US$)
SC-HK-210128	20/1/22	18.58	29,170.60
SC-HK-210241	31/12/21	32.77	52,104.30
SC-MX-210003	26/8/21	88.11[15]	151,284.87
Total:			232,559.77

46.  Interest shall accrue post-judgment at the judgment rate until payment in full.

J. Costs

47.  As the plaintiff’s claim is successful, there is no reason why costs should not follow the event. I make an order nisi that the defendant do pay to the plaintiff the costs of the action (including any costs reserved), to be taxed if not agreed with certificate for counsel.

K. Disposition

48.  Accordingly, I make the following order:

(1) The defendant shall pay to the plaintiff the following sums (i) US$212,111.28[16]; and (ii) US$232,559.77[17].

(2) Interest shall accrue on (1) above at judgment rate from the date of judgment.

(3) There be an order nisi that the defendant shall pay to the plaintiff the costs of the action (including any costs reserved), to be taxed if not agreed, with certificate for counsel. Unless any party applies to vary the same by summons, the costs order nisi shall be made absolute 14 days from the date of this judgment.

49.  It remains for me to thank Mr Chau for his helpful assistance.