|
HCA 1355/2017
[2021] HKCFI 3618
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 1355 OF 2017
________________________
BETWEEN
| |
T&T GLOBAL TRADING LIMITED |
Plaintiff |
| |
and |
|
| |
BOE (HK) GROUP CO., LIMITED |
Defendant |
________________________
Before: Deputy High Court Judge Raymond Leung, SC in Court
Date of Hearing: 19-21 & 23 July 2021
Date of Judgment: 20 December 2021
________________________
J U D G M E N T
________________________
1. This is the Plaintiff’s claim for breach of contract on the part of the Defendant for non-delivery of certain electrical goods. In essence, the Plaintiff claims for (1) return of deposit in the sum of US$707,187.50; (2) loss of profit in the sum of US$143,508.50; and (3) a declaration to be indemnified by the Defendant against any potential claims from its sub-buyer.
2. Mr Jonathan Wong (“Mr J Wong”) together with Miss Leticia Tang appeared on behalf of the Plaintiff and Mr Thomas Wong (“Mr T Wong”) appeared for the Defendant.
Background
3. The Plaintiff company was incorporated in Hong Kong and its sole director, Mr Baris Pandir, was of Turkish nationality. The Plaintiff operated an office in Shenzhen for sourcing of electrical goods for export to various Eastern European countries. Amongst the Plaintiff’s customers were Horizont Factory of Electronics and Household Appliance in Belarus (“HORIZONT”) and OOO Smart in Russia (“OOO Smart”). In the Shenzhen office, the Plaintiff employed Miss Pan Hong Yu Paris (“Paris”) as a Sourcing Manager and Miss Chen Jian Zhen Priscilla (“Priscilla”) as a Sourcing Assistant.
4. In April 2016, at the China Import and Export Fair held in Guangzhou, Mr Pandir first came into contact with Huang Long Yun Anny (“Anny”), a Sales of the “Sunshine Group”, which comprised a group of companies specializing in the development of electro-optical technology and production of electronic devices and home appliances, in particular, television sets using Light Emission Diodes (LED). This led to a meeting at the Defendant’s Shenzhen Office in May 2016 between Mr Pandir and Anny along with Mr Vincent Wu (“Vincent”), the Sales Director of the Defendant.
5. In due course, on or about 13 July 2016, a Supply Cooperation Agreement (the “Supply Cooperation Agreement”) was entered into between HORIZONT on the one part and business associates of the Sunshine Group on the other part (including Guizhou Shengxinhui Science & Technology Ltd 贵州晟鑫辉科技有限公司 (“Guizhou Factory”) and Shenzhen One Touch Business Service Ltd (“Shenzhen One Touch”)). Guizhou Factory was in fact a supplier of the Sunshine Group.
6. In August 2016, the Plaintiff started to place order for LED television sets pursuant to the Supply Cooperation Agreement. In particular, there was an order in the amount of US$1,500,000 placed by the Plaintiff with Shenzhen One Touch to fulfill a corresponding order from HORIZONT (the “HORIZONT Order”).
7. The Plaintiff’s case herein arose from another order for LED television sets of various sizes and models as evidenced in a Proforma Invoice dated 22 September 2016 (the “1st Invoice”) wherein the Defendant was named as the seller upon being nominated as such by virtue of what is called a “Letter of Delegation” issued by the Sunshine Group on 20 September 2016.
8. By the exchange of correspondence (both before and after signing of the 1st Invoice), it is clear that the Defendant was aware that the goods thereunder were to be exported by the Plaintiff to OOO Smart in Russia (Kallingard).
9. A peculiar feature of this case is that the television sets sold by the Defendant to the Plaintiff were not completely assembled but were in Semi-Knocked Down (“SKD”) form. The term SKD may be a bit misleading. All it means is that the goods were not completely assembled, not that they had been fully assembled and then disassembled into SKD form.
10. The 1st Invoice amounting to US$3,708,500.00 states as follows:
Proforma Invoice (PI)
|
Invoice No |
16YQ0922001BA |
Date: |
2016/9/22 |
|
From: |
BOE (HK) GROUP CO., LIMITED |
To: |
T&T Global Trading Ltd |
. . .
|
Item |
Product Description |
Unit FOB Price (US$) |
Quantity(PCS) |
Amount (US$) |
Remark |
|
1 |
18.5” ATV/AC3 (V56) |
54.50 |
1,500 |
$81,750.00 |
|
|
2 |
21.5” ATV/AC3 (V56) |
62.50 |
1,500 |
$93,750.00 |
|
3 |
23.6” ATV/AC3 (V56) |
66.00 |
1,500 |
$99,000.00 |
|
4 |
32” ATV/AC3 (V56) |
103.00 |
5,000 |
$515,000.00 |
|
5 |
32” DTV DVBT2/S2/C/C1+/AC3 (3463) |
111.50 |
6,000 |
$669,000.00 |
|
6 |
39.5” DTV DVBT2/S2/C/C1+/AC3 (3463) |
157.00 |
10,000 |
$1,570,000.00 |
|
7 |
43” DTV DVBT2/S2/C/C1+/AC3 (3463) |
170.00 |
4,000 |
$680,000.00 |
|
|
below blank |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
29,500 |
$3,708,500.00 |
|
Remark:
1. Shipping term: FOB SHENZHEN.
2. Payment term: %20 TT deposit, %80 TT against B/L copy within 20 days
3. Delivery date: 40-45 days will start the delivery after %20 TT deposit received and necessary artwork confirmed in advance. Partial delivery is allowed.
4. Artwork design: will be done by client. Artwork files will be provided to client for designing before the order placed after PI confirmed.
5. Panel: 18.5”, 21.5”, 23.6” A grade. . .
6. Accessories: user manual *1pc (Russian), remote control*1pc, brown carton box * 1pc.
7. OSD languages . . . Default: Russian.
8. Shipment: SKD shipment. . .
9. Spare parts: 1% FOC. . .
10. Certifications: No need. Only AC3 should be included in mainboard.
11. Price validity: until next week before/on Friday (30th Sept)
11. On 27 September 2016, the Plaintiff paid to the Defendant by bank transfer a sum of US$741,700 being 20% deposit of the invoiced amount. Pursuant to the 1st Invoice, the artwork was confirmed by email on 8 November 2016. Thereafter, by an email dated 30 November 2016, the Defendant proposed a delivery schedule in two batches in respect of six out of the seven items under the 1st Invoice (1st and 2nd Batches).
12. By the same email, the Defendant informed the Plaintiff in respect of Item No. 6 (ie 10,000 pcs of 39.5” LED television sets at US$157 each) as follows:
“3rd…39.5” 10k pcs of DVBT2/S2: we are still searching the panel. As to market situation, the panel cost up more than 20usd, and panel shortage. We kindly need your checking with client for usd10 unit price costup”.
13. On 1 December 2016, the proposed delivery in 3 batches was set out in a “Guarantee Letter” (signed by Anny and Vincent) and was sent by email from Anny to Mr Pandir.
14. After a round of exchange of emails, the unit cost of 39.5” LED television sets was increased by US$5.00 from US$157 to US$162. This is evidenced in a second Proforma Invoice dated 8 December 2016 (the “2nd Invoice”). The costs for Item 6 was accordingly increased by US$50,000 (ie from US$1,570,000 to US$1,620,000). The 2nd Invoice states as follows:
Proforma Invoice
|
Invoice No |
16YQ1208001BA |
Date: |
2016/12/8 |
|
From: |
BOE (HK) GROUP CO., LIMITED |
To: |
T&T Global Trading Ltd |
. . .
|
Item |
Product Description |
Unit FOB Price (US$) |
Quantity(PCS) |
Amount (US$) |
Remark |
|
1 |
18.5” ATV/AC3 (V56) |
54.50 |
1,500 |
$81,750.00 |
|
|
2 |
21.5” ATV/AC3 (V56) |
62.50 |
1,500 |
$93,750.00 |
|
3 |
23.6” ATV/AC3 (V56) |
66.00 |
1,500 |
$99,000.00 |
|
4 |
32” ATV/AC3 (V56) |
103.00 |
5,000 |
$515,000.00 |
|
5 |
32” DTV DVBT2/S2/C/C1+/AC3 (3463) |
111.50 |
6,000 |
$669,000.00 |
|
6 |
39.5” DTV DVBT2/S2/C/C1+/AC3 (3463) |
162.00 |
10,000 |
$1,620,000.00 |
|
7 |
43” DTV DVBT2/S2/C/C1+/AC3 (3463) |
170.00 |
4,000 |
$680,000.00 |
|
|
below blank |
|
|
|
|
|
|
|
|
|
|
TOTAL |
|
|
29,500 |
$3,758,500.00 |
|
Remark:
1. Shipping Term: FOB SHENZHEN, CHINA.
2. Payment terms: 20% DEPOSIT IN ADVANCE, 80% BALANCE AGAINST B/L COPY WITHIN 20days. BOTH THE SELLER AND THE BUYER SHOULD BE SIGNED AND STAMP ON THIS PI.
3. Delivery date: 40-45days will start the delivery after %20 TT deposit received and necessary artwork confirmed in advance. Partial delivery is allowed.
4. Artwork design: will be done by client. Artwork files will be provided to client for designing before the order placed after PI confirmed.
5. Panel: 18.5”, 21.5”, 23.6” A grade. . .
6. Accessories: user manual *1pc (Russian), remote control*1pc, brown carton box * 1pc.
7. OSD languages: . . . Default: Russian.
8. Shipment: SKD shipment. . .
9. Spare parts: 1% FOC . . .
10. Certifications: . . .
11. Tolerance on Value and Quantity allowed.
12. Packing: Export standard packing.
13. T&T GLOBAL TRADING LTD. AND WE SHOULD PERFORM ALL THE COMMITMENTS ACCORDING TO THE PI ONLY. THIS PI AND THE CARGO IS NOT SUBJECT TO ANY OTHER AGREEMENTS AND CONVENTIONS.
15. For all purpose and intent, the 2nd Invoice replaced and superseded the 1st Invoice. It is fortuitous that the Plaintiff managed to secure a change in the back-to-back contract with OOO Smart in that the unit cost for this item was increased from US$162 to US$168 (see proforma invoice dated 7 December 2016 between the Plaintiff and OOO Smart). On the face of it, consequential upon the change from the 1st Invoice to the 2nd Invoice, the Plaintiff managed to achieve even better profit margin for this item from US$5.00 (US$162 - US$157) to US$6.00 (US$168 - US$162).
16. Although the 2nd Invoice provided for 20% deposit to be paid “IN ADVANCE”, no top-up deposit was paid by the Plaintiff to the Defendant on account of the increase in price by US$50,000 under the 2nd Invoice (as compared to the 1st Invoice).
17. Upon notification of partial shipment on or about 10 February 2017, the Plaintiff paid by bank transfer a balance sum of US$138,050 (net of 20% deposit paid on 27 September 2016) for (1) full quantity of goods under Item 1 of the 2nd Invoice (1,500 units of 18.5” television sets amounting to $81,750); and (2) partial shipment of Item 2 thereunder (1,473 out of 1,500 units of 21” LED television amounting to US$90,812.50).
18. Thereafter, no further delivery was made which was subject matter of discussions by email between 6 March 2017 and 28 March 2017. By the first email in this series (dated 6 March 2017), Anny proposed a delivery schedule for the remaining items under the 2nd Invoice (with delivery dates straddling from 25 March 2017 to 18 April 2017) and offered to put this in a “guarantee letter” (ie meaning an update from the previous one (dated 1 December 2016) referred to in Paragraph 13 above).
19. Despite the exchange of further emails, the updated “guarantee letter” for delivery was not forthcoming (see Paris’s email to the Defendant dated 23 March 2017). Importantly, on 23 March 2017, Anny replied to Mr Pandir by email which reads:
“For OOO Smart orders, the PMC [Production Materials Control] is checking the deliveries of the undelivered materials. Confirmed delivery schedule will be shared after all the material deliveries confirmed.”
20. Thereafter, another series of emails was exchanged with Mr Pandir suggesting on 28 March 2017 that instead of delivering the goods under the 2nd Invoice, the Plaintiff would accept existing stock materials so that the Plaintiff could commission another factory to process the same to make them ready for delivery to OOO Smart. The Defendant was warming to the idea and material lists were provided to the Plaintiff in April 2017.
21. The net effect of the negotiation was that component parts of LED television sets of various models and sizes to the total value of RMB4,879,593.75 (ie the equivalent of the balance of deposit in the sum of US$707,187.50, which was paid under the 1st Invoice and carried over to cover the 2nd Invoice) were to be handed over by the Defendant to the Plaintiff (or the Plaintiff’s nominated factory) for processing. Subject to some other terms and conditions yet to be agreed, the Defendant would be released from its obligation to make delivery under the 2nd Invoice.
22. Significantly, in an email from Paris to Anny dated 6 April 2017, it is stated:
“Pls urgently make the final confirmation for the materials we talked yesterday. We should finalize it asap and will sign the agreement for both parties.”
23. On 19 April 2017, Anny sent an email to Paris enclosing a Proforma Invoice between the Plaintiff and Defendant (backdated to 15 March 2017) covering the proposed components to be delivered. However, this backdated Proforma Invoice was never signed. Notably, it contained a clause, which reads:
“14. For the above items 1-7, the deposit balance is US$707,187.5. According to 1US$=6.9RMB exchange rate, totally amount is RMB4,879,593.75. Stock SKD materials shipment will be arranged. Total delivery value needs to be equal to RMB4,879,593.75 (including VAT). After the SKD materials delivered, this PI is closed. All the terms of this PI will be subject to clause 14”.
24. Thereafter, a meeting was held at the Defendant’s Shenzhen Office on 25 April 2017. Immediately after this meeting, Mr Pandir wrote an email to Anny and Vincent, which reads:
“As per our discussion this morning at your Shenzhen office and our internal communication that we could sign the agreements for OOO Smart including Horizont order. Please send us these two agreements drafts asap.
But the below two points must solved (sic) by your side before we sign these agreements otherwise it will be useless and not meaningful.
1) The SKD materials (with amount of 4,881,317.88 RMB) must open equivalent amount VAT Invoices to our appointed factory.
However, we cannot help to your side to make the account work. For example, make money flow into your account and then return and etc.
You can ask all the suppliers top open VAT invoices to our appointed factory or buy VAT invoices from the market.
If you cannot do that, you could deduct the VAT values from the price and offer all the materials without VAT invoice value to us and increase the amount of SKD materials in your delivery.
2) We can not (sic) pay %70 of balance payment to your account (both CVT & Cultraview) to get the delivery.
In this case, you should convince CVT & Cultraview that they must agree to receive the %70 of main board orders balance from 3rd party appointed company in China by us.
Or you could remove the 30% deposit TT amount of MAINBOARDS from you SKD material list amount and you could place this amount with other materials such as panels. You can load extra panels to us instead of these main boards order amount from CVT or Cultraview.
Please kindly check these two points above.
If you can (sic) solve these points above then we cannot afford the lost in VAT and will not take the materials from you side any more.
In this case than Sunshine have to return all the deposit to us or we could take the legal way for the remaining orders.” (emphasis added)
25. This was followed by a “Confirmation Letter” (确认函) (dated 26 April 2017) sent by email from Paris to Anny and Vincent, which reads as follows:
「 确认函
TO：以晴集团
兹有PI（PI号：16YQ0922001BA）的定金共707,187.5美金，按1 美金=6.9人民币汇率折算成人民币总金额4,879,593.75元，经双方协商同意，贵司同意将贵司提等价于4,879,593.75元的物料出货给我司以抵消定金的处理方案。
但贵司后提出，需我司或第三方再次付款到贵司账户以协助贵司平账。我司或第三方公司有如下疑问，请贵司对此举做一个书面答复以便我们跟第三方沟通解决。
问题一：贵司为什么会要求我司或第三方再次入账同等金额材料款到贵司账户？此前定金不是已经抵消了所有材料科？
问题二：请问该如何操作？请给出具体操作步骤？以便我们商讨可行性。
问题三：如我司或第三方不能协助此需求，材料将如何处理？」(emphasis added)
The Plaintiff’s Case
26. What transpired after issuing of the Confirmation Letter (确认函) is where the Plaintiff’s case significantly diverges from the Defendant’s case. The Plaintiff’s position is that the Confirmation Letter (确认函) is no more than an indication to accept component parts in lieu of delivery under the 2nd Invoice (the “Settlement Proposal”) subject to resolution of various issues arising from the Defendant’s request for settling of accounts within the Defendant’s accounting system.
27. It became apparent from the emails that at some stage the Plaintiff nominated 贵州汤姆逊电气有限公司 (“Thomson Factory”) to be the processing factory for the components parts to be supplied by Guizhou Factory (as directed or arranged by the Defendant) as contemplated under the Settlement Proposal.
28. On 4 May 2017 between 10:30 am and 12:09 pm, a string of emails were exchanged between Paris and Anny concerning the procedure for settling the Defendant’s account as follows:
「1、走账操作流程：汤姆逊带着他们的UKEY到深圳 以晴自己拿出20W人民币[RMB200,000]三方面对面走完这400多万的账 开票。会单独提供购销合同，双方签字。[Anny at 10:30 am]
RE：汤姆逊的财务在贵州不会过来，这20万可以打到汤姆逊老板的个人账上，他按股东名义马上入帐到汤姆逊公司账户。此操作你们公司的财务与汤姆逊老板务必在我们深圳办公室同时进行，并多见证实款的来回操作。那是否走账同时你们会在我们办公室当场开票？ [Paris at 11:30 am]
---Anny：可以到TT GLOBAL办公室三方见证走账操作。开票是我们贵州先开好票，可以先提供扫描件给你，走账完成后提供发票正本。[12:09 pm]
2、开票的同时，需要提供声明：HORIZONT/TT GLOABEL 与一达通/贵州晟鑫辉科技有限公司已经终止所有合作关系，不再有任何法律纠纷（HORIZONT和TT GLOBAL盖章）。 还有上次我们一起商讨的协议由TT GLOBAL 签回。[Anny at 10:30 am]
RE：等于说走账同时开票，开票同时提供声明？[Paris at 11:30 am]
---Anny：是的，开始走账的时候需要提供盖章版本的声明及上次我们确认的协议，在协议上可以加上开票事项。我们一定要提供够发票。[at 12:09 pm]
3、货可以先出，出货同时走账。[Anny at 10:30 am]
RE：综合以上，那就是走货，走账，开票同时进行？[Paris at 11:30 am]
--- Anny：货可以先出，或者是开始走账的时候出，这个看你们那边安排。[at 12:09 pm] (emphasis added)
29. Thereafter, 2 further emails were exchanged in the afternoon on 4 May 2017 (Thursday) which read as follows:
「12:21 pm
Hi Anny,
综合讨论如下：
1. 货请安排进明两天出完。出货到汤姆逊仓库必须要求汤姆逊收货人在送货单上签名。
2. 走账可以安排下周一二进行 [8th and 9th May]。请准备好20万于周一在我司深圳办公室进行走账，发票请提前开齐，届时请提供发票扫描件给我们，发票请这两天开好就寄到你们深圳办公室。周二时带过来我们办公室。周二走账完全请交齐给我们。
3. 周一走账是我们会提供声明、协议复印件给你们。待周二走账完成，正本发票收齐，我们同时提供正本声明、协议给贵司。
按以上步骤完结，我们协议终结。请确认。
Best Regards,
Paris
17:21 hrs
Hi Paris
明天安排先出万鸿盛处的物料，一会确定好时间，明天请也安排人到万鸿盛。
走账问题OK，按照以下步骤操作。
请先提供声明的草稿件给我们确认。正本在最后完成开票后双方互交。
Best Regards,
Anny Huang 」
30. Pursuant to the arrangement under the foregoing emails, on 5 May 2017, Priscilla attended a warehouse known as Wanhongsheng (万鸿盛) operated by the Defendant’s suppler in Shenzhen and signed her name on two Delivery Notes setting out certain quantities of television components. Priscilla was not called to give evidence but Mr Pandir said he had instructed Priscilla not to affix the company chop and only sign to signify mere sight of the goods (as opposed to acceptance of delivery).
31. Belatedly, the Defendant produced two corresponding delivery orders (dated 5 May 2017) issued by the Plaintiff to Wanhongsheng (万鸿盛) which apparently demonstrated that the Plaintiff had taken possession of the goods from the Defendant and in turn deposited them with the warehouse (Exhibit YJH-1 attached to the Witness Statement of Yuan Jahong 袁加洪). Quite apart from the fact that the provenance of these delivery orders were not explained and the signatures thereon were not identified, I do not think it adds much to the Defendant’s case that the Plaintiff did take delivery of the goods on 5 May 2017 in the sense that property therein had passed to the Plaintiff.
32. Thereafter, on 9 May 2017 (Tuesday) Paris wrote an email to Anny at 16:07 hrs) which reads as follows:
“Hi Anny,
Pls kindly check and confirm below points asap. Need your urgent confirmation.
1. How about the mainboard issued with CVT and Cultraview? If they agreed, please offer the evidence accordingly. If they don’t agree to receive balance from Thomson and make delivery. Pls provide extra materials that equivalent to those mainboards values. We will not involved (sic) in your communication.
2. When will we make the accounting work? Pls give an exactly (sic) date that we also need to book the date with Thomson boss to support. I prefer to start from tomorrow afternoon. Pls confirm.
3. When could you make the delivery for zunyi [遵義, a warehouse in Guizhou] materials? We prefer if you could realse (sic) the zunyi materials within Wednesday?
Looking forward to your early reply. Thank you.”
33. It was intended that Guizhou Factory was to enter into a sales contract with Thomson Factory, which would mirror the unsigned Proforma Invoice between the Plaintiff and the Defendant (referred to in paragraph 23) with an Item 8 inserted (ie 5,000 pcs 39.5” FHD DLED at RMB1,503,349.7) thus bringing the total invoice amount to RMB4,879,593.75 (the equivalent to US$170,187.50).
34. After much toing and froing by emails, a sales contract between Guizhou Factory and Thomson Factory (the “Guizhou-Thomson Contract”) was concluded on or about 19 May 2017 but backdated to 17 February 2017 (see email from Anny to Paris dated 19 May 2017 enclosing a copy of this contract, which was not signed but bore the respective chops of Guizhou Factory and Thomson Factory). The Guizhou-Thomson Contract reads as follows:
「 产品购销合同
供方：贵州晟鑫辉科技有限公司 合同编号：CT201702170002
需方：贵州汤姆逊电气有限公司 签订地点：深圳
签订时间：2017年2月17日
双方依照《中华人民共和国合同法》及有关法律、法规，经友好协调，制定本产品销售合同，共同遵守。
一、产品名称、商标、型号、厂家、数量、金额、供货时间：
|
序号
|
产品名称
|
规格型号
|
Detail
|
数量(PCS)
|
含税单价(RMB)
|
含税金额(RMB)
|
交货日期
|
|
1
|
SKD铺料
|
21.5” FHD DLED ATV AC3 Analogue Tuner
|
OOO SMART
|
47
|
507.016809
|
23829.79
|
|
|
2
|
SKD铺料
|
23.6” HD DLED ATV AC3 Analogue Tuner
|
OOO SMART
|
1500
|
92.556360
|
138834.54
|
|
|
3
|
SKD铺料
|
31.5” HD DLED ATV AC3 Analogue Tuner
|
OOO SMART
|
5000
|
34.399090
|
171995.45
|
|
|
4
|
SKD铺料
|
31.5” HD DLED DTV (DVBT2/S2/C/C1+/AC3)
|
OOO SMART
|
6000
|
8.829555
|
52977.33
|
|
|
5
|
SKD铺料
|
43” HD DLED DTV (DVBT2/S2/C/C1+/AC3)
|
OOO SMART
|
4000
|
681.062760
|
2724251.014
|
|
|
6
|
SKD铺料
|
55” FHD DLED DTV
|
HORIZONT
|
32
|
1189.018636
|
26158.41
|
|
|
7
|
SKD铺料
|
31.5” HD DLED DTV (DVBT2/S2/C/C1+/AC3) + SMART
|
HORIZONT
|
2000
|
119.098730
|
238197.46
|
|
|
8
|
SKD铺料
|
39.5” HD DLED DTV (DVBT2/S2/C/C1+/AC3)
|
HORIZONT
|
5000
|
300.669940
|
1503349.7
|
|
|
小计
|
|
|
|
4,879,593,75
|
|
|
二、基准价总计金额
|
人民币 肆百捌拾柒万玖千伍百玖拾元柒角伍分整
|
|
三、付款方式：提货前全款支付
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四、交（提）货的地点：石岩仓库与贵州安顺仓库
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五、运输方式及费用：石岩仓库处的物料需方自提，供方贵州仓库处的物料供方送货到需方的贵州仓库
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六、包装标准/品质协议：无质保
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七、合同的生效及变更：本合同一式两份，均具有法律效力。双方代表签字并加盖合同章后生效。如合同需变更或修改，需双方致书面同意可重新签署。
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八、附件：无
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九、其他约定事项：如有未尽事宜，双方友好协调解决
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供方： 需方：
公司名称：贵州晟鑫辉科技有限公司 单价名称： 贵州汤姆逊电气有限公司
单位地址：贵州以晴新浦科技园区 单位地址： 贵州省安顺市西秀工业园区产业科技园C 区
委托代理： 委托代理：
35. On 19 May 2017 (Wednesday), Priscilla attended Shiyan (石岩) warehouse in Shenzhen as arranged by the Defendant and signed for 2 items of goods listed in what appears to be a Delivery Note of the Guizhou Factory, namely, (1) 37 pcs of 21.5” television sets and (2) 22 pcs of 55” television sets. On this occasion, she also affixed the chop of the Plaintiff apart from signing the Delivery Note. There is however a dispute between the Plaintiff and the Defendant as to whether these two items were completely assembled television sets on the Defendant’s case or SKD units on the Plaintiff’s case.
36. On the evidence of Mr Pandir, there seemed no dispute that the goods under this Delivery Note was received by the Plaintiff. However, Mr Pandir asserted that only Item 1 (21.5” television sets) was referrable to the OOO Smart Order (ie under the 2nd Invoice) and Item 2 (55” television sets) were inserted by the Defendant in the Delivery Note without the Plaintiff’s knowledge, which was in fact referrable to the HORIZONT Order and ought not have been used to fulfill delivery of the components under the Settlement Proposal. I have no difficulty in rejecting this assertion. Clearly, the 55” television sets in SKD form corresponded with Item 6 in the Guizhou-Thomson Contract, which was cross-referenced to the HORIZONT Order and contemplated to be part of the goods under the Settlement Proposal.
37. Meanwhile, between 11 May 2017 and 9 June 2017, further emails were exchanged with each of the Plaintiff and Defendant insisting on their versions of draft Settlement Agreement, which was never signed in the end.
38. Further, on 11 May 2017, Guantao Law Firm Xiamen Officer, acting on behalf of the Plaintiff, sent a letter to the Plaintiff alleging lack of progress of the matters discussion between the Plaintiff and the Defendant between April and May 2011 (ie a reference to the Settlement Proposal), namely:
(1) The Defendant would accept television components in the total value of RMB 4,8779,593.75 in lieu of the return of deposit of US$170,187.50 under the 2nd Invoice;
(2) The Defendant to provide VAT Invoice to the total amount of RMB4,879,593.75;
(3) The Defendant to pay commission of US$15,328 to the Plaintiff in respect of the goods referable to the HORIZONT Order and the OOO Smart Order;
(4) Subject to the above, the Defendant would be released from its obligation under the Supply Cooperation Agreement and the 2nd Invoice.
39. This was followed by a letter dated 23 May 2017 from LT Lawyers (acting for the Plaintiff) to the Defendant in Hong Kong alleging repudiatory breach of 1st Invoice (notwithstanding that it had been superseded by the 2nd Invoice) but in the same breath citing erroneously the payment terms under the 2nd Invoice.
40. The stumbling blocks in the negotiation of the Settlement Agreements seemed to be that:
(a) The Plaintiff sought to name as parties, in addition to the Plaintiff and Defendant, (1) Guizhou Factory and Sunshine Group in the Settlement Agreement to give effect to the Settlement Proposal; and (2) Guizhou Factory, HORIZONT, Shenzhen One Touch and Sunshine Group in a related agreement to release Guizhou Factory and Shenzhen One Touch from their obligations under the Supply Cooperation Agreement.
(b) However, the Defendant only intended a Settlement Agreement to be signed between Plaintiff and Defendant with the Plaintiff procuring a declaration from HORIZONT (to be signed by the Plaintiff on behalf of HORIZONT) releasing Guizhou Factory and Shenzhen One Touch from their obligations under the Supply Cooperation Agreement.
(c) The Defendant sought to impose in the HORIZONT declaration that the Plaintiff was to underwrite any loss caused by the default of HORIZONT.
(d) There was an issue as to whether the Defendant’s suppliers (CVT and Cultaview) would accept balance payment of 70% for certain quantity of LED panels earmarked to be supplied to Thomson Factory under the Settlement Proposal thus giving credit for the 30% pre-payment (valued at RMB517,019.19) previously made by the Defendant.
(e) There was an issue as to the timing for presentation of the VAT invoices. The Plaintiff requested the VAT invoices to be produced at the time of delivery of the goods under the Settlement Proposal. The Defendant insisted that the same would be provided 15 days after delivery of all the SKD goods.
(f) The Defendant insisted that once the SKD parts were delivered and signed for by the Plaintiff under the Settlement Proposal, no further question could be raised by either party and the Defendant’s obligation under the 2nd Invoice would be terminated. Any breach of this clause would be subject to a penalty of RMB200,000.
(g) The Defendant proposed that the parties should submit to the jurisdiction of the Huli District of Xiamen whereas the Plaintiff proposed an arbitration clause.
41. The last version of the draft Settlement Agreement was sent by the Plaintiff to the Defendant by email on 9 June 2017. By and large, it would appear that the issues identified in (a) and (g) have been resolved.
42. That said, while the Plaintiff seemed to have accepted 15 days after delivery of all SKD goods for presentation of the VAT invoices (under Clause 5 of the draft Settlement Agreement), a collateral request was made in the accompanying email for scanned version of the VAT invoices to be produced in advance [C1/201]. Notably, the idea of providing scanned copies of the VAT Invoices in advance (as opposed to the original) was in fact suggested by Anny in her email dated 4 May 2017, which was agreed by Paris (see Paragraphs 28 and 29 above).
43. At the end, due to reasons which will become apparent hereinbelow, the Settlement Agreement was not signed. The Writ of Summons was issued herein on 12 June 2017 of which a copy was sent to Anny by email on the same day [C1/208].
44. In summary, the Plaintiff’s case is that no binding settlement agreement was reached. Further, despite acceptance by the Plaintiff of the Defendant’s repudiatory breach of its obligation to make delivery under the 2nd Invoice (as evidenced by issuing of the Writ of Summons at the latest), the Defendant is liable for the secondary obligation thereunder. Hence, the Plaintiff claims for (1) return of the remaining deposit; (2) loss of profit caused by non-delivery; (3) a declaration to be indemnified against any claim by the Plaintiff’s sub-buyer.
The Defendant’s Case
45. In essence, the Defendant raised 2 defences against the Plaintiff’s claim, namely:
(a) there was no obligation to make delivery under the 2nd Invoice due to the Plaintiff’s failure to top-up the deposit by US$10,000 on account of the increased in unit price of the 10,000 pcs of 39.5” LED television;
(b) any obligation of the Defendant to make further delivery under the 2nd Invoice has been curtailed by an agreement giving effect to the Settlement Proposal as evidenced by (1) the Confirmation Letter (确认函) ; and (2) an Implementation Agreement in furtherance of the Settlement Proposal as evidenced by the exchange of emails on 4 May 2017.
46. The Defendant further argued that, viewed objectively, the agreement giving effect to the Settlement Proposal is also evidenced by part performance of both the Plaintiff and the Defendant. According to the Re-Amended Defence (at Paragraph 12):
(a) The Plaintiff took delivery of the goods with a total value of RMB3,460,458 and signed the relevant Delivery Notes on 5 May 2017 and 19 May 2017.
(b) Between 12 May 2017 and 19 May 2017, the Defendant remitted (by way of 25 remittances) a total of RMB 4,879,593.75 to the bank account of Mr Diao, the legal representative of Thomson Factory, pursuant to the Plaintiff’s instructions.
(c) Between 12 May 2017 and 19 May 2017, Thomson Factory also remitted (by way of 25 remittance) a total of RMB4,879,593.75 to the bank account of Guizhou Factory, pursuant to the Plaintiff’s instructions.
(d) The Plaintiff and the Defendant arranged Thomson Factory and Guizhou Factory to execute the Thomson-Guizhou Contract on 15 May 2017 and 19 May 2017 respectively (see Paragraph 34 above).
(e) On 19 May 2017, the Defendant instructed Guizhou Factory to issue 39 VAT Invoices naming Thomson Factory as the buyer for a total of RMB 4,879,593.72. The Defendant has also informed Thomson Factory of the same on the same day.
(f) Guizhou Factory duly reported its tax liability under the Thomson -Guizhou Contract to the relevant PRC tax authority for a total sum of RMB829,530.93 (ie 17% of the contract price under the Thomson-Guizhou Contract).
47. In the premises, it is contended (at paragraph 13 of the Re-Amended Defence) that the Plaintiff is estopped by way of representation and/or convention from denying (a) the enforceability of the agreement giving effect to the Settlement Proposal and the Implementation Agreement in furtherance thereof; and (b) that the parties’ rights and obligation under the 1st and 2nd Invoices have been extinguished and superseded thereby.
48. It is further contended (at paragraph 14 of the Re-Amended Defence) that the parties were unable to execute a written Settlement Agreement (as per the Implementation Agreement) because of the sudden change of mind of the Plaintiff on 13 June 2017 by seeking to cancel, with no or no justifiable reason, the purchase of certain goods (valued at RMB1,280,832.20) already included in the Guizhou-Thomson Contract.
49. In this regard, by an email from Paris to Anny dated 13 June 2017 (at 12:59 pm), the Plaintiff demanded that the version of draft Settlement Agreement sent by the Plaintiff on 9 June 2017 be executed. In the same email, the Plaintiff also requested for production of copies or scanned images of VAT Invoices to the value of RMB3,300,000 upon indicating rejection or cancellation of certain goods kept at the Junyi (遵義) warehouse in Guizhou on the ground that (1) these included printing materials which had been stored for over ½ year and were damaged by moisture; (2) HORIZONT no longer required the 7,000 pcs of 39.5” televisions SKD (Items 7 and 8 of the Guizhou-Thomson Contract).
Discussion
50. It is a peculiar fact of the proceedings herein that both the Plaintiff and the Defendant elected not to call their respective key witness, namely, Paris of the Plaintiff and Anny of the Defendant, to give evidence. Practically, any adverse influence that might otherwise be drawn from the absence of each of these 2 witnesses is mutually neutralized.
51. Only Mr Pandir gave evidence on behalf of the Plaintiff. The Defendant called Madam Meng Yaling (孟雅玲), Manager of the Defendant Business Operation Centre (in Xiamen) and Mr Yuan Jiahung (袁加洪), Manager of Shenzhen office of the Sunshine Group, who had no direct knowledge of the negotiation between the Plaintiff and the Defendant pertinent to the 1st and 2nd Invoice and the Settlement Proposal.
52. In the main, Madam Meng and Mr Yuan relied on the 2 affirmations of Madam Lu Lili, (盧麗麗) a director of the Defendant, filed for the purpose of resisting the Plaintiff’s application for Summary Judgment. That said, Madam Lu did not have much firsthand knowledge of the transactions either.
53. Since the Court is deprived of the benefits of direct evidence from Paris and Anny, the case falls to be decided mainly on the basis of the pleadings and documentary evidence.
Obligation to deliver – Alleged non-payment of top-up deposit
54. Just to deal with this short point, although the 2nd Invoice provided for payment of 20% deposit (Clause 2) and contained an “entire agreement clause” (Clause 13), the circumstances leading to the signing of the 2nd Invoice cannot be ignored. Basically, it came into existence to accommodate the Defendant’s request to increase the unit cost of the 39.5” LED television sets.
55. For ease of reference, these 2 clauses under the 2nd Invoice read as follows:
“2. Payment term 20% DEPOSIT IN ADVANCE 80% BALANCE AGAINST B/L COPY WITHIN 20days.
. . .
13. [The Plaintiff and the Defendant] SHOULD PERFORM ALL THE COMMITMENTS ACCORDING TO THIS PI ONLY. THIS PI AND THE CARGO IS NOT SUBJECT TO ANY OTHER AGREEMENTS AND CONVENTIONS”.
56. As a matter of commercial reality, I would imagine the Defendant would gladly not impose the requirement to top-up the deposit by US$10,000 (ie 20% of the increase in contractual price in the sum of US$50,000, being the difference between the 1st Invoice and the 2nd Invoice). In the circumstances, it was almost by default that the usual clause of 20% deposit was incorporated into the 2nd Invoice.
57. The Plaintiff argued that (1) there was a “common understanding” that no top-up deposit and no re-confirmation of artwork would be required (Re-Amended Statement of Claim, at Paragraph 10C) and; (2) there was a “mutual agreement” between the parties at the time when the 2nd Invoice was entered into, that no top-up deposit would be necessary (Reply at Paragraph 3).
58. This is met with the Defendant’s argument relying strictly on the “entire agreement clause”, which excluded the admissibility of evidence to contradict the express terms contained in the 2nd Invoice.
59. Notably, the Defendant made the first partial delivery in February 2017 without demur and in its email dated 6 March 2017, the Defendant even offered to set out the further delivery schedule in an updated “Guarantee Letter”. On this factual matrix, the Plaintiff would have a cast iron case of waiver of the top-up deposit, had it been pleaded. I would have given leave to the Plaintiff to amend, if it had been necessary, since no prejudice would be caused to the Defendant which could not be compensated by costs.
60. However, the averment in the Reply that there was a “mutual agreement” at the time when the 2nd Invoice was entered into that no top-up deposit would be necessary admits a construction that there was a variation immediately after the 2nd Invoice was entered into to the effect that despite the requirement on the face Clause 2, no top-up deposit needed to be paid. Although not canvassed by counsel, I am of the view that this is an exception to the rule against parole evidence arising from the “entire contract clause” (see Chitty on Contract (34th Ed) at 15-038).
61. This line of reasoning is supported by the evidence of Mr Yuan of the Defendant (at Paragraph 12 of his Witness Statement) that upon issuing of the 2nd Invoice, the Defendant requested the Plaintiff to top-up the deposit but the Plaintiff said it would be paid against delivery of the goods. This also tallies with the evidence of Mr Pandir that there was a phone call involving Paris and Anny in which it was agreed that no top-up deposit was required (see Para 33(3) of the Witness Statement of Mr Pandir and Paragraph 3 to 5 of his Supplemental Witness Statement). Importantly, Mr Yuan frankly accepted that in his own mind, the obligation to delivery had arisen despite the lacking of top-up deposit.
62. Accordingly, I find that notwithstanding Clause 2 and Clause 13 of the 2nd Invoice, there has been a subsequent “mutual agreement” or “variation” of Clause 2 with the effect of dispensing with the payment of top-up deposit.
63. For the sake of completeness, Mr J Wong also relied on the provision for “partial delivery” in the 2nd Invoice and the “de minimis” rule in that the top-up deposit of US$10,000 was only a tiny fraction of the deposit payable under Clause 2 (ie US$10,000/(US$3,758,500 x 20%) x 100% = 1.33%). I do not see the need to dwell on these fine points.
Whether the Confirmation Letter (确认函) together with the Implementation Agreement, reinforced by part performance, created a binding agreement giving effect to the Settlement Proposal and/or giving rise to estoppel
64. It is beyond dispute that whether a binding contract has been concluded is to be assessed “objectively”. Lord Clark in RTS Flexible Systems Ltd v Molkerei Alois Muller GmbH & Co KG (UK Production) [2010] 1 WLR said:
“The principles
45. …Whether there is a binding contract between the parties and, if so, upon what terms depends upon what they have agreed. It depends not upon their subjective state of mind, but upon a consideration of what was communicated between them by words or conduct, and whether that leads objectively to a conclusion that they intended to create legal relations and had agreed upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations. Even if certain terms of economic or other significance to the parties have not been finalised, an objective appraisal of their words and conduct may lead to the conclusion that they did not intend agreement of such terms to be a precondition to a concluded and legally binding agreement.
47. We agree … that, in a case where a contract is being negotiated subject to contract and work begins before the formal contract is executed, it cannot be said that there will always or even usually be a contract on the terms that were agreed subject to contract. That would be too simplistic and dogmatic an approach. The court should not impose binding contracts on the parties which they have not reached. All will depend upon the circumstances…
48. These principles apply to all contracts, including both sales contracts and construction contracts, and are clearly stated in Pagnan SpA v Feed Products Ltd [1987] 2 Lloyd’s Rep 601, both by Bingham J at first instance and by the Court of Appeal. In the Pagnan case it was held that, although certain terms of economic significance to the parties were not agreed, neither party intended agreement of those terms to be a precondition to a concluded agreement. The parties regarded them as relatively minor details which could be sorted out without difficulty once a bargain was struck. The parties agreed to bind themselves to agreed terms, leaving certain subsidiary and legally inessential terms to be decided later.
49. In his judgment in the Court of Appeal in Pagnan Lloyd LJ (with whom O’Connor LJ and Stocker LJ agreed) summarised the relevant principles in this way, at p 619:
‘(1) In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole …
(2) Even if the parties have reached agreement on all the terms of the proposed contract, nevertheless they may intend that the contract shall not become binding until some further condition has been fulfilled. That is the ordinary ‘subject to contract’ case.
(3) Alternatively, they may intend that the contract shall not become binding until some further term or terms have been agreed …
(4) Conversely, the parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled …
(5) If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty.
(6) It is sometimes said that the parties must agree on the essential terms and it is only matters of detail which can be left over. This may be misleading, since the word ‘essential’ in that context is ambiguous. …It is for the parties to decide whether they wish to be bound and if so, by what terms, whether important or unimportant. It is the parties who are, in the memorable phrase coined by the judge [at p 611] ‘the masters of their contractual fate’. Of course the more important the term is the less likely it is that the parties will have left it for future decision. But there is no legal obstacle which stands in the way of the parties agreeing to be bound now while deferring important matters to be agreed later. It happens every day when parties enter into so-called ‘heads of agreement’.’
The same principles apply where, as here, one is considering whether a contract was concluded in correspondence as well as by oral communications and conduct.
50. Before the judge much attention was paid to the Percy Trentham case [1993] 1 Lloyd’s Rep 25... In the passage from the judgment of Steyn LJ, at p 27 ... identified these four particular matters which he regarded as of importance. (1) English law generally adopts an objective theory of contract formation, ignoring the subjective expectations and the unexpressed mental reservations of the parties. Instead the governing criterion is the reasonable expectations of honest sensible businessmen. (2) Contracts may come into existence, not as a result of offer and acceptance, but during and as a result of performance. (3) The fact that the transaction is executed rather than executory can be very relevant. The fact that the transaction was performed on both sides will often make it unrealistic to argue that there was no intention to enter into legal relations and difficult to submit that the contract is void for vagueness or uncertainty. Specifically, the fact that the transaction is executed makes it easier to imply a term resolving any uncertainty, or, alternatively, it may make it possible to treat a matter not finalised in negotiations as inessential. This may be so in both fully executed and partly executed transactions. (4) If a contract only comes into existence during and as a result of performance it will frequently be possible to hold that the contract impliedly and retrospectively covers pre-contractual performance.
51. By contrast, in the Court of Appeal much attention was paid to the decision of Robert Goff J in the British Steel case [1984] 1 All ER 504…
52. The particular passage in Robert Goff J’s judgment on which Waller LJ relied reads [1984] 1 All ER 504, 510–511:
‘The real difficulty is to be found in the factual matrix of the transaction, and in particular the fact that the work was being done pending a formal sub-contract the terms of which were still in a state of negotiation. …Accordingly, when, in a case such as the present, the parties are still in a state of negotiation, it is impossible to predicate what liability (if any) will be assumed by the seller for, eg defective goods or late delivery, if a formal contract should be entered into. In these circumstances, if the buyer asks the seller to commence work ‘pending’ the parties entering into a formal contract, it is difficult to infer from the [seller] acting on that request that he is assuming any responsibility for his performance, except such responsibility as will rest on him under the terms of the contract which both parties confidently anticipate they will shortly enter into. It would be an extraordinary result if, by acting on such a request in such circumstances, the [seller] were to assume an unlimited liability for his contractual performance, when he would never assume such liability under any contract which he entered into.’
…
54. There is said to be a conflict between the approach of Steyn LJ in the Percy Trentham case [1993] 1 Lloyd’s Rep 25 and that of Robert Goff J in the British Steel case [1984] 1 All ER 504. We do not agree. Each case depends upon its own facts. We do not understand Steyn LJ to be saying that it follows from the fact that the work was performed that the parties must have entered into a contract. On the other hand, it is plainly a very relevant factor pointing in that direction. Whether the court will hold that a binding contract was made depends upon all the circumstances of the case, of which that is but one. The decision in the British Steel case was simply one on the other side of the line. Robert Goff J was struck by the likelihood that parties would agree detailed provisions for matters such as liability for defects and concluded on the facts that no binding agreement had been reached. By contrast, in the Pagnan case [1987] 2 Lloyd’s Rep 601 Bingham J and the Court of Appeal reached a different conclusion, albeit in a case of sale not construction.” (emphasis added)
65. As to formation of contract evidenced by part performance, it is instructive to note the sentiment of the Court of Final Appeal in World Food Fair Ltd v Hong Kong Island Development Ltd (2006) 9 HKCFAR 735 wherein the plaintiff (potential tenant) paid a deposit of HK$200,000 and continued to negotiate with the defendant (landlord) for renting certain shop spaces for use as a food court. A tentative commencement date was mentioned but there was some delay. At some stage, the defendant allowed the plaintiff to have the key to the premises for installation of equipment thereby occasioning certain costs in anticipation of a lease being entered into. However, there was a change of mind on the part of the defendant as it no longer wished to allow the use the premises as a food court. The trial judge found no contract was concluded but the decision was reversed by the Court of Appeal.
66. Upon appeal of the landlord, the Court of Final Appeal held that there was no concluded contract and that, viewed objectively, no final agreement had been reached on (1) the commencement date; (2) the rent free period; (3) the option to renew, all being matters which the parties had plainly intended to be regulated by contract.
67. In reversing the decision of the Court of Appeal, which put emphasis on (1) payment of the deposit by the plaintiff; and (2) giving of possession of the shops by the defendant to the plaintiff, Riberio PJ said (at 745-746) that:
“27. In my view, there is a circularity inherent in the Court of Appeal’s approach. In regarding payment of the deposit and the giving of possession for fitting out works as “performance” which decisively proved the existence of a concluded contract, the Court of Appeal implicitly assumes that there existed a concluded contract of which such acts constituted “performance”, which “performance” is then relied on to prove the existence of that very contract.
28. Such acts are no doubt consistent with the existence of a concluded contract but they do not prove its existence. They are no less consistent with being acts done in anticipation of a legally binding agreement which the parties confidently expected to enter into but which never materialised — which is what the Judge found was the position in the present case.
…
33. A dramatic example involving handing over possession and effecting works on the site pursuant to an agreement subject to contract can be found in A-G & Another v Humphreys Estate (Queen’s Gardens) Ltd [1987] HKLR 427 (PC). Lord Templeman described the steps taken as follows:
A major part of this agreement, as subsequently modified and expanded, was carried out. In particular the government took possession of the Tregunter flats and fitted them out, and moved in senior civil servants to that accommodation by August 1981. The government disposed of the residences formerly occupied by those servants. HKL [Hongkong Land] took possession of Queen’s Gardens by November 1981 and demolished the existing buildings on the Queen’s Gardens and adjoining sites by May 1982 with a view to redevelopment. HKL paid to the government by August 1982 the full sum of $103,865,608, the agreed difference between the value of the Tregunter premises and the value of Queen’s Gardens. (at pp.428–429)
Yet it was not in doubt that there was no concluded contract and that those drastic steps had been taken merely in the confident hope and expectation of a final agreement being executed, which in the event never materialised. The government’s arguments based on proprietary estoppel having failed, it was held that Hongkong Land were entitled to withdraw.” (emphasis added)
68. Applying the foregoing principles to the factual matrix in this case, it is tolerable clear that by the Confirmation Letter (确认函), the Plaintiff agreed in principle that it would accept component goods in lieu of return of the deposit. However, no agreement was reached at that stage since the Settlement Proposal was subject to resolution of the steps to be taken for settling the Defendant’s account. Hence, the query at the end of the Confirmation Letter (确认函) as to what would happen to the delivered goods if the steps could not be agreed (ie 问题三：如我司或第三方不能协助此需求，材料将如何处理?).
69. However, by the exchange of correspondence on 4 May 2017 (see paragraphs 28 and 29 above). The detailed steps for settling of accounts were proposed by the Defendant and agreed by the Plaintiff. Pausing there, one cannot fail to notice that the steps for settling of Defendant’s accounts and issuing of VAT Invoices seemed quite convoluted, if not downright clandestine, but there was no evidence before the Court as to why it was necessary. It may well be the case that the Plaintiff had an incentive to cooperate with the Defendant since it was also hoping to earn a commission from the Defendant.
70. In essence, the steps involved creating a “false” impression on the accounting record that Thomson Factory had paid Guizhou Factory for the components set out in the Guizhou-Thomson Contract in the total sum of RMB 4,879,593.75. This might be designed to facilitate the eventual issuing of VAT Invoice by Guizhou Factory to Thomson Factory. However, it is rather inexplicable why the Defendant could not simply procure payment of the said sum to Guizhou Factory (by itself or by its business associates) and earmarked the same to the credit of Thomson Factory against delivery of the components under the Guizhou-Thomson Contract.
71. In any case, the steps eventually agreed and actually undertaken involved:
(a) The cooperation of the Plaintiff and the Defendant (using what is known as a “UKEY” for electronic transfer) as well as Mr Diao, the legal representative of Thomson Factory by allowing the use of his personal bank account.
(b) A “seed” money of RMB200,000 was provided by the Defendant for transfer to Mr Diao’s account, who would in turn transfer the same to Thomson Factory’s bank account. Thomson Factory would then transfer the same to Guizhou Factory’s bank account as evidence of payment.
(c) The process in (b) above was repeated 24 times to generate payment records totalling RMB4,879,593.75 between 12 May 2017 and 19 May 2017.
(d) On 19 May 2017, Guizhou Factory generated a pile of 49 VAT Invoices (totalling RMB 4,879,593.75) naming Thomson Factory as the buyer, which corresponded with the items of goods under the Guizhou-Thomson Contract.
72. The foregoing facts suggests that any issue concerning the settling of the Defendant’s accounts was resolved and acted upon to the satisfaction of both the Plaintiff and the Defendant. Hence, the Plaintiff’s concern pertinent to settling of the Defendant’s account as stated in the Confirmation Letter (确认函) ceased to exist as of 19 May 2017.
73. As said, between 11 May 2017 and 9 June 2017, various versions of draft Settlement Agreement were exchanged. Although it was not signed at the end of the day, it seems that a final draft was agreed on 9 June 2017, which was said to be the Plaintiff’s “bottomline” (the “final draft”). In fact, it would appear that the final draft [C1/202] is no different to the previous version sent by Anny to Paris on 8 June 2017 [C1/195].
74. It is true that in Paris’s email dated 9 June 2017 attaching the final draft:
(a) a request was made by Paris for sight of copies or scanned images of the VAT Invoice (c.f. production of original within 15 days as provided in Clause 5 of the final draft [C2/204]);
(b) a query was raised as to what replacement goods would be provided if CVT or Cultraview would not agree to give credit for the 30% deposit paid by the Defendant to release the mainboards to Thomson Factory upon payment of the balance of 70%.
75. It is noteworthy that the Plaintiff did not seek to make further provision in the final draft in respect of these two matters (ie apart from Clause 3 and Clause 5 of the final draft). I am therefore satisfied that the Plaintiff and the Defendant were ad idem as to all “essential” terms of the Settlement Agreement (as well as declaration to be signed by HORIZONT) by 9 June 2017 at the latest.
76. The effects of the foregoing steps already taken by the Plaintiff and the Defendant are that all essential matters pertinent to the Settlement Proposal by delivery of television components in lieu of return of the Deposit as contemplated in the Confirmation Letter (确认函) have been resolved (or provided for) and agreed upon by the parties. Hence, a “workable” agreement to give effect to the Settlement Proposal had been reached although the written Settlement Agreement had yet to be executed.
77. The turn of events came on 13 June 2017, when the Plaintiff sent an email seeking to (1) reject certain moisture damaged printing materials kept in Zunyi warehouse; and (2) cancel the order of 7,000 pcs referable to the HORIZONT Order (ie Items 7 and 8 in the Guizhou-Thomson Contract or Items 8 and 9 in Clause 1 of the final draft).
78. In other words, the Plaintiff was seeking to scale back the quantity and value of the goods included in the settlement to about RMB3,300,000. This is a reference to the value of the goods already received by the Plaintiff under the Delivery Notes signed by Priscilla on 5 and 19 May 2017. In an email of Mr Pandir dated 21 June 2017, the precise value of the goods acknowledged thereunder was stated as RMB3,331,914 (or US$480,000). However, the final draft did not provide for partial acceptance.
79. The Plaintiff contended that despite the Confirmation Letter (确认函) and the Implementation Agreement, which was buttressed by part performance and the agreed terms contained in the final draft, there was still no binding agreement to give effect to the Settlement Proposal. In essence, Mr J Wong argued that (1) presentation of the VAT Invoices; and (2) signing of a formal written settlement agreement are two conditions that needed to be fulfilled before formation of a binding settlement agreement.
80. I am of the view that none of these 2 arguments is of avail to the Plaintiff. It is self-evident from the series of emails that the final draft was not signed because of the Plaintiff’s change of stance on 13 June 2017 (referred to in Paragraph 77 above). It is notable that the Writ of Summons herein had already been issued on 12 June 2017.
81. As for the VAT Invoices, it is correct that at the inception of the negotiation the Plaintiff sought to impose a condition that the same be provided upon delivery of the goods as it is perceived that the delivery of the goods would otherwise be “useless” or “meaningless” (see email of Mr Pandir dated 25 April 2017). During the course of negotiation of the Settlement Agreement, the Plaintiff also sought to impose such a term but the final draft only provided for production of the original VAT Invoices 15 days after delivery (see Clause 5).
82. In his Closing Submission, Mr J Wong relied heavily on the Yuan’s own evidence (1) as to the significance of the VAT Invoices for exporting goods; (2) that the Defendant would only be relieved from its obligation under the 2nd Invoice upon completion of 8 steps which included signing of a settlement agreement and production of VAT invoices (see Yuan’s Supplemental Witness Statement, at paragraph 27).
83. However, the issues as to whether (1) a “workable” agreement had been reached; and (2) certain “condition precedents” had been raised, are to be assessed objectively. I am of the view that reading the contemporaneous documents as a whole, the Plaintiff has not made clear that presentation of copies or scanned images of the VAT Invoices was a “condition precedent” to the formation of an agreement to give effect to the Settlement Proposal.
84. On a proper reading, no “condition precedent” to the formation of a binding agreement referable to the advance production of the VAT Invoices (whether by copies or scanned images or original) has been pleaded or canvassed by the Plaintiff at the trial (see Reply at paragraphs 5(1)b and 5(4)c, the Plaintiff’s Opening Submissions at paragraphs 38 to 40, the Plaintiff’s Closing Submission at paragraph 36(2) and the Witness Statement of Mr Pandir, at paragraph 68) .
85. At best, the exchange of emails show that the Plaintiff expressed a wish to have sight of the copies or scanned images of the VAT Invoices but their request was not yet acceded to (as confirmed by Thomson Factory and the text messages between Paris and Anny on 31 May 2017). However, the Defendant agreed to provide copies of the VAT Invoices in advance of sending the original (see email dated 20 June 2017 [C1/249 at 251]).
86. The Plaintiff has adduced no evidence as to what they would be looking for in the scanned copies of the VAT Invoices, if they had been provided by the Defendant at the material time. Notwithstanding that copies of the VAT Invoices were discovered by the Defendant in this action, the photocopies inserted in the Trial Bundles were rather illegible.
87. Apparently, the Plaintiff did not see the need and have not called for better or legible copies of the same for inspection. To err on the safe side, I have directed the Defendant to produce clearer copies of the VAT Invoices and I am satisfied that they were issued on 19 May 2017 and they corresponded with the goods enumerated in the Guizhou-Thomson Contract and the final draft.
88. I can well understand why presentation of the original VAT Invoices before shipment to Russia was very important to the Plaintiff otherwise the tax refund could not be obtained. This was provided for in Clause 5 of the final draft. That said, it is beyond my fathom (1) why the Plaintiff needed to have sight of the copies or scanned images in advance to the extent that it was a “condition precedent” to entering into an agreement to give effect to the Settlement Proposal; (2) why the scanned copies seemed to be so jealously guarded by the Defendant since they were ready by 19 May 2017 in any event.
89. In this regard, no evidence was led by either the Plaintiff or the Defendant. However, I observe that in his email dated 25 April 2017, Mr Pandir stated that the VAT Invoices might be bought “from the market”. It is suggestive that the importance of the VAT Invoices lies in the intrinsic value for tax refund purpose perhaps even in the hands of a bearer, who was not involved in the underlying sales transaction.
90. In so far as Mr Pandir, as a foreigner conducting business in the PRC, was anxious to have sight of the scanned copies of the VAT Invoices so that he could have the peace of mind that the Defendant would be able to deliver the same in good time, the expression of a wish to have sight of the scanned copies in advance is not, without more, to be elevated to a “condition precedent”. More importantly, it has not been specifically pleaded and canvassed as such. Although the prominent absence of such a plea may not be fatal to the Plaintiff’s case, I am of the view that it has significantly taxed on the credibility of the Plaintiff’s case when all the evidence is considered objectively.
91. In the final analysis, in so far as the VAT Invoices were made available to the Plaintiff at the time of shipping of the goods to Russia, no difficulty would be encountered by the Plaintiff in exporting the goods (after processing by Thomson Factory) and in claiming for the tax refund thereunder in the sum of RMB829,530.93.
92. In all circumstances, I find that a workable and binding agreement to give effect to the Settlement Proposal as evidenced by the Confirmation Letter (确认函) and the Implementation Agreement, which was buttressed by part performance and the agreed terms contained in the final draft, had come into existence.
93. It follows that the Plaintiff’s right under the 2nd Invoice has been extinguished and was subsumed in an agreement to settle as found by me as aforesaid. Further, the Plaintiff was estopped from enforcing their right under the 2nd Invoice.
94. For completeness, the further performance of the agreement to settle was prevented by the Plaintiff’s change of stance on 13 June 2017. Hence, it did not lie in the Plaintiff to revert back to its right under the 2nd Invoice on the ground that the agreement to settle had not been fully performed.
Disposal
95. In the premises and upon the foregoing findings, the Plaintiff’s claim herein is dismissed with a costs order nisi that the Plaintiff do pay the Defendant’s costs of the action to be taxed if not agreed.
96. It remains for me to thank counsel on both sides for their able assistance.
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(Raymond Leung SC) |
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Deputy High Court Judge |
Mr Jonathan WONG and Ms Leticia TANG, instructed by Ince & Co, for the Plaintiff
Mr Thomas WONG, instructed by Hui & Lam LLP, for the Defendant
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