HONOUR STATE LTD v. GORGEOUS TEXTILLE CO LTD

HCA 816/2013

[2020] HKCFI 2642

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL ACTION NO 816 OF 2013

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J U D G M E N T

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1.  This is a claim for the balance of price of goods sold and delivered.

Matters in dispute

2.  Both the plaintiff and the defendant were at all material times garment traders.  The plaintiff had connections with garment manufacturers and suppliers, and further set up its own garment factory in 2009, in Mainland China whereas the defendant was able to obtain orders for garments from overseas buyers.  They started to deal with each other in about October 2007.  During the period from about October 2007 to about December 2012, the plaintiff sold to the defendant, and the defendant purchased from the plaintiff, garments with a total f.o.b. value close to $60 million[1].

3.  The defendant settled the plaintiff’s invoices in a number of ways.  Other than payment in cash, by cheque, telegraphic transfers and back-to-back letters of credit, the defendant would also from time to time issue to the plaintiff debit notes by which the defendant set off against the amounts invoiced by the plaintiff various claims that the defendant had against the plaintiff.  The defendant had in the said course of dealings between the parties issued nearly 400 debit notes[2].

4.  In issue is the state of the final account between the parties as at 31 December 2012 when they ceased trading with each other.  According to the plaintiff, a sum of $2,717,915.06 was due from the defendant to it whereas the defendant only accepted that it still owed the plaintiff $89,496.42.  The difference is $2,628,408.64. 

5.  The liability for $2,398,188.61 of such difference turned on whether the defendant was entitled to make deductions under 25 debit notes issued by it to the plaintiff, which I set out hereunder as they were enumerated in the agreed Scott Schedule and Schedule A to the 1^st supplemental witness statement of the plaintiff’s manager and only witness, Mr Wong Yau Keung Gary (“Gary Wong”):

	Debit Note Number	Date	Reasons for Deduction	Amount in dispute (HK$)
1	DN-08/032 (“Disputed D/N 1”)	27.4.2009	“質量問題,客人扣款” in respect of style 26102	$1,454,207.40
2	GTA-10035 (“Disputed D/N 2”)	20.7.2010	3.5% one-off interest for advanced payment	$26,250.00
3	GTA-10042r (“Disputed D/N 3”)	6.8.2010	2% one-off “factoring payment interest charge”	$36,666.37
4	GTA-10055 (“Disputed D/N 4”)	1.9.2010	2% one-off “factoring payment interest charge”	$37,616.35
5	GTA-10065 (“Disputed D/N 5”)	1.9.2010	8.5% per annum interest for 2 months for cash advance	$21,250.00
6	GTA-10072 (“Disputed D/N 6”)	28.9.2010	2% one-off “factoring payment interest charge”	$59,483.82
7	GTA-11056 (“Disputed D/N 7”)	16.1.2012	“Interest charge”	$8,000.00
8	GTA-12007 (“Disputed D/N 8”)	5.4.2012	“Handing (sic) interest charge”	$4,907.98
9	GTA-12012 (“Disputed D/N 9”)	10.5.2012	“Handing (sic) interest charge”	$4,000.00
10	GTA-12020 (“Disputed D/N 10”)	25.7.2012	Interest on “cash in advance” RMB9,000 on RMB121,000 at RMB1 = HK$1.22	$10,975.60[3]
11	GTA-12021 (“Disputed D/N 11”)	25.7.2012	Interest on “cash in advance” – RMB15,400 on RMB204,600 at RMB1 = HK$1.22	$18,780.48[4]
12	GTA-12027 (“Disputed D/N 12”)	8.8.2012	Interest on “cash in advance” – RMB11,000 on RMB139,000 at RMB1 = HK$1.22	$13,414.63[5]
13	GTA-12034 (“Disputed D/N 13”)	31.8.2012	Bank fee (T/T handing (sic) charges)	$27,966.86
14	GTA-10049r (“Disputed D/N 14”)	17.8.2010	5% export tax rebate the claim of which defendant had allegedly been deprived due to late delivery by plaintiff	$27,057.19
15	GTA-10050r (“Disputed D/N 15”)	21.8.2010	5% export tax rebate the claim of which defendant had allegedly been deprived due to late delivery by plaintiff	$60,822.27
16	GTA-10070 (“Disputed D/N 16”)	24.9.2010	5% export tax rebate the claim of which defendant had allegedly been deprived due to late delivery by plaintiff	$31,312.71
17	GTA-10071 (“Disputed D/N 17”)	24.9.2010	5% export tax rebate the claim of which defendant had allegedly been deprived due to late delivery by plaintiff	$21,179.34
18	GTA-10083 (“Disputed D/N 18”)	15.10.2010	5% export tax rebate the claim of which defendant had allegedly been deprived due to late delivery by plaintiff	$32,314.01
19	GTA-10079 (“Disputed D/N 19”)	13.10.2010	Extra inland transportation charges for 2 containers of goods allegedly incurred by defendant due to late delivery of style FW0045	$96,530.13
20	GTA-10082 (“Disputed D/N 20”)	15.10.2010	Extra inland & sea transportation & storage charges for 2 containers of goods allegedly incurred by defendant due to late delivery of styles 18096 & 18111	$79,178.26
21	GTA-10084 (“Disputed D/N 21”)	20.10.2010	Extra re-operation & inspection charges for 379 units of goods allegedly incurred by defendant due to late delivery of styles FW0045	$48,464.63
22	GTA-10089 (“Disputed D/N 22”)	28.10.2010	Extra inland transportation charges for 3 containers of goods allegedly incurred by defendant due to late delivery of style 110-152	$151,310.07
23	GTA-12032 (“Disputed D/N 23”)	30.8.2012	Bank T/T “handing (sic) charge”	$23,659.20
24	GTA-10034 (“Disputed D/N 24”)	15.7.2010	3.5% one-off interest on money used to pay airfreight due to late delivery by the plaintiff	$4,450.53
26	GTA-09007 (“Disputed D/N 26”)	7.1.2009	Interest for advanced payment by defendant at plaintiff’s request	$98,390.78
			TOTAL:	$2,398,188.61

6.  In the course of his testimony under cross-examination by Mr Gary Lam, counsel for the plaintiff, Patrick Wong dropped the defendant’s claims under Disputed D/Ns 7, 8 and 9.

7.  The remainder of the difference between the parties ($230,230.03) depended on whether the plaintiff was entitled to charge $0.50 and $2.60 more per piece for styles 110-152 and 110-154 respectively (“Disputed Item 25”):

Style number	Quantity	Extra unit price invoiced by plaintiff (US$)	Total extra invoiced amount (US$)
110-152	18,121 pieces	0.5	9,060.50
110-154	7,941 pieces	2.6	20,646.60
		TOTAL:	29,707.10
		x 7.75	HK$2230,230.03

The witnesses

8.  The key witnesses were Gary Wong for the plaintiff and Patrick Wong for the defendant.[6]  These gentlemen contradicted each other, and had been cross-examined, on numerous points.  To maintain the focus of this judgment, I do not propose to resolve each and every point of difference between the witnesses and will address only those having a bearing on the findings that I have to make.  In choosing whose evidence to accept on a particular question of fact, unless otherwise indicated, it is unnecessary for me to resort to, and I have not relied on, the general impression that one may form as to the overall credibility of the witnesses.  I prefer to consider the issues, and assess the veracity of the witnesses on each issue, individually, insofar as it is possible.  In so doing, I have been guided by, and have derived assistance from, the inherent commercial plausibility of the witnesses’ accounts and the congruity of such accounts with the undisputed/indisputable facts and circumstances of the case.

Plaintiff’s final sets of “settlement spreadsheets” before the action

9.  I shall in due course have to examine the validity of each of the Disputed B/Ns.  Before I give each such Disputed D/N individual attention, this is a convenient point to mention the 3 sets of “settlement spreadsheets” emailed by the plaintiff to the defendant on 4 and 28 December 2012 and 3 January 2013.

10.  By way of background, to keep track of the account between them, over the years, settlement spreadsheets would be prepared at regular intervals by one party to state the account with the other.  Such settlement spreadsheets listed out the invoices issued by the plaintiff on the one hand and the payments made, and debit notes issued, by the defendant on the other.  The documents would then be jointly reviewed, and, where appropriate, revised at “settlement meetings”.   After the meetings, the party which compiled the spreadsheets would update them to take account of the agreed revisions.  The spreadsheets so updated would then be sent to the other party for its record.

11.  The plaintiff initially assumed the responsibility of compiling the settlement spreadsheets.  This continued until about 2009 when the defendant began to query the way in which the plaintiff prepared the settlement spreadsheets and took over the task (for reasons that I need not go into).

12.  Then, in late 2012 and early 2013, sensing the dwindling of orders from the defendant and following an unpleasant incident at the defendant’s office in about October 2012[7], the plaintiff produced to the defendant 3 sets of settlement spreadsheets on 4 and 28 December 2012 and 3 January 2013. 

13.  The second and third such spreadsheets (“plaintiff’s Final Spreadsheets” collectively) both yielded a credit balance of only $341,400.16 (as opposed to the amount of $2,719,915.06 claimed herein) in favour of the plaintiff. 

14.  Notably, the plaintiff arrived at the balance of $341,400.16 after giving the defendant credit for the amounts charged under Disputed D/Ns 1 to 24. 

15.  Such accounting treatment was construed and put forward by the defendant as the plaintiff’s admission or acknowledgment of the defendant’s claims under these 24 debit notes.  And the defendant questioned why the plaintiff should be permitted to resile from such admission or acknowledgment of its debts to the defendant. 

16.  First, the answer in fact is that the plaintiff’s Final Spreadsheets, prepared by Gary Wong with the assistance of his wife, were not intended to be final binding documents.  Rather, they were produced to facilitate the finalisation of the final account between the parties.  He anticipated the parties would compare notes and jointly review, discuss and negotiate over such spreadsheets, as they had done in the past with every other settlement spreadsheet.  In particular, he expected the defendant to provide him with supporting documents in relation to Disputed D/Ns 1 to 24, which he had orally asked for many times at the parties’ settlement meetings[8]. Gary Wong also expected the defendant to be prompted to issue all debit notes for claims that it may have against the plaintiff.

17.  There was not a single letter or email from the plaintiff to the defendant relating to the supporting documents for Disputed D/Ns 1 to 24.  Nevertheless, I accept Gary Wong’s evidence that he had orally sought documentary proof of Disputed D/Ns 1 to 24.  Patrick Wong stressed in paragraph 30(2) and (4) of his witness statement dated 22 August 2014 that when the defendant issued debit notes to the plaintiff, it would also send the supporting documents.  However, it will be seen from the discussion below that the defendants had not disclosed any or any adequate supporting papers for at least some of the Disputed D/Ns.  That was a reason why the defendant did not insist on the claims under Disputed D/Ns 7 to 9.  In relation to these 3 items, all that the defendant could adduce were the debit notes.  It is commercially inconceivable that the plaintiff would accept any debit notes from the defendant without sight of sufficient proof.

18.  I was initially puzzled as to why the plaintiff should want to receive from the defendant more debit notes which, if valid, would reduce the credit balance in favour of the plaintiff.  However, according to paragraph 23 of Patrick Wong’s said witness statement, during their settlement meetings, in addition to payment by the defendant, Gary Wong would also chase the defendants for the issuance of outstanding debit notes, because he needed the same in order to square the accounts with his own sub-contractors.

19.  Second, as a matter of law, the plaintiff would not be bound by any alleged admission or acknowledgment of the defendant’s claim under a debit note unless the claim, or the acceptance thereof, was for consideration that could support a binding compromise.  The burden of proof of the validity or enforceability of a Dispute D/N rests with its issuer, the defendant.  On this note, I now turn to the Disputed D/Ns.

Disputed D/N 1

20.  With regard to Disputed D/N 1, the defendant adduced certain settlement spreadsheets compiled by the plaintiff back in 2007 and 2008, in which the plaintiff appeared to have split the amount of $1,454,207.40 charged under Disputed D/N 1 into 2 sums, one of $286,868.30 and one of $1,168,589.50[9], and appropriate them to partly settle the plaintiff’s invoices Nos 2007/15 and 2008/74 respectively.  A notation “OK” was printed under each of such invoice numbers to denote that the invoices had been fully settled.   

21.  It was not surprising that the defendant placed heavy reliance on these old spreadsheets.  I do not propose to spend any more time on these pieces of evidence.  The plaintiff could re-open its said accounting treatment of Disputed D/N 1 if the debit note itself was not issued for consideration or was otherwise unenforceable.

22.  In this connection, the sum charged under Disputed D/N 1 was described as being for “質量問題,客人扣款” in relation to style 26102.  From such description, this debit note was premised upon the defendant’s customer, Indipunt, having withheld payment from the defendant to the tune of $1,454,207.40 due to quality issues concerning style 26102.  Patrick Wong had accepted under cross-examination that the defendant would not be entitled to impose any deduction on the plaintiff if the defendant itself had not suffered any such corresponding loss.

23.  Although there was an abundance of email correspondence between the plaintiff and the defendant and between the defendant and Indipunt, on various defects in the garments of style 26102, the defendant had not adduced a single document showing any deduction of payment to it by Indipunt.

24.  Under cross-examination, Patrick Wong conceded that the defendant had in fact received full payment for style 26012 from Inidpunt but maintained that Indipunt had deducted $1.4 million from the payment due under some untraceable invoices for the price(s) of other style(s) of goods sometime in 2009.  One would have expected such a considerable deduction (if made) to be contained or evidenced in some form of writing.  One would have expected such documents to still exist at the commencement of this action in 2013.   One would have expected the relevance of such documents to be realised. One would have expected such documents to be retrieved and disclosed once their relevance was appreciated.  However, the defendant had not disclosed any invoice or debit note by Indipunt or other supporting document showing any deduction by Indipunt despite the plaintiff’s cry for supporting documents throughout this action.

25.  I am unable to find that the defendant had suffered a loss of $1,454,207.40 to pass onto the plaintiff just on Patrick Wong’s unparticularised say so.

26.  In the absence of any documentary proof of a deduction by Indipunt against the defendant, it is commercially implausible that the plaintiff would have unreservedly agreed to absorb a $1.45 million loss, for which it could not seek recourse from its own subcontractor for want of proof.

27.  In the premises, the defendant was not entitled to any deduction under Disputed B/N 1.

Disputed D/Ns 2, 3, 4, 5 & 6

28.  These 5 debit notes were issued in July, August and September 2010 to charge one-off interest payments at a fixed percentage (2% / 3.5%)[10] on principal sums, which the plaintiff had admittedly received from the defendant.

29.  To avoid such interest charges, Gary Wong insisted that the plaintiff did not borrow from the defendant or ask the defendant to make advanced payments that were not yet due.  Rather, the plaintiff was simply collecting outstanding purchase price from the defendant. In support, the plaintiff pointed to the fact that the defendant often settled the plaintiff’s invoices outside of the agreed credit periods.  Reference was made to the defendant’s statements as at 19 May 2011, 24 August 2011, 19 November 2011 at C1/527, 538 and 547, which demonstrated that as at these dates in 2011, the defendant still owed the plaintiff money for invoices issued in 2010.

30.  In resolving the issue arising from such argument, I consider the spreadsheets exhibited as “WYK-3” to Gary Wong’s supplemental witness statement dated 13 May 2015 (“Chronological Spreadsheets”) to be more precise and directly material.  The Chronological Spreadsheets are so called because they tracked all transactions between the parties (i.e. invoices issued by the plaintiff, payments made and debit notes issued by the defendant and the balance resulting from each such due invoice, payment and debit note) from 2007 up to December 2012 in a strictly chronological order.  One can therefore readily ascertain the state of the account between the parties on any given date by cross-referencing the Chronological Spreadsheets.

31.  Although, over the years, the defendant did often pay the plaintiff’s invoices late, sometimes well after the expiry of the credit periods resulting in an account in the credit in favour of the plaintiff for extended periods of time, according to the Chronological Spreadsheets, during the times material to these 3 debit notes, i.e. July, August and September 2010, the plaintiff in fact owed substantial sums to the defendant.  Hence, the principal sums in respect of which these 5 debit notes charged interest could not have been paid to settle outstanding purchase price.  I find that the defendant did make advances to the plaintiff as stated in Disputed D/Ns 2, 3, 4, 5 and 6.

32.  The plaintiff next questioned why it would agree to pay the defendant interest when it did not impose the same burden on the defendant when the defendant was late in paying the plaintiff. 

33.  One has to look at all the circumstances.  A circumstance that strikes me as being of considerable significance is the probable imbalance in the parties’ relative bargaining powers.  On one hand, the plaintiff is a one-man show.  It had no staff.  Gary Wong was from time to time assisted only by his wife.  The defendant was the plaintiff’s single largest customer, accounting for about 90% of the plaintiff’s turnover.  The plaintiff was in need of funds at the material times but, due to its business set-up, it may not be as resourceful as it wished to be in fundraising.  On the other hand, the defendant obviously had a bigger operation.  While maintaining more or less the same volume of orders to the plaintiff, by mid 2010, the defendant had started to look for and work with alternative garment suppliers in order to reduce its dependence on the plaintiff as a supplier.  Against this background, one gets the sense that the defendant may weld relatively more and stronger bargaining power than the plaintiff.

34.  Further, unlike other Disputed D/Ns for which the plaintiff was asking, and waiting for, the defendant’s supporting documents, these 5 debit notes were straightforward.  They set out the principal sums borrowed by the plaintiff, the applicable interest rate and, in one instance, the period for which interest accrued.  Had the plaintiff not agreed to pay interest as charged, it should and would have just rejected these 5 debit notes, which it had not done.

35.  I find, on the balance of probabilities, that the plaintiff had agreed to pay interests as claimed under Disputed D/Ns 2, 3, 4, 5 and 6.

Disputed D/Ns 7, 8 & 9

36.  These claims were abandoned in the course of Patrick Wong’s evidence.

Disputed D/Ns 10, 11 & 12

37.  In support of each of these 3 debit notes, the defendant had adduced proof of payment in Mainland China of a sum that was somewhat less than the amount of the debit note and claimed that the difference represented the interest element that had been deducted by the lender.

38.  As in the case of the 5 debit notes discussed under the last heading, there was no dispute that the plaintiff had received the principal sums the payment of which the defendant had adduced documentary proof.

39.  However, Disputed D/Ns 10 and 11 were dated 25 July 2012 in respect of payments of RMB121,000 and RMB204,6000 made on 6 and 17 July 2012 respectively.  I refer to the Chronological Spreadsheets, which showed that between 28 June and 25 July 2012, the defendant in fact owed just over $400,000 to the plaintiff.  Had the defendant settled such account, the plaintiff would not have had to borrow.  I therefore rule that the plaintiff should not have to pay the interest element under either of Disputed D/Ns 10 or 11.

40.  As for Disputed D/N 12, although, by 6 August 2012, the account between the parties had reversed in favour of the defendant, on closer look, the small debit balance against the plaintiff was largely due to Disputed D/N 10 and 11.  It therefore follows from my above analysis and conclusion that the plaintiff would probably not have had to borrow the principals charged under Disputed D/N 10 and 11 had the defendant settled its overdue account with the plaintiff that the plaintiff should not bear the interest element of Disputed D/N 12.       

Disputed D/N 13

41.  Garmen Wong prepared this debit note.   19 Standard Chartered Bank import bill update advices were disclosed by the defendant, purportedly to support, but actually did not show, the handling charge of 0.23% or 0.3% or the document fee of $200 or $300.  Under cross-examination, it transpired that Garmen Wong had no personal knowledge of the matter as he got the percentages from a colleague called Ricky in the finance department.  Ricky did not give evidence but his absence was not explained.

42.  On such evidence, the defendant had not discharged the burden of proving that the charges claimed under Disputed D/N 13 had been incurred.

Disputed D/Ns 14-18

43.  There was no mention of any loss of opportunity to claim export tax rebate by the defendant in the body of its defence.  However, these 5 debit notes were all included in the 2010 table of debit notes attached to the further and better particulars of the defence. This is, in my view, sufficient pleading of the defendant’s claim for lost tax rebate under these debit notes, bearing in mind that it was then unknown which debit note(s) the plaintiff would challenge.

44.  The problem that I have with such claim is the 5% with reference to which the tax rebate was calculated.  The defendant had not adduced any evidence as to how such percentage was obtained or arrived at.  In the absence of such evidence, I am not satisfied that these claims had been properly quantified.  For this reason, the defendant was not entitled to credit for these 5 debit notes.

Disputed D/Ns 19 & 22

45.  The charges under these 2 debit notes were incurred because the plaintiff missed the original shipment booked by the defendant which then had to switch voyage to a different port of discharge and then caused the goods to be transferred from that port to the defendant’s customer’s warehouse by truck to make up for some lost time.  The charges in question covered the extra inland transportation necessitated by the plaintiff’s delayed delivery.  Gary Wong admitted under cross-examination that the styles in question[11] were delivered late by the plaintiff.  Subject to the provision of supporting documents, such additional costs should be borne by the plaintiff.  The defendant did disclose the relevant debit notes from one ITX Trading SA.  I find the plaintiff liable for Disputed D/Ns 19 and 22.

Disputed D/N 20

46.  This debit note also appeared to cover extra inland transportation costs due to late delivery of 2 styles[12] of goods by the plaintiff.  Although references were made under the description to 2 debit notes by Indipunt, these supporting documents were not supplied by the defendant to the plaintiff.  I hold the plaintiff not liable for this debit note.

Disputed D/N 21

47.  Patrick Wong explained that a random examination by its customer of this batch of garments styled FW0045 revealed such serious defects that the customer decided to open and inspect all 379 pieces and then repacked the same.  This debit note covered the costs incurred by the customer in doing so and was properly supported by the customer’s debit note.  As the supplier of the garments, the plaintiff should bear such costs which was caused by the defective quality of the goods.

Disputed D/N 23

48.  No witness from the defendant could explain the matter with which this debit note was concerned.  Garmen Wong also confirmed that the document placed after the debit note in bundle “X” (another import bill update advice by Standard Chartered Bank) which was supposed to be the supporting document in fact had no relation to the debit note.  On such evidence, the defendant had not discharged the burden of proving the expenditure charged under Disputed D/N 23.

Disputed D/N 24

49.  There were 5 items of charges totalling $142,556.50 under this debit note.  In issue was the fourth sum of $4,450.53.  From the description, it appeared to represent a one-off 3.5% interest on the sum of $127,158 being the airfreight payable to one Scanwell Logistics (China) Co Ltd Shenzhen Branch for the carriage of certain garments that were delivered late by the plaintiff.  Garmen Wong explained that the airfreight had to be prepaid; that the plaintiff did not have ready funds to make the payment; that the defendant also had to borrow in order to be able to disburse the airfreight on behalf of the plaintiff first and that 3.5% was the defendant’s costs of borrowing.

50.  I notice that the time at which the airfreight was incurred coincided more or less with the times when the advances with which Disputed D/N 2 was concerned ($450,000 + $100,000 + $200,000) were made when the account between the parties was in the debit against the plaintiff.  Much of what I have said about Disputed D/N 2 therefore should apply with equal force to Disputed D/N 24.  It was more probable than not that the plaintiff agreed to bear this interest.

Disputed D/N 26

51.  First, it was the plaintiff’s case that it had never received this debit note from the defendant.  Mr Albert Yau, counsel for the defendant, very fairly pointed out in paragraph 31 of his closing submissions that this document was not mentioned in the settlement spreadsheet prepared by the defendant for the year 2009.  I also note that the defendant had disclosed some emails by which certain debit notes identified by numbers were sent to the plaintiff.  However, I could not find any reference to Disputed D/N 26 in such emails.  The defendant had not disclosed any other email by which this debit note was sent to the plaintiff.  On such evidence, I am not satisfied that the defendant had issued Disputed D/N 26 to the plaintiff before this action.

Disputed Item 25

52.  It was common ground that the respective agreed unit price between the parties for style 110-154 was US$11 and for style 110-152 was US$9.

53.  It goes without saying that the plaintiff could not unilaterally increase these prices after contract simply because they turned out to be bad deals for the plaintiff.  I am inclined to think that the increases to US$13.60 per piece for style 110-154 and US$9.50 per piece for style 110-152 in the plaintiff’s invoices were unilateral because they were persistently captured in the spreadsheets prepared by the defendant under the caption “PENDING FOR ASKING COMPENSATION” (emphasis added) [C1/527, 538, 547, 556 & 566].

54.  Indeed, even if the defendant had consented to the increased prices, it would not have been bound unless the consent had been given for consideration.  

Was the plaintiff estopped from claiming more than $341,400.16?

55.  That leaves the defendant’s alternative defence of estoppel by representation by which, on the basis of the plaintiff’s Final Spreadsheets, the defendant sought to preclude the plaintiff from contending that the amount due from the defendant to the plaintiff exceeded $341,400.16.

56.  The relevant averments appear in paragraphs 5A to 5C of the Re-amended Defence as follows:

“5A. As appear hereinbelow, the amount claimed herein is significantly larger than on the Settlement Spreadsheet compiled and prepared by the Plaintiff as at December 2012.

5B. The Defendant avers that, having regard to the course of dealings and the fact that the parties hereto conducted their business on the basis of the Settlement Spreadsheets compiled from time to time, as far as the sum due from the Defendant to the Plaintiff at the date of the relevant Settlement Spreadsheet, the Plaintiff is estopped or precluded from denying that the Defendant was liable to it in a sum greater than that appearing on that Settlement Spreadsheet.

5C. The defendant would not have continued its business relationship with the Plaintiff had it known that the Plaintiff would later resile from position as stated on the relevant Settlement Spreadsheet and in so doing disbursing during the business relationship from time to time expenses on behalf of the Plaintiff and extending at times credit to the Plaintiff so as to enable it to fulfil its contractual obligation as supplier.  The Defendant could have looked for other suppliers of garments much earlier, thereby more effectively protecting its economic interests or avoiding unnecessary financial risk.”

57.  The estoppel raised by these averments was identified as one by representation, the requirements of which are:

(1)  a statement or other conduct that constitutes a representation of fact;

(2)  its communication to the representee;

(3)  the representee’s justifiable belief in the truth and his alteration of position in that belief;

(4)  an attempt by the representor to contradict his representation;

(5)  prejudice to the representee as a result of his alteration of position if contradiction of the representation were permitted.

See, e.g. Handley, Estoppel by Conduct and Election, 2^nd Edition, paragraph 1-006.

58.  Even if, for the sake of argument, the plaintiff’s Final Spreadsheet could constitute a representation by the plaintiff as to the final state of the account between the parties, there are a number of insurmountable difficulties in the defendant’s case of estoppel grounded upon such alleged representation.

(1)  First, while Patrick Wong had given a detailed account of the dealings between the parties, including their practice of preparing settlement spreadsheets and having settlement meetings regularly to sort out their account, neither Patrick Wong nor any other witness for the defence, had testified in terms that made out the said elements of an estoppel by representation with regard to the plaintiff’s Final Spreadsheets.

(2)  Second and to the contrary, the defendant must have implicitly considered such spreadsheets to be inaccurate.  Its primary case was that it owed the plaintiff not more than $87,000,82.  Any suggestion of a belief in the truth of a representation that the defendant owed the plaintiff $341,400.16 would contradict the primary defence case.

(3)  Third, there could be no alteration of position by the defendant caused by a belief in the truth of the alleged representation. 

(a)  The defendant certainly did not pay the plaintiff $341,400.16.

(b)  The reliance and prejudice averred in paragraph 5C of the Re-amended Defence did not get off the ground as a matter of timing. As said earlier, from 2009 onwards, the settlement spreadsheets were prepared by the defendant.  The plaintiff’s Final Spreadsheets were produced on the eve of the termination of its business relationship with the defendant with a view to facilitating the final settlement of account between them.  By December 2012, the defendant had stopped placing any additional purchase order with the plaintiff or disbursing any more expense for the plaintiff or extending any further credit to the plaintiff.  On its own evidence, the defendant had set up its own factory and switched to garment suppliers other than the plaintiff well before it received the spreadsheets in question.  

59.  I can find no estoppel against the plaintiff, based on the 21.12.2012 Spreadsheets or 3.1.2013 Spreadsheets.

DISPOSITION

60.  For the above reasons, the plaintiff is entitled to recover from the defendant $2,005,663.66, which I breakdown as follows:

	Description	Amount (HK$)
	Amount claimed by plaintiff	$2,717,915.06
Less	Disputed B/N 2	$26,250.00
Less	Disputed B/N 3	$36,666.37
Less	Disputed B/N 4	$37,616.35
Less	Disputed B/N 5	$21,250.00
Less	Disputed B/N 6	$59,483.82
Less	Disputed B/N 19	$96,530.13
Less	Disputed B/N 21	$48,464.63
Less	Disputed B/N 22	$151,310.07
Less	Disputed B/N 24	$4,450.00
Less	Disputed Item 25	$230,230.03
		$2,005,663.66

61.  The defendant should pay interest on $2,005,663.66 at 1% above the prime lending rate for Hong Kong dollars from the date of the writ to this date and thereafter at judgment rate until payment.

62.  I also made an order nisi that the defendant should pay the plaintiff’s costs of the action on a party and party basis, to be taxed if not agreed.

[1] Unless otherwise stated, all monetary figures in this judgment are in Hong Kong dollar.

[2] Which the defendant had set out in 6 yearly tables attached to the further and better particulars of the defence filed on 26 March 2014 [A/22-32].  These tables were produced in evidence by the defendant’s manager and main witness, Mr Wong Lap Patrick (“Patrick Wong”).

[3] The full amount of this debit note was HK$158,536.59 (converted from RMB).  The plaintiff did not dispute liability to repay the principal sum of RMB121,000 which it did receive.

[4] The full amount of this debit note was HK$268,292.68 (converted from RMB).  The plaintiff did not dispute liability to repay the principal sum of RMB204,600 which it did receive.

[5] The full amount of this debit note was HK$182,926.83 (converted from RMB).  The plaintiff did not dispute liability to repay the principal sum of RMB139,000 which it did receive.

[6] Mr Wong Garmen (“Garmen Wong”), a merchandiser of the defendant, and Mr Lam Man Hon, also a merchandiser of the defendant, also gave evidence in support of the defence.

[7] In which Gary Wong felt that Patrick Wong had been rude to, or had cold-shouldered, him.

[8] As for Disputed D/N 26, it was the plaintiff’s case that it had never received the same from the defendant.

[9] These 2 sums added up to $1,455,457.80 which exceeded the amount of Disputed D/N 1.  It appears that the plaintiff had made a mistake in its calculation here.

[10] Except for Disputed D/N 5 which charged interest at 8.5% per annum for 2 months.

[11] FW0045 & 110-152.

[12] 18096 & 18111.