LAM YUK CHEUNG t/a CORBIERES WINE CO v. MAISON RIVIERE FILS

DCCJ 1364/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1364 OF 2012

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JUDGMENT

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INTRODUCTION

1.  This is a case about the sale and purchase of wine from a supplier in France to a merchant in Hong Kong.

BACKGROUND

The parties

2.  Mr Lam Yuk Cheung (“the plaintiff”), at all material times, was and is the sole proprietor of Corbieres Wine Company (“Corbieres”).  Corbieres carries on business in Hong Kong of importing and selling wine.

3.  Maison Riviere Fils (“Maison”) is a family company in France that exports and sells wine to a number of countries, including Hong Kong.  Mr Philippe Riviere (“Riviere”) is the managing director of Maison, and Mr Guillaume Faugeron (“Faugeron”) is the export manager of Maison in Asia.

4.  Corbieres and Maison have had business dealings since 2001.

5.  A crucial person in the dealings between Corbieres and Maison is one Mr Eric Ka (“Ka”).  Ka was all along the person in contact with the defendant on behalf of the plaintiff and acted as a go-between amongst the parties.  It is not disputed by the plaintiff that Ka had full authority to handle the purchasing of wines from Maison on his behalf.  It is also the plaintiff’s case that the plaintiff himself did not deal with Maison directly when making purchases from Maison.

6.  However, behind the plaintiff’s back and without his knowledge, Ka has since or about 2004 been involved in another entity called ‘Collectionneur du Vin’ (“Collectionneur”). In this regard, Ka had requested Maison to help Collectionneur to set up its own account with Maison which was separate from the Corbieres’ account. Collectionneur is also presently indebted to Maison with sums due and outstanding from deliveries of wines to it.  Collectionneur was registered and is still under the name of Ka’s wife, Freda Li.

7.  The defendant was given to understand that both Corbieres and Collectionneur were operated by Ka and his partners, with Ka being the person in charge of all import matters for Corbieres and Collectionneur.

8.  Although Ka had played a crucial role in the factual matrix surrounding these proceedings and had on one occasion even filed an affirmation on behalf of the plaintiff in an interlocutory application, the plaintiff has opted not to call him as a witness at the trial. This is despite  the fact that Ka was apparently available as a witness and was seen outside of the court room conferring with the plaintiff on the first day of trial.  Further, perhaps more importantly in the context of this case, the plaintiff has not sought to make any claims against Ka or join him a party to the present proceedings.

The claim and counterclaim

9.  The plaintiff’s claim arises in the following manner:-

(a) Ka placed an order for wines with Maison in around October 2011 for the price of €37,519.20;

(b) payment was made in late November 2011 by transfer of the sum €35,519.20 and another purported transfer of €2,000.00; and

(c)  no delivery of the wines ordered was made by the defendant.

10.  For these reasons, the plaintiff alleges that it is entitled to and claims for:-

(a) specific performance on the part of the defendant to deliver the ordered wines; or

(b) repayment of the sum of €37,519.20.

11.  The defendant’s defence and counterclaim are based on the following:-

(a) for many years, the plaintiff has been behind in making payments to the defendant for wines delivered;

(b) as at 24 July 2009, a sum of €37,254.70 was due and outstanding from the plaintiff to the defendant from the previous orders^[1];

(c) it was expressly agreed between Ka and the defendant that the outstanding amounts due to the defendant would be paid first before the latest order in October 2011 was to be processed;

(d) alternative to (c) above, the defendant was entitled to set off the amounts paid to it and the defendant’s General Terms and Conditions expressly provides that failure to settle payment for goods will result in suspension of deliveries (Clause 9(1));

(e) when the defendant received payment from the plaintiff in the sum of €35,494.20 on 28 November 2011, the sum was used to offset the outstanding due  to the defendant by the plaintiff;

(f) the defendant does not admit that the sum of €2,000 paid by Ka on 27 November 2011 was for the Corbieres account with the defendant;

(g) even after the sum of €35,494.20 was paid by the plaintiff, a sum of €26,653.42 remains due to the defendant from the plaintiff;

(h) the amount of €26,653.42 is made up of the following sums:-

(i) amount still due from the plaintiff in the sum of €1,760.50;

(ii) a sum of €17,881.44 being the interest due on sums owing to the defendant from the plaintiff, namely,

(aa) interest at the rate of 1% for 47 months (period between December 2007 and October 2011) on the sum of €23,009.80 due under the defendant’s Invoice No F0107029 (ie €10,813.22), plus

(bb) interest at the rate of 1% for 47 months (period between November 2006 and October 2011) on the sum of €12,400.40 due under the defendant ‘s Invoice No F0099408 (ie €7,068.22).

(iii) a sum of €3,535.20 being the interest at the rate of 1% for 18 months (period between October 2011 and April 2013) on the sum of €19,641.14 being the outstanding due from the defendant (including the above interest); and

(iv) a sum of €3,476.28 being the contractual penalty at a one-off rate of 15% on the total amount due as at April 2013 in the sum of €23,176.34 (including the above interest).

12.  For these reasons, the defendant says that it is not liable to make any further deliveries to the plaintiff and the defendant is entitled to and counterclaims against the plaintiff for:-

(a) payment of the sum of €1,760.50, being the amount of outstanding from the plaintiff;

(b) payment of interest in the sums of €17,881.44 and/or €3,535.20, or alternatively at such sums at such rate and for such periods as this court deems fit; and/or

(c) the contractual penalty in the sum of €3,476.28, or alternatively at such sums or rate as this court deems fit.

Issues to be decided

13.  The issues which the court is asked to decide are as follows:-

(a) The plaintiff’s claim for specific performance for delivery of wines purchased from the defendant or damages for non-delivery in the sum of €37,519.20, and damages to be assessed for loss of profits[2]; and

(b) the defendant’s counterclaim for the outstanding amounts due to the defendant from the plaintiff in the sum of €26,653.42 or such sums that are found due by this court.

DISCUSSION

14.  First and foremost, one special feature which stands out in this case is the dire lack of documents from the plaintiff to support his case.  In fact, a closer analysis of the plaintiff’s case actually reveals that he does not have much of a case to speak of at all.  The defendant, on the other hand, has plenty of contemporaneous documents to prove not only the course of dealings between them but also the crucial role played by Ka in all these transactions.

The defendant’s accounts

15.  A crucial document showing the payments made to the defendant from the plaintiff and the invoices issued by the defendant to the plaintiff since 2003 can be found in the defendant’s account ledger (“the defendant’s accounts”).  The defendant has also particularized further invoices issued to the plaintiff since 2002.

16.  The defendant’s counsel Mr Robin D’Souza has very helpfully produced a table incorporating the defendant’s accounts and the invoices since 2002 and attached it as “Schedule 1” to his opening submissions.

17.  I accept the accuracy of these accounts and the evidence given by Riviere who has verified them in court. 

Correspondence

18.  The defendant has also produced the history of the correspondence, principally by way of emails exchanges but sometimes through facsimile letters, between Ka and the defendant.  Reading from those emails and correspondence, it is obvious that Ka had been using the plaintiff’s money to settle debts from orders placed in the name of his own company. 

19.  The defendant’s counsel has also very helpfully produced a table putting all the relevant documents in chronological order which was attached to the opening submission as “Schedule 2”.  I accept these documents are accurate and truthful and reflect the business relationship between the parties at the time.

The Plaintiff’s evidence

20.  In my judgment, both in the plaintiff’s pleadings and in his evidence, the plaintiff has taken a blinkered approach to the entire case.  He has merely attempted to state each and every transaction it had with the defendant without as much as even tried to find out what Ka had done on his behalf in between these transactions.  Not only his version of events (except for the last few orders) does not corroborate with the documentary evidence, the plaintiff has not been able to adduce all the invoices or receipts of the payments from the defendant to support whether his case is accurate at all.

21.  The plaintiff was the only witness testified for his own case.  I have no hesitation at all to reject his case for the following reasons:-

(a) During his oral evidence, as well as in his witness statement and supplemental witness statement (which was incorporated as part of his evidence-in-chief), the plaintiff kept repeating the same phrases around the same theme -- almost like reciting the lines of an actor in a play -- saying that he had always paid for all the goods before delivery on each delivery and that the defendant’s accounts were inaccurate.  This I find however was in complete contradiction of the contemporaneous documents produced by the defendant.

(b) While accepting that he was not involved with any of the orders and Ka was the person in charge of all import matters of Corbieres, yet the plaintiff has failed to call Ka to give evidence at trial but has chosen to believe everything that Ka had told him.  The failure of calling a material witness will entitle the court to draw adverse inferences against that party and favourable inferences on the other side: Kao Lee & Yip v Koo Hoi Yan & Others [2003] 3 HKLRD 296 at 310 §34.  I would so draw such adverse inference against the plaintiff wherever there is a discrepancy between the evidence presented by the parties in this case.  

(c) Further, it is clear that most of what the plaintiff has stated in evidence regarding the dealings between the plaintiff and the defendant had in fact come from Ka.  The plaintiff did not have any first-hand knowledge as to what had been communicated between Maison and Corbieres.  Hence, most, if not all, of the plaintiff’s evidence regarding what took place between the parties is hearsay evidence based on what Ka had told him.  It is apparent that the plaintiff did not even bother to check the accuracy of what Ka had told him is true or not.  In such circumstances, the court can give little or no weight at all to the plaintiff’s evidence which is principally based on hearsay and from a source which has self-interest to protect.

22.  On the other hand, there are plenty of documents to show that Ka had deliberately tried to mislead the defendant into believing that he was one of the “partners” of the plaintiff while at all material time the plaintiff was a sole proprietorship: see, for example, a fax dated 18 October 2005 and a letter dated 10 July 2007 from Ka to Maison.

23.  The reasons offered by the plaintiff during cross-examination of why he had to rely on Ka in all these transactions are that: (i) Ka was the person who had introduced him to Maison and; (ii) his inability or limited ability to communicate in French and English.  In my view, such are not valid reasons of why he should delegate the authority to Ka without as much as questioning him or checking the record of correspondence Ka had purportedly communicated on behalf of the plaintiff.  As the plaintiff has admitted during cross-examination, Ka was responsible for all import matters on behalf of the plaintiff.  As such, he was conferred actual or apparent authority by the plaintiff.  Thus, what Ka did, as agent of the plaintiff, would be binding on the plaintiff.  He cannot now turn around and says that he did not know Ka was acting against his own interest without his knowledge.

24.  Further, the plaintiff was not able to explain the shortfall between the price of the invoices and the payments made to the defendant over the years as shown in the defendant’s accounts and the bank statements.  He would very conveniently rely on a purported debt owed by Ka to him to say that such sums were paid for by Ka.  However, not a single document has been produced by the plaintiff of the existence of such loan and that Ka had in fact made those payments to the defendant on behalf of the plaintiff.  In my judgment, such allegation is simply not believable.

25.  The plaintiff also relies on the payment of €3,240 purportedly paid to Masion on or about 12 July 2005 as part of his case to show that his version of payment is correct. However, such claim is defective at least on 2 counts.  First, the only evidence adduced by the plaintiff is his passbook record kept with Nanyang Commercial Bank showing there was a withdrawal (by way of remittance) in the sum of HK$30,634.68 on 14 July 2005.  It is not even clear from the passbook record to whom the remittance was made to.  Second, as Riviere explained, such a payment was never received by the defendant, as the bank statements of the defendant have clearly shown.  Thus, I find the plaintiff has failed to prove that such sum was in fact remitted to the defendant’s account. 

26.  In addition, during the course of the trial, the evidence reveals that the following purported payments from Ka, although supported by payment slips from his bank which were shown to the plaintiff, had never been received by Maison:-

(a) a payment of €7,974.00 on 14 November 2007;

(b) a payment of €1,700.00 on 19 June 2009; and

(c) a payment of €2,000 on 27 October 2011 (which formed part of the plaintiff’s claim in the present proceedings).

27.  In the absence of any explanation from Ka, the only reasonable inference I think the court can draw is that Ka had somehow managed to cancel the remittances after showing the plaintiff the payment slips. 

28.  Based on the above, I find the plaintiff’s claim that payments for all the orders were made before the delivery is simply inconsistent with the contemporaneous documents. Further, such claim is not supported by the documents adduced by the plaintiff.

The defendant’s evidence

29.  On the defendant’s part, the defendant has called Riviere as its main witness.  I find him to be a straight-forward and honest witness.  He explained clearly how the accounting system of the defendant works and confirmed the bank statements which had been produced on the first day of the trial as true and accurate copies.  I accept his evidence.

30.  Equally, I find the defendant’s second witness Faugeron as a credible witness.  Despite the plaintiff’s counsel having previously indicated that there would be questions for the witness, when the witness returned to court over the weekend to give evidence, not a single question was put to him during cross-examination.  In such situation, the witness’s evidence stands unchallenged and the court has no reason not to accept his evidence in its entity.

31.  The defendant has adduced the defendant’s accounts and documentary evidence to the latest 3 orders that make up the bulk of the outstanding amount due to it.  These 3 orders included:-

(a) Order for €25,506.00 under Invoice No F0099408 dated 20 November 2006; and

(b) Order for €23,009.80 under Invoice No F0107029 dated 4 December 2007; and

(c) Order for €33,472.80 under Invoice No F0116490 dated 6 July 2009.

32.  Prior to these three orders, the amount due to the defendant from the plaintiff was at €6,196.70 only.  Although some subsequent payments were made to the defendant, it was not sufficient to cover the entire amount due.

33.  When giving his evidence, Riviere explained (of which I accept) that before 2003 Maison had been using a different accounting software programme.  The old accounts were “migrated” into a new accounting programme since 1 January 2003 and that is the reason why the ledger does not show the transactions prior to 2003.  However, the ledger shows that, as of 1 January 2003, there was an outstanding sum of €15,891.28 already owed by the plaintiff to the defendant.  I have no reason to believe that Maison would make up such accounts or that Reviere would lied under oath about this matter.  More importantly, the fact that the plaintiff had been running a deficit account in the purchase of wine over the years with the defendant can be found in the correspondence between Ka and the defendant.

34.  A good example of how Ka had abused the trust placed in him by the plaintiff can be found in a letter written by Ka to Maison on 27 October 2004.  In this letter, Ka made a request to Maison to transfer €8,871.00 of the plaintiff’s money into a new account set up by Collectionneur.  It is clear that it was used to pay for orders made by Ka’s newly set-up company.  When confronted with such blatant act of breach of trust during cross-examination, the plaintiff still chose to bury his head under the sand and refused to acknowledge any wrongdoing on the part of Ka.  In my judgment, such blinkered approach of the plaintiff not only shows his naivety of commercial reality but also his stubbornness in refusing to accept that Ka had done anything wrong when the evidence clearly shows otherwise.

35.  I further find that there was no double charge or double payment of the sum of €25,506.00 or €23,506.00 under Invoice No F0099408 dated 20 November 2006 as alleged by the plaintiff. The accounts clearly shown that such sums were only carried forward for accounting purposes from 2006 to 2007 and had not been double counted.  Sadly, despite of such clear evidence, the plaintiff and his legal representatives have steadfastly refused to accept the defendant’s case on this issue.

36.  In addition to the above, I further find that the following contemporaneous documents show that the plaintiff was indeed indebted to the defendant.  Such debts had either been acknowledged or admitted by Ka on the plaintiff’s behalf:-

(a) a letter by fax dated 4 July 2005 from Ka to Maison, in the course of making a new order for Corbieres, Ka acknowledged that payment will be made in instalments and that he will “remit additional €7,000.00 to settle the outstanding payment”;

(b) a letter by fax dated 7 July 2005 from Ka to Maison where he admitted that a sum of €22,326.70 was due from the plaintiff to the defendant and proposed payments to be made in instalments;

(c) an email dated 26 September 2005 where Ka asked for “a little bit more time to raise enough money to settle the balance.”  He further ended the email by stating that “(B)ut for sure, I will be trying very hard to keep my words.” ;

(d) an email dated 18 October 2005 where Ka again asked for time as he was still “raising money”;

(e) a letter by fax dated 14 February 2006 where Ka had apologized again for the delay in paying the “outstanding balance” and stated that he would remit €10,000 as soon as possible and “(S)ettle, if not possible fully, at least 75% of the total outstanding balance” before his next order;

(f) a handwritten letter by fax by Ka to Maison dated 5 July 2006 stating that he would make remittances as soon as possible and apologized for the delay in payment;

(g) in reply to a letter of Maison dated 2 October 2006, Ka had signed and confirmed the contents by reply on 3 October 2006 whereby he acknowledged and admitted the amount owed by the plaintiff to the defendant as of that date was at €23,696.50 (which corresponds the figure in the defendant’s accounts); and

(h) a letter dated 10 July 2007 where Ka had clearly lied to say that “the balance should have been paid off by the old partners which they have refused” and asked for a solution to make payments in order to continue the business relationship with the defendant.”    

37.  In the aforesaid circumstances, I accept the defendant’s submission and so find that the plaintiff is not entitled to now claim ignorance of the defendant’s accounts as it is clear from the correspondence that Ka would from time to time acknowledge debts due by the plaintiff to the defendant.  I further find that any alleged ignorance on the part of the plaintiff is a matter between the plaintiff and Ka, and not the defendant.  From the defendant’s perspective, it was all along dealing with Ka who had full authority to conduct purchases on the plaintiff’s behalf, a matter not disputed by the plaintiff.  In my view, the plaintiff cannot now choose to bury his head under the sand and to pretend as if the dealings between Ka and the defendant had nothing to do with him at all.

38.  In the aforestated premises, I accept the calculations worked out by the defendant’s counsel in Schedule 1 and find that as at 24 July 2009, a sum of €37,422.50 was still due and owed  by the plaintiff to the defendant.

Agreement to deduct money under the October 2011 Order 

39.  It is not in dispute that in around October 2011, Ka contacted Maison to make a further order of wine on behalf of the plaintiff in the sum of €37,519.20.  The plaintiff was provided with a pro forma invoice for that order (“the October 2011 Order”). 

40.  I accept Faugeron’s evidence (which is unchallenged by the plaintiff) that Ka had agreed to settle all outstanding sums due and owing by the plaintiff to the defendant before the defendant would deliver the wine under the October 2011 Order.  I further accept Faugeron had informed Ka that the remittance of €35,494.20 received by the defendant from the plaintiff at the end of October 2011 would be applied as part payment of the outstanding sums due and owing by the plaintiff to the defendant.   

41.  In any event, in a commercial transaction, it is not unusual for the defendant to withhold any further deliveries until it was paid amounts due to it: see Pearl Pond Limited v Tung Ga Linen & Cotton Mills (DCCJ 2629/2007; unreported; HH HC Wong; 9 November 2010).  I do not find anything wrong with this given the history of the case and particularly the debts accumulated by Ka on behalf of the plaintiff over the years.  Further, under the defendant’s General Sales Conditions, it expressly states that the defendant can withhold any deliveries until it has received payment.  Thus, even without the expressed agreement made by Ka on behalf of the plaintiff, I find that the defendant is entitled to make such deductions under the General Sales Conditions.

42.  In any event, I accept the defendant’s case that Ka had expressly agreed on the plaintiff’s behalf that the sums paid by the plaintiff will be first used to pay the outstanding amounts due to the defendant from the plaintiff.  This was not only could be found in the correspondence between Ka and the defendant but was supported by Riviere’s oral evidence of which I accept.

43.  Hence, I find the defendant was entitled to apply the sums of €167.80 and €35,494.20 received from the plaintiff on 27 & 28 October 2011 respectively to re-pay the outstanding sums under the December 2007 invoice and July 2009 invoice. 

44.  Even with those deductions, I find that a sum of €1,760.50 remained outstanding under the December 2007 invoice as at 28 October 2011.  As such, as the defendant was not fully paid for the outstanding amount owed to it, it has no obligation to process the October 2011 Order.

45.  In conclusion, based on the aforesaid reasons, I find that the defendant was entitled to set-off or otherwise apply the payment of €35,662.00 to the sums outstanding from the plaintiff for the December 2007 and July 2009 invoices; and (2) a sum of €1,760.50 by way of counterclaim.     

Terms of agreement

46.  There is an issue as to whether the defendant’s General Sales Conditions form part of the agreement between the parties.  The relevance of the adoption of the General Sales Conditions relates to only the penalty clause and the one-time 15% charge on the amounts outstanding.

47.  There are both factual elements and legal elements to this issue.

48.  There are two factual disputes on this issue.  The first is that the plaintiff alleges that Corbieres has never received the defendant’s General Sales Conditions because Corbieres only issued the invoices issued by the defendant via email and the back page of the invoices (where the General Sale Conditions could be found) was not sent to Corbieres.  On the other hand, the defendant’s case is that Corbieres has received copies of the defendant’s invoices and the General Sale Conditions with them.

49.  The second factual dispute is in relation to the penalty clause.  The plaintiff says that as the defendant did not bring the penalty clause to the attention of Corbieres such a clause is not binding on Corbieres.  The defendant on the other hand says that Eric had notice of the penalty clause and had even agreed to it.

50.  As to the legal issues, the plaintiff raises two points.  First, the plaintiff says that the terms contained in the invoices do not form part of agreement between the parties.  And secondly, even if it did, it does not bind Corbieres as the language of the General Sales Conditions is in French, which Corbieres does not understand.

51.  In relation to the first legal issue, I accept the defendant’s submission that it is an established principle in law that standard conditions can be incorporated “by a “course of dealing” between the parties where each party has led the other reasonably to believe that he intended that their rights and liabilities should be ascertained by reference to the terms of a document which has been consistently used by them in previous transactions”: see Chitty on Contracts (32^nd ed), §13-011.

52.  Further, I accept the following statement relied on by Mr D’Souza which can be found in Circle Freight International Ltd v Medeast Gulf Exports Ltd [1988] 2 Lloyds Rep 427, where Taylor LJ stated as follows (p 33):-

“…… it is not necessary to the incorporation of trading terms into a contract that they should be specifically set out provided that they are conditions in common form or usual terms in the relevant business. It is sufficient if adequate notice is given identifying and relying upon the conditions and they are available on request. Other considerations apply if the conditions or any of them are particularly onerous or unusual.

Again, it is not necessary that notice of conditions should be contained in contractual document where there has been a course of dealing.” [emphasis added]

53.  In relation to the second legal issue, I accept the defendant’s contention that the lack of familiarity of the language of the contractual document or terms is not to be equated with the person bound by the contract as lacking capacity: see Chitty on Contracts (32^nd ed), §9-001.

54.  Not knowing the language of a contract document does not mean that the contract does not bind the person agreeing to the contract, unless the person has been positively misled to the nature of the document or the terms: Kincheng Banking Corporation v Chan Siu Kit (CACV 160/1985; Court of Appeal; 25 April 1986). There is no reason why the plaintiff could not have them translated or otherwise requested Maison for an English version of it. 

55.  On the factual issue, I would also reject the plaintiff’s case for the following reasons. First, Corbieres and Maison had more than 10 dealings throughout the years. Second, in all the invoices sent to the plaintiff, it would contain the same General Sales Conditions in French in the back. Third, the plaintiff admitted to have received the original invoices as those invoices would be needed to enable him to clear the customs in Hong Kong.  

56.  In this regard, I accept the defendant’s submission that as both the plaintiff and the defendant are business entities, they are expected to conduct themselves and act as such.  The fact that the plaintiff had accepted the previous goods without disputing the terms of the sales would have led the defendant reasonably to believe that the plaintiff had accepted the General Sales Conditions: Circle Freight, supra at p 433 per Taylor LJ.

57.  In the circumstances, I agree with the defendant’s counsel submission that none of the objections made out by the plaintiff can be made out.  I further agree that, in any event, these objections only go to the penalty clause aspect of the defendant’s case and not to the amounts due to the defendant and not whether or not the defendant can charge interest.

Penalty Clause

58.  In the context of the present case, I do not find the one-off 15% payment for any outstanding sum due as unconscionable, oppressive or extravagant for 2 reasons: (i) it was not charged on a continuous bases; and (ii) this fixed rate reflects what the defendant could have earned from selling its stock in the open market had there been no default made by the plaintiff: (See Re Mandarin Container & Others [2004] 3 HKLRD 554 at 558 §8.

59.  In the premises, I find that the Penalty Clause is in fact not a penalty clause but a liquidated damages clause.

60.  As for the calculations of the penalty clause, I find that the defendant is entitled to charge the sum of €264.08 (€1,760.50 x 15%) only.

Interest

61.  One of the aspects of the defendant’s claim is that it claims for interest on the outstanding amounts due to it at the rate of 1% per month resulting in the sums of €17,881.44 and €3,535.20 payable as interest.  The defendant’s alternative case is that it is entitled to pre-judgment interest at a rate and for such period as determined by this court.  The usual interest rate awarded by the courts is prime rate plus 1%: Li Xiao Yun & Anor v China Gas Holdings Limited (CACV 215/2013; Court of Appeal; 26 May 2016).

62.  I consider that in a commercial context as in this case, the usual interest at 6% (prime rate plus 1%) should be adopted.

63.  Based on the interest at 6% per annum, I allow the following as interest in this case:-

(a) interest on the sum of €12,667.70 due under the November 2006 Invoice until repayment in July 2009 (after 32 months), being a sum of €2,026.83 (ie €12,667.70 x 6% x 32/12);

(b) interest on the sum of €19,060.10 due under the December 2007 Invoice until repayment in July 2009 (after 19 months), being a sum of €1,810.71 (ie €19,060.10 x 6% x 19/12);

(c) interest on the sum of €3,949.70 due under the December 2007 Invoice until repayment in October 2011 (after 47 months), being the sum of €928.18 (ie €3,949.70 x 6% x 47/12);

(d) interest on the sum of €31,712.30 due under the July 2009 Invoice until repayment in October 2011 (after 27 months), being the sum of €4,281.16 (ie €31,712.30 x 6% x 27/12); and

(e) interest on the sum of €1,760.50 due under the July 2009 Invoice until judgment (expected to be end of November 2016) (88 months), being the sum of €774.62 (ie €1,760.50 x 6% x 88/12).

64.  Hence, based on the above, the total interest allowed in this case is at €9,821.50.

CONCLUSION

65.  Based on the above discussions, I find that the plaintiff has failed to prove his case against the defendant and accordingly his case is dismissed with costs.

66.  Further, the defendant has been able to prove its counterclaim against the plaintiff and the plaintiff is hereby ordered to pay a sum of €11,846.08 to the defendant:-

(a) the sum of €1,760.50 being the amount outstanding from the plaintiff;

(b) the sum of €9,821.50 being interest at the usual rate; and

(c) the sum of €264.80 being the sum due under the Penalty Clause.

Costs

67.  Costs should follow the event.  There is no doubt that the defendant being the winning party in this case is entitled to have costs of this action, including the costs of the counterclaim against the plaintiff, with certificate for counsel.  The only question is on what basis such costs should be allowed in the circumstances of this case.

68.  In exercising the discretion as to costs, the court shall, to such extent, if any, as may be appropriate in the circumstances, take into account, inter alia:-

(a) the underlying objectives set out in Order 1A, rule 1; and

(b) the conduct of all parties:

Order 62, Rule 5(1) of the Rules of the District Court (Cap 336H).

69.  The leading case in the discussion of whether or not costs should be awarded on an indemnity basis is the case of Town Planning Board v Society for Protection of the Harbour Ltd (No 2) [2004] 7 HKCFAR 114.  The principles can be summarized as follows:-

(a) The court has a broad discretion to determine how costs shall be paid and whether indemnity costs should be ordered: p 123C;

(b) a successful party should show, in order to obtain an order for costs on an indemnity basis, that the case has some “special or unusual feature”: p 123J;

(c) such special or unusual feature does not mean that the courts will not only order indemnity costs where a case has been brought with an ulterior motive or for an improper purpose or where there is some deception or underhand conducts on the part of the losing party, but rather the courts have stressed the undesirability of attempting to define the circumstances in which order for indemnity costs are to be made: p 124A-E; and

(d) the grounds upon which indemnity costs are awarded must be connected with the case, and may be extended to any matter relating to the litigating and the parties’ conduct in it, and also circumstances leading to the litigation, but no further: p 124F-I.

70.  In the present case, in my judgment, the plaintiff should have very early on, or at least since the exchange of documents, released that the case he was putting forward was diametrically opposed to the contemporaneous documents exchanged.

71.  It must have also become clear to the plaintiff that Ka’s involvement was more than what it had appeared to be and that Ka’s explanations to him did not in any way explain the contradictions in the contemporaneous documents which his lawyers must have explained to him.  Even during the plaintiff’s oral opening submissions, it became apparent to the court and the defendant that the only person on the side of the plaintiff who had any idea about the details of the transactions was Ka himself, and that the plaintiff should not have sued the defendant but should have sued Ka instead.  Despite these obvious observations, the plaintiff decided to go through the whole case.

72.  As said, Ka had made an affirmation to support the plaintiff’s case during interlocutory applications, but the plaintiff decided not to ask him to make a witness statement or to call him to give evidence at trial despite Ka’s apparent availability. I agree with the defendant’s counsel that the reasonable inference here is that either Ka is being protected by the plaintiff for reasons unknown to the court and the defendant or the plaintiff simply choose to believe Ka blindly despite the overwhelming evidence that he was cheating on him.

73.  Further, as Riviere made clear in his witness statement, the defendant believes that the plaintiff does not have much assets and that is the reason why legal proceedings were not initiated against the plaintiff.  However, notwithstanding being the one in debt, the plaintiff initiated proceedings against the defendant claiming for the specific performance of the contract or for repayment.

74.  I further agree with Mr D’Souza that if the plaintiff, by chance somehow succeed in these proceedings, the plaintiff would have the benefit of the wines delivered as well as receive its payment back.  If the plaintiff loses, then besides his own legal fees, he would have little else to lose.  In these circumstances, it does appear to the court that the plaintiff initiated the present proceedings with an opportunistic view of gambling his chances to see if there is anything the plaintiff can get from the defendant, bearing in mind that it is a foreign company with witnesses residing overseas who may not be keen to come to Hong Kong to give evidence.  The above observations in my view are consistent with the position stated in the plaintiff’s oral opening submissions where the plaintiff’s counsel expressly stated that the plaintiff would simply opt to “put the defendant up to strict proof”.

75.  In my judgment, the above matters clearly amounted to an abuse of the court’s time and resources in an attempt to resolve a rather one-sided case from day one.  For these reasons alone, I consider that they constitute to sufficient grounds to order costs on an indemnity basis against the plaintiff.

76.  Another matter worth noting is on the issue of costs incurred by the parties on Day 3 of the proceedings.  The evidence of Faugeron in-chief had lasted less than 10 minutes (9:30 am to 9:40 am).  And the plaintiff’s counsel then informed the court that he had no cross-examination for the witness.  Had the plaintiff’s legal team indicated on Day 2 that there would be no questions for Faugeron, his evidence could have been swiftly completed towards the end of Day 2 of the trial.  In such case, the court would not have to waste its time and resources to allocate another full day for the trial and the parties would not have to incur one full day of costs for accommodating such evidence. 

77.  As mentioned above, I consider that it is plainly obvious that the plaintiff has taken a blinkered approach to this case from day one and refused to look at the clear documentary evidence which shows that Ka had accumulated substantial debts on his behalf throughout the year.  Instead of trying to settle those outstanding amounts due to the defendant, it chose to issue proceedings against the defendant when he has no case at all right from the beginning.  Whether he was badly advised by his legal advisers or merely being stubbornly refused to acknowledge that he has no case against the defendant and yet chose to sue is not a matter which the court is concerned with.  What the court however is concerned with is that much judicial resources and time have been wasted for a case which has no merits at all almost from the word “go”.  Much expenses have also been incurred by the defendant’s witnesses who have to travel from overseas in order to attend the trial.  Under such circumstances, I see no reason why the plaintiff should not bear the costs of the defendant on an indemnity basis for this action.  Such costs will be taxed by the court if they cannot be agreed by the parties.

78.  I so make such an order.