CHEUK MING MAU v. CHAN PUI CHING t/a CHEUNG FAT PLASTIC CO.

HCA10603/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.10603 OF 1996

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J U D G M E N T

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The facts

1. The plaintiff had placed orders with the defendant for the supply of components of telephone sets ("the goods"). The goods were at the instruction of the defendant manufactured in the Mainland by two factories, namely, Hang Yat Plastic Manufactory ("Hang Yat") and Soder Electronics Company Limited ("Soder"). The finished products were, according to the plaintiff's instruction, delivered by the two factories to a company in the Mainland called Kong Yong Electronic Company Limited (港陽電子有限公司) ("Kong Yong").

2. The goods were ordered by the plaintiff between 1991 and 1992. Payments were made by the plaintiff from time to time to the defendant. After the business relationship of the parties had turned sour, the defendant rendered a statement described as a monthly statement claiming the sum of $479,868.67 being the balance of the price of the goods delivered to the plaintiff that had remained unpaid by the plaintiff.

The plaintiff's claim

3. The plaintiff stated that the defendant is not entitled to the major item in the statement, namely, the price of goods covered by three invoices, namely invoice nos.1974, 1978 and 1979 for the total sum of $380,685.20. The plaintiff claimed that he had not ordered the goods covered by these three invoices. He also claimed that a sum of $112,480.50 should be deducted from $479,868.67 because this is the price of the goods which had been paid for by him but the goods were later returned to the defendant. The parties agreed that a sum of $59,086.75 should also be deducted. As a result, the plaintiff is claiming the sum of $72,383.28 from the defendant.

The counterclaim

4. The defendant, on the other hand, is counterclaiming the sum of $420,669.92 which is based on the sum of $479,868.67 with the agreed deduction of $59,086.75 and a further deduction of $112.

The two issues

5. The two issues in this case is, first, whether the plaintiff had ordered the goods covered by the three invoices and, second, whether the plaintiff had paid for the $112,480.50 and is, therefore, entitled to deduct it from the defendant's claim.

Goods delivered to Kong Yong

6. It is not disputed by the plaintiff that the goods covered by the invoices no.1974, 1978 and 1979 were all delivered to Kong Yong and it had acknowledged receipt of the delivery. The goods under invoice no.1974 were covered by delivery orders nos.90851 (5 August 1991), 90852 (14 August 1991), 90853 (6 August 1991) and 90854 (31 August 1991). The goods referred to in invoice no.1978 were covered by delivery order nos.90856 (2 September 1991), 90858 (3 September 1991), 90859 (4 September 1991) and 90860 (6 September 1991). The goods under invoice no.1979 were covered by delivery order nos.09994 (14 August 1991), 1006 (30 August 1991) and 1007 (1 September 1991).

Relationship of Honor and Kong Yong

7. The plaintiff was the sole proprietor of Honor Trading Company (漢隆貿易公司) ("Honor"). His case is that Kong Yong was not his subsidiary or associated company. Kong Yong was an independent contractor accepting orders for assembling works from various companies and he was just one of its customers.

8. The defendant said that the plaintiff told him he was the boss of Kong Yong as well. The name card of the plaintiff which was given to the defendant contained the names of both Honor and Kong Yong. Likewise, in the purchase orders issued by the plaintiff the names of Honor and Kong Yong also appeared.

9. The plaintiff explained that the reason why he used the name of Kong Yong was a matter of convenience. He said Honor was a trading company. Businessmen in the Mainland looked down upon a trading company which they considered to be lacking in substance. Therefore, he put down the name of Kong Yong as well. Kong Yong was a manufacturer.

10. I do not accept the plaintiff's evidence that there was no relationship between Honor and Kong Yong. In my view, he was trying to play down his connection with Kong Yong. He was asked in cross-examination whether he was one of the persons who could decide things in Kong Yong. His response was that "not on administration, but on matters relating to goods". This clearly indicated that he was more than a client of Kong Yong. In my view, it defies common sense that the name of Kong Yong would appear in the purchase orders of the plaintiff and on his name card if there was no substantial connection between them. Mr Hon of Soder, who delivered goods to Kong Yong, had seen the plaintiff in the premises of Kong Yong and he had heard employees of Kong Yong referring the plaintiff as 'the boss'.

11. I accept the evidence of the defendant that he only dealt with Kong Yong after he began his business dealings with the plaintiff. Orders were placed by the plaintiff himself for the supply of goods. The goods covered by the three disputed invoices were supplied at the beginning of the business relationship with the plaintiff. The plaintiff placed the orders orally with the defendant first and later confirmed by two purchase orders no.CF9101 and CF9102 both dated 29 July 1991. Pursuant to these purchase orders, the defendant instructed the two factories in China to manufacture the goods. Not all the goods covered by purchase order no.CF9101 were delivered. This was in fact done at the request of the plaintiff. In my view, the plaintiff had ordered the goods covered by the three invoices.

Stamping of invoices

12. The plaintiff stated that in order to ascertain those goods that were manufactured, delivered and accepted pursuant to his orders, he would have to acknowledge and recognise them by imprinting his company chop on the defendant's invoices. The three disputed invoices do not bear the chop of his company. He further claimed that he only received the copies of the three invoices after the defendant had rendered the statement in 1995, although in his witness statement, he alleged that he only received the three disputed invoices and the corresponding delivery orders in August 1997 by way of discovery.

13. I do not accept the plaintiff's evidence. I find the plaintiff to be an untruthful witness, telling lies in order to support his case. On the other hand, I find the defendant to be an honest witness, giving evidence according to his knowledge of the case. I accept the defendant's evidence that at the beginning of their contractual relationship, their dealings were carried out in a less formal manner. The invoices which had been stamped with the company chop of Honor were all dated 28 February 1992. The plaintiff agreed that these invoices were all stamped at the same time.

Payment prior to the stamping of the invoices

14. Before the invoices were stamped on 28 February 1992, the plaintiff had in fact made substantial amounts of payment to the defendant. The payment was not by way of reference to one particular invoice but in various sums paid from time to time :

13 September 1991	$100,000
10 November 1991	$400,000
27 November 1991	$57,800
30 November 1991	$300,000
7 January 1992	$200,000.

15. In my view, the lack of stamping on these three invoices does not support the plaintiff's case that the goods were not ordered by him. He was quite prepared to make payment in large sums at a time when he had not yet stamped the invoices. In my view, the evidence clearly established that the goods covered by the three invoices were ordered by the plaintiff and they were delivered to Kong Yong. Accordingly, he had to pay for them. The defendant conceded that under three invoices, a sum of $112 should be deducted. This represented a short delivery of some goods.

The return of goods

16. The defendant's case is that a company called A.B.A. Manufacturers Limited ("ABA") had placed an order with him for the supply of 60,000 sets of plastic cabinets of two piece phone. The instruction to the defendant by ABA was that of the 60,000 sets, 15,000 black colour and 15,000 red colour sets were to be delivered to Kong Yong. The rest were to be delivered to a factory called Wah Hing Electronic Factory. The defendant duly instructed Hang Yat to manufacture and deliver the black and red telephone sets to Kong Yong and the rests of the telephone sets to Wah Hing. Hang Yat duly delivered to Kong Yong 15,200 black telephone sets. They were covered by invoice nos.1031 (30 September 1991), 1032 (2 October 1994) and 1034 (5 October 1991).

17. The defendant later received instruction from ABA to transfer the 15,000 black telephone sets from Kong Yong to Wah Hing. The son of the defendant gave a written instruction to Hang Yat to take back the goods from Kong Yong and transfer them to Wah Hing. He also issued a note requesting the plaintiff to return the 15,000 black telephone sets to the defendant through Hang Yat.

18. Hang Yat obtained the 15,200 sets of black telephone sets from Kong Yong. This is evidenced by a document marked as Return Goods Note dated 12 October 1991 bearing the names of Honor and Kong Yong. The defendant stated that after the goods were delivered, the plaintiff asked him to sign a return goods note in order to complete the formalities because the goods were retrieved from Kong Yong. He duly signed his name on the document dated 12 October 1991. The plaintiff admitted that he only wrote down the deduction of $112,480.00 on the document afterwards.

Goods belonged to ABA

19. I accept the defendant's evidence on what had happened in relation to the goods that had been taken back from Kong Yong. They were not goods ordered or paid for by the plaintiff, but rather they were goods ordered by ABA. In my view, the plaintiff was fully aware that the returned goods belonged to ABA. Despite his reluctance, he admitted in cross-examination that the defendant had informed him before the redelivery that 15,000 sets of telephone would be taken back. He stated that the defendant informed him the telephones were goods of ABA, they were delivered to his place and needed to be taken back. He admitted that the goods were received by Kong Yong on behalf of ABA and they were not his goods. This being the case, the plaintiff's evidence that he had paid for the goods is just not credible. The impression is that he would say certain goods delivered to Kong Yong were his but not other goods when it suits his case. His evidence was that his order of the 15,000 sets of telephone were evidenced by invoice nos.10351 and 10355. The goods covered by these two invoices do not correspond with the description of the goods that had been taken back. I accept the defendant's evidence that the difference in quantity of 15,000 and 15,200 sets was because some spare sets of about 10% which were rounded up to 200 sets were delivered together with the 15,000 sets. This was the usual practice of the defendant.

20. Mr Chong, counsel for the plaintiff, submitted that if in fact the returned goods belonged to ABA, there was another 15,000 sets of goods returned by the plaintiff as well. This is just not borne out by the evidence in this case. Mr Chong had also raised other points, namely that there was no reference to black telephone sets in the receipt signed by the defendant; Hang Yat had not disclosed the other delivery orders for the 15,000 sets; the defendant's invoice to ABA for the goods was not disclosed and in one of the delivery orders, the goods were not marked 'to be delivered on behalf of ABA'.

21. In my view, these do not cast doubt on the defendant's case in this regard. I accept the defendant's evidence and that of Mr Su of Hang Yat on the 15,200 telephone sets. It was supported by contemporary documents. It had never been put to the defendant or Mr Su that the documents relating to the 15,200 sets were not genuine documents. I find that they were genuine documents. The plaintiff is not entitled to deduct $112,480.50.

Conclusion

22. Accordingly, the plaintiff's case is dismissed. There shall be judgment to the defendant for the sum of $420,669.92, which is $479,868.67 less $59,086.75 less $112. The defendant is entitled to interest on this sum at judgment rate from the date of the service of the writ until payment. The defendant is entitled to costs nisi of the action.