JIMHO INTERNATIONAL LTD. v. FLOWER-POWER GMBH

DCCJ3221/1999

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3221 OF 1999

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JUDGMENT

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1. The plaintiff is a Hong Kong company trading in artificial flowers which are made on the Mainland. The defendant is a company registered in Germany and a distributor of such flowers. The parties did business together for a period up to late 1997. The plaintiff is operated by its director, Mr. Jan Verkade, a Dutch national, and his wife Ms. Julia Zhao, whom I will call Julia, for that is how her name appears on the various communications coming from the plaintiff to the defendant in this case. The defendant is headed by its major shareholder and director, Mr. Wasile or Wassilios Lazaridis, a Greek who has resided in Germany for many years.

2. The plaintiff's claim is for US$13,651.20 being the price of goods sold and delivered under an invoice number 07910 dated 10 December 1997. The defendant's defence has gone through a series of changes but it has now crystallised to one of set-off of a debt of DM50,000.00 which the defendant says the plaintiff owes it. There is no dispute that the goods were sold and delivered, at a price of US$13,651.20. It is therefore for the defendant to prove the set-off.

3. The defendant's original defence was filed on 7 June 2000, amended on 11 September 200, re-amended on 3 January 2001, re-re-amended on 30 August 2001 and re-re-re-amended on 30 October 2001, the first day of the trial. In the course of the various amendments a counterclaim originally made was dropped, apparently so that the defendant could avoid being required, as a foreign company, to give security for costs. A further re-amendment was allowed right at the end of the trial. Briefly, the defendant's case is as follows. The parties had a course of dealings from about 1996. In 1997 the defendant ordered flowers from the plaintiff to a total value of US$403,587.00. These were to be delivered in two batches in June and November 1997. It was agreed that the flowers would be properly wrapped and packed and of merchantable quality and/or reasonably fit for resale; they were to be properly labelled; and there was to be timely delivery. However some of the flowers were not properly packed, and as a result damaged by water; they were wrongly labelled; and they were not delivered on time.

4. There were some late deliveries in July 1997 after which a shipping schedule was agreed. Then on about 23 July 1997 it was found that some of the flowers then delivered were wrongly labelled. Mr. Lazaridis contacted Mr. Verkade, who was then in the Netherlands and Mr. Verkade went to see him at the defendant's place of business on or about 25 July 1997. There they made an oral agreement ("the 1st oral agreement") that the plaintiff would waive a labelling charge of US$4,907.64 and would pay the defendant DM25,000.00 as compensation for complaints of late delivery, but that this payment would only be made in 1998.

5. Then on or about 25 August 1997, two container loads of flowers were delivered to the defendant and it was found that some of the cartons of flowers inside them were soaked and damaged by water. The defendant complained; the plaintiff admitted that the packing was not good, and further that there had been heavy rain at the factory, as a result of which a flood had soaked the flowers. The total resale value of the damaged flowers came to DM51,716.88. There were also costs of re-labelling of other flowers but the defendant considered that its loss was compensated by the agreed waiver of the labelling charge. Following several telephoned demands the defendant by a fax dated 20 September 1997 demanded compensation of DM$50,000.00 in relation to the soaked flowers and the earlier compensation which had been agreed; in other words to cover the total of the defendant's claims against the plaintiff.

6. The defendant then placed an order for a further US$55,209.16 of flowers. The goods were represented by three invoices of the plaintiff, one of which is the subject of these proceedings. Two of the batches of goods were delivered and paid for. In December 1997 the defendant deemed it a good time to discuss with the plaintiff the possibility of further business and repeated its demand for compensation of DM50,000.00. Then on about 10 December 1997 Mr. Lazaridis and Mr. Verkade had a telephone conversation, in which it was agreed ("the 2nd oral agreement") that when the defendant settled invoice no. 97910 for US13,651.20 the plaintiff would pay the defendant the compensation of DM50,000.00 that it sought. Pursuant to the 2nd oral agreement the defendant sent the plaintiff a copy of its application for cable transfer of the funds; but then Mr. Verkade telephoned Mr. Lazaridis, denied the 2nd oral agreement and said he would not pay the compensation of DM50,000.00. The defendant accordingly stopped payment of the sum of US13,651.20 and terminated all its business dealings with the plaintiff.

7. By way of reply the plaintiff denies the two alleged oral agreements. It pleads that all the purchase orders from the defendant to the plaintiff are independent of one another. Mr. Lazaridis gave certain mistaken handwritten instructions as to labelling which the plaintiff followed; subsequently Mr. Lazaridis admitted that these were a mistake; therefore if the defendant had to re-label, that was due to the mistake. Only on 7 December 1997 did the plaintiff receive a further copy of the handwritten instructions to which the words "without label" had been added; these words did not appear on the original instructions sent.

8. The plaintiff further says that in respect of goods shipped to the defendant on or about 25 July 1997, some cartons had been found wet in the factory, but had been replaced; there was no damage to the flowers therein, and the defendant had paid for them without complaint in August 1997.

9. As to the goods which are the subject matter of the plaintiff's claim, the plaintiff says that they were delivered on about 10 December 1997 and no complaint was made by the defendant about them. However the defendant, having sent the plaintiff a copy of its application for cable transfer of funds, then cancelled the payment without informing the plaintiff of the reason therefor.

10. The plaintiff denies having received the plaintiff's fax dated 20 September 1997 demanding compensation of DM$50,000.00 and further avers that the only fax received on that date was to inform the plaintiff of a change of the defendant's forwarder. A copy of this message was sent again to the plaintiff on 22 December 1997 with attached to it a copy of the fax transmission report of the original. The plaintiff further says that the defendant never made any oral or written demand for compensation, that it never received the defendant's invoice dated 21 November 1997 for DM51,716.88 and that only on 20 April 1997 when it inquired about the outstanding invoice no. 97910 did the defendant raise the question of damages in the sum of DM50,000.00.

11. The plaintiff says that the cessation of business relations came about because on about 9 November 1997 the defendant placed an order for delivery not later than 31 December 1997; the plaintiff advised that it could not be met before 20 March 1998; the defendant then cancelled the order. The business relationship was then broken and the defendant refused to pay the outstanding invoice no. 97910.

The Issues

12. The main issues of fact relate to whether or not some of the goods (not necessarily the same batches) were delivered late, labelled wrongly, and damaged by water; and if they were, what agreements if any were made between the plaintiff and the defendant as to compensation.

The Agreed Documents

13. It is as well first to look at the background of the case as shown by the agreed documents and other matters agreed in evidence, because the oral evidence must be looked at against this background.

14. The defendant on 5 May 1997 sent to the plaintiff a number of order sheets, written in German, with the goods described by its own article numbers, and a covering letter in English which, inter alia, required the goods to be shipped in two parts, one before the end of June and the other at the beginning of November 1997. The defendant also stipulated that the cartons be made very strong because they had to be stacked high. Then on 8 May 1997 the plaintiff sent the defendant a fax to the effect that the factory wanted to make up a list of items all at the one time; and the defendant sent it back with an endorsement that that was agreed, and the listed items should be delivered at the end of June.

15. The plaintiff then on 10 May 1997 issued a set of order confirmations, bearing their own product identification numbers and the defendant's article numbers for each product, and faxed these confirmations to the defendant. They were confirmations nos. 942386, 942387 and 942391. On confirmation no. 942387 the plaintiff dealt with some of the plaintiff's stipulations in the fax dated 8 May, including that "the packing will be no knock down packing".

16. On 16 May 1997 the plaintiff sent a fax message to the defendant asking with regard to order confirmation no. 942386 whether "there are still hanged label on each item as before shipment". The defendant returned this with a handwritten endorsement saying "Please hanged label on each item as before, ACCEPT.. [a list of item numbers]".

17. It appears that the plaintiff began shipping the goods at the beginning of July 1997. A series of invoices, beginning with one dated 3 July, is before me. The defendant would, on receipt of the invoices, send the plaintiff a copy of its application to its bank for payment. The plaintiff would send over the bill of lading to the defendant against payment. There is no dispute that the defendant paid for all the goods it received, except for those which are the subject of this action.

18. Then on 11 July the plaintiff sent a fax to the defendant apologising for the fact that some goods could not be delivered on time because many workers had gone to the north of China to avoid war between Britain and China because of a rumour that after the hand-over of Hong Kong the Chinese army would fight there, and as a result one of the supplier factories had closed. The defendant on 13 July replied complaining that goods were to have been supplied in June and asking for a shipping schedule. The plaintiff made up such a schedule, and returned it on 14 July; and on 16 July the defendant sent a message back, accepting the schedule but cancelling the order to be delivered in November and stating that it would only work with the plaintiff again "after a talk with you in our office to avoid such problems".

19. The plaintiff went on issuing invoices for shipped goods, and the defendant went on paying for them. However, included in invoice no. 97419 dated 24 July 1997 was an item of US$4,907.64 for label charges. The defendant settled the invoice, subject to deduction of this figure. On 11 August 1997 one William Zhao of the plaintiff's accounting department sent a fax to the defendant asking for payment or an explanation. The defendant wrote back to the effect that it had by its fax of 16 May 1997 told the plaintiff which items had to be sent without labels and appended a copy of the original document, i.e. the plaintiff's message with the defendant's handwritten endorsement; but this time, after the list of item numbers there appeared the words "without label". The plaintiff pointed out the difference between the two documents and on 14 August Mr. Lazaridis wrote back to the effect that his English was not good and that he had meant "except" where he had written "ACCEPT" but also protesting that he had discussed the labelling by telephone and that the sentence as originally written did not make sense. Mr. Verkade replied that "we leave it to you if you are willing to pay the labels".

20. The next significant document is a fax from the defendant dated 20 August 1997 complaining that a container had been received and that "at some times the cartons are a catastrophe, this is not a carton, this is hold together with adhesive", and purporting to send photographs. The plaintiff sent the message back with a handwritten endorsement (under the hand of Julia Zhao) asking for the confirmation and item numbers and promising to check the problem, and also indicating that no photographs had been received. Some photographs were then sent. They are before me, and show rather shabby-looking cartons, bound with tape, stacked up and out of shape, with the lower cartons apparently deformed by the weight of those above them, though so far as I can see there is no discoloration which would indicate wetness. In any event this prompted a fax from Julia Zhao on 1 September 1997 apologising for sending bad cartons, promising to pay special attention to packing in future and asking the defendant to say what the plaintiff could do to solve the problem. The next day, Julia Zhao sent a typewritten message explaining that the warehouse in China had been flooded and some cartons had got very wet. The factory had been unable to get replacements of the cartons but had "use any box which they can find at that moment to replace the wet carton".

21. On 20 September 1997 the defendant wrote to the plaintiff that it had decided to change its freight forwarder to Schenker International (Hong Kong) Ltd., and asking the plaintiff to make all shipments through that company ("the Schenker message"). The plaintiff received this communication by fax, with the usual fax machine print at the top of the document showing the identity of the sender and the date and time, 12:32. On 22 November the defendant sent to the plaintiff a faxed letter complaining that a shipment had been made through the freight company Danzas, reminding the plaintiff of the Schenker message, and appending a copy of it, with the fax machine transmission report (showing the date and time) stuck down the side of it.

22. On 9 November 1997 the defendant placed an order with the plaintiff for one 20' container of goods to be shipped before 31 December. The plaintiff replied that because of the Chinese new year holidays the order could not be filled before 20 March 1998. On 16 November 1997 Mr. Lazaridis reiterated that the goods must be shipped by 31 December, or the whole order would be cancelled.

23. On 16 December 1997 the defendant sent the plaintiff a copy of its application for cable transfer of the funds in respect of invoice no. 97910 but, as I have indicated, the payment was later stopped. Mr. Verkade wrote to the defendant on 26 January, 3 April and 20 April 1998 inquiring about payment. Mr. Lazaridis replied on 27 April 1998 that the defendant had placed an order in 1997 for goods worth over DM500,000; that the goods received were partly a catastrophe, and the defendant had suffered damage of over DM50,000.00 and that this was known to the plaintiff. Mr. Verkade replied on 4 May 1998 that the plaintiff had never been informed of any catastrophe, nor received any complaint about any goods; that the defendant had cheated the plaintiff by cancelling the payment after getting the bill of lading; and threatening to put the matter in the bands of solicitors.

Disputed Documents

24. Some documents bearing to have been sent by the defendant to the plaintiff are disputed. In particular there is a fax message of 20 September 1997, from Mr. Lazaridis to Julia at the defendant. This is the first written mention of wet cartons or of a claim for DM50,000.00. In fact this document was first disclosed in the defendant's second supplemental list of documents as "Copy letter from the defendant to the plaintiff with the relevant fax transmission report"; the report referred to being that dated 20 September 1997 at 12:32, i.e. relating to the Schenker letter.

25. There is also a message dated 16 December 1997, again from Mr. Lazaridis to Julia which says that "enough is enough", the business relationship is at an end, and gives the reason for stopping the payment. Finally there is the defendant's invoice to the plaintiff for DM51,716.88 dated 21 November 1997. Mr. Verkade says that these messages also were never received. I will deal more fully with this below.

26. There is also a set of communications bearing to have passed between the defendant and the shipper, Danzas GmbH, and the defendant and its insurer, in August 1997 bearing to claim in respect of soaked flowers. The plaintiff does not accept the authenticity of these documents and again I will deal with them more fully below.

Evidence

27. The plaintiff's case was heard first, mainly because although an application was made for the defendant to begin, time was short because the first day of the trial had been taken up with the penultimate set of re-amendments, and I took the view that I should get on with hearing the evidence rather than spend further time on argument. However since the defendant has to prove the set-off I will deal first with the evidence of Mr. Lazaridis.

28. Mr. Lazaridis says that he has been in Germany for 22 years. He was educated to the age of 14 in his native Greece. Now he speaks fluent German but his English is "catastrophic"; if he had to write something simple in English he would write it himself, but if he had to send a fax message he would have it translated. He communicated with Mr. Verkade of the plaintiff in German.

29. He placed a large order with the plaintiff in early May 1997; first he talked to Mr. Verkade and then he faxed his order on 5 May with a covering letter. This letter specifically required that the order be shipped in two parts, before the end of June and in November 1997. He also asked that the cartons be made strong because they had to be packed very high. There was never any discussion of paying extra for stronger cartons.

30. Mr. Lazaridis said that he first discovered the problem with labels on about 23 July 1997. It was already late, so he did not telephone Mr. Verkade until the next morning, so as to allow for the time difference between Germany and Hong Kong; but when he did, he found that Mr. Verkade was in Holland. Mr. Verkade agreed to come to the defendant's office the next day, which he did. Mr. Lazaridis showed him the labels and at that stage could not understand why there had been a mistake. However there was a discussion about this and the delays in delivering goods and Mr. Verkade agreed to pay compensation of DM25,000.00, but only in 1998 when he expected to be paid by his customers in Eastern Europe. This figure, which would at that time have been equal to about US$14,700, was to cover both the delays and the labels. There was no written credit note; Mr. Verkade asked him not to mention the agreement and it would be just between the two of them, as is "common practice between business people".

31. From cross-examination, it does not appear that there was at that meeting any discussion of the specific label charge of US$4,907.64 although it was included in an invoice dated 23 July. Nor does it appear that there was any discussion about the mistake in English whereby ACCEPT had been written instead of EXCEPT, though the message had been addressed to Julia and she was with her husband on this occasion.

32. Mr. Lazaridis said that when he was asked to pay the label charge in August, by William Zhao's fax, he faxed back his answer and to make it absolutely clear, he wrote the words "without label" on the original.

33. Mr. Lazaridis said that he found that the boxes were not packed properly when the third container load came in, some time at the end of July or the beginning of August 1997. They were held together with tape, as they appear in the photographs; and they were unacceptable for sending out again, through the German packet service. He complained; the pictures were not received and he sent them again; and then the plaintiff replied that it they would pay attention to this in future.

34. The problem with wet boxes was something different. It arose when a container arrived via the ship Hyundai Duke, on 13 August. In the middle of the container were cartons which were so wet that his men could not move them. The cartons were collapsed from 3 metres high to 1.5 or 2 metres. It was very serious. So he called the shipper, Danzas, and the insurance brokers and corresponded with them; but ultimately liability was refused; they said that the cartons had been loaded wet. The written refusal came on 24 September 1997. He also telephoned Mr. Verkade who told him to wait for the insurance payment.

35. Then on 2 September 1997 he received Julia's fax message about the water problem in the factory in China. Some time around the middle of September he spoke to Mr. Verkade who, he says, agreed compensation of DM$50,000.00. After receiving the insurer's verbal repudiation of liability, but before he got the written confirmation, he sent off the fax message of 20 September, which Mr. Verkade says was never received. In it he wrote "....we need additional to our agreement from Juni a settlement for our damage which will be a minimum of 50,000.-DM". In fact he meant the agreement of "Juli" or July, rather than "Juni" or June, i.e. the 1st oral agreement; but from his evidence it appears that the DM50,000.00 now agreed included the DM25,000.00 agreed in June; which is not what appears in the fax message.

36. He said that in September, further orders were placed, even though there had been problems, because it was difficult to stop business relations within a year. He did not ask for any set-off; he knew that the plaintiff owed the defendant money, but the agreement was that it would only be paid in 1998. The defendant indeed paid for two of the invoices in December, and sent the copy of the application to the bank, in respect of payment for invoice no. 97910. However, after he had done that, Mr. Verkade telephoned him and started to make problems about the 1998 payment. He said that business was bad, DM50,000.00 was too much to pay, and he offered DM5,000.00. So Mr. Lazaridis decided that enough was enough; he went to the bank personally to stop the payment, and he sent the message dated 16 December 1997 commencing with those words, "Enough is enough". He heard nothing more of the matter until the following April when the plaintiff started to demand payment.

37. Under cross-examination Mr. Lazaridis accepted that he had made a mistake in his message about labels, by using the word "accept" when he meant "except". He said that his English was not good, and he always spoke German to Mr. Verkade. He said that at the meeting on about 25 July, labels had been discussed but not the specific figure of US$4,907; the invoice containing could not yet have come to hand or they would have discussed it. Nor was there any discussion of the message containing the wrong word "accept", though Julia must have received it, and she was present, at least in the showroom. Nor could he explain how the compensation figure of DM25,000.00, which he says was then agreed, was arrived at. He could not explain why the first mention of the 1st oral agreement only came in his supplemental statement in October 2001 rather than in his statement made in June 2001, except to say that he had been giving instructions by telephone, at that stage, to his previous solicitors. Nor indeed could he explain why there was no mention of this agreement in the original pleaded defence.

38. So far as the wet cartons are concerned Mr. Lazaridis said that photographs of these were sent to the plaintiff between the original photographs of the poorly-made cartons, which the plaintiff did not receive, and the later ones, which the plaintiff did receive. He said that in connection with his report to the shipper and the insurer, no survey had been done; the flowers stank so badly that they had to be destroyed. However a representative of the insurer had been present to see them while the containers were being unloaded. He also said that the defendant is pursuing a claim against the plaintiff in the German courts in connection with the wet flowers, and that witnesses had been named in those proceedings, but they could not come to Hong Kong.

39. As to the message of 16 September where the figure of DM50,000.00 first appears Mr. Lazaridis could not explain how in that message he claimed DM50,000.00 in addition to "the agreement of Juni" , i.e. DM25,000.00 when according to his evidence, the latter figure came to be included in the former. Nor could he explain why, if the agreement was for DM50,000.00 he sent the invoice to the plaintiff for DM51,716.88 dated 21 November 1997. As to why the fax transmission report relating to the Schenker letter had been put forward as relating to the message of 16 September, he could only say that it was his staff who dealt with the documents and transmission reports.

40. The only evidence for the plaintiff came from Mr. Verkade. He denied that there had been any agreement to provide stronger cartons than normal. Concerning the meeting in July, he says that he was in Holland with his wife and children, and went to the defendant's factory in Germany to pay a courtesy call, although it appears from cross-examination that he was also responding to a complaint about late deliveries; and he agreed that they had discussed the shipping schedule. However there was no discussion of labels at that meeting. Indeed he did not know of any wrong labelling until Mr. Lazaridis raised it on 11 August 1997 in answer to William Zhao's query about non-payment of the label charge. There was no agreement to pay compensation of DM25,000.00 in 1998 or at all. The actual mistake was not his fault, it was caused by Mr. Lazaridis' mistaken use of the word "accept" but he had agreed that the defendant need not pay the label charge in order to keep his customer.

41. As to the cartons Mr. Verkade's evidence was that some sub-standard cartons were indeed shipped. This was because a flood in the factory had caused some cartons there to be wet on their bases. Therefore the factory had made up cartons, from whatever material was lying about. He had received from the defendant photographs showing a container, with some cartons on the ground beside it; but these were to show that the cartons were defective rather than wet. At the same time, he agreed under cross-examination that after repacking in the defective cartons, there could have been some wetness and bad smell; but this would not be such as to cause the cartons to collapse in height, and the flowers could have been aired to remove the smell and repacked in dry cartons. In any event according to him there was never any return of soaked flowers, nor any invoice for them; nor was he ever told of any loss suffered by the defendant because of them.

42. Mr. Verkade took issue with the list of damaged flowers as it appears on the defendant's communications with its insurer and also on the invoice of 21 November 1997. According to him, the flowers listed were not in the containers referred to by the defendant in the letter to the insurer. However further examination of the item numbers, invoices etc., after adjournment, showed that in fact all but one of the listed items should have been in those containers.

43. As to the alleged 2nd oral agreement for DM50,000.00 Mr. Verkade denied its existence. He said that he never heard anything about any claim for this figure until he received Mr. Lazaridis' fax message of 27 April 1998, in answer to his demands for payment of invoice no. 97910. He did not receive Mr. Lazaridis' fax message of 20 September 1997; he first saw this when it appeared in the supplemental list of documents. The only fax received that day was the Schenker letter. He further did not receive the "enough is enough" fax of 16 December 1997, or the invoice of 21 November 1997.

44. So far as the actual subject matter of his claim is concerned, Mr. Verkade said that he received the copy of the defendant's instruction to its bank, and immediately sent off the bill of lading for the goods, as was his normal practice in dealing with the defendant. He did knew a couple of days later that the defendant had cancelled the payment. He said he thought the defendant had cancelled it because of the dispute, which appears in the documents, about the requirement of goods to be shipped by 31 December 1997 when the plaintiff said that they could not be shipped before March 1998.

Evaluation

45. As I remarked to counsel in the course of the closing speeches, there is only one inference to be drawn from Mr. Lazaridis' communication of 11 August 1997, by which he sent the copy of the earlier message about the labels with the words "without label" added, and that is that he was trying to mislead the plaintiff. What he wrote was

"With our fax of the 16th of May 97, we told you exactly, which items you have to send without any labels, attached please find a copie (sic)"

and the copy he attached was that to which he had added the words "without label". It cannot be said that he was trying to make it clear that this was what he had meant; he was saying in terms that this was what he had sent; which was not true.

46. There are various other difficulties with his evidence; I have indicated above some matters for which there he could give no good explanation in cross-examination. There is another one, which relates to the defendant's letterheads. The defendant puts on its headed paper the names of banks with which it has accounts and the account numbers; this was put to Mr. Lazaridis and he agreed it. On the other headed paper used in 1997 there were two banks shown, namely Sparkasse Aachen and Dresdner Bank Aachen. However on the letters to the shipper and the insurer, of which discovery was only given in a fourth supplemental list of documents dated 26 October 2002, there appears a third bank, namely Commerzbank Aachen. It was put to Mr. Lazaridis that these documents were fabricated, which he denied. The discrepancy in the bank names was not, I think, specifically put to him, but it is there and it does raise some suspicion, especially when the documents have come into the picture so late.

47. One has also to take into account the fact of the development of the defendant's case, through the various amended pleadings, right up to the last minute. It is clear that, notwithstanding what was pleaded as late as the first day of the trial, there was no discussion at the meeting in July 1997 of the specific label charge of US$4,907. I accept that Mr. Lazaridis does not speak English well, and may have had difficulty in communicating with his present solicitors, though he should have had none in communicating with his original solicitors, the Hong Kong office of an international German law firm. It is very difficult to see why the present defence was not pleaded at the outset, if it is true.

48. A further problem is the lack of anything in writing about the alleged wet flowers. Mr. Lazaridis was well able to complain of deformed cartons, and to send through pictures of them when there was not really much wrong with them. I myself put it to him that this was a small catastrophe, and the wet cartons would have been a big one; I asked him why there were no letters specifically relating to the wet cartons. The answer was that he had to go against the shipper and insurer first. At the same time, he did say that there did not appear to be any damage to the containers. It seems very strange that in such circumstances no thought should have been given to keeping some record in case there was indeed nothing wrong with the containers, and the only way the flowers could have become wet was by being soaked before being loaded. Mr. Lazaridis says that he sent Polaroid pictures to the plaintiff but one would have thought that others could have been taken and kept. In any event, no covering letter for such photographs has been disclosed; and given the defendant's practice of sending its letters by fax, and keeping the originals, one would have expected to see such a letter.

49. The defendant final pleaded case on the 2nd oral agreement (per Counsel's final amendment at the commencement of her closing submissions) is that

"Pursuant to the 1st Oral Agreement and upon the belief that the plaintiff would make the compensation of DM25,000.00 in 1998 and the compensation in respect of the damaged flowers, the defendant placed another order...on or about 12.9.1997....".

The 2nd oral agreement came into being, according to the pleadings, on or about 10 December 1997, when:

"...it was finally agreed...that when the defendant would settle the sum of US$13,651.50 under invoice no. 97910 promptly, the plaintiff would pay the compensation of DM50,000.00 to the defendant".

That has not been amended. Then on 16 December 1997, because Mr. Verkade denied the 2nd oral agreement, the defendant accepted the plaintiff's breach of it, and stopped payment.

50. The evidence was somewhat different. According to Mr. Lazaridis the 2nd oral agreement for compensation of DM$50,000.00 came into being in September 1997, before the fax message of 20 September which Mr. Verkade says was never received. It seems strange, if an agreement had been reached, that that message, if genuine, did not refer to it in terms; not just "we need additional to our agreement from Juni, a settlement for our damage which will be a minimum of 50,000-DM" but rather something along the lines of confirmation that agreement for that figure had been reached. This is or course apart from the inconsistency already referred to that while on the evidence the agreement was for a total of DM50,000.00, the letter seems to be asking for a total of DM75,000.00.

51. It is no doubt true that there were some defects in some of the flowers, caused by wetness. Mr. Verkade admits that. But he seemed a reasonably credible witness, and he says that the defect would have been a slight one, readily curable. There is no support for the pleaded case of an admission by the plaintiff of water damage to flowers; that is not what the plaintiff's fax of 2 September 1997 says; what it says is that the cartons were damaged, and replaced, though with "any box they can find at the moment", and it was in response to a complaint, not about wet cartons, but about deformed cartons.

52. Looking at the evidence overall I am not satisfied on the balance of probabilities of damage to flowers as spoken to by Mr. Lazaridis, or of the existence of either of the 1st or the 2nd oral agreements for which the defendant contends.

Legal Issues

53. Even if there had been a 1st oral agreement for the repayment in 1998 of DM$25,000.00, which some time in September 1997 turned into the 2nd oral agreement for the repayment in 1998 of DM50,000.00, there remains the problem of consideration. The defendant placed the order on 12 September 1997. This gave rise to three shipments under invoices nos. 97865, 97827 and 97910. The first two lots were sold, delivered and paid for; the last lot was sold and delivered but not paid for. On the face of it the consideration for the payment was the sale and delivery of the goods.

54. If the 2nd oral agreement came into being in December and was that the defendant would pay the money it already owed on a shipment it had ordered, it had no consideration. The case has now changed and seems to be that the order in September was placed on consideration of the plaintiff's promise to pay compensation of $50,000.00 in 1998. That is not supported by the evidence. According to my note Mr. Lazaridis said:

"Despite the complaints we placed new orders in September. In hindsight, better if I hadn't. But it is not easy to stop business relations within a year. We paid for the invoices. We always paid the bills one or two days after their arrival. We paid 2 invoices for the September order. Though they owed us money, I always pay invoices when they arrive; this kind of business I had never done before. I did not ask for set-off. I knew they owed us; but the agreement was that this credit note would only be calculated in 98; and the invoices were paid were in December."

He does not seem to be saying specifically that the new order was only placed in consideration of the agreement for compensation to be paid in 1998. But if that is what was meant the consideration would surely be the continued, or resumed, business. The bargain would be "we will buy from you, if you will pay us compensation next year" but the individual purchases in the meantime would still have to be paid for when the goods were delivered.

Conclusion

55. The defendant's case on set-off must fail. The plaintiff is entitled to judgment on its claim. There will be judgment in favour of the plaintiff for US$13,651.20 or its equivalent in Hong Kong currency with interest thereon from the date of the writ to the date of the judgment at the best lending rate plus 1%, and from judgment until payment at the judgment rate; and the costs of the action (nisi) to be taxed if not agreed.