MARUBENI HONG KONG LTD. AND ANOTHER v. FINSEN TRADING LTD. AND ANOTHER

Action No. A1433 of 1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. A1433 OF 1995

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JUDGMENT

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1. The Plaintiffs bring this action against the Defendants claiming damages for breach of contract and related matters in that the 1st Defendant had failed to take delivery of goods contracted for under a number of contracts. At the start of this trial, by agreement of the parties, I was asked to try the question of liability first. This judgment therefore relates only to the issue of liability in respect of the Plaintiffs' claims.

The Plaintiffs' case

2. Firstly, the 1st Plaintiff, a company incorporated in Hong Kong as its name suggests, claims against the 1st Defendant the total amount of US$450,980.42 being damages for breaches of contracts in that the 1st Defendant has failed or refused to take delivery and/or make payment for goods ordered by the 1st Defendant in respect of 7 contracts contained in or evidenced by the referenced contract numbers as follows: GP2967, GP3009, GP3058, GP3059, GP3138, GP3140 and GP3158.

3. Secondly, the 1st Plaintiff claims against the 2nd Defendant the like sum of US$450,980.42 upon a guarantee dated 15th November 1992 whereby the 2nd Defendant agreed to guarantee and be answerable to the 1st Plaintiff on demand for the due payment by the 1st Defendant for all such goods at its request supplied and delivered to it.

4. Thirdly, the 2nd Plaintiff, a company incorporated in Japan, claims against the 1st Defendant the total amount of US$891,193.25 being damages for breaches of contract in that the 1st Defendant has failed or refused to take delivery and/or make payment for goods ordered by the 1st Defendant in respect of 8 contracts contained in or evidenced by the referenced contract numbers as follows: GP6226, GP6232, GP6235, GP6236, GP6240, GP6252, GP6253 and GP6256. It is the Plaintiffs' case that these contracts were entered into with the 1st Defendant by the 1st Plaintiff as agent for the 2nd Plaintiff.

The Defence

5. The defence to the Plaintiffs' claim in this case is that there were no concluded or binding contracts of sales entered into between the respective parties either in respect of the claims by the 1st Plaintiff or in respect of the claims by the 2nd Plaintiff.

The 1st Plaintiff's claim

6. In so far as the claim by the 1st Plaintiff is concerned the evidence from Dick Lee Kin Ming, the Assistant Manager of the 1st Plaintiff's General Merchandising Section, is that each time a Sales Note is prepared by the staff of the 1st Plaintiff it is typed out on a stack of five NCR (no carbon required) sheets. The top two copies are treated as original duplicates in the sense that it is these top two copies in each stack which have standard printed conditions at the back. The remaining three copies do not have printed conditions on the back and are treated by the 1st Plaintiff as office copies for its internal use. When such a Sales Note is made out by the 1st Plaintiff, the top two copies are signed on behalf of the Plaintiff by its director and General Manager of the Merchandising Section Mr. Sasai with his full signature. Both of the top two copies are then sent or delivered to the buyer (in this case the 1st Defendant) who is requested to sign and return to the 1st Plaintiff one of the duplicate, both duplicate copies having standard printed conditions at the back of them. The remaining three office copies of the Sales Note are initialled by Mr. Sasai and kept in the office of the 1st Plaintiff.

7. It is also a fact in our present case which has not been disputed by the 1st Plaintiff, as indeed it cannot be disputed by them, that the 1st Defendant at the time of the trial was able to produce from their custody the top two copies (with the standard printed conditions at the back) of the Sales Notes in respect of transaction nos. GP3058, GP3059, GP3138, GP3140 and GP3158 all of which had been signed on behalf of the 1st Plaintiff by Mr. Sasai with his full signature but wholly unsigned on the column where it was intended for the 1st Defendant to sign. Apart from the fact that they were unsigned by the 1st Defendant, that the 1st Defendant was able to produce both the top two copies of the above contracts show quite conclusively that none of the top two copies in relation to these contracts had ever been returned by the 1st Defendant to the 1st Plaintiff but had remained in the possession of the 1st Defendant.

8. At the trial the 1st Plaintiff produced a Sales Note in each of these five transactions. It can be seen from the Sales Note produced by the 1st Plaintiff in respect of these five transactions that all of them were office copies in that there were no standard conditions printed on the back of any of them and which only bore the initials of Mr. Sasai. Moreover, whilst the office copy of the Sales Note produced by the 1st Plaintiff in respect of GP3058 and GP3059 had a round chop which bears the name of the 1st Defendant chopped on the space intended for the 1st Defendant to sign, those in respect of GP3138, GP3140 and GP3158 did not have any chop nor any signature at the space intended for the 1st Defendant to sign.

Contract Nos. GP3140 and GP3158

9. The basis upon which the 1st Plaintiff proceeded to establish that there were concluded and binding agreements between it and the 1st Defendant in respect of these two referenced contract numbers came from the evidence of Dick Lee Kin Ming. His evidence was to the effect that an oral contract had been concluded between him on behalf of the 1st Plaintiff and Tam Chun Kit on behalf of the 1st Defendant, Mr. Tam being a director of the 1st Defendant at the material time, when Mr. Tam phoned him and placed orders for goods, the subject matter of these two alleged contracts. His evidence was further that the Sales Notes bearing these two referenced contract numbers were only prepared by the 1st Plaintiff to confirm the orally concluded contract reached between him and Mr. Tam. Based on this evidence of Mr. Lee, Mr. Coleman submits that binding contracts was reached between the parties on the phone when the respective orders were placed and accepted orally or alternatively when the oral orders placed on the phone by Mr. Tam on behalf of the 1st Defendant were accepted by the 1st Plaintiff confirming same by its respective Sales Notes, irrespective of whether such Sales Notes were or were not signed and returned to the 1st Plaintiff. This submission was advanced by Mr. Coleman despite the fact that that was not the Plaintiff's pleaded case.

10. In cross-examination however, Mr. Lee admitted that generally after an order was placed orally by the 1st Defendant, the 1st Plaintiff had to confirm the prices and the ordered goods with its supplier and it was only upon those matters being confirmed with its suppliers that the 1st Plaintiff would then prepare the Sales Note and send the top two copies (with printed conditions at the back) to the 1st Defendant requesting the 1st Defendant to sign the duplicate and send it back to the 1st Plaintiff.

11. I further note that on each Sales Note of the 1st Plaintiff the following words appear on the front:-

"We confirm our sale as stipulated herein. The buyer is requested to read carefully all the provisions and conditions on the front and the back hereof before returning the duplicate with signature of acceptance."

12. In the light of the above matters, I find that the oral order placed by the 1st Defendant is not an offer in law, but an invitation to the 1st Plaintiff to make an offer which the 1st Plaintiff does, after confirming the price and the availability of the goods with its supplier. I further find that the offer from the Plaintiff is made in the form of the Sales Note when both top copies are sent or delivered to the 1st Defendant, and, should the 1st Defendant decide to accept that offer it will be for the 1st Defendant to sign and return the duplicate of the Sales Note to the 1st Plaintiff.

13. One of the reasons which has led me to this conclusion is that from the wording on the Sales Note which I have quoted above, it must necessarily be implied that the conditions printed at the back of the form are to be part of the contract, that the buyer's attention is drawn, inter alia, to them and the buyer is asked to signify his acceptance of same by signing and returning the duplicate. Under those circumstances, I am unable to see how the Sales Note can be anything other than an offer.

14. I further accept the evidence of Mr. Tam and Mr. Lum Chor Wah Richard that the two top copies of the Sales Notes in respect of both these contracts were not signed by the 1st Defendant but had been kept in the 1st Defendant's possession until they were produced to the Court at the trial. This is indisputable evidence that the offers contained in the 1st Plaintiff's Sales Notes in respect of these two alleged contracts had never been accepted by the 1st Defendant.

15. In the light of my findings above, I come to the conclusion that there was no binding agreement arrived at between the 1st Plaintiff and the 1st Defendant in respect of Contract Nos. GP3140 and GP3158.

Contract No. GP3138

16. This transaction is on a slightly different footing than GP3140 and GP3158 which I have dealt with above. Whilst all that I have said above in relation to GP3140 and GP3158 is equally applicable to this transaction, the one major difference between this transaction and GP3140 and GP3158 is that the 1st Plaintiff has produced in evidence a written Purchase Order dated 7th May 1993 which emanates from the 1st Defendant and is signed by Mr. Lum on behalf of the 1st Defendant. The evidence of Mr. Lee was that the Sales Note in respect of this transaction was made out to the 1st Defendant as a result of this Purchase Order receive by the 1st Plaintiff from the 1st Defendant and that the Sales Note merely confirms the goods order by the Purchase Order.

17. In cross-examination however, Mr. Lee conceded that in the Purchase Order of the 1st Defendant there were 6 items of the ordered goods marked with "(L.G.)". He agreed with counsel for the Defendants that the letters "L.G." stands for "long grain" and that in terms of the paper business, that referred to the wood grain running lengthwise across the paper. He further agreed that those 6 items marked "(L.G.)" in the Purchase Order of the 1st Defendant had been marked "M.G." in the Sales Note of the 1st Plaintiff. Mr. Lee explained that the letters "M.G." in the context of the paper business stands for "mixed grain" and it denotes paper with the wood grain running either across the length of the paper or across the width - i.e. a mixture of both types of paper.

18. When further cross examined as to why those 6 items were changed from "L.G." in the Purchase Order to "M.G." in the Sales Note, Mr. Lee's answer was that there is really no difference in the quality of the paper apart from the direction of the wood grain. What he did not say, despite given every opportunity to do so, was that this change from L.G. to M.G. was made with the consent or agreement of the 1st Defendant, nor that the 1st Defendant was ever consulted before this change was made.

19. In the circumstances, and based on the evidence of Mr. Lee from which I could only infer that the change from L.G. to M.G. was effected by the 1st Plaintiff unilaterally and without the prior consent or agreement of the 1st Defendant. On the other hand, the evidence from Mr. Lum was that when he saw the change from "L.G." to "M.G." in the Sales Note made by the 1st Defendant which was different from what the 1st Defendant ordered, he found that unacceptable to the 1st Defendant.

20. I find that whilst the Purchase Order from the 1st Defendant was an offer by the 1st Defendant to purchase the goods particularised therein at the prices stated therein (which could simply have been accepted by the 1st Plaintiff by signing and returning the Purchase Order), the Sales Note in respect of this transaction with the change from L.G. to M.G. effected by the 1st Plaintiff constitutes not an acceptance as suggested by Mr. Coleman, but a counter offer.

21. I further find that this counter offer was never accepted by the 1st Defendant by reason of the fact that both top copies of the Sales Note were never signed by the 1st Defendant and never returned to the 1st Plaintiff. Accordingly I find that there was no binding agreement reached between them.

Contract Nos. GP3058 and GP3059

22. These two transaction can be dealt with together since the same considerations apply to both. In both these cases, the Sales Notes produced by the 1st Plaintiff were office copies without the standard printed conditions at the back. On the other hand, the 1st Defendant was able to produce from its possession both the top copies of the same Sales Notes in respect of both transactions.

23. The office copy produced by the 1st Plaintiff bears a round chop with the name of the 1st Defendant and was also initialled by Mr. Sasai. The two top copies produced by the 1st Defendant were all signed by Mr. Sasai (with his full signature) on behalf of the 1st Plaintiff but unsigned by the 1st Defendant nor bearing any chops.

24. In each of these two transactions, the 1st Plaintiff did produce in evidence a hand-written sheet of paper attached to the Sales Note in which was divided into columns and specifying in each column the amount in metric tons of various items of paper products. However, no prices at all appear anywhere on these two sheets of hand-written paper. The evidence of the 1st Plaintiff concerning these two hand-written sheets again came from Mr. Lee, the Assistant Manager of the 1st Plaintiff's General Merchandising Section. His evidence was that these two sheets were faxed to him by Mr. Tam of the 1st Defendant to place orders for the goods stated therein. He also gave evidence that the prices of the goods had been made known by him to Mr. Tam orally and that Mr. Tam knew of the prices for the goods when the hand-written sheets were faxed to him by Mr. Tam.

25. On the other hand Mr. Tam gave evidence for the 1st Defendant and whilst he did not deny having faxed these two hand-written sheets over to the 1st Plaintiff, he said that the purpose was to ascertain the availability and more importantly the prices of the goods in the amount stated. He said it was not a firm order since the prices had still to be confirmed by the 1st Plaintiff from its supplier.

26. Having heard the evidence of Mr. Lee and Mr. Tam, I am inclined to believe what Mr. Tam said. If the prices had been made known to Mr. Tam as suggested by Mr. Lee, there would be no reason for Mr. Tam not to have stated the prices on the hand-written sheets so as to bind the 1st Plaintiff to it. The absence of any prices in these two hand-written sheets suggests to me that the prices were yet to be confirmed by the 1st Plaintiff from its suppliers. For the same reason, I do not accept Mr. Coleman's submission that these two hand-written sheets constituted firm offers. It lacks an important element that needs to be agreed by the parties, namely the price. On the evidence before me, I find that the two hand-written sheets are no more than an invitation to the 1st Plaintiff to make an offer which it did when it sent to the 1st Defendant the two original duplicates of the Sales Notes in these two respective transactions.

27. Even if the hand-written notes were offers, which I found they were not for the reason given above, the Sales Notes in both these transactions could not in law amount to acceptance of those offers, but only counter offers, for the same reason as in transaction GP3138 as stated above - namely that certain items of goods marked with "L.G." in the hand-written notes in both these transactions were not so marked in the Sales Notes.

28. Were the offers in respect of these two transaction accepted by the 1st Defendant? The 1st Plaintiff says they have been and points to the round chops which appears on both of the office copies of the Sales Notes produced by them. The 1st Defendant says they have not and points to the two top copies of the Sales Note in each transaction still in their possession, unsigned and never returned to the 1st Plaintiff.

29. What then is the evidence showing acceptance of these offers? Mr. Lee was unable to throw any light as to how these office copies of the Sales Notes bearing the 1st Defendant's round chop came about. All he could say was that once the orders from the 1st Defendant were received by him he passed them over to some lady in the office to prepare the Sales Notes and he had nothing more to do with the documentation. Masahiro Yano, the General Manager of the 1st Plaintiff's General Merchandising Section, another witness called by the Plaintiffs, could do no better either. However, Mr. Lee did venture to suggest that sometimes when the 1st Defendant was tardy in returning the signed original duplicate of a Sales Note, the 1st Plaintiff would chase them up for it and if it transpired that the original duplicate may have been misplaced or lost, the 1st Plaintiff might send as a replacement one of the office copies to the 1st Defendant for it to sign to acknowledge acceptance.

30. On the defence side, Mr. Tam gave evidence that when the original duplicates (i.e. the two top copies) of the Sales Note were received from the 1st Plaintiff, it would be for him to go through and if he found that the Sales Note acceptable he would sign his signature in the space reserved for the 1st Defendant to sign for acceptance. The Sales Note would then be sent to Mr. Lum for final approval. If that approval is given, the duplicate would be sent back to the 1st Plaintiff by way of acceptance of the offer contained in the Sales Note. If, for any reason, the approval is not given by Mr. Lum, then the 1st Plaintiff would be informed that the offer is not acceptable.

31. Mr. Tam further gave evidence that if the offer is acceptable, and approval is forthcoming from Mr. Lum, the Sales Note will have his signature as well as a chop, rectangular in shape, with the words "For and on behalf of Finsen Trading Limited" underneath which would be some space, then a dotted line and underneath that the further words "Authorized Signature". He was adamant that the round chop with the 1st Defendant's name would never be used on any Sales Note to denote acceptance of the offer contained in it. He does not deny that the 1st Defendant have these round chops with the 1st Defendant's name on it but says that those round chops are used by the general staff for general purpose such as acknowledging receipt of documents or letters delivered to the company or acknowledging that a notice is issued by the 1st Defendant etc. He insisted that the only chop which would properly be used on a Sales Note requiring a signature would be the rectangular one which provides a space for a signature to be put on.

32. Having heard the evidence from both parties, I am disposed to accept the evidence of Mr. Tam. The fact that the two original duplicates (i.e. the two top copies) of the respective Sales Notes in both these transactions are still with the 1st Defendant and were produced by them in evidence in Court leaves no room for the suggestion of Mr. Lee that at times an office copy would be used where the original duplicates may have been lost or misplaced. On the evidence of Mr. Tam I find that there was no acceptance by the 1st Defendant of the offers by the 1st Plaintiff as contained in its Sales Notes in these two transaction.

Contract No. GP3009

33. Once again there is in this transaction a hand-written note indicating the various items of goods and the quantity of those goods faxed by the 1st Defendant to the 1st Plaintiff but without any prices stated in the hand-written note. For the same reasons given in respect of transactions GP3058 and GP3059, I find that this hand-written note was not an offer by the 1st Defendant but only an invitation by them to the 1st Plaintiff to make an offer which it did by its Sales Note.

34. Moreover, for the same reasons as given by me in transactions Nos.GP3140 and GP3158, I do not accept the evidence of Dick Lee Kin Ming that there was an orally concluded agreement between the parties for the sale and purchase of these goods the subject matter of the Sales Note in this transaction.

35. Once again the Plaintiff was only able to produce at the trial an office copy of the Sales Note with a round chop of the 1st Defendant without any signature. The main difference between this transaction and the all the earlier transactions referred to above is the fact that the 1st Defendant did not have both original duplicates in their possession. The 1st Defendant had one of the original duplicates in their possession which has the full signature of Mr. Sasai on behalf of the 1st Plaintiff, as well as the signature of Mr. Tam (the director of the 1st Defendant) but without any kind of chop, whether round or rectangular, of the 1st Defendant.

36. Mr. Tam gave evidence that this was one transaction which he had read through the Sales Note when it was sent to him by the 1st Plaintiff and had signed on it before passing it over to Mr. Lum for approval. Approval was not given by Mr. Lum and he then informed Mr. Lee of the 1st Plaintiff that the 1st Defendant was not accepting the offer in the Sales Note. In cross examination Mr. Tam was asked by counsel for the Plaintiffs if he knew where the other original duplicate of the Sales Note had gone to. In answer to this question Mr. Tam said it had been returned to "the other party". In re-examination, however, he elaborated on that answer saying that the returned copy of the other original duplicate had been marked "cancelled" when it was returned to the 1st Plaintiff.

37. There was no evidence from the 1st Plaintiff to contradict this evidence. Indeed there was no evidence from the 1st Plaintiff to even explain how the office copy in its possession came to be chopped with a round chop of the 1st Defendant. I have already referred to the evidence of Dick Lee Kin Ming on this aspect of the case. That evidence of Mr. Lee does not advance the case for the 1st Plaintiff any further. As indicated earlier on I do not accept Mr. Lee's suggestion that the original duplicates in respect of this transaction may have been lost or misplaced such that an office copy was used instead and that the round chop of the 1st Defendant on that office copy indicated acceptance by the 1st Defendant of the Sales Note for the simple reason that there was in the 1st Defendant's possession at least one of the original duplicate and it would be highly unlikely that an office copy would have to be used in that way.

38. It is for the 1st Plaintiff to prove, albeit on a balance of probabilities that there was a concluded and binding agreement between the parties. This the 1st Plaintiff have failed to do on the evidence before me.

Contract No. GP2967

39. The circumstances of this transaction is almost on all fours with GP3009 except for two matters. The first difference is that the Sales Note is not preceded by a hand-written note but by a typed sheet particularising items of goods and also quantity both of which correspond to the goods and quantity stated in the Sales Note. Moreover the typed sheet is on the 1st Defendant's letterhead and is marked to the attention of 'Mr. Dick Lee' and it begins with these words: "Dear Sir, We hereby confirm to buy the following goods as below:-" followed by the itemised goods and quantities.

40. Mr. Coleman relies a great deal upon these words in arguing that this typed note shows a clear offer - particularly the words 'confirm to buy' - which, he argues, was accepted by the 1st Plaintiff by its Sales Note.

41. I cannot accept this submission for the reason, as previously stated, that it cannot be an offer when it is missing an important element, namely, the price. For this reason I find that this typed note was no more than an invitation to the 1st Plaintiff to make an offer which was contained in the 1st Plaintiff's Sales Note No. GP2967.

42. The second difference in respect of the evidence concerning this transaction is that the original duplicate of the Sales Note in the 1st Defendant's possession bears a full signature of Mr. Sasai on behalf of the 1st Plaintiff, as well as being properly chopped and signed by the 1st Defendant with the rectangular chop of the 1st Defendant and a signature of Mr. Tam over the dotted lines of the chop. However, this by itself does not show acceptance by the 1st Defendant of the 1st Plaintiff's offer. If there was acceptance, that acceptance needs to be communicated to the 1st Plaintiff by the 1st Defendant. The evidence of Mr. Tam, who was called as a witness by the 1st Defendant was that this was one of the transaction that after he had checked the Sales Note when it arrived from the 1st Plaintiff, he found it acceptable, signed it and passed it over to Mr. Lum for approval. It was not approved by Mr. Lum and as a result he (Mr. Tam) had informed Mr. Lee of the 1st Plaintiff that that Sales Note was not acceptable to the 1st Defendant.

43. Once again, in respect of this transaction as with the other transaction, the 1st Plaintiff only had an office copy of the Sales Note chopped with a round chop of the 1st Defendant. Once more I accept the evidence of Mr. Tam that the 1st Defendant had never signified acceptance of the 1st Plaintiff's Sales Notes by chopping it with a round chop of the 1st Defendant's. In the circumstances, for the same reasons given above in transaction GP3009 I find that there was no acceptance by the 1st Defendant of the Sales Note in respect of this transaction.

Part Performance

44. In respect of transactions Nos. GP2967, GP3009, GP3058 and GP3059 the 1st Plaintiff seeks further to rely on the fact that when the goods in respect of these transactions arrived in Hong Kong, a part of those goods in respect of each of these four transactions were taken delivery of by the 1st Defendant and paid for by the 1st Defendant. Mr. Coleman submits that this constitutes part performance of these four contracts to show that there were binding agreements between the parties in relation to them.

45. On the other hand, the 1st Defendant, whilst accepting that they had taken delivery of some goods when such goods arrived in Hong Kong, deny that those goods were taken pursuant to those transaction but say that when the goods arrived in Hong Kong, although they (the 1st Defendant) were under no duty to accept the goods, there being no contract between the parties, it was at the request of the 1st Plaintiff, and in order to help out the 1st Plaintiff, that the 1st Defendant assisted the 1st Plaintiff to look for buyers for those goods and when buyers were found by the 1st Defendant, a part of the goods were bought by the 1st Defendant and on-sold to such buyers.

46. The 1st Plaintiff was able to point to two letters from the 1st Plaintiff to the 1st Defendant dated 15th September and 4th October 1993 chasing the 1st Defendant for payment of those goods which the 1st Defendant had taken delivery of. With these two letters were enclosed statements of accounts stating that the goods were taken delivery of under the four referenced contract numbers. It is common ground that at some time after these letters were sent to the 1st Defendant the outstanding payments were made by the 1st Defendant to the 1st Plaintiff. This, Mr. Coleman submits, shows that the 1st Defendant took those goods under those four contracts and not outside of them as alleged by the 1st Defendant.

47. When cross examined on these two letters and the attached statements of accounts, Mr. Lum admitted that it was an oversight on their part to have accepted the statements of accounts in the way they were stated.

48. On the other hand, the 1st Defendant was able to point to a Debit Note dated 30th April 1993 from the 1st Defendant to the 1st Plaintiff together with a typed note signed by Dick Lee on behalf of the 1st Plaintiff and by Richard Lum on behalf of the 1st Defendant which certifies that the 1st Plaintiff would be responsible for all overtime warehouse charges for Contract No GP2994 (not one of the disputed contracts) and GP 2967 (being one of the disputed contracts). The total amount for these overtime warehouse charges comes to $230,560.00.

49. Dick Lee, when he was cross-examined on this matter, accepted that he had signed the note and accepted that the 1st Plaintiff was agreeable to pay for the overtime warehouse charges which were incurred partly because the goods under Contract No. GP2967 were not taken delivery of by the 1st Defendant. He was unable to give any satisfactory explanation as to why the 1st Plaintiff took it upon itself to pay these charges if they were incurred due to the default of the 1st Defendant in not accepting delivery of those goods. All he could say was that they (i.e. 1st Plaintiff) had no choice, that the 1st Plaintiff wanted to get rid of the cargo and so decided to bear the overtime warehouse charges and that they "tried to be nice to the buyer" (i.e. the 1st Defendant).

50. Weighing the evidence given by both sides on this matter, I find it not so incredible that in September and October 1993, before any action was started or even any threat of action, the 1st Defendant may well not have paid much attention to the contract number used in reference to the outstanding amounts which the 1st Plaintiff was pressing the 1st Defendant to pay - and even if they had noticed those contract numbers, that probably did not matter very much to them then.

51. On the other hand, I find it quite incredible that when the goods in GP2967 arrived in Hong Kong in April 1993 and by the time that overtime warehouse charges were incurred it must have been known to the 1st Plaintiff that the 1st Defendant was not accepting delivery of those goods, that in those circumstances the 1st Plaintiff was still "trying to be nice to the buyers" in the words of Dick Lee and agreeing to bear the not insubstantial sum of $230,560.00 being the overtime warehouse charges (albeit it is not clear from the evidence how much of that sum related only to GP2967). For this reason I find that the evidence given by Dick Lee unconvincing to say the least and I prefer the evidence given on behalf of the 1st Defendant. Accordingly I accept that there was no part performance of any of the four contracts by the 1st Defendant and that whatever part of the goods taken delivery of by the 1st Defendant were not taken by them pursuant to the contracts or any of them but were taken by the 1st Defendant entirely outside of those contracts.

52. In view of the above findings, the claim by the 1st Plaintiff against the 1st Defendant wholly fails.

Claim by 1st Plaintiff against 2nd Defendant

53. The claim by the 1st Plaintiff against the 2nd Defendant upon the Guarantee is wholly dependant upon the claim against the 1st Defendant succeeding in whole or in part. It follows therefore that where the claim by the 1st Plaintiff against the 1st Defendant wholly fails, so too the claim against the 2nd Defendant must also fail.

Claim by 2nd Plaintiff against 1st Defendant

54. In so far as the 2nd Plaintiff's claim is concerned, eight Sales Notes were produced in evidence by the Plaintiffs with these referenced numbers: GP6226, GP6232, GP6235, GP6236, GP6240, GP6252, GP6253 and GP6256. All of these Sales Notes are on printed forms of the 1st Plaintiff and are addressed to the 1st Defendant. It is expressly stated on all of them the following printed words:-

"Contracted on behalf of our Principal: MARUBENI CORPORATION (TOKYO)"

as well as the following printed words:-

"As agent for the above principal, we hereby acknowledge that the above Sale will be confirmed by the said Principal who will issue you a formal contract. Kindly sign and return to us the duplicate of this note"

55. These eight Sales Notes variously bore either a round chop of the 1st Defendant with no signature of anyone from the 1st Defendant, or a round chop of the 1st Defendant with a signature of Mr. Tam, or the rectangular chop bearing in 1st Defendant's name with a signature of Mr. Tam over the dotted lines.

56. The evidence from the Plaintiffs is that this form of Sales Notes are used when the 1st Plaintiff is contracting on behalf of its principal in Japan, namely the 2nd Plaintiff. This form of Sales Notes are also in printed form in a stack of five with NCR paper. The major difference between this form of Sales Notes and those used by the 1st Plaintiff when contracting on its own behalf is that none of these Sales Notes in a stack of five, not even the top two copies, are printed with any standard conditions at the back of them. The reason for this appears to be that those standard conditions will come from the principal in Japan when the formal contract is issued by them to the buyer after the buyer has signed and returned the duplicate of this Sales Note to the 1st Plaintiff and after the 1st Plaintiff has passed over the signed duplicate to its Japanese principal.

57. Moreover in all these eight Sales Notes the Payment term stated therein was to be "By at sight L/C in favour of Marubeni Corp" followed by its address in Tokyo, Japan. These eight Sales Notes were dated between November 1992 and April 1993.

58. There was no evidence from the Plaintiffs to even indicate whether any formal contract had been issued by the 2nd Plaintiff to the 1st Defendant in respect of any of these eight transactions. Mr. Lee could only tell the Court that the duplicates of the Sales Notes received back from the 1st Defendant had been passed on to their principal in Japan. It was for the Japanese principal to check with their own suppliers as to whether the respective orders could be met and thereafter it was for the principal in Japan (i.e. 2nd Plaintiff) to contact the 1st Defendant directly. When the 2nd Plaintiff contact the buyer, the 2nd Plaintiff do not inform the 1st Plaintiff of it and any letter of credit issued by the buyer would be issued directly to the 2nd Plaintiff. Mr. Lee further agreed that there was no formal contract issued by their principal in Japan signed by the 1st Defendant and that no letters of credit had been issued by the 1st Defendant. Mr. Yano also gave evidence for the Plaintiffs and when cross-examined agreed that he had signed Sales Note GP6226 on behalf of the 1st Defendant but otherwise he had no other knowledge of the other seven transactions. No other witness from the 2nd Plaintiff was called to give evidence and no formal contract issued by the 2nd Plaintiff relating to these eight transaction were produced by the Plaintiffs.

59. On behalf of the 1st Defendant, Mr. Tam and Mr. Lum both gave evidence that the 1st Defendant had never received any formal contracts from the 2nd Plaintiff in relation to any of these eight transactions and therefore they had never issued any letters of credit in relation to them. The defence did, however, produce in evidence one such 'formal contract' issued by the 2nd Plaintiff in respect of an earlier dealing between the parties (but not related in any way to any of these eight disputed transactions) which also involved the 1st Plaintiff issuing a Sales Note as agent for their principal in Japan. That 'formal contract' was on the face of it issued by the 2nd Plaintiff and addressed to the 1st Defendant as buyer. It was on yellow paper and titled in bold letters at the top "CONFIRMATION OF SALES CONTRACT". It contained on its front (inter alia) the following printed words:-

"We as Seller, hereby confirm having sold to you, as Buyer, the following goods in accordance with all the provisions hereof."

also printed at the bottom of the front page are the following words:-

"This Contract includes the general provisions set forth on the reverse side hereof. Please sign and return the duplicate copy to us. Do not make any change in this Confirmation. If any correction is necessary to reflect accurately all the provisions of our Contract, let us know immediately by telegraph or cable, and if we agree that the correction is necessary, we will send a revised confirmation for your signature. This Confirmation will become binding when you sign it, when we do not receive within ten (10) days after you receive this Confirmation your written advice that any correction is necessary, when you give us any instructions relating to this Contract or when you accept delivery of any goods covered hereby, whichever is earlier. This Confirmation shall not supersede any prior agreement between the parties relating to the goods covered hereby until this Confirmation becomes binding in accordance with all the provisions hereof."

60. Underneath these words there is a space for the buyer's signature with the printed words "Accepted and confirmed by:" and next to that a space for the 2nd Plaintiff's signature underneath the printed name of the 2nd Plaintiff. On the reverse of this sheet are fourteen printed conditions.

61. When Dick Lee was cross-examined on this document, he agreed that this was the standard printed form of formal contract issued by the 2nd Plaintiff in cases in which the 1st Plaintiff would act as the agent of the 2nd Plaintiff in entering into a transaction with a buyer.

62. The Plaintiff's complaint was that the 1st Defendant had failed to issue the letters of credit in respect of these eight Sales Note and was thereby in breach of contract. It was argued for the 2nd Plaintiff that there was a binding agreement between it and the 1st Defendant once the respective Sales Notes in these eight transaction were signed or chopped and returned by the 1st Defendant to the 1st Plaintiff irrespective of whether the 2nd Plaintiff did issue any formal contract to the 1st Defendant thereafter. On the other hand the defence submits that without any formal contract issued by the 2nd Plaintiff which was accepted by the 1st Defendant, there could be no binding contract and therefore the 1st Defendant was under no obligation to issue any letter of credit in respect of any of these eight transactions.

63. In deciding this issue I take into account the following matters. Firstly, the fact that the 2nd Plaintiff had to check with its own suppliers after it received the Sales Note from the 1st Plaintiff suggests that the 2nd Plaintiff's intention is clearly that they would not be bound until they can confirm with their own supplier that the order from the buyer can be met. When they have confirmed that with their own supplier then the 2nd Plaintiff will contact the buyer and issue the 'formal contract'. Secondly, such intention of the 2nd Plaintiff is also adequately reflected by the wordings quoted above in the Sales Note of the 1st Plaintiff when transacting as the agent of the 2nd Plaintiff when they acknowledge 'that the above Sale will be confirmed by the said Principal who will issue you a formal contract'.

64. Furthermore, this view of mine is further strengthened by the words found in the 2nd Plaintiff's Confirmation of Contract which is stated above. From those words it is quite clear that the agreement only becomes binding on the happening of any one of the occurrences stated, whichever is the earlier. Each one of those occurrence could only take place after, but not before, the issuance of the Confirmation of Contract by the 2nd Plaintiff to the buyer.

65. For all these reasons, I have come to the conclusion that in the absence of any evidence showing that the formal contracts or Confirmations of Contract in respect of the eight transactions contained the eight respective Sales Notes had been issued by the 2nd Plaintiff and accepted by the 1st Defendant, there are no binding agreements between them in respect thereof.

66. Accordingly the 1st Plaintiff's claims against both the 1st and 2nd Defendants are dismissed and likewise the 2nd Plaintiff's claim against the 1st Defendant is also dismissed.

67. Costs Order nisi that the Plaintiffs to pay the costs of the 1st and 2nd Defendants such costs to be taxed if not agreed.