周佩詩以博通發展公司的名義經營 v. INTERFID LTD

DCCJ 105/2012

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION No. 105 OF 2012

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JUDGMENT

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1.  The plaintiff (“Chau”) carried on her sole proprietorship business in the trade of printed materials under the trade name of Porton Development Company (“Porton”) in Hong Kong. Porton supplied labels and hang tags to the defendant (“Interfid”) for its overseas customers. The plaintiff’s claim is for the outstanding balance for goods sold and delivered in the sum of HK$406,000. Interfid counterclaims for return of an alleged overpayment in the sum of HK$157,520.

Background

2.  Most of the background facts are evidenced by documents and a summary is provided as follows. The parties’ first commercial contact started in October 2010. Attached to an email of Madam Deborah Yeung (“Yeung”), director of Interfid, to Mr Alvin Yeung (“Alvin”), sales manager of Porton dated 28 October 2010 was a document entitled “Quotation” (“October Quotation”). Yeung signed the document with a chop of Interfid for confirmation. The October Quotation involved 3 different products. This action does not concern any transactions relating to the October Quotation.

3.  On 22 November 2010, at 11:27 a.m., Alvin sent to Yeung an email attached thereto a document containing quotation prices. Alvin asked Yeung to sign on the same to confirm the details.

4.  On the same day, at 12:09 a.m., by way of an attachment to her email to Alvin, Yeung returned the document with her signature appended thereon. Again, it was stamped with the chop of Interfid. The document is entitled “Quotation & Confirmation” dated 22 November 2012 (“November Q & C”).

5.  The November Q & C concerned two products. They were silver hang tags and green hang tags. It is common ground that Interfid merely placed orders for green hang tags and not silver hang tags pursuant to the November Q & C. Porton’s claim involves the green hang tags only insofar as the November Q & C is concerned. The unit price of the green hang tags was stated to be HK$4.8/fold for 20,000 and HK$4.5/fold for 50,000 or above. The total quantity was stated to be 200,000 folds. For packing, there would be 1,000 folds in each box.

6.  Proton issued to Interfid an invoice dated 20 January 2011 in respect of 30 boxes (30,000) of green hang tags at the unit price of HK$4,800/k folds (“the 1^st Invoice”). The invoice was partially settled.

7.  Due to a change of the design of Interfid’s client’s products, in February 2011, Interfid required a new hang tag of a new design and laser labels from Porton. By an email of Yeung to Alvin dated 3 March 2011, a document dated 2 March 2011 was sent to Porton. It was entitled again “Quotation & Confirmation” (“March Q & C”). It bore the company chop of Interfid albeit without the signature of Yeung.

8.  In the March Q & C, again 2 different products were involved. First, it included hang tags of a new design (“new hang tags”) at a unit price of HK$5.2/fold and the total quantity was specified to be 300,000 (300 boxes). Second, it included laser labels at a price of HK$630/k folds and the total quantity was specified to be 300,000 (300 boxes).     

9.  Porton issued to Interfid another invoice dated 21 March 2011 in respect of 20 boxes (20,000) of green hang tags at the unit price of HK$4,800/k folds (“the 2^nd Invoice”). The invoice was again settled partially.

10.  Evidenced by an invoice of Porton dated 6 April 2011 (“the 3^rd Invoice”), 50 boxes of new hang tags (totaling 50,000) were ordered by Interfid. Two delivery notes dated 6 April 2011 and 12 April 2011, both stamped with the chop of Interfid, confirm the receipt of the said 50 boxes of new hang tags by Interfid.

11.  Pursuant to the March Q & C, altogether 400,000 laser labels were ordered by Interfid. Proton duly delivered such laser labels to Interfid in 5 insalments. Since nothing turns on these laser labels in these proceedings, no more has to be said about these orders.

12.  Porton kept a running account for Interfid (“the Account”). Interfid from time to time made payments by cheques without specifying to which invoices such cheques were related.  Each of such payments of Interfid would first settle the earliest indebtedness.

13.  In respect of the goods sold and delivered under the October Q & C and the March Q & C, Interfid paid Porton altogether a total sum of HK$458,800. The outstanding balance in the Account stood at HK$406,000 as at November 2011. This is the sum (with interest thereon) Chau now claims.

Plaintiff’s case

14.  Porton’s case is simple and straightforward. It relies on the express terms of the October Q & C and the March Q & C. There is no dispute that Porton did deliver to Interfid 50,000 green hang tags and 50,000 new hang tags and Interfid accepted their delivery. Interfid made no complaint about their quality. Porton contends that the balance of the purchase price must therefore be payable.

15.  In regard to the 50,000 green hang tags which were not the subject matter of any purchase order, they are not yet delivered to Interfid. Porton’s case is that they were actually manufactured pursuant to the November Q & C in advance. However, in February 2011, Interfid wanted hang tags of a new design instead of such green hang tags and so the same became otiose. Interfid told Porton not to deliver them due to lack of storage space.

16.  Alvin and Yeung had a meeting to discuss how to deal with these 50,000 green hang tags. They finally came up with an agreement whereby both parties orally agreed to share equally the total price of those goods. Porton agreed to deliver the said green hang tags to Interid when so required and in the meantime they were to be placed at the factory of Porton. Therefore, Porton issued an invoice dated 29 March 2011 (“the March Invoice”) for the sum of HK$120,000 being half of the total purchase price of the said 50,000 green hang tags.

Defendant’s case

17.  The defence case and the counterclaim are convoluted. First, it is alleged that the price for the green hang tags orally quoted by Porton was HK$520/k folds and not that stated in the March Q & C, i.e. HK$5.2/fold. Interfid alleges that it used to purchase such tags from other suppliers at the price of HK$1,300/k folds and hence Porton’s price in the March Q & C was very much higher than the normal market price. Accordingly, no one was authorized by Interfid to sign on the March Q & C. Interfid further alleges that according to the trade practice, hang tags price quotations should be given in terms of k (1,000) folds and all along Porton agreed to give quotations in such a manner. Interfid contends that the March Invoice was both misleading and coercive.

18.  Interfid further contends that the 1^st, 2^nd and 3^rd Invoices and the March Invoice are not supported by any corresponding purchase orders placed by Interfid.

19.  Interfid contends that it has already paid Porton all the prices for the green hang tags and the laser labels supplied by Porton. In a mistaken belief and/or under the coercion of Porton, Interfid partially settled the 1^st, 2^nd and 3^rd Invoices and the March Invoice with reference to the prices stated therein whilst in fact the agreed prices should be that orally quoted by Porton when she placed orders with Porton. In another breath, however, Interfid asserts that it repeatedly complained to Porton about the prices stated in such Invoices upon receipt of the same.

20.  Therefore, Interfid claims that it has overpaid Porton in the total sum of HK$157,520, which forms the subject matter of its counterclaim.

21.  In answer to Porton’s Request for Further and Better Particulars of the Defence and Counterclaim, Interfid avers that the Alvin orally agreed the price for the green hang tags to be HK$480/k folds two weeks before the dates of the 1^st and 2^nd Invoices and the price for the new hang tags to be HK$520/k folds two weeks before the 3^rd Invoices.

22.  In the course of her closing submissions, Ms Yang, counsel for Interfid, confirmed that Interfid did not rely on any plea of misrepresentation, duress and/or mistake. The central defence is that the November Q & C and the March Q & C are not valid contracts and instead the parties are to be bound by the alleged oral agreements referred to in the preceding paragraph. 

Issues to be determined

23.  These are the matters that the court has to decide:

(1) whether the November Q & C and the March Q & C are binding contracts;

(2) whether the alleged oral agreements were made between the parties whereby the prices of the green hang tags and/or the new tags were to be reduced ten times lower than their prices specified in the November Q & C and the March Q & C;

(3) if the November Q & C and the March Q & C are binding contracts and if there were such oral agreements, whether the latter constituted valid variations of the former; and

(4) whether there was an oral agreement made between the parties as embodied in the March Invoice.

Plaintiff’s evidence

24.  Alvin’s testimony was in accordance with the documentary evidence. He candidly explained that he came to know Interfid when he worked for his former employer. He was responsible to follow the account of Interfid on behalf of his former employer.  The invoices were issued pursuant to the oral purchase orders placed by Yeung on behalf of Interfid over the phone. He and Yeung did not talk about prices in such oral purchase orders. The goods under such oral purchase orders were delivered to Interfid and were never rejected. Indeed Interfid never raised any protest against the invoices.

25.  Alvin confirmed that the March Invoice was issued in the wake of a meeting with Yeung. No objection was ever raised by Interfid after the receipt of the March Invoice.

26.  When this court referred Alvin to the unit price of such goods under the November Q & C for 50,000 or above of such green hang tags, Alvin fairly agreed that the applicable unit price should be HK$4.5/fold instead of HK$4,800/k folds. He accepted that it was probably a mistake made by the accounting department of Porton and he agreed that the difference was HK$7,500 (HK$4.8-4.5 x 50,000/2) and Interfid should only pay HK$112,500 under the said invoice.

Defendant’s evidence

27.  Only Yeung testified for Interfid. Yeung tried to play down her role in Interfid. She said she was only asked to do a housekeeping job in Hong Kong for the two other Italian shareholders. However, she had to agree that she was in fact the director and shareholder of Interfid. She signed the annual returns for Interfid.

28.  Yeung could not explain why she stamped the chop of Interfid on the November Q & C and the March Q & C. She asserted that she returned the stamped documents to Porton to acknowledge receipt of the same. She did not believe that two valid contracts were thereby created. She said she was confused at that time without knowing exactly the prices quoted therein.

29.  Yeung accepted that she was the one who issued cheques to Porton to settle invoices of Porton by filling in all the relevant information on Interfid’s cheques including the amounts signed in advance by her Italian partners. She said she was careless in that she failed to take note of the wrong prices stated in the 1^st, 2^nd and 3^rd Invoices and the March Invoice. She claimed that she did not seriously read such invoices and she only discovered the mistakes in November 2011 when her Italian partners alerted her to the same. Her Italian partners suspected that she had in fact misused the fund of Interfid. I note that this is contrary to the pleaded case of Interfid that repeated complaints were made about such invoices after receipt of the same.

30.  For the 1^st, 2^nd and 3^rd Invoices, Yeung accepted that she did place such orders over the phone. She explained that usually she would issue written purchase orders but at that time she was very busy with the opening of her florist’s. This made the complaint of Interfid in its pleaded case about the lack of written purchase orders invalid and indeed frivolous.

31.  Further, under cross-examination, she agreed with Mr Leung, counsel for Porton, that for each order placed over the phone, she merely mentioned the quantity thereof and she did not talk about the price.

32.  As regards the March Invoice, Yeung agreed that she had a discussion with Alvin about the 50,000 green hang tags which were not yet delivered to Interfid before she received the March Invoice.

33.  For completeness, one Mr Ng Siu Kwok made a witness statement for Interfid. Both parties agreed that the same could be admitted into evidence. Yet, I do not find it of any relevance to the issues identified.

Analysis

34.  Alvin struck me as an honest witness whose evidence was collaborated by documentary evidence. In stark contrast, Yeung was evasive in her evidence and her evidence did not make sense at times. I have no hesitation to prefer Alvin’s evidence to that of Yeung wherever there is a conflict arising in their evidence.

35.  The central issue as to the legal nature of the November Q & C and the March Q & C can be resolved without involving factual disputes. In these documents, the express terms were clear and unequivocal. All the essential terms of a sales contract were included. The subject matters of these two documents and their prices were certain.

36.  Both of them allowed partial delivery within one year. As explained by Alvin, which I accept, it means that the total quantity of the products to be sold and delivered to Interfid under these two documents could be separately ordered on different occasions within one year. The total quantity of such orders within the year was agreed. Yeung accepted that the total quantity agreed should have a bearing on the agreed price. The more the total quantity of the goods agreed to be purchased by Interfid, the lower the price of such goods would be.

37.  It follows that the prices quoted therein were valid within the year. During the year, Interfid was obliged to place orders with Porton pursuant to the November Q & C and the March Q & C at the agreed prices. On a proper construction of the terms of these documents, the parties agreed that 20 working days after confirmation of such orders and sample were required to produce such products and not after confirmation of these two documents by Interfid, as contended by Ms Yang.

38.  For each of such orders under the November 2010, the parties agreed that if it involved a quantity of 500,000 or more, a lesser price would be charged.

39.  The contemporaneous correspondence by emails exchanged between the parties was clearly indicative of Interfid’s acceptance of all the terms of these two documents. In her email to Porton dated 22 November 2010, Yeung returned the March Q & C and described it as a signed document. The fact that it only bore the chop of Interfid without her signature does not make any difference.

40.  Accordingly, I hold that the November Q & C and the March Q & C are two binding contracts between the parties.

41.  With this finding, the alleged oral agreements made subsequently to the effect that the prices were to be reduced tenfold appears to offend the parol evidence rule: Cheuk Tze Kwok v Leung Yin King and Anor. [1993] HKLR 169 per Penlington J.A..

42.  In any event, I believe Alvin’s evidence and cannot accept that there were such alleged oral agreements for the following reasons:

(1)    With the written binding contracts embodied in the November Q & C and the March Q & C, it does not make commercial sense that Alvin would orally give a 90% discount off the agreed prices. I cannot believe that the parties could be happy with such substantial variations of the original contracts to be made orally without documentary proof.

(2)    The 1^st, 2^nd and 3^rd Invoices and the March Invoice were all issued with reference to the agreed unit prices stated in the November Q & C and the March Q & C. Yeung did not raise any complaint about them and she even issued cheques in accordance with them. She explained that she did not read the invoices seriously and Alvin won her total trust because of his sincere service. In re-examination, she added that she was a sentimental person and she easily believed others. She could not believe that Alvin would charge her for the green hang tags and the new tags exorbitantly. I find her explanation incapable of belief.

(3)    If there had been such oral agreements, it is only inexplicable that there was no mention of the same in the email of Yeung dated 23 November 2011 (“the November email”) when she allegedly just discovered the mistakes over the prices. In the email, Yeung merely informed Porton of her misunderstanding of the quotaions and she even accepted that she could not escape the responsibility of her carelessness.

(4)    It is more inexplicable that Interfid failed to mention such oral agreements in the letter of its former solicitors, Messrs Patrick K.H. Lam & Co. dated 22 December 2011 in which its former solicitors were instructed to put on record the whole account.

43.  Given this factual finding against Interfid, it is not necessary for me to consider the legal effect of the alleged oral agreements.

44.  In regard to the March Invoice, in the light of my finding that the November Q & C constituted a valid contract whereby Interfid was obliged to place orders for the green hang tags in the total quantity within a year of the date thereof, I find that there was nothing untoward that Porton manufactured the remaining 50,00 green hang tags in the absence of purchase order of Interfid. Interfid already agreed to purchase the same under the November Q & C.

45.  I further accept Alvin’s evidence that he had a meeting with Yeung and they reached the oral agreement that the parties were to share the costs equally. The March Invoice was accordingly issued. I believe that if such an agreement had not been made, Interpid for sure would complain soon after receipt of the March Invoice. Yeung did not deny liability to pay such undelivered tags in the November email, either. Yeung agreed that there was discussion about such tags in a meeting with Alvin. On balance, in the light of the parties’ subsequent conduct, I accept the existence of the oral agreement that Interpid was to pay the price stated in the March Invoice for the 50,000 green hang tags.

Conclusion

46.  I am satisfied that Chau has proved her claim on the evidence. I conclude that Interfid is liable to pay Chau a total sum of HK$398,500 (HK$406,000 – 7,500) given the appropriate concession of Alvin and I enter judgment against Interfid for the said amount, together with interest thereon from the date hereof at judgment rate until full payment. I further dismiss Interfid’s counterclaim.

47.  There is no reason why costs should not follow the event. I make a cost order nisi that Interfid should pay Chau her costs of this action with certificate for counsel, to be taxed if not agreed.

48.  Lastly, I thank Ms Yang and Mr Leung for their helpful assistance.