CHIMBUSCO PAN NATION PETRO-CHEMICAL CO LTD v. SILVER LOYAL PETROLEUM LTD

DCCJ 2641/2020

[2021] HKDC 1312

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 2641 OF 2020

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BETWEEN

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DECISION

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THE APPEAL

1.  This is the defendant’s appeal against a Master’s decision made on 2 March 2021 by which, among other things, summary judgment was granted in favour of the plaintiff for the sum of USD257,397.50.

2.  By this appeal, the defendant asks that the summary judgment be set aside, or alternatively, that there be an order for assessment of damages.

LEGAL PRINCIPLES

Summary Judgment

3.  The legal principles are trite and undisputed.

4.  In Li Chuen Kwai v. Po Lam Construction Development Limited (HCA 2376/2013, unreported, 24 September 2014), it was held that:-

“11. As far as the plaintiff’s claim is concerned:

(1) An application for summary judgment must be supported by an affidavit verifying the facts on which the claim is based [Order 14, rule 2(1), Rules of the High Court].

(2) The Statement of Claim must be good and complete in itself; any defect or omission in the Statement of Claim cannot be corrected or supplemented by the plaintiff’s affidavit. If the defect is one of substance, the application for summary judgment will be dismissed [see: Hong Kong Civil Procedure 2014 at Practice Note 14/1/5].

(3) This means that an Order 14 application has to proceed on the case as pleaded, and it is those facts (as pleaded) which have to be verified on affidavit.

(4) Where the assertions in the plaintiff’s affirmation constitute a material deviation from the plaintiff’s pleaded case, the plaintiff will have failed to verify his claim as pleaded, and summary judgment should not be granted [Lin Jan v Long Xiaobo, HCA 1516/2012 (Judgment dated 4/09/2013)].

(5) Equally, summary judgment will not be granted where the plaintiff’s affidavit evidence is materially different from and inherently inconsistent with his/her case in the Statement of Claim [see: Sin Yuk Hung v Sin Tung San, HCA 474/2013 (Judgment dated 18/12/2013)].

12. As far as the defendant’s defence is concerned:

(1) The defendant shoulders the burden to satisfy the court that he has a real or bona fide defence (ie that there are triable issues), or that there ought for some reason to be a trial of the plaintiff’s claim.

(2) However, a complete defence need not be shown. The defence set up need only show that there is a triable issue or question or that for some other reason there ought to be a trial; and leave to defend ought to be given unless there is clearly no defence in law and no possibility of a real defence on the question of fact.

(3) Although the mere assertion in an affidavit does not, ipso facto, provide leave to defend, the court will not embark upon a mini-trial of the action on paper and leave to defend will be granted unless the defence raised is so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that the defence is a sham.

(4) The test is not whether the defendant’s assertions are to be believed, rather it is whether those assertions are believable, ie capable of being believed. If so, the defendant must have leave to defend.

(5) Whether the defendant’s assertions are believable is a question that should be answered not by taking those assertions in isolation bur rather by taking them in the context of so much of the background as either undisputed or beyond reasonable dispute.”

5.  In Ju Yan Di Emperory Genesisy v Yau Wai Han [2015] 1 HKLRD 822, 827, Cheung JA held that:-

“14. It is well-established that the burden on the defendant in a summary judgment application is to show that he has a credible defence and he must condescend to give particulars of his defence. However, this does not mean that once the plaintiff invokes the application and irrespective of the strength of his case, the defendant bears all the burden of showing that there are triable issues in the case. This is because the starting point in a summary judgment application is that it should only be invoked when there is no defence to the claim. This means that the plaintiff must in the first place demonstrate that the defendant has indeed no defence. This requirement is further recognised in the procedural rules which mandate the plaintiff to state his belief in the verifying affidavit that there is no defence to the claim. This requirement must be kept in proper perspective when assessment is made of the strength of the application, otherwise there is a danger that the attention will be focused solely on what the defendant has said without consideration at the same time of the basic premise of the plaintiff’s claim or its inherent strength and weakness…”

6.  Having said that, to raise a triable issue or arguable defence, the defendant cannot be sparing of the particulars of his defence, and then claim, as a result of his own parsimony in details, that there is an obscurity which must await trial for illumination.^[1]

Appeal against Master’s decision

7.  In relation to an appeal brought against Master’s decision, it is well established that such an appeal is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the Judge treats the matter as though it came before him for the first time. The Judge will give the weight it deserves to the previous decision of the Master, but he is in no way bound by it. The Judge in chambers is in no way fettered by the previous exercise of the Master’s decision. (Hong Kong Civil Procedure 2021, Volume 1, paragraph 58/1/2).

THE PLAINTIFF’S CLAIM

8.  The plaintiff’s case against the defendant is quite straight-forward and may be summarised as follows:-

(1) On 23 January 2020, the defendant agreed to buy and the plaintiff agreed to sell 7,500 barrels (i.e. 1,000 metric tons) of marine gas oil (“the Contract”);

(2) It was an implied term of the Contract that the defendant was obliged to take delivery of the entirety of the oil ordered within the month of February 2020;

(3) The defendant had failed to take any oil ordered under the Contract in February 2020. Despite such failure, the plaintiff agreed to extend the deadline for the defendant to take delivery of the oil to April 2020;

(4) Be that as it may, the defendant failed to take delivery of any oil by the end of April 2020;

(5) As a result, the plaintiff has suffered loss and damage.

THE DEFENDANT’S ARGUMENTS

9.  In opposing this application for summary judgment, the defendant contended that:

(1) There was no binding agreement between the parties;

and

(2) The plaintiff had failed to mitigate its loss.

LIABILITY

10.  The defendant alleged that no agreement had ever been formed between the parties for oil to be taken in February 2020 as alleged on the following basis:

(1) The parties had had long-standing trading relationship. According to the past practice between the parties, the plaintiff would inform the defendant at the end of each month about the plaintiff’s selling price of oil for the coming month by Whatsapp message. The defendant would in turn inform the plaintiff the quantity of oil which the defendant intended to buy. The plaintiff would then prepare and send the defendant a formal written agreement accordingly. A binding agreement would not be formed until the defendant had returned to the plaintiff a signed copy of the said formal written agreement.

(2) In the present case, the defendant had never received any formal written agreement from the plaintiff, and as a result, the defendant had not returned any signed copy of agreement back to the plaintiff.

11.  In Banco Del Austro, S A v Regal Prosper Trading Limited & Others (HCA 477/2015, unreported, 1 April 2016), Recorder Linda Chan SC (as her Ladyship then was), in determining whether a binding contract had been reached in the case before her, had the following to say:

“24. Where the documents relied on as constituting a contract contemplate the execution of a further contract, it is a matter of construction of the documents whether a binding contract has been made. In Von Hatzfeldt-Wildenburg v Alexander [1912] 1 Ch 284 at 288-289, Parker J said:

‘It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognize a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored. The fact that the reference to the more formal document is in words which according to their natural construction import a condition is generally if not invariably conclusive against the reference being treated as the expression of a mere desire.’ (emphasis added)

25. The above principles accord with the general principles summarised by Lloyd LJ in Pagnan S.p.A. v Feed Products Ltd [1987] 2 Lloyd’s Rep 601 at 619, as follows:

“(1) In order to determine whether a contract has been concluded in the course of correspondence, one must first look to the correspondence as a whole (see Hussey v Horne-Payne).

(2) Even if the parties have reached agreement on all the terms of the proposed contract, nevertheless they may intend that the contract shall not become binding until some further condition has been fulfilled. That is the ordinary ‘subject to contract’ case.

(3) Alternatively, they may intend that the contract shall not become binding until some further term or terms have been agreed….

(4) Conversely, the parties may intend to be bound forthwith even though there are further terms still to be agreed or some further formality to be fulfilled (see Love and Stewart v. Instone per Lord Loreburn at p.476).

(5) If the parties fail to reach agreement on such further terms, the existing contract is not invalidated unless the failure to reach agreement on such further terms renders the contract as a whole unworkable or void for uncertainty.

(6) It is sometimes said that the parties must agree on essential terms and it is only matters of detail which can be left over. This may be misleading, since the word ‘essential’ in that context is ambiguous. If by ‘essential’ one means a term without which the contract cannot be enforced then the statement is true: the law cannot enforce an incomplete contract. If by ‘essential’ one means a term which the parties have agreed to be essential for the formation of a binding contract, then the statement is tautologous. If by ‘essential’ one means only a term which the court regards as important as opposed to a term which the court regards as less important or a matter of detail, the statement is untrue. It is for the parties to decide whether they wish to be bound and if so, by what terms, whether important or unimportant…..’ (emphasis added)”

12.  With the above legal principles in mind, I now turn to consider the facts of the present case.

13.  It is undisputed that on 23 January 2020, the parties had sent the following Whatsapp messages to each other:

plaintiff (Ms Karen Ho)	defendant (Mr Sunny Tse)
中午12:05 FEB MGO (WMA) + 3.8/bbl
	下午12:58 Karen 2020年2月份 貨價: Singapore Mops (平均價) + USD 3.80/bbl 單價:以倉單內顯示bbl計算為準 貨源: 雪佛龍/美孚 油庫 數量: 1,000 mt. Silver Loyal Petroleum Ltd.
下午2:06 thanks
	下午2:44 Thx

14.  In my view, there was an invitation to treat made by the plaintiff when the selling price of oil for the month of February 2020 was given at 12:05pm on 23 January 2020. The defendant then made an offer at 12:58pm, which was accepted by the plaintiff at 2:06pm on the same day. There was nothing in the messages which indicated that the contract would not become binding until the defendant had signed and returned a “formal written contract”.

15.  Be that as it may, the defendant stated that there was a past practice between the parties that such a signed “formal written contract” was required before any binding contract could be formed. According to Mr Tse, it was in fact the plaintiff’s requirement that the formal agreement had to be signed before it could become binding. He stated this in paragraph 7 of his Affirmation:

“As the payment for Bunkers can only be made in the following month after the Bunkers are delivered, the plaintiff required formal agreements to be signed by both parties before each order is confirmed.”

16.  When and by what means did the plaintiff impose such a requirement? If this requirement was imposed in writing, where is the document in support? If it was made orally, by whom and where was this mentioned? There was absolutely nothing in the evidence which gave particulars on the above matters. This is a classic example where a defendant has failed to “condescend upon particulars”.

17.  I am of the view that the defendant’s assertion that there was no binding agreement is incredible as shown by the defendant’s own conducts as shown below.

18.  Firstly, while it was alleged by the defendant that “[t]here were no further communications between the parties from 23 January 2020 to 24 March 2020”[2], it is evident that Ms Karen Ho of the plaintiff did send a Whatsapp message to Mr Sunny Tse of the defendant on 26 February 2020:

“[溫馨提示]: 2月貨要在月底前出完”

19.  It is also undeniable (as shown from the Whatsapp messages print-out produced by the plaintiff) that Mr Tse of the defendant did not reply to the above gentle reminder at all.

20.  If the defendant held the bona fide view that no binding agreement for the purchase of oil for the month of February 2020 had ever been formed, there was no reason why Mr Tse did not clarify the matter with the plaintiff right away.

21.  Secondly, according to Ms Ho’s 1^st Affirmation, she had a telephone conversation with Mr Tse on 25 March 2020 in which he on behalf of the defendant “acknowledged that they could not take delivery of the Bunkers in February and the plaintiff requested that the Contract be terminated by reason of the defendant’s failure to do so”[3]. It is undisputed by Mr Tse that he had had a telephone conversation with Ms Ho. According to Mr Tse, he could not recall the details of the call but he did say “the defendant would not take delivery of the Bunkers”[4]. In my view, if there was no binding agreement as such, Mr Tse would have pointed that out in the telephone conversation, but there was no evidence that he did.

22.  Thirdly, it is undisputed that the plaintiff sent a letter to the defendant on the same day (25 March 2020) after the conclusion of the aforesaid telephone conversation. It reads:

“Sunny, 您好!

我們今天下午在電話上 ，得悉貴司未能在本月如期履行2月份的合同，需要取消合同。

提貨紀錄顯示貴司定的1000mt全數未提，出現2月份至今天的價差問題， 造成我司虧損如下:

2月份MGO 10ppm全月平均價: 65.968/BBL

3月24日 mgo 10ppm mops: 39.44/BBL

USD65.968 – USD 39.44 = USD26.53/BBL*7.45 =

USD 197.65/MT

總額: USD 189.23/MT*1000MT = USD 197,650

定好合同履行合同，是貴司的責任，因此貴司須負責上述損失。感謝貴司的理解和支持。”

23.  Mr Tse admitted that he did receive this letter on 25 March 2020 after the telephone conversation. He stated in his Affirmation that, having received it:

“I then replied that the defendant did not accept the plaintiff’s proposal to terminate the contract. The reason for my reply was that, to me, I did not want anything to affect the good working relationship between the parties which has lasted for so many years. Although no agreement was ever formed for February 2020, I still wished to find a solution to the problem without damaging the relationship.”

24.  The exact wordings which he used in his Whatsapp message when he replied to Ms Ho on the said letter dated 25 March 2020 were:

“不接受 你們提議取消合約

為(sic)有繼續取油吧”

25.  It is clear that in his reply, Mr Tse did not mention anything about there being no binding contract at all. His acceptance that the defendant would continue to take delivery of the oil in fact shows the opposite.

26.  Further, if Mr Tse is right that there was a past practice between the parties that there could not be any binding agreement until the “formal written agreement” was signed and returned, then that must mean that under such past practice, there was no obligation on the part of the defendant to enter into agreement with the plaintiff every month. Indeed, the defendant has never asserted the existence of such an obligation in this action. That being the case, I do not understand why it would “affect the good working relationship between the parties” if the defendant informed the plaintiff that there was no binding contract in respect of February 2020 at all. It does not make any sense to me.

27.  Moreover, if the alleged past practice really existed, then there should be nothing abnormal for there being no binding contract formed between the parties for a particular month by reason of the lack of signed written agreement (despite the agreement seemingly made by Whatsapp messages). Again, it is difficult to understand why the parties’ relationship would be damaged if the defendant pointed out to the plaintiff that no such written agreement was signed for the month of February 2020.

28.  Fourthly, according to the plaintiff, Mr Tse asked the plaintiff on 26 March 2020 to grant an extension of time for the defendant to take delivery of the oil ordered. Upon such a request, Ms Ho sent the following two messages to Mr Tse on 26 March 2020 and 31 March 2020 respectively:

26 March 2020

“你好sunny.

了解你提出的解決方案.

請問可能把貨提完,

因為該1000mt亦不能無了期的等貴司提清

所以請給一個deadline

好讓我向公司提議這個解決協定”

31 March 2020

“你好Sunny

如繼續取油的話

公司指示為4月份前把油提清

基於長期合作關係

請理解我司已給予貴司一個十分合理的延期

如4月內仍未能履行2月的合同

我們亦需取消其合同”

29.  Mr Tse denied that he had asked for any extension of time on 26 March 2020. I am of the view that this denial is incredible. The message which was sent on 26 March 2020 clearly referred to the fact that Mr Tse had proposed a solution to solve the problem. If Mr Tse did not make any proposal at all, it would have been natural for him to point that out forthwith. However, he did not answer to the messages at all.

30.  Furthermore, the allegation that there was a past practice between the parties that no binding agreement would be formed until the defendant signed a written formal agreement is, in my view, a bare assertion because, if the alleged past practice really existed, then it must have happened in the past that there was no purchase and sale for a particular month despite a “non-binding agreement” having been reached by Whatsapp or other means. However, the defendant had not been able to give even one example on this, not to mention to support such an example with documentary evidence.

31.  I have not lost sight of the signed fax messages in the past produced by the defendant. However, in my view, they do not assist the defendant. While it might have been the defendant’s practice to sign on the documents, it does not necessarily mean that the agreement was not binding yet before such signature.

32.  The fact that an agreement had already been reached even before the signing of this document is shown by the words used by the plaintiff therein. The message started by saying:

“We hereby confirm our final deal as follows […]”

33.  It is clear that the deal had already been concluded with binding effect before this message was sent by email. If it was not the case, the defendant would have been asked therein to return a signed copy within a certain deadline. But that is not the case here. I agree with Mr Chan for the plaintiff that the message was just a confirmation of the concluded deal.

34.  In passing, I should also mention that, as a matter of fact, the defendant queried that the written formal agreement was not even sent in the present case. This has been proved otherwise by the plaintiff by referring to an email which was sent at 4:04pm on 23 January 2020 to which the fax message was attached.

35.  Mr Sham for the defendant had raised other arguments on liability. I will deal with them in turn below.

36.  Firstly, it was argued that the Ms Ho of the plaintiff had changed her evidence in her 2^nd Affirmation in that “the plaintiff is now trying to argue that the contract was formed via Whatsapp and that the Fax only served as evidence of the contract”[5]. I do not agree that Ms Ho had made any change to her evidence as such. It is clear from her 1^st Affirmation that it was all along the plaintiff’s case that “by Contract numbered SC20200082 evidenced in writing by a fax message from the plaintiff to the defendant dated 23 January 2020, the defendant agreed to buy and the plaintiff agreed to sell 7,500 barrels (1,000 metric tons) of Bunkers”[6], and that “the said Contract is also confirmed by a message sent by [her] to Mr Sunny Tse of the defendant on WHATSAPP on the same day”[7]. The Whatsapp messages had also been exhibited to her 1^st Affirmation in support.

37.  Secondly, it was argued that the fact that the contract was formed by Whatsapp was never pleaded in the Statement of Claim, and that summary judgment ought not be granted if there is any material deviation between the Statement of Claim and the plaintiff’s supporting affirmation.

38.  What was pleaded in paragraph 2 of the Statement of Claim was that:

“By a Contract numbered SC20200082 evidenced in writing by a fax message dated 23 January 2020, the Defendant agreed to buy and the Plaintiff agreed to sell 7,500 barrels of marine gas oil […]” (emphasis added)

39.  Hence, I do not agree that there was any “deviation” as alleged.

40.  Thirdly, it was submitted on behalf of the defendant that the Whatsapp messages did not contain all the essential terms (loading period and payment terms) and that therefore it could not be said that a binding agreement had been formed.

41.  According to the legal principles which I have quoted above, the question is whether the party intended to be bound forthwith even though there were other terms still to be agreed.

42.  Relying on the discussions above, I am of the view that it is clear that the defendant’s conducts show that the defendant had all along treated that it was bound by the agreement to buy the oil concerned in the month of February 2020 reached by Whatsapp messages. Even though the loading period and payment terms were not mentioned in the Whatsapp messages at all, it is neither here nor there.

43.  For the above reasons, I hold that the defence raised is so incredible and so contradicted by contemporaneous documents and circumstances that it becomes clear that the defence is a sham. There is no triable issue on whether any binding agreement had been reached between the parties.

QUANTUM

44.  It seems that the plaintiff accepts that it had a duty to mitigate its loss upon the defendant’s breach of the contract, and as a result, the plaintiff’s claim herein is only limited to the difference between the contractual oil price and the price of 1,000 metric ton of oil as at the end of April 2020 (the time when it was said the defendant breached the contract by failing to take delivery of the oil ordered), as opposed to the full contractual price.

45.  Mr Sham for the defendant submitted that there is an arguable issue as to whether the plaintiff had discharged its duty in mitigating its loss upon the defendant’s breach of the agreement in February 2020. It was alleged that the plaintiff had failed to do anything as the plaintiff only issued a demand note on 25 March 2020.

46.  Mr Sham further submitted that there is an issue on whether there was “an available market” as provided for under section 52(3) of the Sale of Goods Ordinance (Cap.26, Laws of Hong Kong)[8] which cannot be determined without expert evidence.

47.  I do not accept these arguments.

48.  As far as the plaintiff’s duty to mitigate in February 2020 is concerned, I do not think this argument is open to the defendant, because it was the defendant which requested for an extension of time to take delivery of the oil ordered. The time was subsequently granted until April 2020. In these circumstances, the plaintiff’s duty to mitigate had not yet arisen in February 2020.

49.  On Mr Sham’s argument that there was no available market for the oil, this was not supported by Mr Tse’s evidence at all.

50.  Having said that, I am of the view that it is inappropriate for the court to rule on quantum in a summary judgment application.

51.  Mr Chan for the plaintiff has fairly referred this court to the case of Philipp Doodt & Others v Huang Shihua & Others [2021] HKCFI 305 in which Coleman J held in paragraph 21 thereof that:

“[…], in an action for unliquidated damages, if the liability of the defendant is clearly established, including where the defendant does not satisfy its burden in the face of the summary judgment application, the court should give judgment for the plaintiff on liability with damages to be assessed.”

52.  A similar approach had been adopted by HH Judge Lok (as his Lordship then was) in Sam Nickolas David Hing Cheong v Lowe Edwin Ryan (DCCJ 4846/2009, unreported, 22 September 2010) in which it was held that:

“49. It is trite law that if the claim of a plaintiff is the form of a liquidated demand, i.e. a specific sum of money due and payable under or by virtue of a contract, then the court should, in the case of a successful O.14 application, grant final judgment in favour of the plaintiff for the fixed sum claimed. Its amount must either be already ascertained or capable of being ascertained as a mere matter of arithmetic. If the ascertainment of a sum of money, even though it be specified or named as a definite figure, requires investigation beyond mere calculation, then the sum is not a “debt or liquidated demand”, but constitutes “damages” (see: Hong Kong White Book 2010, vol. 1, para. 6/2/4). In the latter case, the court should grant interlocutory judgment for damages to be assessed.”

53.  Therefore, I am only prepared to make an order for damages to be assessed.

ORDER

54.  By reasons of the aforesaid, I make the following orders:-

(1) The learned Master’s order dated 2 March 2021 be set aside;

(2) Interlocutory judgment be entered against the defendant with damages to be assessed.

COSTS

55.  While the defendant has been successful in its appeal against the final judgment granted by the learned Master, an interlocutory judgment is still made herein.

56.  Further, this court had allowed the appeal not because of any argument made on behalf of the defendant. In fact, all arguments raised by the defendant (whether on liability or quantum) had been rejected.

57.  On the other hand, it should be borne in mind that the plaintiff had advocated for a final order, as opposed to an interlocutory one, both before the learned Master and before this court. Although the plaintiff did seek an order for “damages to be assessed” in the Order 14 summons filed on 30 June 2020 (“the Summons”) as an alternative relief, that apparently was not the approach eventually adopted by counsel for the plaintiff.

58.  Having taken the above matters into account, I make a cost order nisi that:

(1) The defendant shall pay 80% of the plaintiff’s costs of the Summons, with certificate for counsel for the hearing before the learned master;

(2) The defendant shall pay 80% of the plaintiff’s costs of the appeal, with certificate for counsel.

59.  The above order nisi shall become absolute in the absence of application to vary (which shall be made by letter, if any) within 14 days hereof. Any application to vary the costs order nisi shall be dealt with on papers.

60.  The aforesaid costs shall be assessed summarily in lieu of taxation. For this purpose, in the absence of any application to vary the costs order nisi, the plaintiff shall lodge and serve its statements of costs of the Summons and of this appeal within 7 days after the expiry of the said 14 days. The defendant shall lodge and serve its statements of objection within 7 days thereafter. The summary assessment of costs shall be conducted on papers upon the expiry of the said 7 days no matter whether the defendant has lodged any statement of objection. The assessed costs shall be paid by the defendant within 14 days after the summary assessment.