KINIK CO v. AUTO-TECHNIC ENGINEERING CO LTD

cacv 110/2005 & CACV 169/2005

in the high court of the

hong kong special administrative region

court of appeal

civil appeal nos. 110 AND 169 of 2005

(on appeal from HCA NO. 4092 of 2003)

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This is an appeal from a judgment of Deputy High Court Judge Carlson given on 14 March 2005.  The matter before the judge was an appeal from the master who had given judgment for US$374,076.29.  The judge upheld the judgment but adjusted the amount of the judgment to US$372,754.86.  Execution of the judgment was stayed on terms of payment of a partial amount into court but that does not affect the issues on this appeal.  At the conclusion of the hearing of this appeal, this court set aside the judgment and ordered that there be an account taken on condition that the sum of US$372,754.86 be paid into court within 28 days and in default of payment into court there be judgment for the plaintiff for the said sum.  The costs were ordered to be costs in the account.

Background

2.  The relevant facts can be stated briefly.  The plaintiff is a Taiwanese company and is, evidently, a manufacturer of abrasive products.  The defendant and its unincorporated predecessor firm imported the plaintiff’s products into Hong Kong and sold them in Hong Kong and Macau.  From about 1987 onwards the defendant was appointed the plaintiff’s agent.  Whether it was a sole agent and the terms and duration of any such agency remain to be determined.  In any event, the defendant was incorporated in 1992 and it continued the previous business with the plaintiff.  It operated under a running account.

3.  The claim in this case relates to invoices which were issued in the period from January 2001 to the end of March 2003.  Altogether there are well over 200 invoices involved amounting to US$1,278,694.66, credit is given for part payments amounting to US$876,800.92 leaving the balance outstanding.

4.  The defendant’s position is, and from the correspondence to which this court was shown has always been that, although it does not deny that a large quantity of goods has indeed been supplied in respect of which there are still amounts owing, it wishes to check the exact amounts against proper contemporaneous records.  Affirmations have been filed by Mary Oong Wan Kit, who is, now, the director in charge of the defendant.  She has indicated that her brother, who previously ran the company, has absconded and cannot be found.  Her evidence is not entirely complete to the extent of explaining fully the difficulty which the defendant has encountered in checking the records, but it appears likely that the defendant’s records are in disarray.  As such when the plaintiff first made claim on the defendant, the defendant asked for copies of its purchase orders and the shipping documents as well as the invoices.  The only things that the plaintiff has so far provided are copies of the invoices but that they were obliged to do so under the provisions of Order 24 rule 10 of the Rules of the High Court because those documents had been pleaded in the statement of claim.

5.  In the defence filed on behalf of the defendant, and, indeed, in the evidence which has been filed, discrepancies have been found in the claim made by the plaintiff.  Those are not large discrepancies but they are sufficient to raise a doubt about the exact amount that has been claimed.  In those circumstances it appeared to this court that the correct course was to have a proper account taken between the parties.  There is no dispute on the part of the defendant, and there never has been, that it was an accounting party, but there is sufficient evidence to show that if the defendant seeks that an account should be taken, it should be permitted to have that done, albeit at its own risk as to costs.

Counterclaim

6.  The defendant has raised a counterclaim on the basis that it is the sole agent for the distribution of the plaintiff’s products both in Hong Kong and Macau and in Guangdong.  The claim is based upon the wrongful breach of that contract.  In my view although there are indications in the various documents which have been produced that the defendant was what might be correctly termed a distributor of the plaintiff’s products.  On the evidence which has been produced, I am far from being satisfied that the defendant was appointed the sole agent for the distribution of the plaintiff’s products and, even if it were, as to the period of termination should the plaintiff wish to terminate such an arrangement.

7.  In any event the judge below held that the claim made by the defendant in the counterclaim was not sufficiently connected with the plaintiff’s claim to warrant it being treated as an equitable set-off and execution of judgment delayed on that account.  In my view he was correct in this and if the defendant wishes to pursue the counterclaim it is open to it to do so.

Hon Le Pichon JA:

8.  I agree.