TOBRIX B.V. (a company incorporated in the Netherlands) v. HONGKONG TRIPOD LTD

DCCJ 291/2021

[2024] HKDC 2124

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 291 OF 2021

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JUDGMENT

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1.  This is my decision in relation to the trial of this action between the parties, which concerns disputes arising from orders that were placed for Personal Protective Equipment (“PPE”) (namely face masks, mask clips, and aprons[1]) in the first half of 2020, and hence in the early days of what subsequently became known as the COVID-19 pandemic.

2.  At trial, the plaintiff was represented by Mr Philip Rompotis and Mr Lavesh Kirpalani[2], both instructed by Messrs Tanner De Witt[3]. Although the defendant had been represented by solicitors and counsel until late 2023, at trial[4], the defendant was represented by its sole director, Mr Johannes Jozef Bults (“Jos” or “Mr Bults”). The defendant was assisted by someone who was not in court, but who was in legal training.

I.  BACKGROUND

3.  The plaintiff is a limited company incorporated in the Netherlands and engaged in the business of supplying medical equipment and related services. Its CEO is one Mr Antonius Johannes Cornelis Stokbroex (“Toine”). His brother, Mr Hank Stokbroex (“Hank”) is an employee of an international company, Huawei Enterprise Services, based in Shenzhen.

4.  The defendant is a limited company incorporated in Hong Kong. As mentioned, Mr Bults is its sole director. He was born and educated in the Netherlands and has since 2000 lived in mainland China and Hong Kong. The defendant pleaded inter alia that it was experienced in sourcing manufactured goods, in particular PPE products, from mainland China and had experience arranging logistics of shipping such goods from mainland China to Europe, and procuring and inspecting documentation.

5.  In early 2020, discussions took place between Toine and Hank, Hank and Mr Bults, and Hank, Toine and Mr Bults, which related to the ordering of PPE from China for use in Europe. From that period until around May 2020, several orders were placed for amounts of PPE and there were hence also, until at least around August 2020, various dealings and issues that arose between the parties, and also with various manufacturers/suppliers of PPE. The issues in this action relate mainly to 7 orders for PPE by the plaintiff (for face masks of various qualities, aprons, and mask clips) which are explained in more detail below as the 1^st to 7^th Orders.

6.  However, the relationship and dealings of the parties in relation to these matters was not governed by a formally drawn up and executed written agreement (or agreements). Rather, in determining the exact nature and implications of the parties’ relationship, and the agreement(s) reached between them and consequences thereof in relation to the 1^st to 7^th Orders, both parties have pleaded and referred at trial to a several thousand messages that were exchanged directly between Hank and Mr Bults via WeChat (“Private Chat”), as well as between Hank, Mr Bults, and Toine via a WeChat group set up by Hank on 20 March 2020 (“Chat Group”) which concerned inter alia negotiations, payment, and other activities in relation to orders of PPE (some of which were inchoate). The 7 trial bundles contained all such messages sent in the Private Chat and the Chat Group, which amounted to, respectively, just over 2,500 messages and just over 5,100 messages. There were also 3 rounds of witness statements, which totalled over 250 pages, and an affirmation of Toine in relation to a discovery application by the defendant (“Toine Aff”).

7.  Given the matters set out in the paragraph above, this judgment is somewhat lengthier than might normally be expected for an 8-day trial on a contractual claim. Another reason for its length is that I have sought to deal – insofar as is necessary to the Issues that I must decide in this action – with the wide variety of arguments raised by the defendant which thrust, materiality, and/or relevance were not always readily apparent.

II.  THE EVIDENCE BEFORE THE COURT

8.  The parties did not refer to each and every document or page within the trial bundles, although as I have mentioned, the parties made numerous references during trial to messages sent in the Chat Group and the Private Chat.

9.  At trial, the plaintiff called 2 witnesses, namely:

(1)  Toine, who has given 3 witness statements filed on 4 July 2022 (“Toine 1”), 24 November 2022 (“Toine 2”), and 14 November 2023 (“Toine 3”). These totalled 44 substantive pages, and he adopted them as his evidence-in-chief – and as I have mentioned the trial bundles also included Toine Aff; and

(2)  Hank, who has given 1 witness statement filed on 20 April 2023 (“Hank 1”), which was 8 substantive pages long and which he adopted as his evidence-in-chief.

10.  Both Toine and Hank were cross-examined by Mr Bults for the defendant, Toine for approximately 2½ hours and Hank for just under 3 hours.

11.  Only 1 witness gave evidence for the defendant, namely Mr Bults, who had given 4 witness statements filed on 4 July 2022 (“Bults 1”), 24 November 2022 (“Bults 2”), 18 October 2023 (“Bults 3”) and 6 February 2024 (“Bults 4”). These totalled 200 substantive pages, including a 28-page Appendix A to Bults 1 (“Bults 1 Appendix A”), and were adopted as his evidence-in-chief. Mr Bults was cross-examined by Mr Rompotis over the course of some 2½ days.

12.  It is convenient at this juncture to mention some other individuals mentioned within the documents, but who were not called to give evidence at trial, namely:

(1)  Kelly Son (“Kelly”) who was Hank’s girlfriend or partner at the material time;

(2)  Zhao Peng Yi, aka Sarah (“Sarah”) is the wife of Jos and the sole shareholder of the defendant. I accept the unchallenged portion of Mr Bults’ evidence that both he and Sarah together managed and manage the defendant, such that he is effectively the “front office” of the defendant, Sarah is the “back office” dealing with administrative and logistical work, and that they would work with freelancers in mainland China in the ordinary course of the defendant’s business[5];

(3)  Nanny Stokbroex (“Nanny”), the Operations Director of Tobrix and Toine’s wife, who joined the Chat Group on 27 March 2020;

(4)  One Lao Yang (“Lao Yang”) and his wife, Tracy Lao (“Tracy”), who the defendant’s evidence indicated were church friends of Kelly who claimed to own a mask manufacturing company referred to in the documents as LiJiang; and

(5)  A Mr Aarnot Boehmer (“Mr Boehmer”) of an entity known as Landelijk Consortium Hulpmiddelen (“LCH”). For context, LCH on the evidence before me was founded/established, apparently as a consortium by the Dutch Ministry of Health, Welfare and Sport (“VWS”), as (effectively) a temporary branch/unit of the Dutch government to organise the control and supply of PPE and other COVID-19 related medical devices in the Netherlands.

III.  BROAD OUTLINE OF MAIN DISPUTES

III.1  The pleadings and the parties’ cases

13.  At trial, the pleadings comprised an Amended Statement of Claim dated 13 November 2023 (“ASOC”) which bore the name of Mr Rompotis[6], a Re-Amended Defence dated 3 January 2024 (“RADefAndCC”) filed by the defendant which was by then acting in-person, and an Amended Reply and Amended Defence to Re-Amended Counterclaim dated 17 January 2024 (“AReplyandDeftoCC”) settled by the plaintiff’s solicitors[7].

14.  For the purposes of general background, the parties’ main cases, and the disputes in relation to the relevant agreement(s) arising from the pleadings, can be broadly summarised as follows.

15.  The plaintiff pleads that an agreement was reached between the parties (“the Agreement”) by a series of instant electronic messages between 20 March to 2 May 2020. Pursuant to such:

(1)  The plaintiff would purchase PPE from the defendant at prices to be agreed between the parties, which price would reflect a 15% margin on the purchase price thereof and an additional 5% surcharge for logistics costs, advance payments totalling EUR2,039,500 were made to the defendant by the plaintiff as money on account (“MOA”) to the order of the defendant, from which the defendant would deduct the agreed price, with the defendant entering into a separate agreements with the PPE manufacturer/supplier (“the Manufacturer/Supplier”) in respect of each order;

(2)  The Agreement contained an implied term that the balance of the MOA would be repaid on demand at any time, or upon the termination of the Agreement. Further, goods supplied thereunder and/or in pursuant to the terms of what the plaintiff calls the “KY Purchase Order” (discussed and defined below as the 1^st Order, which relates to an order by the plaintiff for 550,000 face masks) would be of merchantable quality and fit for a specific pleaded purpose;

(3)  Some masks that were delivered pursuant to the 1^st Order breached those implied terms as they were not of merchantable quality and not fit for purpose, and the 3^rd Batch (defined below) of such 1^st Order was not delivered;

(4)  The plaintiff accepted such breaches and demanded a return of the balance of the MOA paid to the plaintiff under the Agreement, and terminated such by way of a letter dated 2 May 2020 (“the Letter of Termination”);

(5)  Ultimately, the plaintiff is entitled to be paid such balance, said to be the “Retained MOA” in the sum of EUR217,700, which arises as a result of payments made by the plaintiff in relation to the 1^st Order and other orders (being the 2^nd to 7^th Orders[8]) placed by the plaintiff with the defendant, on the basis of the defendant’s breached of the implied term to return such on demand, as loss and damage for breach of such, and/or on the basis of unjust enrichment as the basis of consideration for the MOA has failed; and

(6)  Due to the breaches of the implied terms as to merchantable quality and fitness for purpose, the plaintiff has suffered and claims loss, damages, and expenses in the amount of EUR122,108.54.

16.  The defendant agreed per paragraphs 7 to 13 of the Statement of Agreed Facts (“SOAF”) that the plaintiff had made advance payments to the defendant in the amount of the said MOA, and in the amounts and on the dates (from 22 March to 6 April) in question set out. However, in its pleadings it disputed the plaintiff’s case and claim by saying inter alia that the parties did not enter into the Agreement. Rather the defendant pleaded that:

(1)  Hank, and Toine on behalf of the plaintiff, had entered into an “agreement or arrangement” (“the Hank Sourcing Agreement”) (emphasis added) whereby Hank would use his contacts and experience in China to source PPE for the plaintiff;

(2)  “Accordingly, Hank approached [the defendant] for assistance in the execution of the Hank Sourcing Agreement”;

(3)  “Hank and/or Toine on behalf of [the plaintiff] and [Mr Bults] on behalf of [the defendant] thereafter entered into an agreement” (“Service Agreement”). Another major feature of the defendant’s pleaded case on the terms of the Service Agreement was that the defendant says it negotiated[9], agreed, and executed contracts with the relevant Manufacturer/Supplier as an agent for the plaintiff (RADefandCC paragraphs 10(2) to (4)). The defendant also said that it also provided further additional services in relation to such (RADefandCC paragraphs 10(5) to (6));

(4)  Accordingly, the defendant disputes that it was the party that provided or sold PPE to the plaintiff, and also disputes that the defendant had warranted and was responsible for the merchantability and fitness for purpose of the PPE. It relied on such in relation to the disputes in relation to the quality of goods supplied under the 1^st Order;

(5)  In RADefandCC paragraph 10(7), the defendant claimed that “in respect of each shipment ordered by [the plaintiff], [the plaintiff] agreed to pay [the defendant]”:

(a)  “a service commission of 15% of the selling price of goods as approved by [the plaintiff]” (RADefandCC paragraph 10(7)(a)); and

(b)  “a further surcharge of 5% on the actual incurred logistics costs for arranging export logistics”. (RADefandCC paragraph 10(7)(b))

The defendant counterclaimed for payment such sums in relation to each of the 1^st to 7^th Orders in the total of EUR272,744.90 as set out in RADefandCC Annex IV;

(6)  The defendant also pleaded an implied term of the Service Agreement that the plaintiff would indemnify the defendant for expenses reasonably incurred in carrying out its obligations under the Service Agreement (RADefandCC paragraph 11), which expenses it counterclaimed against the plaintiff as set out in RADefandCC Annex V. These were shipping costs[10], legal expenses[11], testing costs[12], and storage costs[13] totalling RMB896,714.92; and

(7)  While EUR60,241.34 of the MOA was refundable to the plaintiff[14], this was subject to the plaintiff’s liability to pay the defendant the sums mentioned above. The defendant also pleaded that due to the plaintiff’s failure to pay the amounts in Annexes IV and V, it had suffered loss and damage and sought “Damages for breach of the Service Agreement to be assessed”.

17.  For present purposes the plaintiff’s pleadings in denying any such liability to the defendant (insofar as are relevant to disposal of the issues before the court) may be summarised as:

(1)  The defendant was not an agent of the plaintiff for any purchases from the Manufacturers/Suppliers, and the plaintiff did not authorise the defendant to act on its behalf;

(2)  It was denied that the plaintiff had reached any arrangement and/or agreement with Hank (including the Hank Sourcing Agreement) – Hank only assisted Toine to get into contact with Mr Bults and/or the defendant;

(3)  In denying the Services Agreement, it was also inter alia denied that Hank and/or Mr Bults and/or the Defendant were authorised to negotiate and conclude (as agent of the plaintiff) any contract/agreement/arrangement on behalf of the plaintiff, and that Hank acted as agent for the plaintiff in any manner – also, the defendant was and is not an agent of the plaintiff for any purchases from Manufacturers/Suppliers, and the plaintiff never authorised the defendant to act on its behalf; and

(4)  As the Agreement was entered into (and not the Service Agreement), the purchase prices paid by the plaintiff to the defendant in respect of all of the 1^st to 7^th Orders (which amounts are set out at ASOC Annex II) had already included the margin and commission claimed by the defendant, there was also no admission as to the relevant implied term as to indemnity, and the defendant was not entitled to recovery of the expenses at RADefandCC Annex V.

18.  In essence, and at trial, as regards each of the 1^st to 7^th Orders, the main thrust of the plaintiff’s case was that each of them was placed by the plaintiff as buyer with the defendant as seller (which had placed separate orders for each with the relevant Manufacturer/Supplier) hence the application of Sale of Goods Ordinance (Cap 26) (“SOGO”) and of attendant liability regarding the 1^st Order. The defendant’s case was that it acted as agent of the plaintiff in contracting with the Manufacturer/Supplier and provided services in relation to each order, hence SOGO does not apply but the defendant is entitled to be indemnified its expenses.

III.2  Joint Statement of Issues

19.  The parties had filed a Joint Statement of Issues in Dispute dated 24 May 2023 (“Joint Statement of Issues”), which was signed by the plaintiff’s solicitors, as well as the defendant’s then-solicitors. This set out the following issues.

“1. What were the terms of the agreement reached between the Plaintiff and the Defendant on or about 20 March 2020 (the Agreement)?

2. In particular (without limitation), under the Agreement:

(1) did the Defendant act at all material times as an agent of the Plaintiff?

(2) did the Defendant warrant the quality of PPE products sourced by the Plaintiff under the Agreement?

(3) is there a term that the Plaintiff should indemnify the Defendant for any expenses that are reasonably incurred by the Defendant in carrying out its obligations under the Agreement?

3. What products, and at what total price, were the subject of the first order under the Agreement for ‘KY’ products on or about 22 March 2020 (Order #1)?

4. What was the total value of the PPE products sourced by the Plaintiff under the Agreement and therefore the amount that ought to be charged to the Plaintiff?

5. Whether the amount under Issue 4. above was inclusive of the Defendant's commission and surcharge?

6. Insofar as relevant under Issues 1 and 2, whether the KYC Masks and/or KY DG Masks supplied to the Plaintiff were of merchantable quality and/or fit for purpose and/or in compliance with the terms of the Agreement?

7. Insofar as relevant under Issues 1, 2 and 6 (i) was the Plaintiff entitled to reject the KYC Masks and/or KY DG Masks as against the Defendant; and (ii) is the Defendant liable to the Plaintiff for damages for breach of contract and if so, in what amount.

8. What is the remaining balance, if any, of the MOA retained by the Defendant?

9. In light of lssues 5 and 8, is the Defendant entitled to:

(1) any further payment from the Plaintiff in respect of orders placed under the Agreement and if so in what amount; and/or

(2) the pleaded unpaid commission and surcharge?

10. Insofar as relevant under Issues 1 and 2, were the expenses claimed by the Defendant (including its legal expenses pleaded as incurred in its suit against KYC in the PRC) reasonably incurred in carrying out its obligations in the Agreement, and accordingly is the Plaintiff under an obligation to indemnify the Defendant in respect of those expenses and if so in what amount.”

20.  I have considered and treated the Joint Statement of Issues as offering a broad framework for me to dispose of the live issues before the court, and have referred to the relevant Issues below because (i) the parties since amended or re-amended their pleadings between November 2023 and January 2024[15] (ii) apart from a portion of the defendant’s written closing submissions, the parties’ submissions were not generally structured in line with the Joint Statement of Issues and (iii) of developments in the defendant’s case during trial, which I will outline next.

III.3  Developments in the defendant’s case during the trial of the action

21.  Two other claims for damages were advanced, for the first time, in the defendant’s opening as filed on 22 April 2024, namely:

(1)  RMB 899,999.78 as “Damages for breach of the Service Agreement”, said to be “based on the fact that Hank 2 times ordered 2 million masks and l time ordered l million masks, based on the average price of [RMB9]/mask x 15%/2”; and

(2)  HK$500,000 for “Loss of income due to postponement of the trial with 5 months”.

22.  The defendant in the course of its oral opening abandoned the first of these claims, and agreed that the second would more properly be dealt with as a matter of its legal costs if and when such issue arose.

23.  In its closing submissions, the defendant[16]:

(1)  Dropped its pleaded claim (within RADefandCC Annex V) for all of the “Shipping costs” under expenses, which left only the other expenses claimed (legal expenses, testing costs, and storage costs) of RMB375,547.60 (or EUR50,073.013); and

(2)  In relation to its claims for commission and surcharge (RADefandCC Paragraph 10(7) and Annex IV):

(a)  Firstly dropped its pleaded claim for the 5% surcharge calculated on the aforementioned “Shipping costs” (as pleaded at Annex IV of the DefCC and hence also RADefandCC paragraph 10(7)(b)), and reformulated its claim as being for 20% (i.e. 15% + 5%) of its calculation of the “net value” of all of the 1^st to 7^th Orders (i.e. the total amount that the defendant had agreed to pay to the Manufacturers/Suppliers) which it claimed were all the subject of the Services Agreement, with the latter 5% being its charge for logistics costs; and

(b)  Eventually, and during the parties’ oral closing submissions, admitted that such claims for 20% were already included within the prices that the plaintiff had agreed to pay to the defendant in relation to each order (which was in accordance with the plaintiff’s case all along), and accordingly said that it would drop such claim in relation to all of the 1^st to the 7^th Orders.

III.4  The Lunch Agreement and the 1^st to 7^th Orders

24.  Before going into the 1^st to 7^th Orders I should briefly refer to events that took place prior to the 1^st Order being placed on the evening of 21 March 2020 (and hence also prior to the 2^nd to 7^th Orders), as they are relevant context for the purposes of deciding the pleaded issues.

25.  Firstly, there were some discussions and dealings between Hank and Mr Bults regarding the trading of PPE prior to 20 March 2020. However, the first discussions they had which were directly linked to the 1^st to 7^th Orders took place on 20 March 2020 in the Private Chat, which led to further discussion in the Chat Group with Toine. During the discussions with Toine, there was an agreement in the Private Chat that Hank and Mr Bults would talk about “prices, margins and commissions tomorrow”, for as Hank said “I don't see any reason to support my brother financially, and I want to make some money from it myself.”

26.  The next day (21 March 2020) there was a lunch at the Baia Burger concept in Shenzhen between Hank (accompanied by Kelly) and Mr Bults at which both of them reached an oral agreement (“the Lunch Agreement”), before the 1^st Order was placed. It is clear, and I find, that they reached the Lunch Agreement pursuant to the previous discussions between Hank and Toine. I will determine the detailed terms of the Lunch Agreement below, but for now and in essence:

(1)  Hank’s evidence (and the plaintiff’s stance in its submissions) was that Hank and the defendant agreed to split, 50/50 between each of them, the profit that the defendant would earn from collaboration between the plaintiff and the defendant, and that Hank was acting as a consultant to the defendant;

(2)  Mr Bults’ evidence was that the split between Hank and the defendant was 50/50 on “commission earned”, being effectively the 15% and 5% as claimed in RADefandCC paragraph 10(7)(a) and (b) and supported by the rest of his testimony. He denied that the defendant “was paying Hank commission based on [the defendant’s] margin”, and said the fee paid to Hank was an “introductory fee” or “in the nature of an introducer’s fee which is common enough in business”; and

(3)  After the Letter of Termination (dated 2 May 2020) was received by Mr Bults on 3 May 2020, there were discussions between him and Hank, and calculations carried out by both of them, concerning the “margin” payable to Hank.

27.  The 1^st Order: This relates to an order for 550,000 FFP2/N95/KN95 face masks, (“the 1^st Order”). I find (Issue 3) that the 1^st Order was placed by the plaintiff pursuant to, and as can be seen from, discussions in the Chat Group that took place largely in the evening of 21 March 2020, to which I shall refer to below[17]. Further and on relation to such:

(1)  It was not seriously disputed, and I hence find on the evidence before me, that it was intended that the masks in the 1^st Order meet the FFP2/N95/KN95 standards, which are interchangeable[18].

(2)  In the course of events the 1^st Order was split into 3 batches. 50,000 face masks of the 1^st Order (“the 1^st Batch”) had been delivered to the Netherlands by 30 March 2020, with 20,000 thereof being received on 28 March 2020. The plaintiff onward delivered some 49,990 thereof to its customers which included three hospitals, namely Elisabeth-TweeSteden Ziekenhuis Hospital (“Steden Hospital”) (7,200 masks), St Antonious Hospital in Nieuwegein (“St Antonius Hospital”) (12,000 masks), and St Trudo Ziekenhuis Hospital (“St Trudo Hospital”) (1,200 masks). 250,000 face masks of the 1^st Order (“the 2^nd Batch”, also referred to in the plaintiff’s evidence as the “LCH Batch”) were firstly delivered to a facility nominated by LCH in Shanghai in mid-April 2020, and then subsequently to the Netherlands. Another 250,000 face masks of the 1^st Order (“the 3^rd Batch”) were delivered to and kept in storage facilities in mainland China in mid-April 2020. They were seized by the PRC authorities in April 2022 as part of a criminal investigation.

(3)  It is the plaintiff’s case that pursuant to the 1^st Order it had agreed to pay the defendant EUR1.57 for each mask, which included the margin and commission claimed by the defendant. While the defendant had originally disputed this and advanced its counterclaim for margin and commission, the effect of the defendant dropping such counterclaims was that the defendant accepted that EUR1.57 was the price to be charged to the plaintiff for the 1^st Batch. It seems to me that the same goes for the rest of the 2^nd to 7^th Orders.

(4)  There are disputes as to (i) The circumstances in which the plaintiff originally agreed to pay the defendant the price of EUR1.57 per mask (ii) The actual quality of the 1^st to 3^rd Batches of masks – it being the plaintiff’s pleaded case that such were “defective”, thereby causing it to suffer loss and damage, and that in order to mitigate such it had to resell masks out of the 1^st and 2^nd Batches and (iii) Whether the parties agreed in or around mid-March 2020 to April 2020 to reduce the price per unit for the 2^nd Batch of masks to EUR1.24 (ASOC 11.3), which the plaintiff says was agreed in the course of mitigating its losses. These issues with the 1^st and 2^nd Batch of masks are also relevant to other matters, such as the circumstances in which the 6^th and 7^th Orders were placed.

(5)  The defendant’s pleaded case in response to these matters essentially relies on the Service Agreement (which it denies having breached), says that the defendant did not warrant the quality of products that were ordered by the plaintiff, and (read charitably) can be read as pleading that the masks were merchantable, or “saleable”, as it refers to the fact that some were sold. In relation to renegotiation the defendant pleads a bare denial, which amounts at best to a non-admission.

(6)  As to the identity of the contracting Manufacturer/Supplier for the 1^st Order, there were apparently 2 different “King Year” entities: firstly King Year Printing and Packaging (Hong Kong) Co Ltd[19] (“KY HK”) which was the contracted Manufacturer/Supplier of the 1^st Order masks (but which contract was cancelled after the 1^st Batch was delivered), and secondly Dongguan Jinnian Paper Products Co Ltd (“KY DG”) which was the contracted Manufacturer/Supplier in relation to the 2^nd and 3^rd Batch. I have (insofar as necessary) dealt below with the specific circumstances of the involvement of each entity below. However, and ultimately both entities were together and interchangeably referred to at trial as “King Year”. Such is unsurprising, and I will (unless otherwise indicated) do the same herein, as:

(a)  it was Mr Bults’ evidence that he had been introduced to KY HK and KY DG (both referred together as “King Year”) by his personal contact Ms Hao, whose contact named Jack was the sales manager of “King Year”, and both entities used the same address (“KY Address”) at which there was a mask factory visited on 21 March 2020 by Mr Bults, Hank, Ms Hao, and Kelly (see SOAF paragraph 26);

(b)  At the first visit to the factory at the KY Address, “King Year” was represented by Wu Xiaopeng (“Mr Wu”), his sister Wu Xiaoxia (“Wendy Wu”), and Sun Haitao (“Mr Sun”). The latter was Wendy Wu’s husband and (as per company searches) was the owner of KY DG as well as the same sole director and shareholder of KY HK; and

(c)  Before the contract with KY HK was terminated, and as recorded in the KY Termination Agreement (defined below) payments in the total amount of RMB5,280,000 were made by the defendant to personal accounts of inter alia Mr Wu and 2 officers of what Mr Bult referred to in his testimony as “King Year”.

28.  The 2^nd and 4^th Orders: These relate to two orders, each for 50,000 aprons. There is no dispute as to the quality required or provided. The Manufacturer/Supplier of all such aprons was Xinle Huabao Medical Products Co Ltd (“Xinle”). It was Mr Bults who found Xinle as a supplier.

29.  As a matter of background, I find that on 28 March 2020 an order for 100,000 aprons at US$2.20 each was placed by the defendant with Xinle after there were discussions in the Chat Group (from 20 to 28 March 2020) as to, inter alia, the need and availability, of aprons meeting certain standards. Xinle then issued the defendant with a proforma invoice reflecting US$2.20 per mask for 100,000 aprons, and the defendant transferred US$110,000 to Xinle in relation to the said order of aprons (which is EUR100,000 or EUR2.00 per apron if one uses the exchange pleaded by the defendant). This was paid from money received from the plaintiff (SOAF paragraph 87) (i.e. part of the MOA).

30.  I also find that pursuant to Toine’s request to Mr Bults in the Chat Group at around 10:00 pm on 1 April 2020, shortly thereafter the plaintiff in the Chat Group agreed to buy from the defendant all 100,000 of those aprons at EUR2.55 per apron. Over the next few days, there was an attempt to buy more aprons by the plaintiff, pursuant to which the plaintiff transferred a further EUR460,000 of MOA to the defendant on 4 April 2020 with a view to paying for that further order. However, on 6 April 2020, Xinle informed Mr Bults (and Mr Bults informed the Chat Group) that they were no longer able to supply the aprons on the initially agreed terms. Xinle then issued a pro forma invoice dated 10 April 2020, and a sales contract dated 22 April 2020, to the defendant (as “Buyer” in the sales contract) for 50,000 aprons at US$4.40 per apron.

31.  While eventually a total of 100,000 aprons were eventually delivered from Xinle to the Netherlands, I also find that by 30 April 2020:

(1)  As to the order of the first 50,000 of those aprons (“the 2^nd Order”), the plaintiff agreed to pay the defendant EUR127,500, being EUR2.55 per apron. This was admitted in Mr Bults’ testimony, and in any event such terms are recorded on a message dated 30 April 2020 sent in the Chat Group, the tables at Appendix A to the Letter of Termination on 2 May 2020 (“P’s 2 May Table”), and a spreadsheet of Mr Bults that he sent to Hank dated 9 May 2020 (“D’s 9 May Spreadsheet”) regarding Hank’s portion of the margin “after settlement of costs”.

(2)  As to the order of the remaining 50,000 of those aprons (“the 4^th Order”), the plaintiff had agreed to pay the defendant EUR201,000, and hence EUR4.02 per apron. I do so as such terms are recorded in the same message referred to above in the Chat Group, as well as in P’s 2 May Table, and D’s 9 May Spreadsheet.

(3)  The plaintiff, in addition to the US$110,000 already paid to Xinle, paid another US$220,000 to Xinle. This reflects the price of US$4.40 per apron set out in Xinle’s 10 and 22 April 2020 documents, which is EUR200,000 or EUR4 per apron if one uses the exchange rate pleaded by the defendant.

32.  The 3^rd Order: This relates to an order for 600,000 face masks (“the 3^rd Order”). The Manufacturer/Supplier was a party named For You Essentials (“FYE”), which was also referred to as “Foshan” by the parties. I find that the quality of the masks required and were eventually provided were masks meeting the EN14683IIR standard, also described in the evidence as being “surgical masks”, which term I will use below.

33.  On the evidence and pursuant to the parties’ agreement in SOAF paragraphs 101 to 102, it was on or about 1 April 2024 that the plaintiff agreed to buy the surgical masks that were the subject of the 3^rd Order at EUR0.42 per mask, which price included transportation to Amsterdam[20]. This comes out to EUR252,000 for the whole order. I hence find that the 3^rd Order was placed by the plaintiff in such terms on or about 1 April 2024.

34.  I find that FYE as a supplier was not introduced by the plaintiff to the defendant, but was introduced by the defendant (acting via Mr Bults) to the plaintiff[21]. I also find that the 3^rd Order of FYE masks were ordered and purchased by the defendant in USD for USD180,000 (USD0.30 per mask). As to the EUR equivalent to USD180,000 for which the defendant ordered the masks, on the plaintiff’s pleaded case and Mr Bults’ evidence in chief (which adopted Bults 1) such is said to be EUR168,000 (EUR0.28 per mask), although the defendant’s pleaded case uses a different exchange rate giving EUR163,636.36 (EUR0.27 per mask).

35.  The 5^th Order: This relates to an order of 25,000 mask clips (“the 5^th Order”). No underlying documents between the defendant and the Manufacturer/Supplier (such as a contract or pro forma invoice) were included in the trial bundles, or were disclosed in the action. However, I find on the evidence before me (and taking into account Mr Bults’ admissions during cross-examination) that (i) Mr Bults had found the supplier (ii) the Manufacturer/Supplier had priced them at EUR0.14 each (hence EUR3,500 in total) (iii) the defendant had on 20 April 2020 quoted the plaintiff a price of EUR0.20 a mask which included the defendant’s margin of 15%, transportation costs, and any surcharge thereon (iv) the quote was accepted and the 5^th Order placed by the plaintiff in the Chat Group and (v) the defendant then ordered the mask clips from the Manufacturer/Supplier.

36.  The mask clips were sent by the defendant to the plaintiff on 22 April 2020 (SOAF paragraph 139). There is no dispute or issue as to the quality requested or provided of the goods.

37.  The 6^th Order: This relates to an order for 350,000 KN95 face masks (“the 6^th Order”). Their Manufacturer/Supplier was named Shenzhen Yuguan Medical Instruments Co, Ltd (“YuGuan”), the masks met that quality, and they were delivered to the Netherlands on or around 25 May 2020. It is agreed and I find that on or about 6 May 2020 the plaintiff agreed to buy 350,000 YuGuan masks at a price of EUR1.21 each (SOAF paragraph 115). Further, the parties apparently agree that the sum to be paid by the plaintiff in relation to the 6^th Order should be deducted from the remaining MOA between the parties.

38.  However there are disputes between the parties as to the exact circumstances in which the defendant placed an order with masks from YuGuan, and the circumstances in which the plaintiff are said to have ordered such. Put simply, the plaintiff says the defendant had unilaterally[22] ordered such masks from YuGuan in early April 2020 and paid for them using the MOA transferred from the plaintiff to the defendant, and that when the plaintiff found out about this 6 May 2020, the parties then negotiated and agreed the 6^th Order in terms above. The plaintiff says that it did this to try and retain/prevent the potential loss of LCH as a customer which had resulted from the rejection of the 2^nd Batch/LCH Batch of the 1^st Order. The defendant’s case, as explored in more detail below, is that the defendant placed its order with the Manufacturer/Supplier on behalf of the plaintiff pursuant to its obligations under the Services Agreement, and that the latter hence covered the 6^th and 7^th Orders. The defendant disputes that YuGuan was paid out of MOA.

39.  At this stage, as context in resolving the above and other relevant disputes below, I find that on 8 April 2020 Mr Bults[23] visited the factory of YuGuan, and that the same day, after the defendant had conducted what Mr Bults says was “necessary due diligence”, the defendant made a payment to YuGuan of RMB1,900,000 (which fact of payment and sum is agreed) in relation to the supply of those facemasks. I also find from the underlying contract that the price that the defendant had agreed to pay was USD1.25 per mask (FOB Shanghai). It was the defendant’s evidence, using its pleaded exchange rate, that this worked out to EUR1.14 per mask. I also find that YuGuan was not introduced by the plaintiff to the defendant, but was instead introduced by the defendant to the plaintiff, and that it was Mr Bults who found YuGuan for the defendant[24].

40.  The 7^th Order: This relates to an order for 250,000 KN95 face masks (“the 7^th Order”). Their Manufacturer/Supplier was Promask Electronic Medical Device (Guangzhou) Manufacturing Co, Ltd (“ProMask”). As with the 6^th Order, there is no dispute or issue as to the quality of the masks required (namely masks meeting the KN95 standard), nor as to the fact that they were delivered to the Netherlands after April 2020. It is agreed and I find that on 6 May 2020, the plaintiff agreed to buy 200,000 ProMask masks at a unit price of EUR1.21 each (SOAF Paragraph 128). Further, the parties apparently agree that the sum to be paid by the plaintiff in relation to the 7^th Order should be deducted from the remaining MOA between the parties.

41.  There are disputes between the parties as to the exact circumstances in which the defendant placed an order with masks from ProMask, and the circumstances in which the plaintiff are said to have ordered such. Those disputes are essentially identical (save that here the identify of the Manufacturer/Supplier is ProMask) to those mentioned in relation to the order with YuGuan, as set out in paragraph 38 above.

42.  At this stage, as context in resolving the above and other relevant disputes below, I find that (i) on 8 April 2020 Mr Bults had placed an order with an entity named Hongkong Tanso Clothing Co Ltd (“Hong Kong Tanso”) for 350,000 KN95 masks at a price of USD1.245 each (ii) while Hong Kong Tanso had arranged for a supplier named Shunde to fulfil the order, Mr Bults was subsequently informed by Hong Kong Tanso that Shunde could not do so, and that it had been assigned to ProMask for completion (iii) the defendant made payment to Hong Kong Tanso on 22 April 2020 (iv) it was Mr Bults of the defendant who was first introduced to ProMask, and that the defendant introduced ProMask to the plaintiff[25].

IV.  EVALUATING THE CREDIBILITY OF FACTUAL WITNESSES

43.  As is well-known, the relevant principles relating to assessing the credibility of a witness require that I consider the inherent likelihood or unlikelihood of a witness’ evidence and the apparent logic of events, the consistency of that evidence with undisputed or undisputable evidence, with contemporaneous conduct and documents, with objective, undisputed, and/or indisputable facts and documents, the internal consistency of the witness’ evidence amongst their witness statements and with pleadings, and any material change of case. Some indications (without being exhaustive) that a witness’ evidence is unsatisfactory include where there are evasive and argumentative answers, tangential speeches avoiding the question, blaming legal advisers for pleading, disclosure and evidence shortcomings, self-contradiction, internal inconsistency, shifting case, new evidence, and selective disclosure. I also need to consider the totality of the evidence. I warn myself against attaching undue weight on demeanour, though demeanour is obviously relevant when considering credibility.

44.  Some of those matters have been mentioned, alongside commentary on how to approach the fallibility and potential unreliability of human memory (which principles I have also borne in mind) in Hydrotech Waterproofing Solutions Limited v Shun Yuen Construction Company Limited [2022] HKCFI 1170 paragraphs 3 to 6 citing inter alia Yu Man Fung Alice v Chiau Sing Chi Stephen [2020] HKCFI 1923. I highlight:

(1)  That accounts of events narrated by a witness in Court, or given in a witness statement, may not be an unbiased recollection to be treated as totally reliable evidence.

(2)  That apart from the question of whether a witness is a truthful or untruthful person, the former might still tell something less than the truth on an issue, or through an untruthful person, may not tell the truth on an issue.

(3)  That even if a witness is a truthful person telling the truth as he sees it, questions may arise as to whether he registered the intentions of the conversation correctly and if so, whether his memory correctly retained them.

(4)  That a concern is whether the witness’ recollection has been subsequently altered by unconscious bias or wishful thinking or by over-much discussion of it with others. Witnesses (especially those who are emotional, who think that they are morally in the right) tend very easily and unconsciously to conjure up a legal right that did not exist. This is particularly so given the truism that “with every day that passes the memory becomes fainter and the imagination becomes more active.” And it is for that reason that “a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance.”

(5)  That while an honest witness may believe he heard or saw this or that, it may be so improbable that it is on balance more likely that he was mistaken. On this point, the balance of probability must be put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability.

(6)  That hence, contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part.

(7)  The importance of Coleman J’s observations in Yu Man Fung Alice as to how memory operates, and how the process of civil litigation considerably interferes with memory by the procedure of preparing for trial and subjects the memories of witnesses to powerful biases, not least where:

(a)  witnesses have a stake in a particular version of events (obviously where the witness is a party of or has some type of loyalty to a party to the proceedings);

(b)  other subtler influences come into play, perhaps from the process of preparing a witness statement and coming to court to give evidence for one side in the dispute, as well as the natural desire to assist, or not prejudice, the party calling the witness, and the desire to give a good impression in a public forum;

(c)  the procedure of preparing for trial including in making making and reviewing a witness statement (which is often done inter alia long after time has elapsed since the relevant events), which effect is “to establish in the mind of the witness the matters recorded in his or her own statement and other written material, whether they be in fact true or false, and to cause the witness’s memory of events to be based increasingly on this material and later interpretations of it, rather than on the original experience of the events.”;

(d)  there is a “powerful tendency for people to remember past events concerning themselves in a self-enhancing light”; and

(e)  “It is also not uncommon for witnesses to deceive themselves in what are essentially honest but nonetheless false recollections.”

45.  I will deal below with specific issues of credibility below, where relevant, when determining the relevant issues in this action. However, prior to such, I make the following observations which I have borne in mind when assessing (where it is relevant and necessary to do so) the credibility, reliability, and accuracy of each witness on any specific issue, also bearing in mind the totality of the evidence before me.

46.  Firstly, given the nature of the allegations and issues raised by the parties (in particular on the nature and contents of the agreement that is said to have been reached), the identities of the witnesses, and the vast amount of evidence and messages contained in the Chat Group and the Private Chat evidence, the testimony given by all three witnesses tended (at least to some degree) to go beyond purely factual matters, and/or to emphasise matters/submissions that they (and/or possibly their legal advisors) had apparently perceived to be in support of the case of the party calling them.

47.  Secondly, there was a clear shift in Mr Bults’ evidence, and in a major portion of the defendant’s case in its closing submissions, away from and in contrast to that which was contained in its pleadings, Mr Bults’ witness statements (as adopted as evidence-in-chief), and the defendant’s prior submissions. The shift was, as I have mentioned, the dropping of the defendant’s claim for “shipping costs” and for “a further surcharge of 5% on the actual incurred logistics costs for arranging export logistics”, and the reformulation of its claim for 15% and 5% by conceding to and agreeing with the plaintiff’s case on inclusion of margin.

48.  This shift was notable as a whole, and was particularly stark in relation to the 5% claim. The original formulation of that claim was an important element of the defendant’s pleaded case and its evidence in relation to the Service Agreement and the 1^st to 7^th Orders, yet was totally inconsistent with the reformulated (and unpleaded by the defendant) 5% claim. Moreover, these changes in case clearly came about only as a result of the original claims being challenged in the course of Mr Rompotis’ cross-examination on how the defendant had handled such margins during the course of the parties’ dealings, and prior to its instructing its former solicitors in August 2020. I highlight, in particular, that:

(1)  In the course of his cross-examination on underlying documents, Mr Bults took approximately 4 minutes before he gave an answer conceding that the defendant’s shipping costs were included in the amount charged to the plaintiff for the 3^rd Order, and conceding the defendant’s claim in relation to such for the 3^rd Order.

(2)  Later, and near the end of his cross-examination, Mr Bults was asked to explain his calculations in D’s 9 May Spreadsheet[26] regarding Hank’s portion of the margin “after settlement of costs”, pursuant to the 50/50 split agreed in the Lunch Agreement. Mr Bults was asked why he had in calculating such amount deducted within the shipping and “other costs” for not only the 3^rd Order, but also the 1^st, 2^nd, and 4^th Orders. He initially sought to deflect the question by replying “I understand that that is [the plaintiff’s] take, yes”, even though these were his own calculations. It then took several minutes before he answered the question by admitting that the reason for those deductions was because he had agreed it with Hank. However, Mr Bults then immediately attempted to resile from this by trying to confine the admission to the 3^rd Order.

(3)  Mr Bults was further questioned whether the calculations he had used in D’s 9 May Spreadsheet reflected that the prices the plaintiff had agreed to pay included the plaintiff’s margin and surcharge (whatever their actual amounts) in relation to the 1^st and 4^th Orders. He initially sought, again, to avoid answering the question by referring to his having made some mistakes in the calculation, before so disagreeing.

(4)  Eventually, and during the defendant’s closing, Mr Bults confirmed that it was no longer claiming any of the figures regarding shipping costs, or a 5% surcharge thereon, in relation to any of the 1^st to 7^th Orders in Annex IV and V of the RADefandCC, and explained the defendant’s decision to advance the reformulated 5% claim as follows:

“COURT: And you say you’re making it now. Right. The 5 per cent that you’re talking about now, I don’t think it has been made clear as far as I can tell with the pleadings or in your evidence.

DEFENDANT: No, that is correct. But during the cross-examination, you have noticed that a number of times I had needed some time to think[27]. During that time, I came actually to the conclusion that plaintiff’s way of looking at that number, and given the way it’s put by me in the WeChat, in [Chat Group] message 18, that that is actually based on that [Chat Group] message 18. That is actually the correct way to do it.”

49.  In the round, I consider Mr Bults’ approach to giving testimony on these core topics during the trial to have been evasive, self-contradictory, and argumentative. I also consider that these exchanges and his shift in stance on the defendant’s case demonstrate Mr Bults had a stronger propensity (when compared to that of the two other witnesses) in these proceedings to give testimony and make assertions that he considered supported the plaintiff’s case, even in the face of objective and contemporaneous (or relatively contemporaneous) documentation. This does not reflect well on the absolute and relative truthfulness, reliability, and accuracy of Mr Bults’ oral testimony on the core issues in these proceedings. I have therefore considered the implications of such below where necessary, for example where there are direct conflicts of evidence with the testimony of other witnesses.

50.  Thirdly, and as for Toine and Hank, given my views above on the general contents of their testimony I have placed more weight on objective contemporaneous evidence and will also continue to evaluate below (where relevant and necessary to the underlying issues) the credibility, reliability, truthfulness, and accuracy of their evidence below. However I deal here with some of the relevant criticisms or issues raised by the defendant as such are not as readily dealt with below:

(1)  I do not understand, much less agree, with the defendant’s complaint (insofar as I understand it) in page 14 of its written closing that Toine had “resorted to hearsay without evidence” on certain topics such as the Hank Services Agreement, and the entry into and performance of Hank’s agreement with Mr Bults on 21 March 2020. Both Hank and/or Toine gave evidence at trial and had produced relevant WeChats.

(2)  In relation to criticism on the same page of errors in Toine 1 paragraphs 19((iii)(a) and (b), it is correct that the evidence shows (as was highlighted in the defendant’s cross-examination of Toine) that the messages were, indeed, sent by Hank rather than (as stated within Toine 1) Mr Bults. However, I do not think this erroneous attribution of those messages is not of such a type or manner which raises material doubts as to Toine’s credibility. In reaching this conclusion I have borne in mind the overall purpose and other contents of this paragraph which also referred to other messages (the next being from the defendant himself, and the last from Toine himself), the nature of the plaintiff’s case, and the volume of messages in these proceedings.

V.  THE APPROACH TO THE TERMS OF THE CONTRACT REACHED BETWEEN THE PARTIES

V.1  The parties’ detailed cases on contract and agency

51.  I begin with the defendant, as it was its stance in the pleadings and in its evidence that consequent to the Hank Services Agreement being entered into in “late March 2020”, the parties entered into the Services Agreement[28] (in relation to which the defendant confirmed at trial that I had to find the Hank Sourcing Agreement existed in order for me to find the Service Agreement) and that Hank’s role was to act on behalf of the plaintiff as its agent, not least by entering into the Service Agreement.

52.  As regards the latter point the Services Agreement itself is pleaded as being one whereby “Hank and/or Toine on behalf of [the plaintiff] and [Mr Bults] on behalf of [the defendant] thereafter entered into [the Service Agreement]” (RADefandCC Paragraph 10(3), (my emphasis) in terms that then followed. As I have mentioned, it is pleaded that Hank also had a role in various capacities (i.e. Hank and Toine, Hank and/or Mr Bults, and Hank and/or Toine) in relation to certain obligations of the Service Agreement. I highlight in particular:

(1)  Hank and Toine were to liaise with each other to identify and agree the plaintiff’s requirements for PPE products in light of demand from the plaintiff’s customers and availability from time to time (RADefandCC paragraph 10(1));

(2)  “Hank and/or [Mr Bults] would identify and present suitable [Manufacturers/Suppliers], present [them] to the plaintiff, and negotiate suitable PPE Products supply contracts on behalf of the plaintiff. [Mr Bults]’ negotiations with suppliers was in accordance with the instructions of Hank and/or Toine.” (RADefandCC paragraph 10(2);

(3)  Hank and/or Toine would determine key terms of contracting with the suppliers including identity, type of product, delivery schedule, item price, and would instruct the defendant to agree such matters with the suppliers. (RADefandCC paragraph 10(3); and

(4)  “Each supply contract negotiated and agreed and approved by Hank on the [plaintiff’s] behalf or by [the plaintiff] would be entered into by [Mr Bults] on behalf of [the defendant] and Hank, alternatively Hank or [the defendant] alone, as agent for [the plaintiff] as principal.” (RADefandCC paragraph 10(4))

(5)  In addition to “cooperating” as above, the defendant would provide various services to the plaintiff as required, including visiting factories, and conducting some corporate due diligence on suppliers, nominated by Hank and Mr Bults, and checking and reviewing some test reports of third-party suppliers, providing delivery and transport services, and making payment out of MOA (RADefandCC paragraph 10(5)).

(6)  “[the plaintiff] would from time-to-time advance payments to [the defendant], at times and in amounts entirely of [the plaintiff’s] own choosing, as MOA from which [the defendant] could make payments to PPE suppliers in mainland China on [the plaintiff’s] behalf.” (RADefandCC paragraph 10(6))

53.  At trial, I sought clarification from the defendant as to whether its case was that the Hank Sourcing Agreement was contractual, or was non-contractual. The defendant seemed to submit that it could have been either. I also note that it was Mr Bults’ evidence that (i) the Hank Sourcing Agreement was an “oral agreement” (ii) based on the messages in the Private Chat between Mr Bults and Hank on 20 March 2020, Hank was sourcing the supply of PPE on behalf of Toine, and Mr Bults had “assumed” that Toine had asked Hank to explore PPE sourcing opportunities on behalf of the plaintiff and (iii) given the “actual events that occurred during the relevant period” (which I understand to mean from March until, at latest, 28 August 2020[29]) Hank was not simply establishing a line of contact between the plaintiff and Mr Bults, or acting as a postbox, but rather, was actively and heavily involved in “every aspect” of the sourcing process for the plaintiff[30].

54.  Also, as Mr Bults said in the course of the defendant’s oral opening, Hank involved the defendant to help him fulfil the ongoing Hank Sourcing Agreement with Toine, with Hank as “the liaison”. In cross-examination he claimed that Hank was the “liaison” between Toine on one side, and Hank and Mr Bults on the other.

55.  The defendant also pleaded that there were portions in writing of the Service Agreement, on which it relied on certain WeChat messages from the Chat Group sent on 20 and 21 March 2020 which were set out in the pleadings. However, other than that, and that the Services Agreement had apparently been formed after the HSA was entered into, the defendant did not in its pleadings explicitly set out its case as to the point at which the Services Agreement was formed, and how it was entered into other than in writing (for example, whether orally or by conduct).

56.  In the course of the parties’ oral openings, I hence raised the contents of Hong Kong Civil Procedure 2024 §18/12/4 and the attendant question of how to approach messages exchanged after the messages pleaded by the defendant 21 March 2020 (such as the messages set out in Bults 1 Appendix A, the majority of which were dated after 21 March 2020 and continued until 2 May 2020 as being apparently relevant to the terms pleaded at RADefandCC paragraphs 10(1) to (7)).

57.  The defendant submitted that the framework of the Service Agreement and of its terms were agreed in the evening of 21 March 2020, and that I could refer to messages subsequent to that date as evidence of how it was executed thereafter, but which did not mean that they had formed or changed the agreement[31].

58.  I also understood that the defendant hence sought to imply the pleaded term of indemnification (RADefandCC paragraph 11) as a result of the alleged agency relationship between the plaintiff and the defendant, since at trial (in particular its written closing) the defendant stated that its claims for expenses arose as it had carried out its fiduciary duty as agent towards the plaintiff and the obligations in the Services Agreement.

59.  The main thrust of the plaintiff’s case at trial on this issue was, firstly, that the Agreement (as pleaded by the plaintiff) was entered into “By way of a series of exchange of instant electronic messages between 20 March 2020 to 2 May 2020 in [the Chat Group]”. Secondly, there was no Service Agreement as:

(1)  There was insufficient evidence to establish that the Hank Sourcing Agreement had been entered into as a contract, and in any event even if it were non-contractual (eg as a favour from Hank to Toine) it was unclear where that took the defendant’s case.

(2)  Hank had no actual or apparent authority to act on behalf of Toine/the plaintiff, particularly where Hank could not self-represent. In particular:

(a)  The matters relied on by defendant are not, as required, consistent only with a contract between Hank and Toine/the plaintiff[32], but are instead consistent with an agreement between Hank and the defendant whereby the former would work with and be paid by the latter for his services (the plaintiff says as consultant, with reference to what I have mentioned above as the Lunch Agreement);

(b)  While the plaintiff’s conduct subsequent to the alleged commencement of authority may be admissible in relation to the question of authority, it is likely to be given less weight than contemporaneous evidence (i.e. that available at the time of the alleged creation of the alleged agency relationship); and

(c)  In any event there was no causal link proved between any alleged representation of authority, and the defendant’s actions.

(3)  The defendant was not an agent of the plaintiff. Rather, the defendant had acted (given also the contract between Hank and the defendant) in its own commercial interests as a buyer of PPE from manufacturers, and as a reseller to the plaintiff, with contracts at a marked-up price on a “back to back” basis.

(4)  As for the implied term relating to indemnification of the defendant, the plaintiff submitted that it should be rejected firstly because the defendant was not the plaintiff’s agent, and that even if it were, I had to consider if such a term were necessary to give business efficacy to the agreement between the parties (and whether it was inconsistent with such).

V.2  The relevant principles and approach to contract and agency

60.  The objective test is applicable in relation to the formation of a contract. As regards such:

(1)  Whereby once the parties have to all outward appearances agreed in the same terms on the same subject matter, then neither can (generally) rely on some unexpressed qualification or reservation to show that they had not in fact agreed to the terms to which they had appeared to agree. Such subjective reservations of one party do not prevent the formation of a contract. However, this rule does not apply in favour of a party who knows, or ought to have known, that the other does not assent to the terms proposed in a notice displayed by the former party eg where the course of dealing shows that the offeror must have known that the offeror did not mean what they had said: see Chitty on Contracts, 35^th Edition (2023) §4-002.

(2)  While the objective test of agreement applies to an acceptance, whether an offeror is bound by the acceptance of the alleged offer depends on the state of mind of the alleged offeree (and to this extent the test of agreement can be said to be not “wholly objective”), in that[33]:

(a)  If the offeree actually and reasonably believes that the offeror has the requisite intention, the objective test is satisfied so that the offeree can hold the offeror to their apparent offer, even though the offeror did not, subjectively, have the requisite intention;

(b)  If the offeree knows that, in spite of the objective appearance, the offeror does not have the requisite intention, then the latter is not bound and the objective test does not apply in favour of the offeree as they know the truth about the offeror’s actual intention; and

(c)  As to other permutations, if the offeree does not know, but ought to have known that the offeror does not have the requisite intention, then it has been suggested that the offeror will not be held to his apparent offer. Another possibility is that both parties reach an agreement on term X, but the unexpressed intention of both is that this means term Y, they are held to term Y even if the third party’s objective interpretation is that the agreement is for term X, as otherwise they would be bound to a contract that neither wanted.

(3)  The objective test also applies when determining the identity of the parties to the contract: see Chitty 4-002.

(4)  When the parties carry on lengthy negotiations, it may be hard to say exactly when an offer has been made and accepted, since as negotiations progress, each party may make new concessions or demands, and the parties may eventually disagree as to whether they had ever agreed at all. The court must look at the whole correspondence and decide whether, on its true construction, the parties had agreed to the same terms. If so, there is a contract even though both parties, or one of them, had reservations not expressed in the correspondence. The court will be particularly anxious to hold that continuing negotiations have resulted in a contract where the performance which was the subject-matter of the negotiations has actually been rendered. It may be possible for a contract to be given retrospective effect to cover work done before the final agreement is reached[34].

(5)  The significant of an acceptance is that it immediately binds both parties to the contract, and thereafter neither party can vary its terms without making a new contract. The court hence looks at the entire course of negotiations to decide whether an apparently unqualified acceptance did in fact conclude the agreement: see Chitty §4-036.

(6)  Acceptance by conduct is possible provided that the conduct comes to the attention of the offeror. However it is an exceptional mode of communication and must be unambiguous, such that the conduct relied upon must be “referable… only to the contract” that has been offered. Conduct will only amount to an acceptance if it is clear that the offeree’s alleged act of acceptance was done with the intention, ascertained in accordance with the objective principle, of accepting the offer: See Chitty §4-036, Ho & Hall’s Hong Kong Contract Law, 6^th Edition (2022) §§2-88 to 2-89. In Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79, which is cited in support in Ho & Hall, there was no contract as D’s conduct was not consistent only with an intention to accept an offer to buy goods, but could be reasonably explicable in accordance with a common practice by which a financier seeks to progress a transaction for the benefit of another party.

(7)  Where an offer or acceptance or both are alleged to have been made by conduct, the terms of the agreement may be more difficult to ascertain than where the agreement was negotiated by express words. Where there is a gap (but not a conflict), the court can resolve uncertainty by applying the standard of reasonableness, or by reference to another contract (whether between the same parties or between one of them and a third party). Where parties are negotiating the terms of an agreement, and one party makes a counter-offer, this can be accepted by conduct such as by handing over the subject matter of the contract: see Chitty §4-037.

(8)  While conduct subsequent to the alleged contract being entered into may be admissible, it is likely to be given less weight than contemporaneous evidence at the time of the alleged creation of the contract[35].

61.  Secondly, as to what are the necessary terms in relation to whether an agreement has been constituted:

(1)  An agreement to negotiate is not binding as it is too uncertain to have binding force. Further, the parties to an agreement may also be reluctant to commit themselves to a long-term arrangement when prices and other circumstances affecting performance are likely to fluctuate – an attempt to introduce flexibility by providing that certain terms are to be agreed later, or from time to time, may be to make the agreement so uncertain that it cannot be enforced. A natural inference to be drawn where the parties leave an important matter (such as the price) to be settled by further agreement is that they do not intend to be bound until there is agreement on price: see Chitty §§4-169 to 4-170, 4-174.

(2)  A contract may fail for uncertainty of consideration if the parties fail to agree on the price to be paid for the other party’s promised obligations, or where they fail to agree a mechanism for determining that price which does not depend simply on reaching a future agreement: see Ho & Hall § 2-158 to 2-160.

(3)  An agreement may lack contractual force because it is vague or uncertain that no definite meaning can be given to it without adding further terms: see Chitty §4-186. However, an agreement is not incomplete merely because it calls for some further agreement between the parties, and the courts will sometimes give effect even to an agreement which provides for further terms to be agreed. Commercial agreements are often intended to be binding in principle even though the parties are not at the time able or willing to settle all the details eg contracts of insurance may be made “at a premium to be arranged”: see Chitty §§4-176 to 4-180. The agreement will not be incomplete if an agreement lays down criteria for determining matters which are left open, or if it includes machinery for resolving matters originally left open: see Chitty §§4-181 to 4-182. It will not be ineffective for uncertainty merely because the facts on which its operation is to depend are not known when it is made: see Chitty §4-185.

(4)  While an agreement may be complete even if not worked out in meticulous detail, in an agreement for sale of goods, the price and quantity of the goods will always be among the essential terms which the parties must settle in order to establish a contract. The consideration or price of the bargain is always an essential term, and an agreement which does not settle the matter with reasonable certainty will be void[36].

62.  Thirdly, as to agency, I have had regard to the following propositions cited by the parties which appear to be relevant:

(1)  Agency is a fiduciary relationship between two persons that requires that a principal expressly or impliedly manifest assent that another should act on his behalf so as to affect his legal relations with third-parties. Consent is at the heart of agency, which can be viewed as agent’s authority to bind a principal, or as a power-liability relationship[37]. One aspect of this relationship may be an agent is under a duty to obtain the best price for its principal: See Ready Set Goal (In Liquidation) & anor v Kay-El (Hong Kong) Ltd [2015] HKCFI 721 paragraph 26.

(2)  The parties may be held to have consented if they have agreed to what amounts in law to such a relationship, even if they do not recognise it and even if they have professed to disclaim it. The consent must have been given by each of them, either expressly or by implication from their words and conduct[38]. In determining whether or not there is an agency relationship between the parties (whether contractual or not), the Court may look at the matter objectively, such that conferral can arise from conduct[39].

(3)  One primarily looks to what the parties said and did at the time of the alleged creation of the agency. Earlier words and conduct may afford evidence of a course of dealing in existence at the time and may be taken into account more generally as historical background. Later words and conduct may have some bearing, although are likely to be less important. As to the content of the relationship, the question to be asked is what it is that the supposed agent is alleged to have done on behalf of the supposed principal, and whether the evidence shows that the parties consented to the creation of a relationship of agency[40].

(4)  As to authority, it is possible to have actual authority or apparent authority. An agent may have express actual authority, where a principal expressly confers such authority on him. The agent may have implied actual authority, which is where the law regards the authority as having been conferred upon the agent by necessary implication, either from the circumstances or if appropriate from the course of dealings between the parties[41].

(5)  Two species of implied actual authority are (i) incidental authority, where an agent authorised to do a particular thing is impliedly authorised to do all lesser things required to achieve the principal object eg a solicitor acting in the sale of a house (ii) implied authorisation by virtue of special features of the factual situation which do not fall into the categories of incidental authority, or other recognised species of implied actual authority[42].

(6)  Where an agent is said to have apparent authority, this is looked at the from the perspective of a third-party. There must normally be a representation by the principal to the third-party that the agent has authority to act on the principal’s behalf. If there is such a representation, and the third-party deals with the agent as the principals’ agent on the faith of that representation (i.e. there is a causal link between the representation and the third-party’s actions), the principal is bound by the agent’s acts. As the essence of apparent authority is authority from the principal, an agent cannot ordinarily self-authorise and no representation by the agent as to the extent of his authority can amount to a “holding out” by the principal. This may be different where the principal has in some way instigated or permitted an agent to appear to have authority of the scope in question by way of “holding out” eg where the agent is a managing director whose actual authority to sign cheques is limited by an internal resolution[43].

(7)  Apparent authority cannot arise where a party has actual knowledge, is dishonest, or irrational (i.e. reckless or wilfully blind to the fact that the agent did not have the requisite authority, and put on inquiry)[44].

63.  Finally, on the drawing of inferences (which arises in relation to all other issues) I have applied (having referred the parties to such during trial) the principles set out in paragraph 31 of my decision in Lo Kit Man v Wong Wai Shing Vincent [2021] HKDC 405[45].

VI.  ANALYSIS

VI.1  Outline of Section VI.

64.  Given the parties’ respective cases, I have therefore analysed the matter in stages, and roughly chronologically (with reference to Hong Kong time), as follows:

(1)  At Section VI.2 below considering events until and including the evening of 21 March 2020 (including the early hours of 22 March 2020). This section is relevant mainly to Issues 1-5.

(2)  At Section VI.3 below considering further events until 6:30 pm of 2 April 2020[46], during which period (i) Hank created and started to manage the OneDrive cloud-storage folder (“the OneDrive”) and certain OneDrive Spreadsheets (defined below) (ii) the sequence of orders for 100,000 aprons (which became the 2^nd and 4^th Orders) from Xinle on 28 March 2020 and 1 April 2020 (iii) the 3^rd Order for 600,000 FYE face masks (iv) exploration of various other deals or opportunities, including for ventilators (v) re-contracting of the remainder of the 2^nd and 3^rd Batches of the 1^st Order on 2 April 2020 (vi) 1 April 2020 discussion and circulation of the Letter of Cooperation (defined below). This section is relevant mainly to Issues 1-3 and 5.

(3)  At Section VI.4 below considering, further events until 28 August 2020 in particular (i) The Xinle aprons being split into the 2^nd and 4^th Orders (ii) the 5^th Order (iii) the placing of orders by the defendant with the Manufacturer/Supplier for the ProMask and YuGuan masks (iv) the handling of the masks ordered under the 1^st Order, including the defendant consulting and instructing PRC lawyers, the issuance of the Letter of Termination dated 2 May 2020, and other subsequent dealings, correspondence, and payments including the placing of the 6^th and 7^th Orders. This section is relevant mainly to Issues 1-3 and 5.

(4)  At Section VI.5 below I summarise and set out my findings on the question of what were the terms of the contract entered into between the parties (Issues 1-3 and 5).

(5)  At Section VI.6 below whether there were any implied terms of merchantability and fitness for purpose, and whether they were breached in relation to the 1^st Order of masks (Issues 2(2) and 6).

(6)  At Section VI.7 below the parties’ entitlement to remedies including rejection and whether the defendant is liable to the plaintiff for damages for breach of contract, and if so, in what amount (Issue 7)), the remaining balance, if any, of the MOA retained by the defendant (Issues 4, 8), whether the defendant is entitled to further payment from the plaintiff in respect of orders placed under the agreement and if the pleaded commission and surcharge (Issue 9), and the defendant’s further claim for expenses and if so in what amount (Issue 10).

65.  Much of the analysis in Sections VI.2 to VI.4 below concerns the defendant’s case on the Service Agreement. That is due to its pleaded contents, the manner in which it was advanced before me by its pleadings, evidence, and submissions[47], and as the defendant made references to numerous messages beyond those in Bults 1 Appendix A, including to messages in the Appendices to the defendant’s opening and closing submissions[48] regarding “List of Occasions demonstrating Hank’s management of the financial affairs and the MOA” (“DSub Appendix 1”) and “List of occasions demonstrating Toine and Hank regarded all participants as a team” (“DSub Appendix 2”).

VI.2  Events until and including the evening of 21 March 2020 (as mainly relevant to Issues 1 to 5)

66.  I have analysed in detail the parties’ dealings up to and including the early morning of 22 March 2020 (Hong Kong time) as:

(1)  It is the date by which, on the defendant’s case, not only had the Hank Services Agreement (be it contractual or otherwise) been entered into, but also the date by which the framework of the Service Agreement and its terms was entered into;

(2)  it was by that time that the essential elements of the 1^st Order (which is relevant to the Agreement pleaded by the plaintiff) would have been agreed; and

(3)  the Lunch Agreement was entered into during this period, and before the 1^st Order was placed.

67.  Dealings between Hank and Toine, and between Hank and Mr Bults, in the period until the creation of the Chat Group at 4:02 pm on 20 March 2020: I have considered the evidence over this period, including of Hank and Mr Bults’ discussions in the Private Chat, the evidence from Hank and Toine of the discussions between them, and the 3 witness’ relevant oral testimony. I do not see that such evidence, considered in its totality and in context, establishes that the Hank Sourcing Agreement was entered into, whether as a contract (let alone an oral agreement as suggested in Mr Bults’ testimony) or otherwise.

68.  I find that during the discussion between Hank and Toine (on which both Hank and Toine gave evidence and, as I have said, were not cross-examined by the defendant), Toine asked Hank if he could help in sourcing PPE from China. Toine did so as he had reason to believe Hank could do so, given that Hank lived there and had contacts in its Dutch community. They both discussed how that could be done quickly. I accept the evidence that Hank mentioned (as set out in Toine 1) Mr Bults to Toine[49], and that Toine also mentioned to Hank the general thrust of the License to Operate from 1 March 2020 onward (as later formalised and set out in a letter dated 1 April 2020). However I do not see that such amounted to the existence of a Hank Sourcing Agreement or authority for Hank to represent Toine/the plaintiff, let alone for Hank to enter into the Service Agreement on behalf of Toine/the plaintiff.

69.  Given that context, and in any event, I also find that the timing and contents of the ensuing 70 messages over some 5 to 6 hours between both Hank and Mr Bults in the Private Chat (being contemporaneous documentary evidence prior to the creation of the Chat Group by Hank) are more consistent, objectively viewed, with Hank (and at most with the assistance of Kelly) seeking to work with Mr Bults and his company to meet the needs of Toine/the plaintiff to buy and import PPE to the Netherlands, and as exploring certain areas of that specific co-operation/arrangement between Hank and Mr Bults/the defendant. I do not consider that it establishes, on balance, the existence of the Hank Sourcing Agreement (contractual or otherwise), or any express or apparent authority of Hank to represent and/or enter into an agreement on behalf of Toine and/or the plaintiff:

(1)  On any view, the suggestion that parties “work together” can only sensibly be understood to be made between Mr Bults, Hank, and Kelly, particularly as Mr Bults himself replied “With you and Kelly for sure”. Indeed Mr Bults submitted as such, and admitted that this was his understanding under cross-examination. In the Private Chat, Mr Bults also immediately followed this up by saying “Let’s put our heads together tomorrow morning”. Given the context as a whole, I find that such discussion did not, was not intended to, and cannot be reasonably understood to, refer to their “work[ing] together” with Toine/the plaintiff, whose names were not even mentioned.

(2)  During this period of several hours, Mr Bults also discussed and disclosed to Hank issues relating to quality of PPE, including that which Mr Bults had said he could supply. Hank and Mr Bults discussed various commercial arrangements relating to PPE, such as shipping, payment, and an upcoming visit to a mask factory mentioned by Mr Bults (in the same message quoted above) to which he invited Hank along and they discussed whether Kelly should attend. Such behaviour is entirely consistent with Hank and Mr Bults making arrangements to “work together” with each other, in relation to orders from a potential client (Hank’s brother and/or the plaintiff) seeking to purchase PPE.

70.  Further dealings between Hank and Mr Bults, and Hank, Toine, and Mr Bults, in the period up until around 1:09am on 21 March 2020: Further to the above, and for reasons below, I do not consider (as was submitted by the defendant) that the creation of the Chat Group establishes or supports the existence of the Hank Sourcing Agreement (contractual or otherwise). I also do not consider that any of the additional events and discussion during this period establish that Hank had express or apparent authority as an agent for the plaintiff (particularly in relation to entering into contracts such as the Service Agreement on behalf of the plaintiff), or that there was an offer, acceptance, and agreement of a term that Hank had authority to act as the plaintiff’s agent. Nor do these added matters reflect any consensus that Hank was authorised to enter into the Services Agreement on behalf of the plaintiff. In particular, I do not see that these dealings support the defendant’s pleaded terms of the Service Agreement at RADefandCC 10(2) to (4) (regarding agency), and paragraph 10(6) (regarding transfer of funds).

71.  While I have considered the Chat Group, the Private Chat, and the 3 witness’ relevant oral testimony on this additional period, given my observations on credibility and reliability above, I have primarily had regard to the relevant contents of the Chat Group and the Private Chat.

72.  I have considered the contents of the discussions prior to and during this period (the latter of which are analysed in detail below). I find, given the aforesaid context and agreement between Mr Bults and Hank to “work together”, that Hank created the Chat Group to introduce Toine (who represented the plaintiff) and Mr Bults via WeChat, to facilitate their “work together” in relation to orders from the plaintiff for PPE, and to introduce Mr Bults to plaintiff so that they could discuss potential orders for PPE. I do not see how the parties’ dealings up to this point of Hank creating the Chat Group are consistent with (or establish) a Hank Sourcing Agreement, or that Hank had actual or apparent authority to act on behalf of Toine/the plaintiff. I reject such submission of the defendant.

73.  Almost all of the discussion in the Chat Group during this period took place between Toine and Mr Bults in a context where Toine was clearly representing the plaintiff and Mr Bults the defendant, with almost no input from Hank. It is, in its totality and in context, entirely consistent with a discussion between two principals (subsequent to an introduction from someone who they mutually knew) seeking to discuss and understand the general terms of any commercial agreements between them to buy and sell goods, having particular regard to pricing of goods, quality, and eventually payments and transfers.

74.  In particular, Mr Bults’ first message in the Chat Group was his attempt to outline his/the defendant’s ability to source quantities of surgical masks from suppliers, one of with which he mentioned he had been doing business with for 9 years. There was then discussion of the market for (including numbers) for FFP2 masks, and of pricing including the 15% and 5% figures. There is then further discussion of other PPE products and quality, delivery times, and payment. Three such products are offered by Mr Bults of his own volition with supporting details, namely hazmat suits which Mr Bults mentioned the quantities and pricing that “We can supply” and said he would send the details of later, aprons for which Mr Bults said he had three suppliers, and ventilators for which Mr Bults mentioned a quantity, price, and on which he later (after this period) sent through other information.

75.  As regards the latter discussion, I find on the evidence before me (which was in any event conceded by the defendant at trial), that objectively speaking, during this discussion the parties had reached a both general understanding and consensus that the defendant’s 15% margin and 5% surcharge would be contained within the price to be paid from the plaintiff to the defendant.

76.  I do not see that this discussion (even if one were to take into account the contents of previous discussions between Hank and Toine, and/or the Private Chat) reflects any offer, acceptance, or consensus in line with any entry into the Services Agreement by Hank and/or Toine on behalf of the plaintiff, nor at this point in the terms pleaded in RADefandCC paragraph 10(2) to (6):

(1)  Firstly, and although this is not conclusive, there is no mention of the terms “agency” or “agent”.

(2)  Secondly, and while there was discussion of (and an objective consensus as to) amounts that the defendant would charge in relation to the transactions, I do not consider that such is sufficient (on its own or in context) to establish the existence of any of the defendant’s pleaded terms as to agency, be it Hank on behalf of the plaintiff, or (perhaps more materially to this issue) the defendant as agent for the plaintiff. That was merely part of a discussion on the general issue of pricing, whereby Mr Bults had said the plaintiff did not charge “usury prices” to its customers, in response to which Mr Bults merely sought to reassure the plaintiff that he/the defendant took a similar approach, as shown by how he self-affirmed in the Chat Group that he thought the 15% was “very reasonable”. On the evidence, and even taking account the messages from this period in Bults 1 Appendix A[50], I do not consider that either party would have objectively, and in any event actually and reasonably believed, that Hank was representing the plaintiff, and that an offer had been made (and if relevant, acceptance reached) as per the terms pleaded in RADefandCC paragraph 10(1) to (6), in particular that the defendant was to act as the plaintiff’s agent in relation to orders for PPE.

77.  Furthermore, shortly after the initial discussion on price and margin/surcharge in the Chat Group (which was followed by Mr Bults having of his own volition mentioned hazmat suits), Hank suggested and Mr Bults agreed that they would – the next day – discuss how Hank was to make money from any such PPE supplied to the plaintiff. As Hank wrote in the Private Chat “We [i.e. Hank and Mr Bults] need to talk about prices, margins and commissions tomorrow”, and “I don't see any reason to support my brother financially, and I want to make some money from it myself [Smile emoji].” This contemporaneous evidence is also inconsistent with the suggestion that there was (at least up to this point) some sort of understanding or term agreed between Hank and Toine that Hank would be compensated by Toine/the plaintiff. It does not support the suggestion that there was a contractual Hank Sourcing Agreement. A fortiori given the conclusion of the Lunch Agreement the next day, as in the next section.

78.  I also do not see (particularly as no submissions were made before me to such effect) whether and if so how any knowledge by Hank and/or Toine as to the existence of the general terms of the License to Operate could be or is relevant to any potential permutation of consensus, offer and acceptance, or express or apparent authority, that might be said to give rise to the alleged terms of the Hank Sourcing Agreement reached before, and/or the framework of the Service Agreement and its terms as apparently reached in the evening of 21 March 2020. While submissions were made by the defendant in relation to the License to Operate and the Letters of Cooperation (circulated on 1 April 2020 and defined below), given the timing of the latter I will consider such submissions in the round when dealing, below, with events up until 2 April 2020.

79.  As it is the defendant’s case that the framework of the Service Agreement and its terms were agreed on the evening of 21 March 2020, I will reconsider the matter (as well as the plaintiff’s case) in the round when dealing with such further evidence.

80.  Further dealings up to the placing of the 1^st Order in the evening of 21 March 2020 (including the early morning of 22 March 2020): As mentioned, the next day Hank, Kelly, and Mr Bults met for lunch and reached the Lunch Agreement. There is a dispute between Hank and the defendant over Hank’s title and capacity pursuant to the Lunch Agreement. Hank claimed in his testimony that pursuant to such he was acting as a “consultant” of the defendant, and explained his responsibilities in relation to such role. The defendant gave evidence denying this, with Mr Bults saying that Hank was merely paid an introducer’s fee and acted as the plaintiff’s agent, in support of which he inter alia questioned the relevance of Hank’s qualifications and ability to contribute to the defendant’s operations.

81.  Mr Bults gave testimony (on which he was not challenged, and which portion I accept) that he explained to all present at the meeting (being Hank, Kelly, and Mr Bults) the large amount of work that would have to be done in order to secure a supply of facemasks for Toine involved, and that it would require input from Hank, Kelly, himself, and Sarah, hence a “50/50 division of workload between both couples would be the most logical way to proceed”. Other than that, there was little detailed testimony on what was actually said at the meeting. Both witnesses agree that a 50:50 split was agreed but, in seeking to characterise it differently, do so primarily with reference to evidence of matters (primarily subsequent matters including dealings with the 1^st Order) other than what was actually discussed at the Lunch Agreement. With that said, there appears to be no evidence that the term “consultant” was actually used at that meeting, or indeed prior to the commencement of these proceedings (other than Toine’s evidence, on which portion he was not cross-examined by Mr Bults, that he was apparently told by Hank of such role at the time).

82.  After lunch, Hank, Mr Bults, and Kelly first visited a Manufacturer/Supplier of masks (which identity none of the witnesses remembered). Mr Bults gave evidence in cross-examination (which portion was unchallenged and I hence accept) that he did not know this supplier, and it turned out to be a seller of face masks, which had agreed a prior commission with Kelly, and ultimately there was no discussion of pricing of masks at the time. There was discussion in the Chat Group as to the demand for and quality of those masks between Toine and Hank. In relation to such it is clear (as Mr Bults admitted in cross-examination) that Mr Bults gave his input to Hank on topics such as repackaging and/or boxing (including the possibility of the plaintiff making its own boxes for) the masks. He further explained orally that the latter possibility was raised as shipping masks in boxes would increase the shipping price.

83.  That evening Hank, Mr Bults, Kelly, and Ms Hao visited King Year at the KY Address. The whole visit took around 3 hours and messages were only exchanged in the Chat Group, not in the Private Chat. Mr Bults’ oral testimony (which portion I accept) was that he and Hank were talking mainly to Mr Wu, Wendy Wu, and Mr Sun, and that Hank and Mr Bults inspected some samples of the FFP2/N95 masks manufactured by King Year. He also testified (which portion was not challenged and I accept) that the originals of some CE and FDA test reports were shown to Hank and Mr Bults, the latter of whom asked Sarah to verify them (or at least one of the CE report, and the FDA report) by downloading the original files of the reports from the relevant bodies’ websites, which she did. Some pictures of the masks were circulated in the Chat Group, with Hank mentioning that the masks were “CE and FDA approved”, and Toine expressing interest in ordering 550,000 masks. There followed a discussion of quality (including a comment by Mr Bults that the masks “are good”, on which I accept Toine’s oral evidence he had considered in deciding whether to place the 1^st Order). The defendant also did not dispute Hank’s evidence that Hank and Mr Bults also had, at the time, a discussion amongst themselves about the quality, certification, boxes, and various things related to the order.

84.  Later on, Toine asked in the Chat Group at around 10:15 pm on the evening of 21 March 2020 “Do you think it is possible for 1 euro”, in response to which Hank mentioned that (“We”) were negotiating. Mr Bults said, which portion of his evidence I accept, that the latter related to Hank and himself negotiating the price at which King Year would sell the masks. During cross-examination, Mr Bults said that it was between 10:18 pm and 10:27 pm that he and Hank finally concluded (after earlier negotiation) that the final ex works (“EXW”) price offered by King Year for its masks was RMB9.6 each, and that he had then discussed with Hank (as was also mentioned by Hank in his testimony) the adding of RMB0.4 per mask to cover shipping costs, making the total cost to the defendant RMB10 each.

85.  Hank’s and Mr Bults’ testimony diverged as to exactly what happened next. While what is clear is that a phone call took place between Hank and Toine, after which Toine subsequently posted in the group that he agreed to pay EUR1.57 per mask, as to other matters that happened prior to (and on) that phone call:

(1)  Hank’s evidence was not challenged during his cross-examination. His testimony was to the effect that before the call, he and Mr Bults had added 20% margin on top of the RMB10, agreed that the sales price for the defendant to the plaintiff would be RMB12, which came out to around EUR1.57, and that he then called Toine and articulated the price of EUR1.57 for which he could buy masks “from us”, to which Toine agreed. He also said that “we” (that is, he and Mr Bults) did not communicate the defendant’s “purchase price from [King Year] to Toine at any time”. Toine gave no evidence, and was not cross-examined, on the contents of the call.

(2)  In Mr Bults’ testimony (as contained in Bults 1, and also in his cross-examination) he said that there had been no pre-call agreement on the price to charge the plaintiff. Rather, he said in cross-examination that, after reaching the RMB10 price, Hank called Toine and, as Mr Bults was not privy to the call, Mr Bults “assumed” that Hank updated Toine with the proposal from King Year and that both Hank and Toine reached (as he had not been consulted) the decision to set the price at EUR1.57. He said that the figure of RMB12, if so agreed, would have been around EUR1.6, using the weighted exchange rate (pleaded as being “for illustration purposes”) in RADefandCC Annex V, and said that there was evidence of the exchange rates that day in the trial bundles, and in documents disclosed in the defendant’s 2^nd supplemental list of documents (some of which had been inserted in the bundles by the time he gave such evidence). Mr Bults said in his evidence that he was “not happy” with the EUR1.57 price, as Hank had not factored in ancillary costs (i.e. many others than the shipping costs, which he said had to be taken into account), but had decided to “let it slide” as Hank had and Toine had discussed the price, and “there were plenty of other opportunities coming that we would be able to probably make it up”.

86.  There was then discussion in the Chat Group as to the need for the plaintiff to pay money into an account by Monday, and as to the total amount to be transferred to pay for the masks (using a total figure of 300,000 masks initially before it was corrected to 500,000), including advice from Mr Bults on the fastest way to transfer the money as well as provision of relevant bank account information, with confirmation that the plaintiff would transfer amounts to pay for the 1^st Order. There was also discussion of the delivery schedule for April 2020.

87.  An invoice was issued dated 21 March 2020 by KY HK (“KY HK Invoice”) specifying the “CLIENT” as “J.J. And Hank”, the parties agree and I find that EUR471,000 (which one can see is the equivalent of 300,000 x EUR1.57) was transferred by the plaintiff on Sunday 22 March 2020 to an account of Mr Bults which received such by Monday 23 March 2020, and that a further EUR765,250.00 was transferred by the plaintiff to the defendant between Monday 23 March 2020 and 30 March 2020 (SOAF paragraphs 7 to 11). As mentioned, transfers were also made by the defendant to private personal accounts of Mr Wu and 2 officers of King Year.

88.  In assessing the parties’ cases up to and including the evening of 21 March 2020, and given the principles above, I have hence considered the events up to that day holistically, focusing firstly on what are the relevant terms of the Lunch Agreement, before turning to consider what was agreed that evening at the factory at the KY Address.

89.  In relation to the Lunch Agreement, given my analysis and the evidence mentioned above, I have primarily given weight to the contents and effect of Hank and Mr Bults’ prior discussions in the Private Chat WeChat, as well as what had transpired in the Chat Group the previous day, in light of those also the portion of Mr Bults’ testimony referred to above on discussion as to workload and division, and Mr Bults’ evidence on how he had reached his calculations in D’s 9 May Spreadsheet, pursuant to which document (after some minor corrections due to Hank disputing certain amounts) the defendant transferred Hank USD37,203.

90.  On the evidence before me, I find that at that lunch, Hank on one hand and Mr Bults (who was acting for the defendant) on the other, as part of the Lunch Agreement agreed that Hank was to be paid 50% of the defendant’s profits[51] in return for Hank “work[ing] together” with the defendant to source orders for PPE placed by the plaintiff. Such conclusion is further supported by Hank’s subsequent involvement in, and activities in relation to, the handling of the 1^st Order (in circumstances which I have dealt with in some detail above) and at least the subsequent 2^nd to the 5^th Orders. Such involvement included, as relied on by the defendant and mentioned further below, creating the OneDrive and OneDrive Spreadsheets, and managing access to and the contents of such. It is also supported by Hank being paid US$37,203 pursuant to such.

91.  In my view, it is not necessary for me to determine (and I hence do not do so) whether Hank in doing so acted and/or held the title of “consultant”[52]. The question that I need to determine is whether Hank’s actions and the facts relevant to such affect (and if so how) the parties’ respective cases relating to the Issues at hand, in particular allegations of the agency, in particular the defendant’s case as set out above.

92.  In doing so, and before I turn to the events of the evening of 21 March 2020, I find that the fact of the Lunch Agreement is inherently inconsistent with any suggestion that there was some sort of understanding or term agreed between Hank and Toine that Hank would be compensated by Toine/the plaintiff, and does not support the defendant’s case that there was a contractual Hank Sourcing Agreement. Even if the latter were non-contractual, I also do not see how the Lunch Agreement is consistent with the notion that Hank had any authority to act for the plaintiff, or that there was an offer, acceptance, and agreement of a term that Hank had authority to act as the plaintiff’s agent. Indeed if anything, the fact that Hank sought to and did conclude a deal (the Lunch Agreement) whereby he would make money out of the defendant’s profits[53] is an objective and clear indicator that Hank was acting and would continue to act on his own (or at most, on behalf of Kelly), and not on behalf of the plaintiff or Toine.

93.  Furthermore, and bearing in mind the approach set out in Hydrotech, and in Shanghai Tongji, if reliance is placed on Hank’s involvement and actions post-Lunch Agreement to establish a contractual Hank Sourcing Agreement, such involvement and actions have to be unequivocally referrable to such contractual Hank Sourcing Arrangement (which contract I should not in any event imply lightly). I have also considered this factor in assessing Hank’s subsequent conduct in the rest of this section, and in other sections below.

94.  As for the events of the afternoon and evening of 21 March 2020, I have set these out in some detail above as they need to be seen in light of the background leading up to, and the terms of, the Lunch Agreement, all of which is inconsistent with the existence of a contractual Hank Sourcing Agreement and any suggestion that Hank was somehow representing the plaintiff’s/Toine’s interests.

95.  Firstly, I find that what happened that afternoon and evening has to be seen in light of, and as the result of the parties’ prior dealings, namely the defendant’s role that it had envisaged for itself as a seller of PPE to the plaintiff pursuant to earlier discussions, but with the added formal involvement of Hank (working together with the defendant) as a result of the Lunch Agreement.

96.  To that end, I do not see how such events and dealings, including the amount and extent of Hank’s communication/liaison with the plaintiff in the Chat Group, establish the existence of any prior Hank Sourcing Agreement (contractual or otherwise). They are not unequivocally referrable to a contractual Hank Sourcing Arrangement, given the existence of the Lunch Agreement. Nor do I see that they establish that Hank had express or apparent authority as an agent for the plaintiff (particularly in relation to entering into a contract such as the Service Agreement on behalf of the plaintiff), holding out by the plaintiff that Hank had any relevant authority to act on behalf of the plaintiff, and/or that there was an offer, acceptance, and agreement of a term of the Service Agreement that Hank had authority to act as the plaintiff’s agent and/or (as is apparently pleaded in RADefandCC paragraphs 10(2) to 10(4), 10(5)(j), and 10(6)) that Mr Bults negotiated the contract in accordance with the instructions of Hank and/or Toine, that Toine determined the key contracting terms, the defendant entered into the contract as the plaintiff’s agent, or the pleaded terms of payment/advance payment[54]. I also do not see how any causal link is established between any alleged representation of agency, and the defendant’s actions.

97.  Rather, on balance, I find that such dealings are more consistent with the defendant acting as a seller, where Hank helped to liaise in circumstances where he and Mr Bults (the latter of whom had more experience sourcing and seeking to sell PPE) were visiting and negotiating details with Manufacturers/Suppliers, and where he Hank was incentivised to do so given the Lunch Agreement and relevant discussions thereto.

98.  Secondly, and in relation to the question of which version of events to prefer in relation to how the EUR1.57 price was reached, I on balance prefer Hank’s evidence over that of Mr Bults. I find that Hank and Mr Bults discussed and agreed that the plaintiff would be charged EUR1.57 per mask before the phone call with Toine, and accept Hank’s evidence that he did not reveal or discuss King Year’s proposed price to Toine/the plaintiff at any time. I reject any submission by the defendant that I should infer to the contrary as apparently assumed by Mr Bults in his evidence (i.e. “I can only assume that Hank provided an update on the proposal from [King Year]”). I have reached these conclusions as:

(1)  I regard it as inherently improbable (particularly given Hank and Mr Bults’ dealings with each other, Mr Bults’ own knowledge and experience up to that point, and Hank’s own economic incentive pursuant to the Lunch Agreement) that Hank and Mr Bults did not have even a general or specific discussion on the price to quote to the plaintiff over the RMB10 figure, before Hank sought to call Toine[55].

(2)  Mr Bults’ claim to the contrary in his evidence was based mainly on the assertion that the RMB12 did not match the quoted price of EUR1.57 given the exchange rate that day. However, and despite his claim, I was not referred to any contemporaneous documentary evidence in the trial bundles that could apparently establish such.

(3)  Hank’s evidence on this issue was not challenged on cross-examination, let alone to an extent indicating that the defendant was apparently advancing a factual scenario quite different from that contained in Hank’s evidence, including that Hank had revealed King Year’s prices/proposal to Toine.

(4)  Not only was the defendant’s assumption hence not put to either Hank or Toine, but it in any event amounts at best to conjecture, and is not founded on any sufficient primary evidence or fact. Furthermore, even if one were to disregard or give little/less weight to Hank’s testimony, the assumption is inconsistent with:

(a)  The fact (which I find in Section VI.3 below) that Toine, Nanny, and hence the plaintiff, were not, in the course of the parties’ dealings, given full access to all documents on the OneDrive, and in particular did not have access to the underlying contracts with Manufacturers/Suppliers such as KY HK, and to the 594 OneDrive Spreadsheet (defined below), from which would have been evident the underlying prices charged to the defendant by the Manufacturer/Supplier, and hence the defendant’s actual margins in relation to each of the 1^st to 7^th Orders; and

(b)  Hank did not, in the evening of 1 April 2020, reveal to the plaintiff the final price charged by Xinle of USD2.20 per apron (and hence the defendant’s margin) but only mentioned the EUR2.55 price to be charged to the plaintiff, which as he mentioned (and which Mr Bults agreed in the Private Chat) was “under the guise of better purchase price and lower margins for us”.

(5)  The conclusions are also supported by my views (for reasons I have explained above) as to the testimony of Mr Bults’ credibility, reliability, and truthfulness, relative to that of Hank’s, although I add that I would have reached such conclusions anyway without having to consider my aforesaid views of Mr Bults’ testimony.

99.  Such matters are, in my view, inconsistent with the submission that Hank was an agent for the plaintiff in relation to entering into, and performance of, the Service Agreement and its terms as pleaded in the RADefandCC. They, along with Mr Bults’ admission in cross-examination that he did not personally disclose, to Toine, King Year’s price, or the underlying contract with KY HK (and later KY DG), and the other facts I have found above, are also inconsistent with the submission that there was a pleaded term to the effect that the defendant entered into the contracts as an agent for the defendant. Rather, the facts are more consistent, in the round, with a buyer-seller relationship between the plaintiff and the defendant (which was working together with Hank pursuant to the Lunch Agreement), and not an agency.

100.  I add for the sake of completeness, that I do not see that there is sufficient oral and/or documentary evidence to suggest that the plaintiff represented or held out to King Year that Hank and/or the defendant were agents of the plaintiff, and/or were authorised to negotiate and enter into an agreement to buy and pay for masks on behalf of the plaintiff. Indeed, the terms of the KY HK Invoice (and indeed of the subsequent agreement terminating such (“KY Termination Agreement”) clearly contradict such.

101.  The defendant submitted several reasons why it would not have agreed to contract in its own capacity with the plaintiff as a reseller to the plaintiff, and why it had no reason to believe that Hank/Kelly were facilitating the Hank Service Arrangement. I disagree that these are relevant to my conclusions above on the 1^st Order (and hence the framework of the Service Agreement and its terms as alleged concluded by this date) primarily for the following reasons: (i) King Year as a Manufacturer/Supplier was found and introduced by Mr Bults via his contacts (ii) Inspection and verification as to the quality of the masks produced were carried out, at least in part, by Mr Bults and Sarah (iii) Hank’s involvement must be analysed in light of the discussions leading to, and in the context of, the Lunch Agreement (iv) It was in the aforesaid context that King Year as a supplier was raised (by Mr Bults) and approved via discussion in the Chat Group, and Hank played a role in the 1^st Order (v) My earlier conclusions on the context in which the defendant had earlier mentioned its general margins (vi) My conclusion that the purchase price of the masks from King Year (and hence the exact margin) was not disclosed to the plaintiff at the time, which is consistent with the conclusions below that it was also not disclosed to the plaintiff via the OneDrive (vii) Although Kelly had previously found the first Manufacturer/Supplier, this and dealings with it were referred to and also visited by Mr Bults. (viii) It is clear that the negotiations and dealings up to this point took place in a fast-moving and high-pressure commercial environment. I also do not see how Mr Bults’ other complaints/factors which were not set out in the Chat Group are relevant to the principles above in relation to establishing terms of the alleged Service Agreement (including the contracting parties thereto), and/or any contractual and/or other agency.

102.  In reaching the above conclusions I have considered not only the above (including the matters at paragraph 93 above), but also the following matters, which I deal with at this stage for ease of reference, but all of which (including the matters at paragraph 93 above) have also borne in mind in following sections.

103.  Firstly, the defendant has criticised the plaintiff for originally pleading an incorrect figure of masks in relation to the 1^st Order (namely, 300,000), and only resiling from such before the (originally scheduled) trial in November 2023. I do not see how this takes the defendants’ case any further on the issue of the terms of the Service Agreement, given the principles and analysis above. In any event, Toine was also not cross-examined on this by Mr Bults, or given an opportunity to explain the underlying reason for this change in stance, in spite of the defendant’s criticism via submissions. In any event, as explored below, I do not see how this makes any material difference in relation to other material matters relating to the KY Order, particularly given the volume of messages and dealings between the parties over this period.

104.  Secondly, in reaching the above conclusions, I have found, and have regard to such finding, that the plaintiff had disclosed all such documents within its possession, custody, power, or control, which were the subject of the defendant’s specific discovery request for disclosure of:

“… all relevant communication in writing between [Toine] and [Hank] from February to September 2020 (ie after the conclusion of the pre-action correspondence between the parties) which relate to the factual matters which are the subject of the Action, including but not limited to WeChat messages and/or any other form of instant messaging records.”

105.  I have made such finding as during Toine’s cross-examination he was asked if he had disclosed and put in evidence all of the text and voice messages exchanged with Hank as regards to this case, and Toine answered in the affirmative and said that Mr Bults had seen them all. While Mr Bults then commented he did not think so, there was no further questioning on the topic, nor was there any cross-examination on the contents of Toine Aff 1[56]. Also, and in any event no submissions were made by the defendant to the effect that (and if so why) (i) I should not accept Toine’s testimony on this topic (ii) I should find such requested documents existed which the plaintiff had failed to disclose. Nor were any made on the impact thereof, notwithstanding the other criticisms raised by the defendant of Toine’s evidence.

106.  In summary, having considered all of the evidence set out above, and up to this stage in the round, I do not see how the defendant has established, on the evidence, that the framework of all of the pleaded terms (in particular, the core terms such as those relating to Hank/the defendant being agents for and/or acting on behalf of the plaintiff at RADefandCC paragraphs 10(2) to (6)) of the Service Agreement were finalised and entered into on 21 March 2020, or that the Hank Sourcing Agreement was entered into prior to such. I find that the evidence up to this date is more consistent with a buyer-seller relationship between the plaintiff and the defendant, and with a sale of goods contract having been entered into between the plaintiff and the defendant whereby the defendant was to supply the plaintiff with 550,000 FFP2/N95/KN95 face masks at EUR1.57 each, for which the plaintiff would advance and pay the defendant money in advance of receipt of the masks.

107.  Since the plaintiff seeks to rely on post-21 March 2020 messages as evidence of the terms of the framework of the Service Agreement and its terms reached on that date[57], I shall consider such matters below. I will also consider those events given how the plaintiff has pleaded and argued the Agreement.

VI.3  Events until and including 6:30pm on 2 April 2020 (as mainly relevant to Issues 1-3 and 5)

108.  This section and period encompasses the matters I have summarised at paragraph 64(2) above.

109.  Firstly, it is relevant as undisputed context, and I find on the evidence before me, that all of the dealings between Hank, Mr Bults, and Toine (and between Hank and Mr Bults) from 20 March 2020 onward continued to take place in a fast-moving and high-pressure commercial environment, where the defendant and Hank were (as with others at the time in the PRC) trying to find and assess Manufacturers/Suppliers, and to negotiate orders with them, in order to make deals which would satisfy incoming the plaintiff’s inquiries, demands, and orders for PPE, and in the context of the Lunch Agreement. As part of this process, over the period Mr Bults (and in some cases also Hank) in question visited many Manufacturers/Suppliers in various parts of mainland China[58], and as Mr Bult said in his testimony, the defendant was also sourcing PPE for other clients as well[59]. As Mr Bults stated in the Chat Group on 29 and 31 March 2020, his impression was that it as a “war economy”.

110.  Secondly, there is the issue of who had what access to what portions of the OneDrive. Such was created during this period and it is relevant to my conclusions in relation to the 1^st to 7^th Orders given that:

(1)  Of the documents which were on the OneDrive during this period, there are several spreadsheets created by Hank as of 2 April 2020 (at Trial Bundle B3/594 to 599) (“the OneDrive Spreadsheets”) which included various types of information/detail on orders for PPE, in particular one spreadsheet at p594 containing details such as the prices paid to each Manufacturer/Supplier, shipping costs, markup, and sales prices (“the 594 OneDrive Spreadsheet”).

(2)  The defendant submitted (apparently in support of his argument that Hank was the agent of Toine/the plaintiff) that “Hank prepared and maintained the OneDrive, which contained all data accessible to all - including Plaintiff”, and it was the defendants’ case that it “cannot be excluded” (hence I consider that the defendant asked me to find) that Toine and/or Nanny (hence the plaintiff) had access to the OneDrive Spreadsheets, and earlier or later versions thereof.

(3)  During Mr Bults’ cross-examination, it was suggested in relation to each of the 1^st to 7^th Orders that he had not personally disclosed to Toine the underlying prices paid to each Manufacturer/Supplier, or the underlying contracts with/invoices from each Manufacturer/Supplier indicating such (and in the case of the 1^st Order, also payment slips re: payment from the defendant). Mr Bults would, as part of his response, always mention that such documents were put on the OneDrive, apparently with a view to suggesting (as with the OneDrive Spreadsheets) that Toine/the plaintiff hence knew of such; and

(4)  It is possible for me to determine such issue, on balance, at this stage having regard to relevant subsequent matters, evidence, and the parties’ submissions thereon, and convenient for me to do so as such determination is also relevant to some issues addressed below.

111.  I have considered all of the evidence to which I was referred on the topic, along with the parties’ submissions thereon. I do not see that there is sufficient evidence for me to conclude, on balance, that Toine, Nanny, or anyone acting on behalf of the plaintiff, had “full access” (i.e. access to all of the documents) in the OneDrive at the material time, that is, from 28 March 2020 onward until 28 August 2020. I also find that, on balance, they did not have access to the 594 OneDrive Spreadsheet, and that they did not have “full access” to all of the documents in the OneDrive at the material time. In doing so I have considered the following:

(1)  There were various folders and documents created within the OneDrive, which were mainly maintained by Hank. His evidence on this topic, which was not challenged in cross-examination and which I accept for reasons below, was that he managed each person’s access to each document/information, had created different folders to store and share data in relation to PPE, with some of that information being shared exclusively with Mr Bults, “like the spreadsheet that we use to track orders” which “also included things like quantities, cost price, logistics costs, and sales price”, and that other folders that he created and which were shared with Toine and Mr Bults contained “things like certificates, photos, images of products, etc, that were relevant for [the plaintiff] as a customer”.

(2)  The plaintiff and the defendant had agreed (with Hank confirming in his oral evidence) that Toine had access to p 596 of the OneDrive Spreadsheets (“the 596 OneDrive Spreadsheet”), and to a similarly formatted spreadsheet that had been disclosed by the plaintiff (“the 614 Spreadsheet”). Hank’s evidence on this topic, which was not challenged and which I accept, was that these were spreadsheets created and maintained by him to keep track of orders placed by the plaintiff, transfers of money made by the plaintiff to the defendant, payments made (and the dates on which they were made and received) by the plaintiff for those orders, the quantity and price charged to the plaintiff for each order of PPE, and shipment dates. It is clear and I find that such spreadsheets did not contain the underlying prices paid by the defendant to the Manufacturer/Supplier, nor references to any contracts.

(3)  Further, and while there was at some point also a spreadsheets folder, and while Toine/Nanny clearly had access to at least some documents on the OneDrive (some of which apparently related to certificates/quality of PPE, and some of which apparently related to finance), it is also clear from discussions in the Chat Group itself that there were also different and varying levels of access to folders/files, not all of which were granted to Toine/Nanny. It is also clear that Toine and Nanny knew that there were, at least at some point, documents on the OneDrive to which they did not apparently have access.

(4)  Toine effectively denied that he had full access to the OneDrive in his cross-examination, saying “I cannot confirm that I have full access to OneDrive”. He was not questioned further on this by Mr Bults, let alone on whether during this period he had access to specific underlying contracts with Manufacturers/Suppliers or documents such as the 594 OneDrive Spreadsheet. His evidence is entirely consistent with Hank’s testimony and the objective evidence above from discussions in the Chat Group.

(5)  I find that that Toine and Nanny, who were parties clearly acting on behalf of the plaintiff, did not at the material time have “full access” to the OneDrive, and in particular did not have access to the underlying contracts with each Manufacturer/Supplier, or to spreadsheets containing the prices charged by the manufacturer and the defendant’s margins, such as the 594 OneDrive Spreadsheet. If they had had access to such contracts or spreadsheets, it is inherently improbable that either of them would have kept silent in relation to such, given that the underlying margins reflected in (at least) the 594 OneDrive Spreadsheet showed that the plaintiff was apparently being charged a margin quite different (and on the evidence, generally higher) than the 15% and 5% that had been discussed and agreed on 21 March 2020.

(6)  I also find that the reason Toine and Nanny did not have such full access, including to the 594 OneDrive spreadsheet, is that Hank did not give them access to such. This decision by Hank, particularly given the prior entry into the Lunch Agreement and notwithstanding the fast-paced nature of the environment in which the parties were operating, does not support (but rather contradicts) the defendant’s case that Hank was at the material time authorised to act as an agent of Toine/the plaintiff, including by apparently entering into the Service Agreement on behalf of the plaintiff and underlying contracts with Manufacturers/Suppliers (or indeed by treating his access to and control over the OneDrive as being also on behalf of the plaintiff). It also contradicts the defendant’s case that it was acting as the agent of the plaintiff. This is particularly so when (as discussed below) there was otherwise no disclosure of any of the underlying contracts with, and prices that were ultimately paid by the defendant to, the Manufacturer/Supplier for the 2^nd to 5^th Orders.

112.  Thirdly, I have already made certain findings of fact in relation to the order for Xinle aprons which were eventually reformulated as the 2^nd and 4^th Orders at paragraphs 28 to 32 above, and in relation to the 3^rd Order at paragraphs 32 to 34 above. I refer to such and will not repeat them here. Given those (up to 2 April 2020) and the context as I have set out above, I do not see that the dealings and matters cited in relation thereto and leading up to the placing of the order for 100,000 aprons (which effectively include the 2^nd Order), or the placing of the 3^rd Order change my conclusions as to the Service Agreement. In particular:

(1)  It is apparent from the evidence before me (including Mr Bults’ evidence in cross-examination), and I so find, that the 100,000 aprons were ordered by the defendant (which was working together with Hank) on 28 March 2020 in circumstances where Mr Bults had earlier found Xinle as a supplier, and without a firm order from the plaintiff, so that the defendant could secure the quoted price by the Manufacturer/Supplier. It was only after further discussion on 31 March and 1 April that the plaintiff at around 10:00pm on 1 April 2020 agreed to pay EUR2.55 for those 100,000 aprons (although such were eventually reformulated into the 2^nd and 4^th Orders).

(2)  As for the 3^rd Order, as mentioned, FYE was introduced to the plaintiff by the defendant and via by Mr Bults. Such introduction was made in circumstances where (as per Mr Bults’ testimony, which portion I accept) the defendant had on 25 March 2020, and prior to the first mention of FYE/Foshan in the Chat Group, apparently placed with FYE a substantial order of 2 million masks for a different customer in a different country, with the defendant subsequently on 1 April 2020 adding the plaintiff’s 3^rd Order on top of such, to be dealt with on the same terms vis-à-vis FYE as set out in the prior contract[60]. On the evidence before me, the plaintiff merely knew that it had agreed to pay EUR0.42 per mask, including shipping.

(3)  On the evidence before me, I consider that on balance, it was not established that either Hank, Mr Bults, nor anyone acting on behalf of the defendant disclosed to Toine, Nanny, or anyone acting on behalf of the plaintiff:

(a)  The proforma invoice dated 6 April 2020 issued by Xinle, the underlying contract with specifying USD2.20 per apron, or any document indicating that that price and the defendant’s final margins in relation to the order for 100,000 aprons (including the 594 OneDrive Spreadsheet, which clearly refers to an order for 100,000 Xinle aprons); and

(b)  The original contracts between the defendant and FYE, or any document indicating the underlying price paid by the defendant and the defendant’s margins in relation thereto (including the 594 OneDrive Spreadsheet, which clearly refers to the 3^rd Order of FYE/Foshan surgical masks).

I have found that the plaintiff did not have access to all documents on the OneDrive. I also find that the submission (if so maintained by the defendant) that the plaintiff had access to these documents is not one which I can reasonably draw by inference, as opposed to impermissible speculation. I reject that submission and decline to make such a finding. The plaintiff hence did not know at the material time of the final underlying terms or margins between the defendant and Xinle[61], and between the defendant and FYE/Foshan.

(4)  I have considered in the round the matters above, the additional fact and context that the defendant and Hank were working together pursuant to the Lunch Agreement in relation to these orders, and the matters which I have found above relating to the OneDrive. Such are clearly inconsistent with the suggestion that Hank was somehow acting as an agent of the plaintiff in relation to the entry into of the Service Agreement, and that Hank and/or the defendant were the plaintiff’s agent in negotiating and placing orders with Manufacturers/Suppliers (cf. in particular from the last sentence of RADefandCC paragraph 10(2), through to 10(4)).

113.  Fourthly, and further to the above as well as the context of the Lunch Agreement, I do not see that my conclusions on the earlier period are affected by further evidence of the circumstances during this period, as referred to by the defendant in these proceedings (apparently to support its case on, it would seem in particular, Agreed Issues 1-2) regarding (i) the attempt to buy surgical masks from the first factory visited on 21 March 2020 (ii) a discussion with Mr Bults on the prospect of Tracy assisting in relation to money transfers (iii) the attempt to order masks from LiJiang (iv) attempts to seek to introduce other suppliers (v) that he liaised with the plaintiff/Toine and provided prices to Toine for the 1^st, 3^rd, and original 100,000 Xinle aprons orders (vi) dealings concerning the ventilators (vii) the KY Termination Agreement and the recontracting for supply of the 2^nd and 3^rd Batch via a contract with KY DG (“the KY DG Supply Agreement”), and the Letter of Cooperation.

114.  I consider that the relevant general context above provides a clear motivation and explanation for Hank’s liaison, involvement, and contributions (or attempted contributions) in relation to these orders, as well as the attempted orders, and any alleged attempts to introduce other suppliers. I do not find that such matters, particularly seen as a whole and in context of the parties’ other dealings during this period, are (as apparently claimed by the defendant) post-contractual evidence to establish, on balance, that there was a Hank Sourcing Agreement (particularly a contractual one, given the Lunch Agreement and the principles in Hydrotech) or the pleaded terms of the Service Arrangement. Given such context I do not think it matters even if Hank provided Toine with all of the final prices, to the plaintiff, of every product that was ordered. Indeed, if he provided such (and not the underlying price to be paid by the defendant to the Manufacturer/Supplier and the defendant’s margin) that would contradict the suggestion that he was acting for the plaintiff, whether via a Hank Sourcing Arrangement or the Service Arrangement.

115.  I do not see how and why, and hence do not agree that, Hank’s attempt to explore using Tracy to assist with transfers of money is evidence supporting (as apparently submitted by the defendant) the terms of the Service Agreement, the Hank Sourcing Agreement, or rebutting the plaintiff’s case (in particular on agency). This is particularly so when the relevant contents of the Private Chat in the morning of 25 March 2020 indicate that such effort and discussion by Hank arose out of some prior common understanding between him and Mr Bults that there were “at first” constraints on the extent to which a contact of the latter could assist, and that by the time of the conversation such had changed and there was no need for “all this trouble with Tracy”.

116.  As for the dealings relating to ventilators, from the Private Chat, the actual EXW prices payable by the defendant, including a commission payable to an agent, were far lower than what was mentioned in the Chat Group, and were not actually disclosed to the plaintiff/Toine.

117.  I also do not see how the circulation of the License to Operate, and the process of creation and finalising of the Letter of Cooperation are evidence supporting (as apparently submitted by the defendant) the terms of the Service Agreement, the Hank Sourcing Agreement, or rebutting the plaintiff’s case (in particular on agency). In particular, I reject the defendant’s assertion that the Letter of Cooperation (even if, as the defendant submitted, seen alongside the License to Operate) amounts to a representation by the plaintiff, to the defendant, that the defendant was its agent.

118.  I find that such were circulated due to concerns, as previously discussed in the Chat Group, regarding reports of masks from the PRC having been rejected in the Netherlands which caused King Year to fear that penalties would be imposed on it if it were to happen with their masks. It was in that context that (in the afternoon of 1 April 2020) Mr Bults (and Kelly) visited the KY Address, discussed the remaining batches of the 1^st Order with Wendy Wu and Mr Sun (around which time that the License to Operate and two versions of the Letter of Cooperation[62] were circulated in the Chat Group), and the KY Termination Agreement was entered into.

119.  As the process of drafting/concluding either or both versions of the Letter of Cooperation took place at around 5:17 to 6:05pm that day, I do not see how such (even if read alongside the License to Operate) can be sensibly read as a representation (as apparently submitted by the defendant) by the plaintiff that the defendant was acting as its agent, or clothing the defendant or Hank with express or apparent authority to act for the plaintiff, be that on or prior to 1 April 2020. Nor do I see that such subsequent conduct amounts to evidence in support of the agency-related terms of the Service Agreement. In reaching such conclusion I have taken into account the terms, contents, and timing of both documents (including Mr Bults’ comments on such, that the terms “collaboration” and “mutual cooperation” between parties are ambiguous at best, and also in the context of the known prior context of all dealings between the parties to that point[63], such as the Lunch Agreement. While given the objective test above I have doubts as to the utility of referring to Toine’s oral evidence (which he gave in the course of being cross-examined and on which reason he was not challenged) on why he had used the terms “co-operate”/ “collaborate” such seems to me, if I am entitled to take it into account, to be consistent with such conclusions.

120.  In any event, even if the Letter of Cooperation (read alongside the License to Operate) were somehow a representation by the plaintiff of the defendant’s apparent authority, I do not see that there is sufficient evidence to establish a causal link between any such alleged representation, and the defendant’s subsequent actions in dealing with any Manufacturer/Supplier (or indeed any relevant Manufacturer’s/Supplier’s subsequent dealings with the defendant). I was not referred to any evidence that the Letter of Cooperation (whether on its own or in tandem with the License Agreement) was ever referred to, used, or considered in Hank’s, or the defendant’s subsequent dealings with any Manufacturers/Suppliers, including the next day’s recontracting of the 2^nd and 3^rd Batches via the KY DG Supply Agreement.

121.  Further, on the evidence before me it did not appear that that Mr Bults, Hank, or anyone acting on behalf of the defendant had disclosed the KY Termination Agreement to Toine/the plaintiff. Given my observations above on the OneDrive, I do not see that there is sufficient evidence for me to find or infer (as opposed to impermissibly speculate) that on balance, Toine/the Plaintiff had access to such through the OneDrive.

122.  I also do not consider that the circumstances of the order of masks from LiJiang (which was eventually cancelled on 3 April 2020), and the re-contracting with KY DG Supply Agreement, are consistent with the plaintiff’s case on the authority of Hank to enter into the Service Agreement, or indeed the agency terms of the Service Agreement.:

(1)  The cancellation of 500,000 masks from KY (by the KY Termination Agreement) would have been a major issue to Hank and the defendant’s attempts to “work together”, and both Mr Bults and Hank had visited the LiJiang factory the day before. It was in that context that (as per Mr Bults’ testimony) Hank discussed the LiJiang order with Toine before updating Mr Bults on the contents of that discussion and intended order, and pursuant to which Mr Bults did not, at the time, object to such order being placed with LiJiang.

(2)  As for the KY DG Supply Agreement, this was entered into between KY DG on one hand and the defendant on the other. There was no evidence before me that the KY DG Agreement had been posted in the Chat Group, or (as explored in cross-examination of Mr Bults) sent by Mr Bults to Hank or the plaintiff. Given this, my conclusions regarding communications directly between Hank and Toine, and the OneDrive, there was no evidence before me to indicate that the plaintiff knew of the exact existence and underlying terms of the KY DG Supply Agreement at the time.

123.  In summary, I do not see how such added matters (which are also subsequent conduct) materially support and mean that I should find that the defendant’s case that the framework of all of the pleaded terms of the Service Agreement (in particular those relating to agency) had hence been reached by the parties by the evening of 21 March 2020. Rather, such behaviour is inconsistent with the defendant’s case that Hank was at the material time authorised to act as an agent of Toine/the plaintiff, and that Hank/the defendant acted as the agent of the plaintiff. The evidence, viewed as a whole, remains more consistent with the existence of a buyer-seller relationship between the plaintiff and the defendant.

124.  In relation to the reasons submitted by the defendant why it would not have agreed to contract in its own capacity with the plaintiff as a reseller to the plaintiff, and why it had no reason to believe that Hank/Kelly were facilitating the Hank Service Arrangement, up to this point I still do not see how they would cause me to change my conclusions above having regard to events during this period as, further to the matters above (i) The ventilator supplier, and Xinle as a Manufacturer/Supplier, were found by Mr Bults (ii) Mr Bults raised both Xinle and FYE as relevant Manufacturer/Suppliers via discussion in the Chat Group (iii) Mr Bults had visited and inspected the FYE/Foshan factory (iv) information on suppliers and products was provided to the plaintiff (which did provide descriptions of what was desired) to ensure that quality PPE could be sourced in a fast-paced environment. In any event, I do not see how Mr Bults’ complaints/factors, insofar as they were not set out in the Chat Group, are relevant to the principles above on establishing terms of the alleged Service Agreement (including the contracting parties thereto), and/or any contractual or other agency.

125.  Finally, I also do not consider that the additional matters during this period (insofar as such are not covered above) which are set out in Bults 1 Appendix A, in the defendant’s written and oral submissions, and DSub Appendix 1 and 2 materially assist the defendant’s case on the existence and terms of the Hank Sourcing Agreement, or the pleaded terms as to agency in the Service Agreement.

126.  The further evidence up to this time and date hence does not found a sufficient basis for me to change my views above as to whether there was a Hank Sourcing Agreement (particularly insofar as such is said to be contractual) or whether the framework of the pleaded terms of the Service Agreement (in particular those regarding agency) were allegedly reached on 21 March 2020.

VI.4  Further dealings up to and including 28 August 2020 (as mainly relevant to Issues 1-3 and 5)

127.  This section and period encompasses the additional matters that I have summarised at paragraph 64(3) above.

128.  Xinle aprons and the 2^nd and 4^th Orders: As I have mentioned, on 6 April 2020 Mr Bults informed the Chat Group that Xinle could not supply the 100,000 aprons on the initially agreed terms, and the 2^nd and 4^th Orders were then entered into on terms set out therein by the end of April 2020. I find in relation to this period that:

(1)  There is no evidence from this period to contradict my earlier conclusions in the Section above on disclosure of earlier documents relating to the Xinle aprons and I find that those also continue to apply in relation to the aprons that were the subject of the 2^nd Order.

(2)  Further, in relation to the 4^th Order, I find neither Mr Bults nor anyone acting on behalf of the defendant disclosed to the plaintiff (i) the proforma invoice dated 10 April 2020 setting out the revised EXW price of USD4.40 for 50,000 aprons (ii) the said revised EXW price or (iii) the underlying additional sales contract with Xinle dated 22 April 2020 reflecting such price. Mr Bults conceded in cross-examination he had not personally disclosed them to the plaintiff. I have found that the plaintiff did not have access to all documents on the OneDrive. I also find that the suggestion (if so maintained by the defendant) that it did have access to these documents is not one which I can reasonably draw by inference, as opposed to impermissible speculation, and I reject that suggestion and decline to make such a finding. I hence conclude that the plaintiff hence did not know at the material time of the final underlying terms or margins between the defendant and Xinle on the 4^th Order.

(3)  I further find, in light of the defendant’s concessions during trial and also on the contents of D’s 9 May Spreadsheet, that the agreed prices of EUR2.55 per apron (2^nd Order) and EUR4.02 per apron (4^th Order) included the defendant’s margins of 15% and 5% and all shipping costs.

(4)  The defendant apparently asserted that it had given underlying prices in relation to the defendant’s (unsuccessful) attempt to order more Xinle aprons from around 4 to 6 April 2020. Even if (as was submitted by the defendant without supporting oral testimony) Mr Bults/Sarah had mentioned an underlying price of USD3.20 FOB per apron in the Chat Group on 4 April 2020, I do not think this indicates that the defendant was acting as the plaintiff’s agent.[64] As for message #2771 on 6 April 2020 (which was similarly referred to by the defendant without supporting oral testimony), even if it relates to such products (as opposed to “PP aprons”, which the message might well to do from the context) I do not see that the evidence establishes that the prices quoted were the underlying prices that the defendant would pay for such and hence that the plaintiff knew of such or the defendant’s margin[65].

129.  5^th Order: I have made findings in relation to such at paragraph 35 above. I do not consider that the facts relating to the treatment of this order are evidence supporting the defendant’s case that the Service Agreement was entered into over a month before the 5^th Order, or that there was a prior Hank Sourcing Agreement:

(1)  The WeChat messages to which I was referred (being those in the Chat Group) are consistent with Mr Bults (who found the Manufacturer/Supplier of the mask clips) offering to sell the mask clips to Toine/the plaintiff on terms that he mentioned in his testimony, with which Toine agreed, and Mr Bults saying he would then place the order. This is particularly so given Mr Bults’ agreement in cross-examination (during which he referred to the relevant exchange between himself and Toine in the Chat Group) that the defendant paid EUR0.14 per mask clip, and charged the plaintiff EUR0.20 per mask clip, which sum included transport costs, and all of the defendant’s margin and surcharges.

(2)  There is no evidence before me which indicates that the final underlying price of EUR0.14 per mask was disclosed to Toine, Nanny, or anyone acting on behalf of the plaintiff, at the material time. Even if there were underlying documents indicating such (such as a contract or pro forma invoice), there is also no basis for me to infer (as opposed to impermissibly speculate) that Nanny/Toine/the plaintiff had access to those documents, and hence the defendant’s margin and underlying price, even if they had (which Mr Bults said he assumed they had) been put on the OneDrive.

130.  Defendant’s order for masks which are the subject of the 6^th and 7^th Orders, and plaintiff’s knowledge relating to such: I have had regard to my findings at paragraphs 37 to 42 above on the 6^th and 7^th Orders. Further to such, I find on that each of the underlying orders for masks between the defendant and the relevant Manufacturer/Supplier was placed by the defendant of its own volition on 8 April 2020, without any order from the plaintiff, and that the defendant paid for both orders in the course of April 2020 before the plaintiff was aware that such orders had been placed[66].

131.  I also find in the circumstances that the 6^th and 7^th Orders were only agreed between the plaintiff and the defendant on or around 6 or 7 May 2020, and in any event after the date and receipt of the Letter of Termination. I will deal below with such negotiations and reasons for such.

132.  I do not see how, and reject any submission that, such matters relating to the YuGuan/ProMask masks up to 6 May 2020 are evidence that is consistent with and that supports the existence of the Hank Sourcing Agreement, or the Service Agreement (and in particular that the defendant placed such orders as agent of the plaintiff). On the contrary, the following contradict the suggestion that the defendant (via Mr Bults) placed such orders as an agent for the plaintiff and are more consistent with the relationship between the parties being a buyer-seller relationship:

(1)  The plaintiff only notified of the existence of such orders nearly one month later (on 6 May 2020, after the Letter of Termination had been issued and received). That Hank did not inform Toine/the plaintiff of such orders prior to Toine/the plaintiff learning of them on 6 May 2020 also contradicts the defendant’s case that Hank was an agent of the plaintiff via the Hank Sourcing Agreement, and that Hank had entered into (or was carrying out duties under) the Service Agreement on behalf of the plaintiff.

(2)  I see no basis to find or infer (rather than speculate) that the underlying contracts, prices, and documents with the Manufacturer/Supplier relating to the 6^th and 7^th Orders were disclosed to the plaintiff before 6 May 2020, even if they were uploaded to the OneDrive. Rather, and given the above, I find that the underlying prices were not disclosed until Toine’s request on 6 May 2020 in the Chat Group. There was also no margin that could be disclosed to the plaintiff at the time prior to the placing of the 6^th and 7^th Orders on or around 6 or 7 July 2020.

133.  Handling of complaints re: masks delivered pursuant to the 1^st Order, including instruction of T&C and W&H law firms: At this stage, I address this topic in relation to whether these matters constitute sufficient evidence for me to change my views above as to the Hank Sourcing Agreement and the Services Agreement. However, in doing so I set out some findings of fact as they also relate to other salient matters that I decide in other sections of this judgment.

134.  Firstly, further to the findings of fact at Paragraph 27(2) above on relating to deliveries of the 1^st, 2^nd, and 3^rd Batches, and as a matter of context, while it had been mentioned in the Chat Group that LCH had apparently approved the 1^st Batch delivered on or around 30 March 2020, I find that it was only after these proceedings were commenced that Mr Boehmer orally clarified to Toine (which portion of such evidence was not challenged and I accept) that in March 2020 LCH did not have a proper test facility and relied on the plaintiff’s reputation as a trustworthy medical devices distributor[67].

135.  Secondly, during this period and as context, there was a series of correspondence circulated in the Chat Group relating to concerns, complaints, and reports on the 1^st Batch (on 2, 8, 10, and 29 April 2020), the 2^nd Batch (on 13 to 16 April 2020), and the 3^rd Batch (2 June 2020).

136.  On the 1^st Batch, complaints and/or test reports were received by Toine (on behalf of the plaintiff) via email up to mid-April 2020:

(1)  A complaint from Steden Hospital on 2 April 2020 (“the Steden Email”), which the plaintiff had sold 7,200 masks of the 1^st Batch, which was circulated by Tonie on the date of receipt, to Hank and Mr Bults. The Steden Email complained that they were not a good fit, the rubber bands behind the ears were very weak and quickly break, which issues were discussed in that Chat Group with a concern expressed by Toine as to future masks.

(2)  Emails from St Antonius Hospital dated 8 and 10 April 2020 (the latter including a report from Straten Medical) (“the StAntonius Emails and Report”) to which the plaintiff had sold 12,000 masks of the 1^st Batch. It appears that only the second email was circulated by Toine on the date of receipt to Hank and Mr Bults. However, both emails were discussed in the Chat Group on the date they were received, to the effect that St Antonius had tested and rejected their masks from the 1^st Batch and wanted a full refund of their payment. In essence, from the St Antonius Emails and Report, the filtration of relevant particles was not higher than 94% (cf the KN95 standard, and hence on the evidence before me also N95/FFP2), the rubber bands came loose easily, and an aerosol test using sugar revealed fit and air leakage issues.

137.  As for the complaints received in relation to the 2^nd Batch, after that batch had been delivered to a facility of LCH in Shanghai in April 2020, Mr Boehmer notified Toine (on behalf of the plaintiff) on 13 April 2020 that tests had been conducted, that the tested masks had failed LCH’s testing, and that LCH would reject the 2^nd Batch. Toine mentioned this in the Chat Group, but did not suggest what action should be taken. Shortly afterward, Hank mentioned that he and Mr Bults had discussed the matter and that they would see a lawyer the next day to discuss how to reclaim the purchase amount from King Year, Mr Bults and Hank emphasised that a report was needed from the hospital, and while Toine said that one would be produced, he emphasised that he still had to supply 550,000 FFP2 masks to LCH “The sooner the better because I should have delivered them April 10^th. And then finally I get paid.” Then on 14 April 2020, Mr Bults had a preliminary meeting with T&C to consider civil action against King Year.

138.  On 16 April 2020 Toine received an email from Mr Boehmer regarding the 2^nd Batch which was forwarded to Hank and Mr Bults. This contained a memo referring to tests carried out by Kalibra Company (“the Memo/Kalibra Report”). The Memo/Kalibra Report stated, in summary, that several masks as tested from the 2^nd Batch did not meet the FFP2 or KN95 standards as they failed a filtration test, a fit test, the quality of the masks was not up to standard due to tears, and the quality was inconsistent even within one box. Portions of the Memo were later recast into what was known as the “VWS Report” in circumstances I consider below.

139.  On 29 April 2020, an email complaint was received from St Trudo Hospital dated 29 April 2020 (“the St Trudo Email”), which the plaintiff sent to Hank and Mr Bults the next day. The agreed translation of the St Trudo Email records inter alia that masks from the 1^st Batch had been “examined by approved inspection body IBEVE within the “IDEWE group” recognized by the federal government. Unfortunately, these were found to be inadequate as FFP2 masks and thus may not be used under any circumstances… Please let us know when you come back to collect these masks. Please credit back the [EUR3,900].”

140.  Toine sent the contents of the St Trudo Email via WeChat and made suggestions on how to confront Wendy Wu as to what he said was “pure fraud” by King Year and asked how Mr Bults was going to solve this. Mr Bults replied that he had an appointment with the lawyer the next day. There were then proposals and discussion as to what course of action to take in light of such, with Mr Bults saying that but that he was “lagging behind” or “on the backfoot” “without an official report”. Toine said a report would not matter and suggested taking masks from the batch and getting them tested, but Mr Bults said that such approach would not work and that “friendly consultation” would be more helpful given LCH’s apparent prior approval of the 1^st Batch. He also suggested pursuing LCH for compensation, with Toine replying he would “keep that trump up my sleeve to be able to deliver 550k good ones. So we can make some profit for once.” At trial, Toine was asked during cross-examination why on why he did not “go after” LCH as suggested. He explained that it was because the plaintiff had “no case”, given that LCH had tested and rejected the 2^nd Batch and broadly referred to the results in the Memo/Kalibra Report. There was no further cross-examination on this evidence.

141.  There is no dispute that after 2 May 2020, tests were carried out on masks that were part of the 3^rd Batch by Jiangsu Textiles Quality Services Inspection Testing Institute, a CNAS[68] testing company, with the report on such (“Jiangsu Report”) being received by the defendant and circulated in the Chat Group on 2 June 2020. The defendant says that while it arranged for such, this was at the request of the plaintiff on or around 11 May 2020. It is not in dispute that the tests showed that the 3^rd Batch met the KN90 standard meaning that they had particle filtration efficiency of 90%. However it is clear that they did not meet the GB2626-2006 and also (as admitted by the defendant in its closing submissions) the KN95 standards (and hence also, I find, the FFP2/N95 standards). The parties agreed that the Jiangsu Report should be given the most weight out of itself, the St Antonius Email and Report, and the Memo/Kalibra Report.

142.  There were then some discussions by Mr Bults with T&C on proceedings against King Year in April 2020, and that after 2 May 2020, T&C and then W&H were instructed in the mainland by the defendant to initiate proceedings relating to the King Year masks subject of the 1^st Order.

143.  Thirdly, and with the above in mind, I consider that such matters (or evidence on such) relating to the 1^st Order during this period do not constitute sufficient evidence for me to change my views above that the Services Agreement was not entered into (nor was its framework including the main terms pleaded as to agency agreed) on 21 March 2020, and that there was also no Hank Sourcing Agreement (as allegedly entered into prior to the Service Agreement).

144.  As a matter of context, given the complaints and rejections by mid-April 2020 it was clear to the parties that the plaintiff could not rely on the 1^st or 2^nd Batch (and, it was likely, also the 3^rd Batch) of the masks to satisfy its obligations to deliver FFP2-compliant masks to LCH to get paid. It was also known that the plaintiff had taken out bank loans to procure payment of MOA orders for PPE (as admitted by Mr Bults in his testimony, and evidenced from messages from Nanny in the Chat Group sent on 30 March and 29 April 2020). Hence the plaintiff naturally explored what could be done to sell or deal with the masks that were the subject of the 1^st Order, many of which already had been rejected or returned, including selling them to parties other than those originally intended (eg to Luxembourg). Given that King Year had apparently been paid funds out of the plaintiff’s MOA transferred to the defendant, there were also attempts to explore negotiations with and/or potential legal redress against King Year (including possibly a refund to/claim by the defendant of all money paid), with Mr Bults expressing the view that such would be helped by a more official, or more formal, report than the Memo/Kalibra Report, as they were going back on earlier indications of approval of the 1^st Batch.

145.  It is pursuant to such that, for the following reasons, I do not consider that Hank’s or Toine’s involvement in these matters supports the existence of the Hank Sourcing Agreement or of the pleaded agency terms of the Service Agreement.

146.  Dealing firstly with the Memo/Kalibra Report and reformulation of such by Hank into the “VWS Report” (on which the plaintiff has said it does not rely), I find that Hank did so as a result of his apparent understanding of what Mr Bults had suggested could be done to constitute a formal report that could be used to support his negotiations/dealings with King Year[69]. I do not see that the evidence supports the suggestion that Hank created such on the instructions of the plaintiff. I do not see that this is evidence of his acting as the plaintiff’s agent in relation to the Hank Sourcing Agreement (especially given the Lunch Agreement) and/or the Service Agreement. I also reject the defendant’s submission that the reformulation shows that Hank had a “propensity to misrepresent facts”, particularly when there is no apparent evidential basis for, or cross-examination of Hank on, the defendant’s claim that the “VWS Report” was “to be used in the criminal trial against [Wendy Wu] of King Year”. Nor do the circumstances justify my taking an adverse view of Hank’s credibility, reliability, and truthfulness on matters material to this action.

147.  It does appear from the invoices relating to the Luxembourg Masks that the plaintiff had by 23 April 2020 had begun to sell, or to explore selling, 1^st Order masks to other parties to other parties. Given the circumstances above, I do not see how such attempts and behaviour of the plaintiff (and of Hank if he somehow tried to sell the masks under the 1^st Order from mid-April 2020) suggest that Hank (and/or the defendant) was the plaintiff’s agent under the Service Agreement allegedly entered into in the evening of 21 March 2020, the alleged agencies pleaded in relation to the Service Agreement, and the existence of the Hank Sourcing Arrangement.

148.  I also do not see that any actions taken by Toine and/or Hank in relation to the defendant consulting and instructing PRC lawyers, Toine suggesting how the defendant deal with storage/delivery of the 3^rd Batch, or that the defendant obtain what was eventually the Jiangsu Report on the 3^rd Batch, support the defendant’s case on the Hank Sourcing Agreement, and the agency-related terms of the Service Arrangement (and hence the defendant’s counterclaim as based on such), any further. The same goes for Mr Bults’ actions in relation to such:

(1)  The idea to consult PRC lawyers arose from discussion between Hank and Mr Bults after the complaint and rejection of the 2^nd Batch by LCH on 13 April 2020. This turn must be considered in the context of the earlier Lunch Agreement, the plaintiff’s need to ensure it could repay its bank loan (which eventually led it to demand repayment of all MOA left with the defendant in the Letter of Termination), and the aforementioned efforts to deal with the other fallout from the 1^st Order. I do not see how the evidence establishes any instruction from Toine/the plaintiff that the defendant should consult a lawyer, or that the discussion with Hank can be relied on to suggest such.

(2)  Both T&C and W&H were selected by Mr Bults, apparently without apparently any consultation with Toine/the plaintiff. They were both instructed on behalf of the defendant, and not the plaintiff, and the underlying retainers were not disclosed to the plaintiff until after the proceedings had started and did not mention the plaintiff. At the time the plaintiff was also not invoiced for the amounts paid to either PRC firm, and such claim was only raised in the 28 August 2020 letter from the defendant’s former solicitors. Further, I do not see that Hank and Toine’s input and comments on legal letters and proceedings, support the pleaded agencies. In relation to Hank there is the Lunch Agreement (which remained particularly relevant prior to 2 May 2020). And such conduct subsequent to the alleged Service Agreement must be viewed in light of the fallout from the 1^st Order and given the plaintiff’s attempts to address the fallout from such, with one option being to try and recover MOA paid to the defendant, via the defendant’s negotiations with/recovery from King Year.

149.  I also find and accept that the plaintiff (acting via Toine) and the defendant (acting via Mr Bults) had in mid-April 2020 renegotiated, over the phone, the price of the 2^nd Batch to EUR1.24 per mask:

(1)  In relation to the factual assertion that such re-negotiation took place (ASOC 11.3), while the defendant submitted in its opening that no such conversation took place and that the phone call was “made-up”, the RADefandCC merely advances a bare denial of such renegotiation. I hence treat such as a non-admission.

(2)  I accept Toine’s testimony (on which he was not cross-examined) on such renegotiation and agreed pricing. The fact of such discussion is consistent with contemporaneous documentary evidence, in particular the contents of P’s 2 May Table (including a price of EUR1.24 per mask, which figure Mr Bults was cross-examined on but could not explain how that had been reached). It is also generally consistent with a figure of around EUR1.24 per mask for the entire 1^st Order of 550,000 masks in Mr Bults’ table that was prepared in response to the Letter of Termination[70].

(3)  Further and in any event, it is inherently likely that such renegotiation would have taken place, given LCH’s complaints and the reports received (especially the Memo/Kalibra Report) indicating that the 1^st Order masks did not meet the required FFP2 standard, and (as mentioned above) the pressure and issues faced by the plaintiff in dealing with such, as well as its efforts to handle such financial and other fallout.

(4)  In any event, I reject the defendant’s suggestion that the conversation was “made up”, and/or that the plaintiff has failed to prove such negotiation. My conclusions are consistent with and based on the objective contemporaneous documentation, and the inherent probabilities based on my findings of fact. Further, Toine was not cross-examined on his change in the pleaded case[71], alleged non-disclosure of the call logs, or on renegotiation.

150.  Other matters including discussions from the Letter of Termination until 28 August 2020: I also do not see that my earlier conclusions as to the Hank Sourcing Agreement and the agency-related pleas and terms of the Services Agreement should change in light of discussions between Hank, Mr Bults, and Kelly in April 2020 in an attempt to set up a mask factory, and (particularly given the April 2020 developments outlined above relating to the 1^st Order) the issuance of the Letter of Termination and dealings thereafter, such as the manner in which the plaintiff placed, how the parties dealt with, the 6^th and 7^th Orders, and subsequent messages between the parties, or their lawyers. In particular:

(1)  Even if (as claimed by Mr Bults in his evidence) Hank apparently had a part in suggesting to the plaintiff that it terminate its ongoing relationship with the defendant, and accepting also the Letter of Termination was sent to Mr Bults via Hank, I do not see that such materially supports the defendant’s pleaded case regarding the Hank Sourcing Arrangement (especially if such is said to be contractual) and the pleaded agencies in the Service Agreement. Hank clearly had his own commercial interests to look after, having entered into the Lunch Agreement and spent time and effort “working together” with the defendant. During this period, he was aware of issues that had arisen from the 1^st Order and the MOA (including attempts to remedy such), and was open to considering other commercial opportunities[72]. I consider that such are inherently likely to have been the reason for such suggestion (if so made) by Hank.

(2)  The same approach applies a fortiori in relation to the 6^th and 7^th Orders, which were placed after the Letter of Termination and the defendant’s responses thereto, and which marked a significant objective change in the parties’ dynamics, as they both acknowledged that a prior form of general “co-operation” between them involving MOA had come to an end, with the defendant agreeing to the plaintiff’s request to return remaining MOA to the plaintiff, and starting to do so. The negotiation of and dealings with the 6^th and 7^th Orders were hence part of a process whereby the plaintiff and the defendant were trying to work out the best way to, effectively, close the books.

151.  Finally, I also do not consider that the additional matters during this period (insofar as such are not covered above) which are set out in Bults 1 Appendix A, in the defendant’s written and oral submissions, and DSub Appendix 1 and 2 materially assist the defendant’s case on the existence and terms of the Hank Sourcing Agreement, or the pleaded terms as to agency in the Service Agreement. A fortiori given the context that I have set out above.

VI.5  The terms of the contract entered into between the parties (as mainly relevant to Issue 1-3 and 5)

152.  Having considered all of the evidence in the round up to this point, and bearing in mind the aforementioned principles in Section V.2 (including those regarding weight and importance of subsequent words and conduct at paragraphs 60(8) and 62(3) above), I reject the defendant’s plea that there was a Hank Sourcing Agreement (let alone a contractual one). I also reject the defendant’s plea that the Service Agreement was entered into in the pleaded terms, in particular that Hank was an agent of the plaintiff in entering into or performing certain pleaded obligations under the Service Agreement, and that the defendant acted as an agent of the plaintiff in entering into contracts with Manufacturers/Suppliers thereunder. I hence also reject the defendant’s plea at RADefandCC paragraph 11 that there was an implied term that the defendant would be entitled to indemnification of expenses.

153.  Having also considered all of the evidence in the round from 20 March to 2 May 2020, I find that such is on-balance more consistent with a framework and terms of a buyer-seller relationship and which contained, in particular, the terms that (i) the plaintiff would buy and the defendant would sell from time to time PPE from the defendant, at a price to be agreed between them and delivered to a place designated by the plaintiff (ii) the said agreed price would include the defendant’s margins (15% on its purchase price and 5% to reflect its shipping costs) (iii) advance payments[73] would be made by the plaintiff to the defendant as MOA from which the defendant would deduct the agreed price of such orders by the plaintiff and (iv) PPE was purchased from the Manufacturer/Supplier under a separate contract between the defendant and supplier. The terms were first implemented as, and became, a sale of goods contract between the plaintiff as buyer and the defendant as seller, on 21 March 2020 for the 1^st Order of masks at EUR1.57 each, and on evidence of subsequent dealings, at least also the 2^nd to 5^th Orders.

154.  As for the pleaded implied terms, I find that the contract reached between the parties contained an implied term that the balance of the MOA would be repaid to the plaintiff on demand by the plaintiff at any time, or upon termination of the agreement. I consider that such is necessary for reasons of necessity and business efficacy.[74] I have in the next section explained why I find that the agreement reached between the parties contained the pleaded implied terms as to merchantability and reasonable fitness for purpose relating to the 1^st Order.

VI.6  Implied terms and whether they were breached (as mainly relevant to Issues 2(2) and 6)

155.  As the placing of the 1^st Order constituted a sale of goods agreement, SOGO applies[75]. I also find that there was, as pleaded by the plaintiff, an implied condition that the masks in the 1^st Order (which was in any event placed under and pursuant to the Agreement) would be of merchantable quality under s 16(2) SOGO, there being no plea raised in relation to the provisos thereto.

156.  I also find that all of the masks placed under the 1^st Order were not of merchantable quality within the meaning of s 2(5) SOGO, and that they were hence in breach of s 16(2) SOGO:

(1)  I have borne in mind the contents of the Steden Email and the StAntonius Emails and Report (both relating to the 1^st Batch), the Memo/Kalibra Report (both relating to the 2^nd Batch), and the Jiangsu Report (in relation to the 3^rd Batch). I have considered them as a whole, and as agreed by the parties accord the Jiangsu Report the most weight. I am persuaded that in the circumstances of this case, such evidence is sufficient evidence for me to conclude on-balance, which I do, that all three batches of the 1^st Order of masks (and at the very least, clearly the 2^nd and 3^rd Batches) failed to meet the FFP2/N95/KN95 standard as regards particle filtration.

(2)  As to the points raised by the defendant criticising any test results and/or seeking to suggest that less weight should be accorded to the Steden Email and the StAntonius Emails and Report regarding particle filtration:

(a)  Even if the test set out in the StAntonius Email by Straten Medical was “not conducted by a laboratory conforming to the FFP2 standard” (which assertion was made by Mr Bults in his testimony, as regards which I was not provided with any supporting proof), I do not see that that is sufficient evidence to suggest that the results within are somehow invalid or should be accorded little to no (or even less) weight, particularly when those results are consistent with those in the Memo/Kalibra Report and the Jiangsu Report.

(b)  There is no similar criticism (nor, it seems to me, legitimate basis for any such criticism) in relation to the Jiangsu Report which the parties agreed was the most authoritative (and which findings on particle filtration are consistent with those in the StAntonius Email and the Memo/Kalibra Report).

(c)  There was no evidence from the defendant in support of its submissions criticising the findings regarding particle filtration in the Memo/Kalibra Report, which were tests commissioned by LCH (and which findings on particle filtration are consistent with those in the other two reports).[76]

(3)  While it is not apparent that the Jiangsu Report contained the results of a fit test, the test results of the Memo/Kalibra Report in relation to fit factor of the 2^nd Batch were not criticised by the defendant, and revealed a poor and unsatisfactory “fit factor” below the “less optimal and more practical limit of 33” of 7 (with clip[77]) or, which was not even measurable as mask was too loose (without clip) [78]. While the defendant has criticised the detail and/or test methods in the StAntonius Email and Report and the Steden Email, those results are broadly consistent with those in the Memo/Kalibra Report.

(4)  As the masks were described as FFP/KN95/N95 masks (which on the evidence were commonly bought and used to provide, as PPE, 94-95% particle filtration protection from the COVID-19 virus), but failed to meet such standard and had failed the fit test, the masks failed to meet the requirements of s 2(5)(a), (c), and (d) SOGO. They were hence not, in this case, of merchantable quality within the meaning of the section[79]. I do not consider that a reasonable man in the position of the plaintiff, acting reasonably, would after full examination accept the masks in the circumstances of the case, and in performance of its offer to buy them. They were not merchantable within the meaning of the section even if they met the KN90 standard, or could be (as was the case) sold to other parties or consumers.

157.  Although it is not necessary for me to address fitness for purpose in view of the above, I find that the defendant sold the same masks in the course of a business, and that the plaintiff as buyer made it known to the defendant that such masks would be used in Dutch hospitals at the time it placed the 1^st Order with the defendant. I therefore find that there was an implied condition that such masks had to be reasonably fit for use in Dutch hospitals. Given my findings above on their particle filtration resistance and, in any event, in relation to the fit test[80], I also find that they were not reasonably fit for the purpose in question. I hence find that they were also subject to, and breached, the implied condition s 16(3) SOGO.

158.  I do not see how the submissions at the section beginning with heading 2.(2) (i.e. attempting to deal with Issue 2(2)) on pages 4 and 5 of the defendant’s closing are relevant to or materially affect these issues. This is particularly so given that the portion at page 5 under sub-6) onward contains matters that are not pleaded in the RADefandCC (including in particular paragraphs 18, 20, and 22), contrary to RDC O 18 rr 8, and 12.

VI.7  Entitlement to remedies (Issues 7 to 10)

159.  Effect of the Letter of Termination dated 2 May 2020: The question is whether the breach in respect of one instalment entitles the plaintiff to treat the whole contract as being discharged/repudiated (which the plaintiff says it did and accepted by way of the Letter of Termination), in circumstances where “defective delivery” under s 33(2) SOGO includes cases where the seller (here, the defendant) fails to perform by making a particular delivery. Whether such breaches are a repudiation of the whole agreement, or merely a severable breach giving rise to a claim for compensation (but not the right to treat the whole contract as repudiated) is a question of fact depending on the quantitative ratio of the instalment to the whole and the likelihood of repetition of breaches. The apparent likelihood of such future breaches is overwhelmingly fact-sensitive. Furthermore, judging at the date of purported termination as to whether a contracting party has been deprived of substantially the whole benefit of the contract involves assessing both the likely future consequences of breaches that have already occurred, and the likely consequences of probable future breaches: see Benjamin §8-060 to 8-069[81], Maple Flock Co Ltd v Universal Furniture Products (Wembley) Ltd [1934] 1 KB 148 at 157.

160.  I consider that the plaintiff was, here, entitled to terminate the contract reached between the parties and implemented via the 1^st Order. The 1^st Order was severable at the material time, namely 2 or 3 May 2020, as by performance it had been divided it into 3 batches. Also, and at the material time, the defendant had already breached its pleaded obligations under SOGO in relation to the 1^st and 2^nd Batches, and it was likely (as reflected in the parties’ actions up to that point) that the 3^rd Batch would also be in breach. The plaintiff was hence entitled to reject the 3^rd Batch. The plaintiff had also been deprived of substantially the whole benefit of the 1^st Order. The likely future consequences of such past breaches, and of probable future breaches, were severe to the plaintiff given its financial position, as the plaintiff could not rely on the 1^st and 2^nd Batches (and was highly unlikely to be able to rely on the 3^rd Batch) to fulfil LCH’s order for 550,000 FFP2 facemasks, and as the defendant was apparently unable (given the status of dealings with King Year) to offer the plaintiff a refund or compensation for such breaches.

161.  On balance, and given the above, I consider that there had been a repudiatory breach by the defendant of the contract in relation to the 1^st Order, which the plaintiff was entitled to and did accept by way of the Letter of Termination, which thereby terminated the agreement that had been reached between the parties and implemented via the 1^st Order. By way of the same Letter of Termination and the implied terms of the same agreement, the plaintiff was also entitled to return of the remaining MOA between them (which the defendant soon afterward started to do by paying USD200,000 to the plaintiff). I next consider that amount below (Issue 8) before turning to whether and what damages are payable to the plaintiff for breach of contract (Issue 7(ii)).

162.  The remaining balance of the MOA retained by the defendant (Issues 4 and 8): Given the above, I agree with the plaintiff’s submissions that this amount in question should reflect that there was a non-delivery and rejection of the 3^rd Batch (as was pleaded within the AReplyandDefencetoCC). It also appeared to be common ground, and in any case I find, that the amount of the final remaining balance of MOA retained by the defendant and which should be paid to the plaintiff is to be assessed in the context of (i) all other payments made pursuant to the 1^st to 5^th Orders (ii) the payment by the defendant of US$200,000 in May 2020, and (iii) amounts to be paid to the defendant for the 6^th and 7^th Orders.

163.  On this basis I find that the remaining balance of the MOA is the Retained MOA as pleaded by the plaintiff of EUR217,700.00[82]. I also find that pursuant to the terms of the contract reached between the parties, and the plaintiff’s demand for repayment, the plaintiff is entitled to be paid the Retained MOA, alternatively that the plaintiff is entitled to claim that sum against the defendant as loss and damage for breach of the contract.

164.  Plaintiff’s claim for loss of profits in relation to the 1^st Order, and the 6^th and 7^th Orders (Issue 7(ii)): As to damages claimed by the plaintiff for loss of profits relating to the 1st Order (ASOC paragraphs 13(a) claiming EUR13,091.00) and expenses (ASOC paragraphs 13(c)(i) to (iii)), in relation to disposal of the 1st and 2nd Batches of masks, I have checked each of the underlying documents to which the plaintiff referred and accept the plaintiff’s submission and Toine’s evidence (on which he was not cross-examined by the defendant) that:

(1)  the plaintiff sold 154,560 masks from the 1^st Order to Luxembourg purchasers at a price of EUR.160 each (EUR247,296) (“the Luxembourg Masks”);

(2)  the plaintiff sold a further 43,900 masks from the 1^st Order to other buyers, netting a total of EUR128,113 (“the Other Sold Masks”); and

165.  I accept the plaintiff’s evidence (on which Toine was not cross-examined) that despite its efforts, it could not sell 99,840 masks (“the Unsold Masks”) and as to the underlying cost of storage of such masks until they were destroyed (EUR851.76), and the underlying cost of disposal of the Unsold Masks (EUR165.78).

166.  However, I do not think that the plaintiff has established its claim for EUR165.78 expenses for disposal of the Unsold Masks (or indeed a portion of such). Toine fairly admitted in his testimony that such amount (which was supported by an invoice) included the plaintiff’s general garbage disposal, and there was no evidence before me as to how much of the EUR165.78 could be or was apportioned to disposal of the Unsold Masks.

167.  I also do not think that there is sufficient evidential basis to establish the plaintiff’s claim for EUR1,000 shipping fees, as there was no underlying document to substantiate the amount claimed, or any explanation as to how, when, and what lot of mask(s) this arose.

168.  I do not consider that Mr Bults is entitled to advance his criticisms, which he attempted to do by way of his testimony, of the calculations advanced by the plaintiff regarding the Other Sold Masks. The facts underlying such criticisms were not pleaded in the RADefandCC, contrary to RDC O 18 rr 8 and 12.[83]. In any event Toine was not cross-examined on such matters.

169.  As for the 6^th and 7^th Orders, the plaintiff claims a loss of profit of EUR107,000 (ASOC paragraph 13(b)) which is said to be the difference between its expected profits on the sale of the 1^st Order of 550,000 King Year masks to LCH (EUR676,500) and the agreed sale price to LCH of the 6^th and 7^th Order of masks (EUR569,500). As to the latter, I accept Toine’s evidence and find that such was the total final sale price to LCH of such masks, namely EUR2.80 per mask for the first 50,000 and EUR2.19 for the remaining 500,000.

170.  It was common ground at the trial (in particular, during the course of the defendant’s opening) that at least 500,000 out of the 550,000 masks that were the subject of the 6^th and 7^th Orders were placed in order to fulfil the plaintiff’s outstanding obligations to LCH to deliver 550,000 FFP2 masks. Further to such, and also on the evidence before me (including Toine’s statements in the Chat Group to which I was referred), I find that all 550,000 masks 6^th and 7^th Orders were, in fact, ordered by the plaintiff from the defendant due to the issues or problems that had been encountered in relation to the 1^st and 2^nd Batches of the 1^st Order, which gave rise to concerns at the time as to the quality of the 3^rd Batch, and as the plaintiff needed to fulfil its outstanding obligations to LCH.

171.  I find, having considered the submissions and evidence before me, that the plaintiff did suffer a loss of profit in relation to EUR107,000 (ASOC paragraph 13(b)) which it is entitled to claim and recover against the defendant. The defendant’s failure to provide masks in accordance with the implied terms of merchantability and fitness for purpose of the 1^st Order led to a loss of custom of the plaintiff vis-à-vis its customer, reflected in the plaintiff being forced by its ultimate customer LCH (which had apparently in the interim been supplied with enough other masks such that it refused to pay the initially agreed price of EUR2.80 per FFP2 mask[84]), to accept a lower price in selling the 500,000 masks under the 6^th and 7^th Orders. I agree with the plaintiff that such type of loss was caused by the defendant’s breach of the implied terms, and falls within the tests for remoteness and foreseeability in Hadley v Baxendale (1854) 9 Exchequer, 341 (see GKN Centrax Gears Ltd v Matbro Ltd [1976] EWCA Civ J0414-1), and in particular that such loss was ordinarily and naturally in the contemplation of the parties as a consequence of the breach.

172.  I do not consider that the defendant’s submissions are such that I should refuse to award such damages to the plaintiff as:

(1)  Having considered the contents of the RADefandCC as a whole, including paragraphs 18, 20, and 22 (the last of which merely pleads a non-admission in relation to the claim for loss of profits). I do not see that the defendant has sufficiently pleaded facts which would allow it to support the argument advanced in the section of its written closing beginning with heading 2.(2) (in relation to on pages 4 and 5, particularly when the portion at page 5 under sub-6) onward appears to contain matters that are not pleaded, contrary to RDC O 18 rr 8 and 12. The same goes for an argument advanced in Bults 4 that the losses “are exclusively attributable to the [plaintiff’s] own choices and actions”.

(2)  As to the defendant’s challenge to the authenticity of an email at Item 85A of the Trial Bundle, from the defendant’s questioning and testimony this seemed to relate only to the email, and not the supporting invoices attached thereto which established the original EUR2.80 sale price[85]. I do not see that it is material to my assessment of loss of profits that Mr Bults may not have received the email on 12 May 2020 (or at all), and/or that the plaintiff may have (in light of Toine’s evidence under cross-examination) in these proceedings misdated the email as 12 May 2020[86].

173.  Given the above, the plaintiff is entitled to and I award it damages for lost profits of EUR13,091.00 and EUR107,000.00 (ASOC paragraphs 13(a) and (b) respectively) and expenses of EUR851.76 (ASOC paragraph 13(c)(i)).

174.  Issues 9 and 10: On Issue 9(1), as I have mentioned, the defendant during trial the defendant dropped its claim for Shipping Costs as claimed within Annex V (see also RADefandCC paragraph 31).

175.  In relation to Issues 9(1) and 10, I find that the defendant is not entitled to its claim against the plaintiff for the remaining expenses of RMB375,547.60 (or EUR50,073.013) in respect of orders placed under the contract reached between the parties (RADefandCC paragraph 31 and Annex V). My findings above on the contents of the contract between the parties leave no discernible basis for the defendant to claim legal expenses (for instructing T&C and W&H), testing costs (for the King Year masks, and for the Promask masks), and storage costs (for the King Year masks). I dismiss such counterclaims as advanced in the RADefandCC.

176.  Other than the counterclaim made and dropped by the defendant as set out per paragraphs 21(2) and 22 above, no claim in the form of the defendant’s counterclaim for damages for breach of the Service Agreement to be assessed was made or advanced, and in any event no order was made or sought for a split trial. I hence dismiss that counterclaim.

177.  As already mentioned, the defendant also abandoned its claim for additional commission and surcharge (Issue 9(2)).

VII.  OTHER MATTERS

178.  During the course of the trial, I dealt with two applications in relation to the admission of additional, and previously undisclosed, documentary evidence in the proceedings and their insertion in the trial bundles. The first was made but was eventually withdrawn by the defendant on the first day of trial, and I orally conducted a gross sum assessment of costs. For reasons I gave orally at the time of each of the two later applications, I dismissed the second application (which was made by the defendant) on the third day of the trial, and the third application (which was made by the plaintiff) on day five of the trial. I have not considered the existence and contents of any documents sought to be adduced by the respective party in deciding any of the matters above. I had originally intended to hear from the parties on the costs of the latter two applications after conclusion of the evidence. However, in the course of the parties’ closing submissions I was informed that they had both reached agreement as to the costs thereof. I make no order as to the costs of those two applications.

179.  An application was made by the defendant on the seventh day of the trial to insert, in the trial bundles, some documents that had been previously disclosed by the defendant and referred to in Jos 3, but which had through oversight of the defendant not been not inserted into the trial bundles. The plaintiff had said it was prepared to deal with such documents by way of submission. I granted that application and made no order as to costs, for reasons I gave orally at the time of that application.

VII.  ORDERS AS TO SUBSTANTIVE RELIEF SOUGHT

180.  For reasons above:

(1)  In respect of the plaintiff’s claims, I give judgment to the plaintiff against the defendant in the sums of:

(a)  EUR217,700.00 or the Hong Kong dollar equivalent at the time of payment as payment of the Retained MOA pursuant to the agreement between the parties, alternatively as loss and damage for breach of the agreement reached between the parties;

(b)  Loss of profits in the sums of EUR13,091.00 and EUR107,000 or the Hong Kong dollar equivalent at the time of payment; and

(c)  Expenses in the sum of EUR851.76 or the Hong Kong dollar equivalent at the time of payment.

(2)  I dismiss the defendant’s remaining counterclaims in the amount of RMB375,547.60 (or EUR50,073.013) as set out in RADefandCC paragraph 31 and Annex V, for damages for breach of the Service Agreement to be assessed, and for interest thereon.

IX.  INTEREST

181.  I have a discretion to award pre-judgment interest. In circumstances I make an order nisi awarding pre-judgment interest on the sums that I have awarded to the plaintiff at the rate of P+1% from the date of the writ up to the date of judgment. That rate is the usual rate of pre-judgment interest to represent loss of use of money to the successful litigant. Interest thereafter shall run at judgment rate until payment.

X.  COSTS

182.  As the plaintiff has been substantially successful in this action, there seems to me to no reason why it should not have its costs thereof.

183.  Mr Rompotis submitted in his written closing submissions that I should award the plaintiff its costs on an indemnity basis. I have read the reasons he advances in support, and I also note the concessions made by the defendant in the course of his closing submission as to its claims under the 1^st to 7^th Orders. However, I am not presently convinced that such an order is justified, given the nature of the parties’ conduct and dealings. There was also not enough time for the plaintiff’s submission to be addressed in the course of the parties’ oral closings.

184.  I therefore make an order nisi that the defendant do pay the plaintiff’s costs of the action (including all costs previously reserved or ordered to be in the cause), such costs to be taxed if not agreed. Given the amount and volume of papers and issues before the court, I consider that this is an appropriate case for me to grant certificate for two counsel for the trial of the action, which I do. Such order nisi will become absolute if no application is made to vary such within 14 days hereof.

185.  I thank the parties for their assistance.