XCHRX MITSUI OIL (ASIA) PTE LTD. v. CHUN YEUNG INDUSTRIAL (HK) LTD.

HCCL20/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL LIST NO. 20 OF 1999

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J U D G M E N T

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1. This is an action between a Singaporean company and a Hong Kong company. The Singaporean company, the Plaintiff herein, deals in petroleum. The Defendant, the Hong Kong company, was a buyer thereof from the Plaintiff pursuant to a Contract No. AQ-MOA1102-03 ("the Contract") concluded on or about 11th February 1998. The Plaintiff's claim against the Defendant is in terms of liquidated damages in the sum of US$360,000, and arises from non-performance of that contract.

2. There are two summonses before the Court for determination today. The first is the Order 14 summons taken out by the Plaintiff on 15th March 1999. Against that, there is a cross-summons taken out by the Defendant on 7th April 1999 requesting a stay of proceedings pursuant to Article 8 of the Uncitral Model Law.

3. Only the solicitor on behalf of the Plaintiff now appears before me. This has caused a slight hiatus in the proceedings this morning because what has happened is this. On 15th September, that is nine days ago, the former solicitors for the Defendant applied to come off the record. This order was granted. However, I am told by Mr Kimber that the order itself was not engrossed and served upon him until 22nd September, and indeed the solicitors in question had not formally filed a certificate to that effect until yesterday, that is 23rd September. In these circumstances, I was concerned at the outset as to whether the Defendant could be regarded as having notice of what was to take place today since, by Order of 13th April 1999, this Court had made directions that both these summonses should be heard together.

4. Accordingly, I adjourned the case so that Mr Kimber could make due enquiries as to whether the registered office of the Defendant had in fact changed from that appearing in the Companies Registry, namely, Block F, 5/F, CNT Tower, 338 Henessy Road, Wanchai, Hong Kong. He now is able to tell me that a search this morning has indicated that pursuant to the last return in April 1999, no change has been made to the record in the Companies Registry. The importance of this is thus : Mr Kimber tells me that on 22nd September he had in fact sent to the solicitors he then thought were on the record for the Defendant a bundle of documents, together with a skeleton submission with regard to today's hearing. However, later that day, as soon as he ascertained that those solicitors had come off the record (although technically, until the filing of the Certificate, they remained on the record), Mr Kimber then caused the like documentation, together with a letter referring to today's hearing, to be served on the registered office of the Defendant. He did that yesterday, that is 23rd September. There is an affirmation of service filed by one of the process servers of his firm. However Mr Kimber, with typical candour, tells me that the door of the registered office appeared locked, and that there was an accumulation of unopened mail outside, thereby giving the impression that there was no activity on the part of this company.

5. This, then, is the background to the request by the Court that an up-to-date search be made today of the Companies Registry against the remote possibility that there might have been a change in registered office. However, I am satisfied that nothing would be gained by further adjourning today. Not only was the Defendant formally served via its former solicitors when those solicitors were still technically on the record, but there has been further service on the registered office in the manner I have outlined. In the circumstances, therefore, I proceeded to hear the substance of the argument put up by Mr Kimber, albeit in the absence of any representative from the Defendant.

6. To return, now, to the Contract between these parties. Clause 18 thereof reads as follows :-

"18. SPECIAL CLAUSE

In the event that Seller or Buyer cancel or fail its performance of any obligations stated herein (not including early or late arrival of vessel at discharge port South China and/or force majeure), Seller or Buyer shall compensate the other party USD15.00 per mt (USD One Five point Zero Zero per metric ton) based on Bill of Lading quantity if the vessel is loaded or 24,000 mt if the vessel is not loaded. Such payment if applicable, must be made by 30 April 1998. Late payment shall also be subject to interest charges as per cargo/demurrage payment."

Clause 11 of the Contract deals with the question of demurrage, to which the cross-reference in the final sentence of Clause 18 refers, and which, in effect, provides for an interest payment equal to the prime lending rate quoted by Citibank, New York on the due date, plus 3%, for the period from the date on which payment is due to the date of the seller's receipt of payment.

7. The application of the Plaintiff is backed with an affirmation from one Mr Albert Quek, who is the Trading Manager at the Plaintiff, and whose duties were to oversee the sale and purchase of various oil products for the Plaintiff. He made his affirmation, having been duly authorized to do so, with personal knowledge of this claim, and in this affidavit he recites the origin of the claim, and that of the Contract which forms the basis of the claim.

8. A key aspect of the relations between the parties is dealt with at paragraph 9 of his affirmation, which reads as follows :-

"On 24th July 1998, I then received a fax from the Defendant seeking a further postponement of the delivery of the cargo. This therefore triggered an automatic cancellation of the contract and the sum of US$360,000 then fell due by the Defendant to the Plaintiff in accordance with the terms of the amendment to the contract dated 30th June 1998. Notwithstanding this, we were prepared to waive such cancellation if the L.C. was opened by 28th July 1998. This is reflected in my fax to the Defendant of 27th July 1998 which confirmed that if the L.C. was not opened by 28th July 1998, the contract would be cancelled as per the amended terms dated 30th June 1998. The 28th of July 1998 arrived and still the Plaintiff had not opened its Letter of Credit. By reason of the failure of the Plaintiff to do so the contract was deemed cancelled and the sum of US$360,000 fell due to the Plaintiff. A copy of this exchange of correspondence is at pages 21-23."

9. Subsequent to the matters referred to in paragraph 9, there were further negotiations as to compensation payments between the parties. These are further detailed in the affirmation of Mr Quek. The matter culminated in a faxed letter dated 4th September 1998 from Mr Wong Yuk Mo to Mr Albert Quek wherein any question of liability or quantum, it seems to me, was firmly laid to rest. The letter reads as follows :-

"Re: Contract No. AQ-MOA1102/03 24000MTS 90 Ron Mogas

Reference to our fax dated 24 July 98 and various teleconversation. We regret that for our failure in performance the above mentioned contract. It is because of the import permit is not issued by the Chinese authorities and restriction on ocean import now, so we have no choice to failure the performance.

For the compensation of USD360,000.00, we will settle the payment as per the following schedule :-

Due Date	Amount
On or before 30/9/98	USD50,000.00
On or before 31/10/98	USD80,000.00
On or before 30/11/98	USD80,000.00
On or before 31/12/98	Balance

In order to maintain the good relationship between of us, we would like to request reduce the amount as you can. We sincerely hope that you can consider our situation and request.

Lastly, we apology for any inconvenience and loss incurred. And your prompt reply would be much appreciated."

(emphasis added)

10. Mr Kimber says that this offer, as contained in Mr Wong's letter of 4th September 1998, was subsequently accepted on 17th September 1998 by a fax to the Defendant for the attention of Mr Wong Yuk Mo, Mr Wong Yi Sheng and Ms Karen Ng, all of whom are officers of the Defendant, sent by Mr Quek accepting the instalment terms, and that if and in so far as it be necessary, he bases his claim not only in terms of liquidated damages for the non-performance of the Contract, but also in terms of breach of a concluded settlement agreement. In effect, therefore, he applies both belt and braces to this application.

11. It seems to me that the letter of 4th September 1998 is highly persuasive in terms of the summary judgment application. It lays to rest immediately any concerns about liability and quantum which may naturally have arisen when, given the absence of the Defendant, the Court is only hearing one side of the story, albeit from a commercial solicitor in good standing.

12. Interestingly (and perhaps unsurprisingly in the circumstances) there is no real opposition on affidavit from the Defendant. There is an affirmation of Mr Wong Yuk Mo, who prays in aid a Force Majeure clause which he says "bites" because the Defendant has been unable to obtain the required licence to import the goods into China. In my view, that submission fails (or would have failed) in limine. The rest of that affidavit goes only to the question of the stay under Clause 13 of the Contract, that is, the Law and Arbitration Clause which forms the substance of the stay application pursuant to the Defendant's summons. However, there is, of course, no one presently before the Court to move that summons.

13. After taking all the evidence into account, in my view the Plaintiff has proved its case, and in the circumstances one can, perhaps, appreciate why there is presently no opposition from the Defendant. Be that as it may. I grant the Plaintiff's application for summary judgment and I order that the Plaintiff is to have judgment against the Defendant in the sum of US$360,000.00, with interest thereon at the rate of 10.25% p.a. to run from 31st August 1998 (the due date for performance) to today's date, that is 24th September 1999. Thereafter, there is to be interest on the principal sum, that is $360,000.00, at the judgment rate from time to time prevailing until payment.

14. Turning now to the Defendant's summons, dated 7th April 1999, to stay proceedings, this, as earlier indicated, has not been formally moved, and accordingly is dismissed. In the circumstances the Court is spared to the interesting debate about whether, in circumstances where there is no real dispute between the parties on liability and quantum, Article 8 necessarily applies. In this connection Mr Kimber has drawn to my attention the judgment of Kaplan J. in HCA No.1356/94, wherein the learned Judge made it plain, on the basis of a number of Hong Kong cases set out in that judgment, that he would not refuse a Model Law stay unless the Plaintiff had admitted the claim unequivocally both as to liability and quantum. With respect, in my view that approach is correct, and is the one I would have followed had the matter been a "live" issue before me. This is one of those rare cases, to which Kaplan J. referred in his judgment, wherein the Court could be confident that it is an appropriate case to grant Order 14 judgment, and to dismiss an application for a stay under Article 8 of the Model Law. However, this issue, as I have indicated, has not formally arisen today.

15. As to costs, the Plaintiff is to have the costs of this action, to be taxed if not agreed. Such costs, of course, are to include the costs of and occasioned by these Order 14 proceedings. In so far as may be necessary for taxation, the dismissal of the stay application is accompanied by a like order as to costs in the Plaintiff's favour.

16. That being all for today, I thank Mr Kimber for his assistance.