XCHRX CHINA TRAVEL SERVICE ZHEJIANG v. JIANGSU (HK) TRAVEL CO LTD.

HCA 10570/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10570 OF 2000

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J U D G M E N T

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1. This is an appeal from the final judgment entered by Master Yuen on 20 August 2001 under O.14 in favour of the Plaintiff against the Defendant for RMB381,780.10 and RMB507,525.10. These sums represented amounts claimed by the Plaintiff from the Defendant under paras.4(i) and 4(ii) of the Statement of Claim respectively.

2. In its Statement of Claim, the Plaintiff laid its claim under three heads; under paragraph 4(i) in respect of airtickets allegedly paid for by the Plaintiff for the Defendant in 1999 and 2000 and handling charges; under paragraph 4(ii) for tour services rendered by the Plaintiff for the Defendant in 1999 and under paragraph 4(iii) for tour services rendered by the Plaintiff to the Defendant in 1998.

3. Although initially in its defence the Defendant denied ever purchasing airtickets from the Plaintiff or rendering any tour services for the Defendant's customers, Mr Liu Wen Yin, the General Manager of the Defendant conceded that, unknown to him, the Plaintiff had rendered tour services for the Defendant in 1988. He maintained that the sum claimed under this head was paid to the Plaintiff on 9 April 2001 (i.e. after the filing of the defence in these proceedings). He produced a copy of the relevant bank receipt. The Plaintiff accepts that this sum has been paid. Master Yuen's order did not therefore refer to the amount claimed under para.4(iii) of the Statement of Claim.

4. There has been no dispute between the parties as to the calculation of the figures upon which Master Yuen gave judgment.

5. In support of its claim, Mr Wu Song Chun, the General Manager of the Plaintiff, exhibited to his affirmation what he said were invoices for airtickets bought for the Defendant in 1999 and for tour fees in 1999 issued by the Plaintiff to the Defendant. He also exhibited letters or faxes from the Plaintiff to the Defendant (exhibited as SCW2, SCW3, SCW4 and SCW5) which had been chopped by the Defendant and which clearly confirm that it owed the sums stated therein in respect of airtickets and tours.

6. The Defendant's defence to the Plaintiff's claims under para.4(i) and 4(ii) of the Statement of Claim is simply that it itself was never a customer of the Plaintiff. It bases its case upon a claim that the Plaintiff and China Travel Service of Jiang Su Province ("CTSJS") reached a Joint Venture agreement to engage in the travel business. A copy of this agreement was produced. The agreement referred to an agreement to establish what is described as "The China Hong Kong Tourist Conglomerate"("The conglomerate"). The agreement provided that the Sales Centre of the conglomerate was to be located in CTSJS's Hong Kong subsidiary. The defence case is that the Defendant was this subsidiary and therefore the conglomerate's Sales Centre was at the Defendant's premises. The Defendant maintains that it acted as the sole gratuitous agent of the conglomerate in Hong Kong. Under the terms of the alleged joint venture agreement, monthly statements were to be prepared and the profit and loss was to be shared equally by the Plaintiff and CTSJS.

7. The Defendant admits that it did receive the price of airtickets and the price of tour services from customers, but that it did so on behalf of the conglomerate. It alleged that that part of the money that it received was paid over in accordance with the instructions of the conglomerate. It denied that airtickets were provided by the Plaintiff to the Defendant or that tour services were rendered by the Plaintiff to the Defendant.

8. Mr Liu Wen Yin says that the invoices produced by the Plaintiff were in fact addressed to CTSJS and not to the Defendant. He also said that the letters and faxes produced by Mr Wu Song Chun in which the Defendant confirmed indebtedness were as a result of a mistake by the Defendant's financial section which was not aware that the Defendant only acted as agent for the conglomerate.

9. I must consider whether the Defendant has shown a triable defence.

10. On the Defendant's case the invoices for airtickets produced by the Plaintiff were addressed to CTSJS and not to the Defendant. There is certainly reference to the tickets being airtickets of CTSJS (Sales Centre), but the invoices are all marked either "To" or "Attention" the Defendant. Furthermore, it is somewhat curious if the tickets were sold by the Defendant on behalf of the joint venture that the Plaintiff should demand from its partner in the joint venture payment for tickets which it is said in the documents were "ordered" by them. It is also curious why also should these documents make no reference to the Joint Venture or to "China Hong Kong Tourist Conglomerate"?

11. The Defendant's explanation of the letters in which the Defendant unequivocally confirmed indebtedness gives rise to considerable suspicion. Why should the Defendant's financial section have not been made aware that the Defendant was only acting as agent for the joint venture? Moreover, it does appear that what appear to be invoices for tours (which the Defendant claims it has not received) were issued directly to the Defendant. I find the defence allegation that it never received any of these documents somewhat suspicious.

12. Having said that there are aspects of the Defendant's case which suggest that its case may not be unarguable. In his second affirmation, Mr Wu (the General Manager of the Plaintiff) described the agreement between the Plaintiff and CTSJS as "an agreement of business cooperation rather than a joint venture agreement". He went on to say: "it has never been the intention of CTSJS or the Plaintiff to establish any joint venture organisation nor has such a joint venture organisation ever been established."

13. It is certainly arguable that the written agreement produced by the Defendant as LWY-1 suggests that it was more than a simple agreement of business cooperation. The document produced by the Defendant LWY-2 which is described as a financial statement suggests that "China Hong Kong Tourist Conglomerate" was established and indeed that the conglomerate had sold 178 airtickets. That is the number of airtickets referred to in what the Plaintiff's claims was an invoice in respect of the airtickets for the period from 1 August - 14 September. The reference in the document, LWY-2 to the agreement to share losses suggests that the conglomerate might have been more than a means of achieving discounted airtickets as Mr Wu testifies.

14. Even on the Defendant's case it would be under an obligation under the terms of the joint venture agreement to receive and account for monies which it received on behalf of the joint venture. The Defendant does not deny that it has received those monies.

15. In my view this is a case where the Defendant should be given an opportunity to defend. But the strength of the Plaintiff's case and in particular the express admissions made by the Defendant in correspondence make it a case in which the Defendant should only be given leave to defend conditional upon paying the amount claimed into court.

16. Accordingly I allow the appeal. I order that the Defendant be given leave to defend conditional upon paying the sums of RMB381,780.10 and RMB507,525.10 into court before 4:00pm on 2 November 2001.