DELEEUW FLOWERBULB GROUP B.V v. LEUNG ON t/a ON WAH GRADEN AND ANOTHER

HCA1437/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1437 OF 2008

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J U D G M E N T

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1.  The plaintiff is a Dutch company which sells flower bulbs worldwide. In this action they are claiming Euro 265,866.67 for goods sold and delivered to the defendants in 2005 and 2006. The bulbs were supplied to “On Wah Garden” which, it is the plaintiff’s case, was a firm run by the two defendants, who are brothers.

2.  Leung On, D1, is the elder brother and has played little part in these proceedings and no part in this trial.  At the material time he was the registered proprietor of On Wah Garden.  Since the 1980’s the two brothers had run On Wah Garden.  As will be seen hereafter I have rejected D2’s contention that he was a mere employee of his elder brother, and thus cannot be held contractually liable to the plaintiff.

3.  It is clear that the two defendants worked together for many years.  It seems they split up in 2007, partly because of this case.  D1’s contribution to these proceedings has been no more than the filing of a short “home made” defence.  He is believed to be in the PRC.  D2’s evidence was that he now has no contact with him and cannot assist with his whereabouts.

4.  In the circumstances, the plaintiff, having proved the delivery of and non-payment for the bulbs must get a judgment against D1, being the registered proprietor of On Wah Garden.

5.  The real issues at trial however are between the plaintiff and D2.

ISSUES

6.  It was agreed at the outset of the trial that there are two primary issues to be resolved arising out of the pleadings :

(1)     Has the plaintiff proved that D2 held himself out as a partner in the business and therefore liable to pay for the bulbs (jointly and severally with D1)?

(2)     If so, has D2 proved his counterclaim which he seeks to set off against the plaintiff’s claim a sum of money in excess of the claim said to arise from the plaintiff’s failure to supply and deliver a consignment of bulbs to D2’s new company, To & Ching Gardens, in 2007?  D2 claims that the plaintiff agreed to supply a substantial order but failed to do so thereby causing D2 loss of profits.  The plaintiff’s answer to the counterclaim, in short, is that it never agreed to supply any bulbs and had made it clear that it would not do so until the 2005/6 consignment, the subject of the plaintiff’s claim, was paid for.

(1)     Did D2 hold himself out as a partner?

7.  Section 16 of the Partnership Ordinance, Cap. 38 provides that :

“Every one who, by words spoken or written or by conduct, represents himself, or who knowingly suffers himself to be represented, as a partner in a particular firm is liable as a partner to any one who has, on the faith of any such representation, given credit to the firm, whether the representation has or has not been made or communicated to the person so giving credit by or with the knowledge of the apparent partner making the representation or suffering it to be made …”

8.  There was compelling and reliable evidence in support of this issue in the plaintiff’s favour.  The two witnesses at trial were Mr Hans Oudshoorn, a director of the plaintiff who had had many dealings with D2 over the years and Leung Ah Choy, D2, who gave evidence on his own behalf.

9.  I found Mr Oudshoorn to be a straightforward, honest and reliable witness.  Where there were conflicts in evidence I resolved every one in the plaintiff’s favour.  D2’s case was designed solely to try and make D1 liable for the debt on his own.  His claims, made in both his witness statements and in oral testimony, were all to this same end.  For example, he suggested that Mr Oudshoorn knew that D1 was the sole boss and he was a mere employee. He suggested that Mr Oudshoorn had met D1 on many occasions and that he knew he was his brother.  He suggested that Mr Oudshoorn knew that the only reason he dealt with D2, an employee, rather than D1, the owner, was because D2 could speak and write English.  None of these suggestions were accepted by Mr Oudshoorn, who I believed, and none were supported by other evidence.

10.  In fact the whole of evidence showed that the true picture was very different.

11.  Mr Oudshoorn came to Hong Kong about twice a year and met only D2 when orders were being discussed.  He agreed he may have met D1 on one occasion in about 2003 at a nursery in China but that person did not say anything.  Mr Oudshoorn always addressed D2 and corresponded with him as “Mr Thinky”.  Invoices were often headed “On Wah Garden – Leung On”.  Mr Oudshoorn believed, and reasonably so, that Mr Thinky was Leung On.  He knew of no-one else in the running of the business.  He only discovered that D2 had a brother called Leung On after this dispute had commenced.  Nowhere in any of the correspondence written and signed by D2 in the name of “Thinky” does he refer to his elder brother.

12.  Moreover, none of the correspondence suggests that the liability for the debt is other than on D2.  The following are examples :

(a)     From the plaintiff :

“Dear Mr Thinky …” :

21 April 2005	“If you will not make your payments as agreed we will be obliged to cancel all orders.”
1 August 2005	“… as promised by you we expect …”
23 August 2005	“… your payment has not arrived yet.”
18 January 2006	“Last week you promised to make a payment at latest last Monday …”
6 March 2006	“… you assured me you were going to continue to make more payments …”
27 April 2006	“Mr Thinky, I must tell you that I feel disappointed about your attitude.  Your spoken words does not seem to be the same as your actions.”
3 October 2006	“I trust you will make your promised payment of …”
4 April 2007	“For this order you will make advanced payment as agreed with you during my last visit.  We will only ship to you after we have received payment for crop 2006 and also the (old) promised payments.”

(b)     From D2 to the plaintiff :

1 August 2005	“I need order as below …”
19 August 2005	“I need order as below …”
6 December 2005	“I need … I will make payment next week.”
6 March 2006	“I can pay 50,000 Euro in August.  I also pay 20,000 Euro in October.”
19 July 2006	“… all the documents send to me directly.”
Remainder of 2006	Many examples of “I need order as below”.
9 August 2007	“… has not been able smoothly to repay the debt, that many sorry … hope you can forgive the hardship …”

13.  This final letter was sent by Mr Thinky on his new company letterhead, “To & Ching Garden” and was an attempt to persuade Mr Oudshoorn to abandon his claims against On Wah Garden and deal with To & Ching Garden thereafter.

14.  Two further observations on the correspondence should be made.  Firstly, when Mr Oudshoorn’s letters refer to promises to pay and deadlines not met D2’s response never suggests that he is not Leung On and that only Leung On has the authority to deal with such matters.  Secondly, it is not credible that an employee of a firm would, without the authority of the owner, write the sort of letters which D2 admitted writing.

15.  The whole history of the correspondence is consistent with D2 holding himself out as a partner of On Wah Garden and, ultimately, an attempt to turn his back on his liabilities by creating a new firm whilst falsely suggesting that he had been a mere employee of his elder brother.

16.  Mr Anthony Cheung, counsel for D2, submitted that section 16 of the Partnership Ordinance did not apply to this case because it was the plaintiff’s case that Mr Oudshoorn merely thought D2 was Leung On, the owner of On Wah Garden; it was not their case, he submitted, that D2 had represented himself as a partner and thereby misled Mr Oudshoorn.  I consider this submission to be without merit.  Mr Oudshoorn’s belief was merely a natural consequence of D2’s conduct.  D2’s conduct throughout was that of a partner in the business.  As a result Mr Oudshoorn never regarded him as anything else and accordingly had provided credit to the firm for many years.  In all his dealings with him D2 had never indicated that he needed to consult or take instructions from anyone else in the administration and running of On Wah Garden.

17.  Finally, on this issue, when asked to provide some documentary evidence in support of his contention that he was a mere employee who was paid commission by his elder brother, he failed to do so.  I am satisfied on the whole of the evidence that he failed to do so because he was unable to do so.

18.  I have had no difficulty in resolving the first issue wholly in the plaintiff’s favour.  

(2)     Has D2 established his counterclaim?

19.  D2 claims a binding agreement was made between himself on behalf of To & Ching Garden and Mr Oudshoorn on behalf of the plaintiff in July 2007.  He claims loss of profits in excess of HK$3.5 million as a result of non‑delivery of a substantial quantity of bulbs.

20.  In my judgment the counterclaim is hopeless. Up to the time when D2 left On Wah Garden and set up his new business of To & Ching Garden the correspondence is peppered with requests from Mr Oudshoorn for payments and expressions of frustration that promises to pay have not been kept — all in measured and polite terms.  Common sense dictates that the plaintiff would not have entered into a new contract unless the defendants paid their debts.

21.  In further support of Mr Oudshoorn’s oral testimony that no agreement was ever made it is only necessary to consider the contemporaneous correspondence in relation to the actual alleged purchase order (some of which has already been referred to).

22.  On 4 April 2007 the plaintiff wrote to On Wah Garden by fax :

“Dear Mr Thinky,

[Details of the orders are set out.]

For this order you will make advance payment, as agreed with you during my last visit.

We will only ship to you after we have received your payment for crop 2006 bulbs and also the promised payments have been made of old crop invoices as described here above.”

23.  On 24 April 2007 D2 sent a fax to the plaintiff as follows :

“Started by 2007, I already to leave the On Wah Garden, own established fledgling firm, the name has been called To & Ching Garden, therefore On Wah Garden all order forms and the debt question, all was separates processing with To & Ching Garden fledgling firm, was does not have the correlation, specially stated.”

It is signed “With regards, Thinky”.

24.  On 5 July 2007 a purchase order, almost identical to the order from On Wah Garden in April, was sent.  There is no credible evidence that it was accepted, there is no evidence that the plaintiff’s position as stated in the fax of 4 April 2007 had changed, there is no credible evidence of any agreement between the parties.

25.  Moreover, it is a fact that no money was ever sent either for payment for the 2006 consignments or, in advance, for the 2007 order.  The closest D2 gets to payment is a statement in his 5 July 2007 fax saying, “Now I have enough money …”  Sadly, none is sent and, a month later, on 9 August 2007 D2’s next fax is merely another apology for the debt and another request to deal with To & Ching Garden instead of On Wah Garden.

26.  The counterclaim is not made out.

CONCLUSION

27.  Both primary issues having been decided in the plaintiff’s favour, there will be judgment for the plaintiff against both defendants in the sum of Euro 256,866.67 with interest to run from 1 January 2007, at a rate to be agreed between the parties, together with an order for the costs of the action to be paid by the defendants to the plaintiff.