YARDWAY LTD v. GETSTAR BUILMAT LTD

DCCJ 4198/ 2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4198 OF 2005

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JUDGMENT
ON PLAINTIFF'S APPLICATION
FOR SUMMARY JUDGMENT

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The Plaintiff's case

1.  The Plaintiff and the Defendant entered into an agreement under which the Plaintiff would get a commission for securing contracts for the Defendant's goods and services.  The Plaintiff, through its employee Zhou, secured a contract for the Defendant's goods.  Because of PRC policy, the Defendant, not being a PRC-registered company, had to contract with a PRC-registered company, which would in turn contract with the ultimate customer.  Upon full payment of the contract price, the Defendant refused to pay a commission to the Plaintiff.  The Plaintiff filed a Writ of Summons, and the present application for summary judgment. 

The Defendant's case

2. Zhou was the Defendant's agent.  He secured a contract for the Defendant.  The Defendant then paid him the commission.  The Plaintiff could not claim any commission.   

The issues to be determined

3. Both the Plaintiff and the Defendant were consensual in that it was Zhou who had secured a contract for the Defendant.  The core contention was the capacity of Zhou.  The Plaintiff alleged that at the time of the contract Zhou was the Plaintiff's agent.  Hence the Plaintiff should get commission.  The Defendant alleged that at the time of the contract Zhou was the Defendant's agent.  Hence the Plaintiff should not get commission.  The Defendant had subsequently paid commission to Zhou.  Zhou made an affirmation for the Plaintiff in rebuttal of the Defendant's allegations.     

4. I have to determine the issues as to:

(1)   The capacity of Zhou when he secured the contract for the Defendant;

(2)   If Zhou was the Plaintiff's agent at that time, what commission the Defendant should pay the Plaintiff. 

The Plaintiff's evidence

5. In 1989, the Plaintiff entered the PRC market, providing transport-related equipment, professional repair and maintenance services.

6. In 1992, the Defendant was incorporated in Hong Kong, carrying on construction materials and decoration business. 

7. By the end of 2003, Zhou, who was employed by the Plaintiff as a sales representative in PRC, learned that certain senior personnel of the Chengdu Shangli Airport Project (“the Airport Project”) and Beijing Urban Construction Chang Cheng Decoration Company (“Beijing Company”) would have the conduct of the construction works of the Airport Project.  Before joining the Plaintiff, Zhou had worked in the Architectural Design & Research Institute of Civil Airport Construction of China.  He had ample business connections.     

8. In early January 2004, Zhou came to know Mr. Yim San Kit (“Mr. Yim”), the director of the Defendant, by a friend's introduction.  Mr. Yim expressly desired to enter the market of civil aviation in PRC.     

9. On between 8 and 10 February 2004, Zhou was financed by the Defendant, under an agreement, between the Defendant and Zhou on behalf of the Plaintiff, to travel to Chengdu for promotion meetings with the senior personnel of the Airport Project. 

10. In March 2004, Zhou introduced Mr. Chang Dit Ping Ronald (“Mr. Chang”), marketing manager of the Plaintiff, to Mr. Yim.  They began to discuss business cooperation potentials, namely for the Plaintiff to secure contracts for the Defendant's goods and services.  Meanwhile, Zhou had to take part in further negotiations and the couriering of samples for the Airport Project, which looked promising.  He told Mr. Yim to formalize relationship with the Plaintiff.   

11. On 1 April 2004, a Collaboration Agreement for 2 years was signed between the Plaintiff  and the Defendant [p. 34]. The Defendant thereby appointed the Plaintiff the exclusive representative of the Defendant's goods and services for various projects in PRC. Upon entering into a contract with the customer, the Defendant would fax a copy of the contract to the Plaintiff.  The Plaintiff would have a maximum of 10%commission forthe contractprice.  The commission would be paid pro rata within 30 days upon payments being received from the customer.  The Plaintiff, principally through Zhou, duly promoted the Defendant's goods for the Airport Project through its sales network in PRC.

12. In mid-April 2004, it was orally agreed that the Defendant would pay the Plaintiff a 10% commission for the Airport Project contract price [para. 5 of Mr. Chang's affirmation: p. 310].   

13. On about 30 April 2004, the Defendant entered into an oral contract to provide goods to Beijing Urban Construction Chang Cheng Decoration Company (“Beijing Company”) at RMB$831,600.00 for the Airport Project.  However, PRC policy prohibited a non-PRC-registered company (such as the Defendant) from contracting directly with a state-owned company (such as the Beijing Company).  Hence the Defendant and the Beijing Company could not sign the draft contract [pp. 314 – 315].  In order to comply with the policy, the Defendant, being a non-PRC-registered company, contracted with a PRC-registered company (天津市福高建築裝飾工程有限公司 “Tianjin Company”), which would in turn contract with the ultimate customer (the Beijing Company). 

14. On 24 May 2004, the Tianjin Company accordingly contracted with the Beijing Company [“The Tianjian and Beijing Contract”: p. 317 - 318].  

15. On 4 June 2004, the Defendant faxed The Tianjian and Beijing Contract to the Plaintiff [para. 5 – 9 of Zhou's affirmation: pp. 347 – 349].         

16. On 18 July 2004, Zhou emailed to the Plaintiff to report that the ultimate customer had made the final payment to the Defendant [pp. 318 – 319]. 

17. On 31 January 2005, the Plaintiff issued an invoice to the Defendant to demand payment of commission. 

18. On 25 May 2005, the Plaintiff faxed a reminder for overdue commission to the Defendant [p. 36]. 

19. On 28 July 2005, the Plaintiff's solicitors demanded the Defendant for the overdue commission [p. 37].

20. On 18 August 2005, 30 days after the final payment for the contract, the commission of RMB$83,160.00 became payable [para. 6 of Amended Statement of Claim: p. 16].    

The defendant's evidence

21. In about November 2003, the Defendant and Zhou entered into an oral agreement.  Zhou would act as the Defendant's agent in promoting the Defendant's goods and services in PRC.  Zhou would get a commission and be reimbursed for all related expenses [para. 4 of Mr. Yim's affirmation: p. 324]. 

22. On 23 March 2004, a contract was signed between the Defendant and the Tianjin Company (“The Defendant and Tianjin Contract”) for the former to supply goods to the latter.  It was secured by Zhou as the Defendant's agent.  He also prepared and arranged for signature of it.  The Defendant paid him a commission and the related expenses for it [para. 7 of Mr. Yim's affirmation: pp. 325 – 326]. 

23. On 1 April 2004, the Collaboration Agreement was signed between the Plaintiff and the Defendant.  If the Defendant and the potential customer signed a contract, the Defendant would inform the Plaintiff.  

24. In late May or early June 2004, the Plaintiff requested for information for potential customers' and its own reference that the Defendant's goods had previously been used.  The Defendant asked Zhou for assistance.  

25. On 4 June 2004, Zhou somehow produced to the Defendant a copy of The Tianjin and Beijing Contract.  The Defendant faxed it to the Plaintiff.  Although the Defendant also possessed The Defendant and Tianjin Contract, that was somehow not faxed to the Plaintiff. 

26. Although it was not provided for in the Collaboration Agreement, the Defendant regarded [para. 10(c) – (d) of Mr. Yim's affirmation: p. 43] that the Plaintiff had to submit to the Defendant monthly reports of the state of promotion to, and contact of potential customers.  The Plaintiff did not ever submit any such monthly reports relating to the Airport Project. 

27. Although it was not provided for in the Collaboration Agreement, the Defendant regarded [para. 10(i) of Mr. Yim's affirmation: p. 45] that the Defendant and the Plaintiff would form an ad hoc agreement in writing to determine the exact commission for each contract.   

The Law

28. The defendant has to satisfy the Court that there is a triable issue or question or for some reason there ought to be a trial (HKCP 2004, 14/4/3).  The Defendant must show that his evidence is reasonably capable of belief (HKCP 2004, 14/4/3). 

This Court's findings

29. I have considered all the evidence and counsel's submissions. 

The capacity of Zhou when he secured thecontract for the Defendant

30. The Defendant alleged that Zhou had become its agent since about November 2003 [para. 5 of Mr. Yim's affirmation: p. 324].  Zhou was entitled to a commission to be agreed with the Defendant.  Zhou was to be reimbursed for all expenses in the course of contacting and negotiating with potential clients for the Defendant, irrespective of whether a contract was eventually secured [para. 5(e) of Mr. Yim's affirmation: p. 324].  In purported proof of such a provision and its implementation, the Defendant produced some receipts [pp. 337 – 339].  These mostly undated receipts did not bear Zhou's name or acknowledgment.  This alleged arrangement with Zhou lacks business sense.  First, there was no ceiling for the expenses.  Second, the expenses did not have to be reasonable.  This arrangement would be grossly unfair to the Defendant. 

31. The Defendant produced 2 air-tickets dated 8 and 10 February 2004 respectively bearing Zhou's name as the passenger [pp. 335 – 336].  The Defendant's version was that they showed the Defendant's reimbursement for air-ticket fares to Zhou [para. 7 of Mr. Yim's affirmation: pp. 325 – 326].  The Plaintiff's version was that there was an agreement between the Plaintiff and the Defendant that the Defendant would finance Zhou to travel to Chengdu for promotion meetings with the senior personnel of the Airport Project [para. 6 of Zhou's affirmation: pp. 347 – 348].  I am aware of the conflicting versions but I do not think it necessary to be resolved in the present application.  

32. The Defendant alleged [para. 7 of Mr. Yim's affirmation: p. 325] that Zhou was paid a commission for The Defendant and Tianjin Contract [p. 333].  This bare allegation apart, the Defendant did not give any particulars or proof of the commission. 

33. The Defendant alleged that in about March 2004 it already had a subsisting commission agreement with Zhou.  The Plaintiff's counsel submits that, if that were the case, there could be no reason for Zhou to offer to, and actually did, introduce the Plaintiff to the Defendant [para. 8 of Mr. Yim's affirmation: p. 326] in order to sign the Collaboration Agreement [p. 34].  I agree.  I see no reason why Zhou had to give way to make the Plaintiff the Defendant's exclusive representative. 

34. The Defendant alleged that it had entered into a written contract with the Beijing Company (The Defendant and Beijing Contract) on 23 March 2004 [para. 7 of Mr. Yim's affirmation: pp. 325 – 326] through Zhou's preparation and arrangement for signature.  Zhou denied this allegation [para 11: p. 350].  

35. From the aforesaid analyses, I find the Defendant's allegation (that Zhou had been acting as an agent for the Defendant, or that Zhou had prepared and arranged for signature of the contract) not reasonably capable of belief. 

36. The Plaintiff alleged that PRC had a policy against a state-owned company (such as the Beijing Company) contracting directly with a foreign company (such as the Defendant).  The Plaintiff relied on this assertion to explain the need to have a tripartite deal involving a PRC-registered company (the Tianjin Company) as the intermediate party, thus resulting in The Defendant and Tianjian Contract [pp. 317 –318].  The Defendant did not counter this allegation of the PRC policy.  It merely alleged that on 23 March 2004 it had already contracted directly with the Beijing Company, resulting in The Defendant and Tianjin Contract[p 333].  Without countering the allegation of the PRC policy, I see no way that the Defendant could have signed The Defendant and Tianjin Contract at all. 

37. The Defendant also alleged that in early June 2004, the Plaintiff had requested for some information for potential customers' and own reference that the Defendant's goods had been previously used.  The Defendant faxed a copy of The Defendant and Tianjian Contract [pp. 317 – 318] to the Plaintiff.  I see no reason why the Defendant did not fax over The Defendant and Tianjin Contract if it was in existence.  The most obvious and probable explanation was that this document purportedly signed and dated 23 March 2004 had not yet come into existence on 4 June 2004. 

38. From the aforesaid analyses, I find the Defendant's allegation of having entered into The Defendant and Tianjin Contract[p. 333] on 23 March 2004 or at all not reasonably capable of belief.         

39. As the Defendant's allegations of Zhou's capacity and the existence of The Defendant and Tianjin Contract[p. 333] are not reasonably capable of belief, there is nothing to counter the Plaintiff's allegation that the Defendant and the Beijing Company could not have signed the draft contract.  It also follows from the Defendant's stance, in not countering the allegation of the PRC policy, that the Plaintiff's allegation of drawing a PRC-registered company (the Tianjin Company) into the deal should be accepted by this Court.   

If Zhou was the Plaintiff's agent at that time, what commission the Defendant should pay the Plaintiff 

40. The Collaboration Agreement [p. 34] provided for commission as follows:

[The Defendant] shall allow a maximum ten percent (10%) commission rate for purchase orders/contracts being secured by [the Plaintiff].  However, subject to agreement by both parties, the commission rate may be adjusted to reflect market competition pf each potential project.  The commission of secured projects shall be released at pro rata within 30 days according to the actual payment received from customers of corresponding purchase orders/contracts.  [The Plaintiff] is obliged to keep liaising with customer of projects until the projects are completed satisfactorily.    

41. The Defendant alleged that it had not received any payment from the Beijing Company [para. 3 of Defence: pp. 17 – 18].  I note that in this tripartite deal involving the Defendant, the Tianjian Company, and the Beijing Company, the Defendant would logically be paid by Tianjian Company, not the Beijing Company.  The Defendant never mentioned whether it had been paid by the Tianjin Company [para. 18 of Mr. Yim's affirmation: pp. 47 – 48].  It did not counter the Plaintiff's allegation that Zhou had on 18 July 2004 emailed the Plaintiff [pp. 312 – 313] to report the customer's payment of the last 5% contract price to the Defendant.  In the absence of any evidence to the contrary, I find that the ultimate customer had made all payments to the Defendant.  The commission had become payable by the Defendant to the Plaintiff 30 days after 18 July 2004.   

42. The Defendant alleged [para. 10(i) of Mr. Yim's affirmation: pp. 44 –45] that the Defendant and the Plaintiff would form an ad hoc agreement in writing to determine the exact commission for each project.  However, the Collaboration Agreement made no mention of such ad hoc agreement in writing.  I reject the Defendant's evidence as not reasonably capable of belief. 

43. According to the Collaboration Agreement, the Defendant “shall” allow a maximum 10% commission.  It “may” be reduced by both parties' agreement.   The Plaintiff claimed the payment of a 10% commission for the contract price [para. 6 of Amended Statement of Claim: p. 16].  The Defendant pleaded a general denial but did not traverse the quantum or raise any issue of reduction by agreement [para. 4 of Defence: p. 18].  The Plaintiff alleged [para. 5 of Mr. Chang's affirmation: p. 310] that the Plaintiff and the Defendant had orally agreed in mid-April 2004 that the Plaintiff would have a 10% commission for the Airport Project.  The Defendant did not counter the Plaintiff's evidence, nor was there evidence of reduction by agreement, I find that the Plaintiff shall have a 10% commission, namely RMB$83,160.00. 

The Conclusion

44. The Defendant has failed to demonstrate that there is a triable issue or question or for some reason there ought to be a trial.  The Defendant's evidence is not reasonably capable of belief.  I give judgment to the Plaintiff in the sum of RMB$83,160.00 with interest at judgment rate from the date of the Writ of Summons (i.e., 29 August 2005) until payment.  There is no apparent reason why costs should not follow the event.  I make an order nisi, to be made absolute in 14 days, for costs to the Plaintiff with a certificate for counsel.

Dated this 13 April 2006