TANG YAT KEUNG v. YUNNAN PROVINCIAL IMPORT AND EXPORT CORPORATION

HCA 9214/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9214 OF 2000

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J U D G M E N T

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Introduction

1. The plaintiff commenced this action on 26 September 2000 and claims against the defendant several sums arising from the sale of 2 lots of goods sold and delivered to the defendant. The defendant denies the claim.

The Issues

2. The dispute between the parties are largely factual in nature. Because there is no document which can decisively determine the dispute, it is necessary to assess the credibility and/or reliability of the witnesses' testimony before this action can be properly resolved. Two witnesses were called at trial: the plaintiff himself and Mr Li Tong of the defendant ("Mr Li").

3. Because the plaintiff's claim concerns two lots of goods, the dispute between the parties can conveniently be dealt with under separate headings. This, however, does not mean that the court has not assessed credibility by considering the totality of the evidence. Further, even though this Judgment may not expressly deal with all the matters referred to by the parties during trial (especially those helpfully set out in the parties' written submissions), the court has considered all these matters.

The 1st Lot of Goods

(a) The plaintiff's case

4. The plaintiff's pleaded case can be found in his amended statement of claim and can be summarised as follows. He was trading as Tomdar International Trading Company ("Tomdar Int'l"). The defendant was incorporated in the mainland and its business address is in Kunming, Yannan. The plaintiff started to have dealings with the defendant since 1994.

5. In about October 1994, the plaintiff and the defendant (through a Mr Hu Wei (胡巍) ("Mr Hu")) discussed and entered into a joint venture for the purchase of 504 metric tons of polyester chips ("the 1st lot"). On about 3 January 1995, the parties agreed that the price should be RMB18,200 per metric ton (total RMB9,172,800 (504 x 18,200)).

6. The plaintiff delivered the 1st lot on about 13 January 1995 to a railway station in the mainland. The defendant put pressure on the plaintiff in the following manner:-

(a)	unless the plaintiff agreed to accept a price of RMB17,500, the defendant, through Mr Hu, threatened not to take delivery;
(b)	the defendant's servants or agents opened the package of the 1st lot and threw the contents onto the ground. The plaintiff has to engage workers to pick up and repack the 1st lot at extra costs (RMB68,000).

The plaintiff also feared that violence would be used against him. He finally agreed to the price suggested by the defendant. The defendant only paid RMB8,704,000 but did not pay the balance of RMB468,800.

7. The plaintiff's witness statement was adopted as part of his testimony. In his witness statement, the plaintiff described the incident as follows. The defendant should pay for the 1st lot by cheque when it arrived Kunming railway station. However, when the 1st lot arrived Kunming railway station on about 17 January 1995, Mr Hu refused to pay the full price and reduced the price to RMB17,500. Due to this, and that Kunming railway station only has limited space, only 483.3 metric tons were unloaded. The defendant opened some of the packaging and threw the contents onto the ground. As a result, the plaintiff has to incur extra labour costs for repack the goods. He also has to pay the railway station.

8. Besides the above, the plaintiff also testified as follows:-

(1)	at the time of delivery, Mr Hu gave him a document to sign. The document is headed "Payment Agreement" and in short records that the plaintiff agreed (among other things) to accept the price of RMB17,500 per metric ton;
(2)	when the plaintiff refused, Mr Hu told him if he did not sign it, he would not be paid and the 1st lot would be destroyed;
(3)	the plaintiff could not sell the 1st lot to other buyers because he needed a document from the tax authorities in the mainland to show that tax was already paid. This document was kept by the defendant;
(4)	under the above circumstances, the plaintiff had no alternative but to sign the "Payment Agreement".

(b) The defendant's case

9. In its Defence filed on 18 June 2002, the defendant admits the joint venture agreement but claims that the agreed price was RMB17,500 per metric ton. The defendant also denies any threat, violence or misconduct on its part. No particulars were given as to when the price was agreed.

10. Similar to the plaintiff, the defendant's witness also adopted his witness statement (dated 22 January 2003) as part of his testimony. The witness statement says that Mr Hu has left the defendant in October 1998. He has emigrated to Canada and could not be found. However, Mr Li has met Mr Hu many times before Mr Hu left the defendant and has been given all the documents concerning this action. Mr Hu also provided him a lot of information.

11. Mr Li's witness statement admits that a "new" price was agreed: para. 5 thereof. The reason for the "new" price was said to be this. When the 1st lot was delivered, an invoice for the capital gains tax of the 1st lot was produced by the plaintiff. This invoice evidenced the payment of import tax of the 1st lot. The defendant doubted the authenticity of this invoice and this resulted in the "new" price. The context of his witness statement implies that the "new" price was lower than the original price.

(c) Credibility

12. In brief, I accept the plaintiff's testimony as truthful and reliable. On the other hand, I reject Mr Li's testimony as untruthful.

13. First, the reason given in Mr Li's witness statement for the reduction of price is inherently implausible. If in fact the authenticity of the invoice was important and in doubt, there is no reason why it could not be verified later. After all, there is no dispute the defendant only needed to pay by cheque. Further, the defendant could have asked the plaintiff to acknowledge in writing the need for the verification of the invoice and to agree to indemnify (or repay) the defendant if the invoice should be false. Instead, the "Payment Agreement" only records (among other things) the "new" price.

14. Secondly, as Mr Li admitted at one stage during cross-examination, at the time when Mr Hu handed over his work, he did not tell Mr Li about transactions which have been completed. However, Mr Li changed his testimony later and claimed that Mr Hu also informed him of the details regarding the 1st lot. He asserted this is because he needed to know about the background of the defendant's customers. I find this assertion inherently implausible and find that he was only trying to change his testimony to suit the defendant's case.

15. Thirdly, Mr Li claimed that the "Payment Agreement" evidenced the plaintiff agreed (among other things) to an increase in the price of the goods. This claim was made by him when he was asked to clarify the combined effect of the terms of the "Payment Agreement". The relevant terms were:-

"	(1)	現到貨 ... 483.3 MT。 [原告]同意將 ... 單據，增值稅發票交與[被告] ...
	(3)	所有發票，單據將于簽約日内由[國内的買家]驗證無誤，並由[被告]轉交[國内的買家] ...
	(5)	火車站交貨價17,500/MT。"

16. The effect of the above terms was that the plaintiff was to provide the documents referred to therein. In addition, the plaintiff was also to reduce the price of the 1st lot (from RMB18,200 per metric ton: see the fax from the defendant to the plaintiff dated 3 January 1995). One of those documents the plaintiff agreed to provide was an invoice for the capital gains tax of the 1st lot. As stated above, this was to show that import tax has already been paid.

17. When Mr Li was asked about the above, he alleged that there was actually an increase in price from RMB16,300. Leaving aside whether there is any document to support the last-mentioned allegation, an increase in price has never been raised in the defendant's pleading or witness statement. Instead, the defence case appears to be that the sale price has by agreement been reduced taking into account the doubt cast on the authenticity of the tax document provided by the plaintiff.

18. The defendant criticises the plaintiff for changing his case on duress. The criticism has been summarised in the closing submission as follows:-

(a)	the plaintiff claimed that he was forced to sign the "Payment Agreement" because a number of the defendant's staff caused part of the 1st lot to scatter onto the ground;
(b)	upon further questioning in examination-in-chief, the plaintiff then said Mr Hu told him the place of delivery was the defendant's territory;
(c)	the plaintiff also claimed the 1st lot was a special kind of commodity and could not readily be resold;
(d)	the plaintiff "corrected" his witness statement and claimed that he was only responsible to pay for the duties in Hong Kong;
(e)	the plaintiff continued to deal with the defendant after the alleged duress incident has taken place;
(f)	there was a discrepancy between the plaintiff's affirmation and his testimony regarding the contents of the "Payment Agreement";
(g)	the plaintiff did not immediately complain to anyone about the alleged duress.

19. In relation to point (e) above, the plaintiff explained that he continued to deal with the defendant because he had already issued a letter of credit and the goods in question could not readily be sold to someone else. I accept his explanation.

20. I do not consider points (a) to (c) above to be inconsistencies or changes in the plaintiff's case. I find he was telling the court the various matters which ultimately "sap him of his free will".

21. I do not find the matters set out in points (d), (f) and (g) above (whether individually or collectively) to justify the rejection of the plaintiff's testimony.

(d) Findings of Fact

22. The plaintiff has referred me to a number of authorities regarding economic duress: Chitty on Contracts (1999) 28th Ed., para. 7-010 to 7-040.

23. On the evidence accepted by me (set out above), I find that the defendant has exerted economic duress upon the plaintiff. The reduction in price from RMB18,200 to RMB17,500 per metric ton resulted from this. Such a reduction is voidable: Chitty, para. 7-039, and, in this action, the agreement made under duress should be avoided.

The 2nd Lot of Goods

(a) The plaintiff's case

24. The plaintiff's pleaded case regarding this is as follows. On about 23 November 1994, the defendant appointed the plaintiff to be its agent to purchase 9,000 kg of Nylon-66 at a unit price of US$4.8 per kg CIF Hong Kong ("the 2nd lot"):-

"... and to issue a letter of credit for payment thereof" (para. 4, Amended Statement of Claim).

25. The plaintiff also pleads that the defendant would resell the 2nd lot to an ultimate user in Kunming and would be paid as follows. 30% of the CIF price would be paid to the plaintiff upon receipt of the copy letter of credit whereas the remaining 70% would be paid within 5 days of the arrival of the 2nd lot at Kunming railway station. 46% of the profit of the resale would be paid by the defendant to the plaintiff. Exchange rate between US$ and HK$ was agreed at US$1:HK$7.7365.

26. The 2nd lot was delivered to Kunming on about 21 April 1995 and the defendant delivered it to the ultimate user later. However, no payment was made by the defendant.

27. The sums claimed by the plaintiff are:-

(1) RMB373,538.93 being the plaintiff's pre-payment of the import price of the 2nd lot and various expenses;

(2) RMB10,332.09 being 46% of the profit of the resale of the 2nd lot.

(b) The defendant's case

28. The defendant does not deny there was an agreement regarding the 2nd lot but denies that the 2nd lot has been delivered.

29. In Mr Li's witness statement, he said that there was no document which can evidence the 2nd lot had been delivered. There was only a receipt which shows that it has been stored in a warehouse. The signatory of the receipt was not the defendant's agent and was only a staff of the warehouse.

30. No issue was raised regarding the quantum of the plaintiff's claim.

(c) Credibility

31. I again accept the plaintiff to be truthful and reliable and reject the testimony of defence witness.

32. The plaintiff has faxed an invoice to the defendant (dated 24 November 1994) about the sale and purchase of the 2nd lot. Further, Mr Hu sent a fax (on 28 January 1995) chasing for the delivery of the 2nd lot.

33. When the 2nd lot arrived Kunming, it was stored in a warehouse. The godown receipt (No. 000684 dated 21 April 1995) shows that the defendant's name has been inserted as the consignee. The plaintiff testified that it was signed by a Madam Lau, who was in charge of the warehouse, on behalf of the defendant.

34. There was a line of correspondence passing between the parties about how to deal with goods of the same type as the 2nd lot.

35. In view of the above documents, I find that the defendant's bare denial of delivery of the 2nd lot should be rejected.

Conclusion

36. Accordingly, there will be judgment against the defendant for the following sums:-

(a) RMB468,800;

(b) RMB68,000;

(c) RMB373,538.93;

(d) RMB10,332.09,

with interest thereon at judgment rate from the date of writ to date of judgment and thereafter also at judgment rate until payment.

Costs

37. Pursuant to RHC Ord 42 r 5B(6), there will be a costs order nisi that the costs of this action be paid by the defendant to the plaintiff to be taxed if not agreed.