XCHRX SOLOMON TECHNOLOGY CORPORATION v. KARMA (ASIA PACIFIC) LTD. and JTS CORPORATION (Third Party)

HCA 13339/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 13339 OF 1997

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J U D G M E N T

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1. This is an appeal from the Order of Master Kwan given on 18th May 1998 ordering that summary judgment be entered against the Defendant under Order 14 of the Rules of the High Court for the sum of USD$281,184 together with interest and costs.

2. The Plaintiff's claim against the Defendant is for the sum of USD$281,184 being the price for goods sold and delivered by the Plaintiff to the Defendant. There is no dispute that goods, namely computer hard disk drives, were sold and delivered to the Defendant. The Defendant, however, says that the contract that it had entered into was a contract between JTS Corporation ("The Third Party"), the producer of the products and itself and not a contract that they entered into with the Plaintiff. This is despite the fact that a purchase order signed by the Defendant and dated 20th September 1997 was issued to the Plaintiff by the Defendant.

3. By way of background, the Third Party had appointed the Defendant as a distributor for its products in China and Hong Kong under a Distribution Agreement dated 4th June 1997 on the terms and conditions set out therein. As part of the schedule plan under the Distribution Agreement, the Third Party was to supply 1,920 pieces of hard disk drives at the unit price of USD$146.45 with a delivery schedule set out therein. As the Third Party was temporarily out of stock for this item it was unable to deliver this item to the Defendant but arranged for the Plaintiff, who was a distributor of the Third Party in Taiwan, to supply the same to the Defendant. This led to the purchase order being issued. The Plaintiff says that this shows that the contract to supply 1,920 pieces was one between the Plaintiff and the Defendant. The Defendant, however, says that the purchase order was issued to the Plaintiff because Miss Jean Chan of the Third Party told the Defendant that it was required by the Plaintiff to comply with the formalities of the Taiwanese Customs and Excise to enable the drives to be exported to Hong Kong. That is the reason given as to why the purchase order was issued to the Plaintiff and not to the Third Party.

4. On 5th June 1998, the judgment sum with interest was paid into court as a condition for granting stay pending appeal. That money is still in court. Mr. Graham, counsel for the Defendant, has offered on behalf of his client to leave the money in court as a condition for leave to defend.

5. The main issue between the parties is: who are the contracting parties? Were the goods sold and delivered under a contract between the Plaintiff and the Defendant or under a contract between the Third Party and the Defendant? On the face of the purchase order it would appear to be between the Plaintiff and the Defendant, but as Mr. Graham for the Defendant correctly pointed out, in my view, the purchase order is not the entire contract between the parties. The purchase order has not been signed by the Plaintiff and it is important that the whole picture be looked at in my judgment.

6. There are number of matters raised in the second affirmation of Anita Yu which was not before the Master and which in my judgment requires the matter to be investigated at trial. I mention some of these. Mr. Graham has commented on the fact that on the purchase order itself it shows that the freight charges were prepaid by the Third Party. If the contract was one between the Plaintiff and the Defendant it would be unusual for the Third Party to pay the freight charges. Also, the unit price of US$146.45 was the very same price which the Defendant had agreed to pay the Third Party, the producer of the goods. The Plaintiff being also a distributor of the Third Party in Taiwan was charging the very same price. It would, it was suggested, be unusual for a distributor to charge the same price as the producer and it suggests that the contract was one between the Third Party and the Defendant. Also, the Plaintiff and the Defendant have no prior dealings yet the Plaintiff was content to ship the goods on credit terms and without requiring a letter of credit or other security for payment again suggesting that the contract was one between the Third Party and the Defendant.

7. There are other matters which are set out in the second affirmation of Anita Yu but it is not desirable that I should deal with these in detail. I am satisfied that the matter should go to trial. The Defendant has offered to leave the money already paid into court to remain in court as a condition for leave to defend. I am prepared to grant leave to the Defendant to defend on condition that the money paid into court do remain in court until judgment. The appeal is allowed and I grant conditional leave to defend on condition that the money paid into court do remain in court until judgment.

[After hearing submissions]

8. I will leave the costs order before Master Kwan undisturbed as the Defendant has put in new evidence which was not before the Master. Costs of the appeal is to be costs in the cause.