MILLIONICE LTD. t/a BLESSINGS TRADING LTD. v. TOP CENTRE LTD.

H.C.A. No. 1411 of 1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1411 OF 1997

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J U D G M E N T

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1. This is an action commenced by Writ of Summons dated 5th February 1997 wherein the Plaintiff company claims $222,259.18 as being the sum due to it from the Defendant company in respect of goods sold and delivered. That sum is the total represented by 4 invoices issued by the Plaintiff to the Defendant in March and April 1996. Subsequent to the issuing of the writ the Plaintiff acknowledged in a Reply dated 28th May 1997 that the sum of 20,812.50 set out in one of the invoices was not in fact due to the Plaintiff from the Defendant. Thus the total amount now claimed in respect of 3 invoices is $201,446.68 plus interest.

2. It is not disputed that goods to that value were duly ordered by the Defendant from the Plaintiff and were supplied, on the Defendant's instructions, by the Plaintiff to Senon International Limited (hereinafter called Senon) which had placed an order for those goods with the Defendant. During the course of the evidence before me, it was suggested that, in relation to the goods the subject of the three invoices, the Defendant was acting as a 'middleman' between the Plaintiff and Senon or as the agent or broker for Senon.

3. I was told in evidence by a Ms Hui, a Director of the Defendant company, that the original intention was that Senon would order fabrics from the Defendant and the Defendant would in turn (with the full knowledge of Senon and to fulfil that order) order those same fabrics from the Plaintiff. Those goods were to be delivered to Senon and Senon would pay to the Defendant the Plaintiff's invoice price plus a sum representing about 8-10% of that invoice price. The Defendant was then to settle the Plaintiffs' invoice and take the additional sum as its fee for ensuring due delivery of the proper order.

4. It was not disputed that the orders for goods which were contracted between the Plaintiff and the Defendant were met; and that the goods were duly delivered to Senon which, in turn, resold them. Nor was it disputed that the Plaintiff did not receive payment in respect of the three invoices either from the Defendant or from Senon, which is now in liquidation. Senon did however issue two post-dated cheques payable to the Plaintiff both of which were dishonoured by Senon's bank.

The issues

5. In its Defence the Defendant claimed that a meeting took place on May 24th 1996 between Mr LAM of the Plaintiff company; Ms HUI of the Defendant company and a Mr POON and a Mr CHIU of Senon and that at that meeting it was agreed that from that day Senon would take over from the Defendant responsibility for the sums due to the Plaintiff arising from the three invoices, and that thereafter any further disputes would be resolved directly as between the Plaintiff and Senon.

6. The Defence case, in a nutshell, was that by reason of the oral agreement reached at such meeting (which agreement it was suggested was evidenced by a memorandum faxed by Senon to the Defendant and the Plaintiff) the contract between the Plaintiff and the Defendant had been discharged by reason of the Plaintiff releasing the Defendant company from its obligations under that contract, and by its agreeing to recission by novation in that Senon was to take over the Defendant's liability which arose from the contract.

7. The Plaintiff, however, denies that any such meeting took place, and that whilst there was a meeting between the parties in July, the only thing agreed at that meeting was, that provided Senon settled the three invoices by the end of October 1996 the Plaintiff would take no steps to pursue its claim against the Defendant.

8. The issues then for me to resolve can be simply stated as follows:-

1. Am I satisfied, on the balance of probabilities, that a meeting did take place on 24th May 1996 as alleged by the Defendant and

2. if so, am I similarly satisfied that at such meeting the Plaintiff agreed to release the Defendant from its obligations under the contract upon an undertaking by Senon to settle the three invoices.

The evidence

9. Three witnesses gave evidence before me; Ms HUI of the Defendant company; Mr CHIU of Senon and Mr LAM of the Plaintiff company.

10. Inter alia, Ms HUI told me that shortly after her company started working with Senon she realized that Senon was in financial difficulties and that, in consequence, the Defendant company was at risk. She told me about the meeting which she said took place on 24th May 1996 and, in essence, she said that at that meeting Senon's representatives asked Mr LAM of the Plaintiff company to stop pressing Ms HUI for payment as it was Senon who was responsible for payment. Ms HUI went on to say that Mr LAM responded by saying that he would stop putting pressure on Ms HUI if Senon would give an undertaking to pay the invoice sums. She said that after this meeting she received a 'fax' from Senon in the form that appears at page 21 of the document bundle. Ms HUI acknowledged in her evidence that, thereafter, the Plaintiff still continued to send to her company monthly statements showing the invoice sums as being due from her company, but she said these were usually sent to her accountant's office and she could not recall having seen them.

11. Cross-examined, Ms HUI agreed that she could see no benefit whatsoever to the Plaintiff in agreeing to discharge her company from its obligations, but she seemed to suggest that the Plaintiff might have been influenced in its decision by her saying that she would introduce new business to the Plaintiff if agreement could be reached. Ms HUI agreed that, in essence, what she and Senon were asking of the Plaintiff at the meeting in May was for more time for payment. When asked again what Mr LAM's response was to that, Ms HUI replied - and I quote:

"He said that if Senon acknowledged the outstanding balance then he was willing to set it aside and not to press me for payment".

Ms HUI then agreed that, in essence, all that Mr LAM was saying was that he would give Senon more time for payment, and that he required from Senon a signed memorandum acknowledging its indebtedness.

12. As to the document which Ms HUI said had been faxed to her (and which was the only written document relating to the alleged meeting and one which, if it ever existed, would have borne a date and time of transmission), she said that she had not retained it.

13. Re-examined, Ms HUI was asked if Senon had ever offered concrete proposals to settle the outstanding debt. She replied that its representatives had stated that they hoped to clear the debt within 3-6 months - in other words before November.

14. In his evidence, Mr CHIU told me that he had been a director of Senon (which was established in 1992) which was compulsorily 'wound up' in August 1996.

15. As to the alleged meeting in May, Mr CHIU told me that Mr LAM had then agreed that the sums outstanding in respect of the three invoices would thereafter be the sole responsibility of Senon.

16. Directly contradicting what Ms HUI had earlier told me, Mr CHIU also said that she had agreed to waive her commission, or profit due, from Senon in respect of the orders relating to the three invoices. When asked about the memorandum which had been prepared subsequent to the meeting Mr CHIU sought to blame Mr Poon's secretary for the fact that it did not refer to many of the important matters which he had said had been discussed at the meeting. That was less than kind, given that Mr Poon's secretary did not attend the meeting and given that according to Mr Chiu, Mr Poon had dictated the memorandum to her.

17. Mr Chiu then proceeded to tell me that the memorandum was prepared at the request of Ms Hui, and not at the request of Mr Lam. He said that in so far as Senon was concerned the greatest benefit resulting from the meeting was that Senon was relieved from making any payments to the Defendant in respect of the fulfilled orders represented by the invoices, but that no mention of that benefit was made in the memorandum.

18. As to the memorandum itself Mr Chiu was unable to satisfactorily explain why it was that his signature appeared at the bottom of the page whereas the memorandum was typed at the top. Whilst he somewhat surprisingly agreed that he had subsequently told Mr LAM that a number of blank pages had been chopped and signed by him and Mr Poon, he denied that the memorandum had been typed onto such a page. Finally, when it was put to him that there had in fact been a meeting in July with Mr LAM, at which time Mr LAM had agreed to wait for payment of the sum outstanding until October, Mr Chiu said that he could not remember.

19. In his evidence before me, Mr LAM on behalf of the Plaintiff adopted the contents of his witness statement as his evidence in chief. As I have indicated already, in that statement he denied that there was ever a meeting in May as alleged by the Defendant, let alone a meeting at which he agreed to release the Defendant from its contractual obligations.

20. Cross-examined he denied that there were ever any direct business dealings between his company and Senon which did not involve the Defendant. He told me about a meeting with Ms HUI and the representatives of Senon in July, at which he agreed to give Senon until October to pay the outstanding balance of monies due. He added that he also made it clear at that meeting that if payment was not forthcoming the Plaintiff would look to the Defendant for it, and that was always his position. He frankly, and in my view understandably, said that he was not unduly concerned who settled the invoices - as long as they were settled.

Conclusion

21. On all of the evidence before me, considered in conjunction with the submissions of Counsel, I quite simply am unable to say that I am satisfied on the balance of probabilities that there was a meeting on 24th May 1996 attended by Mr LAM, Ms HUI, Mr POON and Mr CHIU. Whether there was a meeting on that day attended by all of those parties save Mr LAM I simply do not know. I am satisfied however, that there was a meeting between these parties at some stage prior to August 1996, and that at that meeting Mr LAM demanded to have concrete proposals for settlement of the Plaintiffs' outstanding invoices. He received those proposals from the representatives of Senon, and upon their undertaking to pay the sum due before the end of October the Plaintiff(in the form of Mr LAM) agreed to withhold any action against his long time business acquaintance Ms HUI, to whose company his company was contracted.

22. At this meeting Senon bought some extra time for payment for the goods which it had received but not paid for and (I have little doubt) that Ms HUI believed or at least hoped that she would escape her contractual liability to the Plaintiff in the event that Senon complied with its verbal undertaking or promise.

23. I am not satisfied on the balance of probabilities - indeed I am not satisfied on any standard - that Mr LAM ever agreed to release Ms HUI from her contractual obligations. To suggest that he might have done so seems to be to verge upon the absurd. There was no reason whatsoever why he should do so - more particularly given Senon's repeated broken promises in the form of dishonoured cheques and other assurances made both to the Plaintiff and to the Defendant.

24. As to the memorandum which Ms HUI alleges was faxed to her by Senon in May 1996 I simply am not satisfied that such a document was in existence at that time and, if it was, that Ms HUI would be so careless as to fail to retain it in its faxed form bearing a date and time, given that in her view (but not, I might add, in mine) that it helped to exonerate her from her contractual obligations.

25. If there was a meeting in May 1966 involving Mr LAM (which on the evidence before me I have reason to doubt) and if indeed Senon sent a memorandum to the Defendant in the terms suggested (which again on the evidence before me I have reason to doubt), the wording of that memorandum does nothing, in my view, to support the suggestion that the Plaintiff (Mr LAM) agreed to rescind the contract with the Plaintiff so that the Plaintiff's obligations under that contract were taken over by Senon.

26. It was for all of these reasons that I entered judgment for the Plaintiffs on 11th February in the sum of $201,446.68 such sum to bear interest at 11% from 30th May 1996 until judgment and thereafter as provided for by section 49(1)(b) of Chapter 4.

27. Having heard counsel on the matter of costs on the 11th February I further ordered that the Defendant do pay the costs of the Plaintiff to be taxed, if not agreed, upon a common fund basis.