PLEXIAN INTERNATIONAL LTD AND ANOTHER v. JIN TIN INTERNATIONAL LTD AND OTHERS

HCA1058/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1058 OF 2006

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D E C I S I O N

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1. This is an Order 14 application in relation to sale of goods.  Two broad lines of defence have been put forward:

(i)	the balance sheet point, as Mr Yau put it; and
(ii)	two, that the 1st defendant was the principal of the plaintiff (the agency point).

The Balance Sheet Point

2. On this point, I rule against the 1st defendant.  The court is concerned with resolution of disputes between parties.  If there is no dispute, then even though there was only one contract between the parties, there is no point in a plaintiff setting out the whole history of dealings thereunder for which the plaintiff has no complaint.  The burden, rather, is on the 1st defendant (whose case is that the plaintiff is liable to reimburse it) to give particulars in support of its averment.  Apart from a bare assertion that it had only received a deposit of US$408,398.49 and that there were outstanding deficits of over US$500,000.00, the 1st defendant was not close to discharging its onus in an Order 14 application. 

3. Mr Yau comments on the reliefs sought by the plaintiffs, namely, damages.  It is true that the plaintiffs are asking not for restitution of the price of goods per se but damages for breach of contract.  I agree with Miss Ismail that, notwithstanding any duty to mitigate on a breach of contract, there is no question that the plaintiff will recover the amount it has paid to the 1st defendant and for which they have not received any goods.  In my view, there is no arguable defence under the balance sheet point. 

The Agency Point

4. The agency point rests on an alleged oral agreement.  Having regard to the pleaded terms of that agreement which were premised on an intention to circumvent loss in the Mainland, it is understandable that the alleged agreement would not be in writing.  This court, however, always reminds itself that oral agreements are easy to assert but difficult to prove. 

5. In an Order 14 context, regard must be had to the surrounding circumstances disclosed to see if the defendant's case is at all believable.  The test is not whether the defence is to be believed.  As pointed out by Mr Yau for the 1st defendant, the facts in the well-known case of Ng Shou Chun shows a situation of proper documentation and yet leave to defend was given on a set of facts not quite supported by documents. 

6. In the present case, having considered first the documents, I am of the view that the documents point to only one conclusion, i.e., that the 1st defendant was not an agent of the plaintiffs but was trading in its own right.  This is evidenced by the pro forma invoices describing D1 as "the seller".  The demand letter from the 1st defendant's solicitors dated 4 January 2006 described the 1st defendant as having by five pro forma invoices "agreed to sell" certain goods to the plaintiffs. 

7. In terms of surrounding circumstances, I first considered the terms of the alleged agreement set out in paragraph 9 of the defence.  On its face, this agreement purports to benefit both parties.  To say the least, the 1st defendant would get commission, whereas the plaintiffs would be able to obtain cheaper goods.  What I find puzzling, however, was the term set out in paragraph 9(g) of the defence.  One wonders why, as agent, the 1st defendant would agree to prepay 85 to 90 per cent of the price of goods to the supplier on behalf of the plaintiffs when the commission would only be about 10 to 15 per cent of the price.  On its pleaded case, the amount of prepayment made by D1 reimbursable by the plaintiffs was $576,406.98, about three times as much as the commission of $195,062.41 allegedly owed by the plaintiffs.  This state of affairs simply lacked commercial sense. 

8. The 1st defendant has purported to disclose purchase orders with its Mainland suppliers.  Leaving aside the question of authenticity, these purchase orders are neutral in themselves.  They are consistent with back-to-back sales and the plaintiff's case as submitted by Miss Ismail. 

9. Mr Yau then points to page 83 which shows a purchase order from the 1st plaintiff.  He points out that in the plaintiff's purchase orders, invoices need to state the country of origin per line item, etc., yet in the invoice on page 83 was the remark "no country of origin from China on the boxes".  The wording of the remark was strange.  It does not say the goods should not come from China but that, on the boxes, it should not or need not be stated to be so.  Is there, or was there, anything to hide?  Mr Yau says that this purchase order lends credence to his agency point. 

10. I have seriously considered this document.  It was disclosed as part of the plaintiffs' affidavit evidence.  It was pleaded as one of the purchase orders for which the subject payment of $435,326.70 was made yet (and this was pointed out by Miss Ismail) there was no corresponding pro forma invoice or invoice.  Neither party has explained the meaning or importance of that remark.  Yet the plaintiffs' insistence on its performance by making payment and the defendant's purported intention to effect delivery pending payment as evidenced by the letter dated 4 January 2006 was clear.  The effect of this remark was only relied on by defence counsel in his submission.  It was not the subject matter of comment in his client's evidence.  The remark was equivocal.  It was not necessarily inconsistent with the contract which required country of origin to be stated on an invoice.  I cannot say that this remark created such a doubt as to make the 1st defendant's defence capable of being believed. 

11. Ultimately, considering the evidence as a whole, apart from an assertion, there was nothing from the defendant's side to show what policies or laws of the PRC that the parties intended to circumvent.  They remain bare assertions. 

Summary

12. Miss Ismail has taken me through the documents and I am satisfied that the 1st defendant has received the sum now claimed for.  The 1st defendant has failed to deliver the goods as contracted for as seller. 

13. In deciding the case against D1, I do not think I need to take into account the effect of any judgment on the personal claims against D2 and D3.  Considering the evidence as a whole, the balance sheet point is unsustainable; the agency point is not capable of being believed. 

14. Judgment ought to be to the plaintiffs.