GUANGDONG (HK) TOURS CO. LTD. v. LINCOLN VENANCIO AND OTHERS

HCA 8178/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 8178 OF 1998

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J U D G M E N T

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Introduction

1. By writ of May 1998 the plaintiff Guangdong (H.K.) Tours Co. Limited, an authorized travel agent in Hong Kong, sued four individuals trading under the name of Spectrum for the balance of the cost of travel and hotel accommodation incurred by the plaintiff for and on behalf of Spectrum and not paid for. This amounts to $1,584,165.00. No defence having been filed judgment by default was entered in June 1998. The first named of the individuals, Lincoln Venancio (named in this judgment the first defendant) applied to have judgment against him set aside, and this was granted. This trial, then, is limited to the issue of the first defendant's liability. His defence in a re-amended defence dated June 2000 is that neither he nor any of the other three named individuals in the plaintiff's writ traded as Spectrum; in particular they did not, in such guise, contract with the plaintiff for the supply of travel or related services. He does not deny that the plaintiff is entitled to be paid for services rendered in the amount it sues for, but this by various individual incorporated companies trading under the umbrella called the Spectrum Group of Companies. Neither he nor any of the individuals sued have any personal liability.

2. Thus the plaintiff's claim stands or falls on whether it contracted with the first defendant and others holding themselves out as trading under the name of Spectrum.

Evidence

3. Two witnesses filed statements and were called upon to adduce evidence, one for each side.

4. Miss Eva Chan, for the plaintiff, came first. She said that the plaintiff at all material times has been a travel agent. For six years she has been employed by it as its International Manager. Her duties include receiving orders from customers and, on such request, booking air travel, hotel accommodation and group tours. In that capacity, in 1995, she came to meet the first defendant when he told her he ran a company called Media Serv Limited (MSL). As a result of that contact the plaintiff came to provide travel services, which transactions were concluded to the satisfaction of both parties.

5. In 1996 the first defendant made contact again. It is her account that he represented himself then as the boss of a company called Spectrum. He handed her his business card which contained the title Spectrum, his name and then his description Group Managing Director. She took this to mean that he was the head of two companies - Spectrum, and the one which the plaintiff had already done business with, MSL. She was provided with promotional material, which described Spectrum as a pioneer in the development and commercial promotion of Asian sport. Spectrum was regularly required to provide travel and hotel accommodation for those engaged in a particular activity it was running and was looking to the plaintiff to provide such service. He told her that Spectrum was in the throes of promoting a professional basketball league called Chinese New Basketball Alliance (CNBA) which would significantly increase its travel requirements.

6. Miss Chan said they came to agree that the plaintiff would supply to Spectrum all its travel needs. The agreement was confirmed in a letter sent to the plaintiff under the letterhead of Spectrum signed by a Mr Maurice Tun titled General Manager Finance and Administration. The manner in which bookings were to be made and those authorized to make the bookings were set out also. I reproduce here the letter in full:

S P E C T R U M

HONG KONG ■ TAIPEI ■BEIJING

KUALA LUMPUR

"November 15, 1996

Guangdong (H.K.) Tours Co., Ltd.
G/F, Hanley Commercial Bldg.
776-778, Nathan Road
Kowloon

Attn: Ms Sophy Zhang

Dear Sophy,

We are please to open an account with you as one of our travel agent. However, we need your help to secure our control on bookings.

We have appointed Mr Ellis Chiu, Ms Mary Liu or Ms Angela Wong to book on behalf of our company. Please make sure you received our TRAVEL FORM, with signature of approval as a booking confirmation (i.e. a purchase order) before issue the ticket. Please find below samples of the authorized signatories and attached a copy of our TRAVEL FORM.

Ellis Chiu	Andy Jay
Maurice Tun	Lincoln Venancio

Please be reminded that our company would only recognize the travel expenses with either one of the four signatures on the TRAVEL FORM.

Do not hesitate to call me if there are any queries.

Kind regards,

 

Maurice Tun
General Manager
Finance & Administration
/aw

c.c.: Lincoln Venancio, Andy Jay, Mary Liu, Ellis Chiu, Angela Wong

Head Office: 8/F., Trinity House, 165 Wanchai Road, Hong Kong
(Tel: 852)2834-0060 Fax: (852)2838-8593"

7. And that is how they came to do business. Someone from Spectrum would send a schedule, usually faxed on a form headed Spectrum Group Travel Form. The plaintiff undertook the arrangements, booking and paying for the travel or related service, uplifting the travel documents and delivering them, together with two copies of an invoice addressed to Spectrum, to Spectrum's offices in Wanchai. The duplicate invoice would be stamped by the receptionist and handed back, signifying receipt.

8. A number of transactions came to be satisfactorily negotiated and completed in this way. Business was brisk and regular; by mid 1997 when business ceased more than $4 million had been invoiced.

9. For the first months accounts were regularly settled promptly. Then, without warning, payments stopped with a significant amount outstanding. Miss Chan chased the first defendant for payment. She said he proposed and the plaintiff agreed that this would be met by instalments between April and July 1997. The first defendant reduced this to writing, which I reproduce as follows:

S P E C T R U M

HONG KONG ■ TAIPEI ■BEIJING

KUALA LUMPUR

"March 27, 1997

To: Ms. Eva Chan
Guangdong (H.K.) Tours Co., Ltd.
From: Lincoln Venancio

Dear Eva,

Further to our telephone conversation, I would like to confirm our payment schedule as follow:

April 30, 1997	20%
May 31, 1997	30%
June 30, 1997	25%
July 31, 1997	25%

Thank you for your support and understanding and we look forward to our continuous cooperation.

Kind regards,

Lincoln Venancio
Group Managing Director

LV:sk

cc: Derick Wu, Accounting Manager - Spectrum

Head Office: 8/F., Trinity House, 165 Wanchai Road, Hong Kong
(Tel: 852)2834-0060 Fax: (852)2838-8593"

10. On Miss Chan's account this commitment was not honoured at all. Believing it to be a delaying tactic or trick and that she and the plaintiff had been deceived she laid a complaint to the police. After investigation they told her the matter should be pursued civilly.

11. And so the plaintiff sued. It is her claim that an entity called Spectrum, however constituted, is liable. The contract, negotiated between herself and the first defendant in 1996, was between the plaintiff and Spectrum. That was why the invoices were, for all travel and other services provided, made out to Spectrum. She had no knowledge of the existence of any companies which formed part of a so-called Spectrum Group of Companies. She had no knowledge of any arrangement whereby the company whose chop was found on the duplicate invoice would be contractually liable.

12. In cross examination Miss Chan said that she came to know that some of the invoices were met by various companies, not by the defendants. She conceded that it was never her understanding that the plaintiff had contracted and was doing business with a firm or partnership. She accepted that on no occasion did the first defendant or any of the other three sued tell her that they were operating as a firm or partnership. When she was asked why was it, then, that the plaintiff chose to sue them in their personal capacity, operating as a firm, she was unable to answer.

13. The remaining witness was the first defendant himself, Mr Lincoln Venancio. He said at all material times he was and remains a director of a BVI company called Spectrum International Holdings Limited, which is the parent company of Spectrum Entertainment Holdings Limited (SEHL) which in turn is the holding company of seven subsidiaries. He is a director and in charge of operating all of them, hence his title Managing Director of the Spectrum Group of Companies as per his business card. In addition he is a director of Warminster Enterprises Corporation (Warminster) another BVI registered company. Whilst it is not by shareholding related to or part of the companies comprising the Spectrum Group it undertakes much of its business in conjunction with member companies of the Spectrum Group.

14. The Spectrum Group and Warminster promote sporting events in Asia. The business operations are entirely encompassed in the Spectrum Group and Warminster. There is no company called Spectrum. There is no unincorporated firm or partnership operating under the name of Spectrum. He is not and never has been in partnership with the other named defendants Ellis Chiu, Andy Jay and Maurice Tun. All three at the material time were in the employ of one of the companies in the Spectrum Group called Pro-Tennis Management Limited. All have long since resigned and moved away.

15. Whilst he has no recollection of being in direct touch with Miss Chan, as is her evidence, he accepts there was a steady stream of business between the plaintiff and Spectrum Group and Warminster from September 1996 to mid 1997. He said by arrangement confirmed in the letter of 15 November 1996 travel would be ordered by a faxed Spectrum Group Travel Form signed by an authorized signatory. The cost of that was borne by that member of the Spectrum Group or Warminster that had called for it. The invoice when it issued from the plaintiff was invariably addressed to Spectrum. It was thus essential that the duplicate invoice be stamped with the chop of the company that needed the service so that the plaintiff knew as to which it should look for payment. So it was that business in this way was conducted between September 1996 and mid 1997. Whilst he does not dispute Miss Chan's evidence that it amounted to around $4 million he said some of that was offset by advertising that was carried out by the Spectrum Group on behalf of the plaintiff. And he does not dispute, as I shall come to, that $1,584,165.00, the amount sued for, remains due and outstanding.

16. Sometimes, because of the advertising contras and for ease of internal management, SEHL assumed liability by chopping the duplicate invoices, paid the amount and then recovered the amount due from the company within the group (including Warminster) that was liable.

17. Warminster and a Spectrum Group company called Spectrum Pacific Limited (SPL) were jointly responsible for setting up CNBA, the basketball league in China. It was through them that travel was ordered from the plaintiff. Most of the invoices were, in the event, chopped by SEHL rendering that company liable to the plaintiff, though SPL and Warminster recognized primary responsibility was theirs. CNBA ran into difficulties and was wound up unable to meet its debts. Warminster and SPL were not paid and had no funds to pay the full amount of travel costs incurred, or put SEHL in funds to do so. This led to default in meeting on time the plaintiff's bills and the arrangement set out in the letter of 27 March 1997, which was a genuine attempt by the management of SEHL to meet what it knew was its obligation to pay, not, as Miss Chan says, a trick or delaying tactic. Contrary to Miss Chan's evidence the balance was reduced in a concerted attempt to honour the settlement. By 31 July four lots of cheques of $200,000.00 were written on Warminster's account in reduction of what was due. He has exhibited those returned cheques. What is not disputed is that following credit for those payments the sum of $1,584,165.00, the amount now sued for, was and remains outstanding. SPL and Warminster have ceased trading and have no funds to pay or reduce the debt. SEHL has attempted to settle but without prejudice negotiations have not been successful.

18. In cross examination Mr Venancio denied he had promoted his company as Spectrum thereby misleading the plaintiff that there was such an entity. He said it was common shorthand for the group or holding company to be referred to as Spectrum. But it was common knowledge, from the signboards at the registered office, from the various company chops affixed to the duplicate invoices, from the cheques presented in payment coming from a variety of different companies, that there was and remains a group of separate companies comprising the Spectrum Group of Companies.

The Outcome

19. It is for the plaintiff to prove it contracted to sell to the named four defendants (of which the first defendant is one), holding themselves out as carrying on business under the style or firm name of Spectrum, air tickets and hotel accommodation supplied but, as to the sum of $1,584,165.00, not paid for.

20. There is no doubt that in 1996, prior to any business between the plaintiff and Spectrum, there was communication between Spectrum's representatives and Miss Chan and perhaps others of the plaintiff concerning a prospective business relationship between the plaintiff and Spectrum. Whether the first defendant participated directly at this stage is not clear. Miss Chan said he did. He cannot recall. But it is likely he came to be at some stage, for Miss Chan had in her possession his business card.

21. What is clear is that Spectrum was put forward as a corporate entity. Promotional material, albeit, according to the first defendant, intended primarily to attract sponsorship, had somehow found its way into Miss Chan's possession. There are within it references to a company called Spectrum, for instance: "Spectrum - Company profile", and "Since its corporation in 1987, Spectrum .....". The first defendant's business card under the title Spectrum describes him as Group Managing Director. The letter confirming the opening of an account, already reproduced in this judgment, with its letterhead depicting Spectrum and a logo, made reference twice to "our company", and the signatory carried the title General Manager, Finance and Administration.

22. I am satisfied that when the plaintiff came to conduct business with Spectrum it did so with a corporation. Whether it was then aware or came to know that this was shorthand for a series of companies, linked by ownership to be part of a group known as Spectrum Group of Companies or not, is not important. If it chose to provide services on credit without undertaking its own enquires or establishing just with whom it was dealing, or putting into place procedures to protect its position, that was a matter for the plaintiff.

23. What is also clear is that at no stage did the four defendants held themselves out to be carrying on business under the firm name of Spectrum as to give rise to personal liability. All four including the first were at the material time employees of one or more of the member companies of the Spectrum Group of Companies. In that capacity and that alone did they come to be involved. At no stage did they or any of them contract either individually or under the firm's name of Spectrum to purchase travel from the plaintiff for which they would be jointly or severally liable.

24. I come to this conclusion because there is not a shred of evidence to suggest otherwise. Even the plaintiff's own witness Miss Chan said that she never understood the plaintiff to have contracted and done business with a firm or partnership whose members were the defendants or any of them or, for that matter, anyone else.

25. Borrowing the lines of Mr Bell, counsel for the first defendant, I am satisfied that the plaintiff's claim is a cynical attempt to recover moneys due and unpaid from someone who is not liable. It must wholly fail.

26. There remains the formality of my judgment. That part of it dealing with costs will be subject to the right for the parties to return for argument on notice given within 14 days.

Judgment

27. The claim against the first named defendant is dismissed.

28. Costs including any reserved shall be to the first named defendant, taxed if not agreed.

29. The order as to costs shall be nisi at first instance.