AC GLORY MARKETING CO LTD v. PUREMED MEDICAL CENTRE LTD

DCCJ1747/2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1747 OF 2016

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DECISION

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1.  This is the plaintiff’s application for summary judgment against the defendant for:-

(a)   A sum of HK$125,846 as claimed in the Statement of Claim dated 18 April 2016;

(b)   Interest on the said sum;

(c)   Costs;

(d)   The counterclaim in the Defence and Counterclaim be struck out.

Background

2.  The background of the case is as follows:-

(a)   By a written agreement dated 16 October 2015 entered into between the plaintiff and the defendant, the defendant engaged the service of the plaintiff to carry out marketing activities on behalf of the defendant to solicit new customers to the defendant, and arrange the customers to attend the defendant’s shops for beauty care and/or cosmetic treatments.  It was agreed that the defendant would pay the plaintiff HK$1,000 for every new customer introduced plus 20% of the first expenditure spent by the said customers (“the Agreement”).

(b)   Payment would be made on the seventh day of each month after verification of the account. 

(c)   The plaintiff had introduced 179 customers who had spent a total of HK$30,875 at the defendant’s shops in November 2015 and such account was verified by both parties.

(d)   Some customers who attended the defendant’s shops were removed from the account and were not verified due to their age or physical conditions.

(e)   The plaintiff had introduced two customers who had spent a total of HK$1,980 for the period from 1 December 2015 to 8 December 2015 and such account was verified by both parties.

(f)   The plaintiff claimed the sums of HK$185,175 (November 2015) and HK$2,396 (December 2015) (“the Commission”).

(g)   Accordingly, two invoices were issued on or around 10 December 2015 and 4 January 2016 respectively;

(h)   On 21 December 2015, the defendant informed the plaintiff by email that the payment was pending the top management’s approval.

(i)   On 7 January 2016, Tackie Cheuk of the defendant sent an email to the Angel Cheung of the plaintiff and stated as follows:-

“日前與閣下商議後將分三期付費的第一期的支票已準備好，貴司可隨時請速遞到取或可入貴司賬戶。

由於与貴司合作的一個半月時間中，出現客人雖多，但成功銷售率比正常我司与其他公司合作的成功銷售率明顯偏低，差距亦甚遠！

嚴重影響貴司的市場形像及說服力。

為確證出現的客人是從正常途徑推介至本店，而非貴司的集团性包銷工作人員或親友，我司希望貴司能提供有關附夾call客的對話內容給予我司作了解及確認客人的真偽。

以便盡快作出報告及付費。”

(j)   On 8 January 2016, the defendant made a part-payment by delivery of a cheque of HK$61,725 to the plaintiff.  The amount is exactly one-third of the commission for November 2015. 

(k)   The defendant refused to provide the requested information.

(l)   Between January 2016 and March 2016, the plaintiff sent further requests and/or demands to the defendant for payment of the outstanding amount, being HK$125,846.  This included requests by emails and a demand letter from the plaintiff’s solicitor dated the 4 March 2016. 

The defendant’s submissions

3.  The defendant’s stance was that the plaintiff should not be entitled to summary judgment.  There were disputes in facts and law.  The matter should go to trial, and the case depended on the credibility of witnesses.

4.  The defendant contended that in additional to the express written terms in the Agreement, there were also oral representations relating to the quality of customers.  There were factual disputes as to whether the plaintiff had made such representations.

5.  In paragraph 19 of the affirmation of Hung Wai Kit (“Hung”), the proprietor and sole shareholder of the defendant, Hung affirmed that:-

“Angel Cheung of the plaintiff told Tackie over the phone, which Tackie related to me straight away after the call, that she has engaged in the business of selling hotel package before and she had a great number of good quality customers including flight attendants and office ladies.  Angel Cheung further represented that the Plaintiff were very experienced in the business call center and introducing customers to beauty care center and they had been providing services to many big beauty care companies including “About Beauty” and “Be a Lady”.  Angel Cheung expressed (sic) represented on behalf of the plaintiff that they would introduce customers of the 1st and the 2nd type mentioned in paragraphs 12 and 13 (should be 13 and 14) in the above” (“the Representations”).

6.  The first type of customers mentioned in paragraph 13 was those who came with a true will and genuine need to use beauty care or aesthetic medical services.  They would open their ears to listen to the presentation of the staff of the defendant and ask sensible questions.  Most of them ended up spending money to buy the services.

7.  In paragraph 14, the second type of customers was those attracted by the free services or service offered at a great discount.  However, after enjoying those free or discounted services, they were willing to listen to the presentation of the staff services with sincerity, and sometimes bought extra services according to their needs and financial means.

8.  In paragraph 4 of the Defence and Counterclaim, the defendant pleaded that the plaintiff represented orally that “the new customers introduced by the plaintiff would be of good financial means, who understands the purpose of going to the defendant's shops”.

9.  Alternatively, the defendant contended that there were implied terms in relation to the quality of customers to give the Agreement business efficacy.  There was dispute of law as to whether such terms must be implied to give the Agreement business efficacy.

Analysis and reasons for decision

10.  I do not accept the defendant’s contention that Angel Cheung expressly represented on behalf of the plaintiff that they would introduce customers of the first and the second type mentioned in the affirmation of Hung.

11.  The defendant knew that the plaintiff engaged in the business of call centre.  Mr Hung said that he had experience of such call centre.  The business model is to introduce clients through cold calls.

12.  Mr Li, counsel for the plaintiff, submitted that it would be impossible and impractical for the plaintiff to check or verify the new customers’ state of mind and financial stance. Furthermore, there was no way for the plaintiff to know whether the new customers “were willing to listen to the presentation of the defendant’s staff and would buy extra services according to their financial means”, as this would depend on many factors outside the plaintiff’s control.  The factors include the following:-

(a)   The quality/effectiveness of the defendant’s presentations;

(b)   The quality of the services provided by the defendant, including the initial free/discounted services;

(c)   Whether the new customers were satisfied with the defendant’s services, including the initial free/discounted services;

(d)   The type of offers that were made by the defendant to the new customers after the initial free/discounted services.

13.  Hence, Mr Li submitted that it was unbelievable and did not make sense that the plaintiff would make the representations to the defendant when entering into the Agreement.

14.  I accept Mr Li’s submissions.  It is highly unlikely that in cold calls, the caller asks question about the financial status of the customers.  The purpose of the call is to convince the customers to attend the defendant’s shops to try the free service offered in the month of November 2015.  It would also be impossible to ascertain the state of mind of the customers, or to know whether they are willing to listen to the presentations of the defendant’s staff.  I find such allegations unbelievable.

15.  As the defendant knew about the operation of the plaintiff’s business, it is also unbelievable for Hung to say that he relied on such representation to enter into the Agreement.

16.  Such finding is also supported by Tackie Cheuk’s e-mail dated 7 January 2016 that she just asked for the calling record to identity the genuineness of the customers.  No challenge as to the quality of the customers had been raised.

17.  Further, there is nobasis and no evidence to support the defendant’s allegations that the new customers were “not of good financial means” or that they “did not understand the purpose of going to the defendant’s shops”.  The only fact put forward by the defendant is that the new customers spent less money than what the defendant had expected after the initial free/discounted services.

18.  Even if there were such representations, I find that there was no evidence to show that they were false.

19.  The willingness of the new customers to purchase more services from the defendant after the initial free/discounted services depended on many factors, including whether the new customers were satisfied with the defendant services and the content of the offers proposed to the new customers.

Implied term argument

20.  It is the defendant’s alternative argument that therewere implied termsto give business efficacy to the Agreement that “the new customers introduced by the plaintiff would be of good financial means, who understand the purpose of going to the defendant’s shops”.  There was also an implied term as to the quality of the new customers.

21.  In relation to implication by the unexpressed intention of the parties and the “official bystander”, the relevant principle is that the implication must be “necessary to give the transaction such business efficacy as the parties must have intended”.(The Moorcock [1889] 14 PD 64)

22.  The test was summarised by Lord Simon in the following terms:-

“for a term to be implied, the following conditions must (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract , so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of close expression; (5) it must not contradict any express terms of the contract.”(BP Refinery [Westport] Pty Ltd v Shire of Hastings (1977) 16 ALR 363)

23.  I accept Mr Li’s submission that both parties knew that it was impossible for the plaintiff to check and verify the financial and mental capabilities of the new customers prior to introducing them to the defendant.  Mr Li submitted that it was neither necessary norreasonable for the term to be implied in the Agreement, I agree.

24.  I find that the term “of good financial stance” is rather vague.  Mr Li submitted that even if there was such an implied term, there was no evidence to suggest that the new customers were not of good financial stance, and hence, the plaintiff was not in breach of such term.

25.  Ms Lee, counsel for the defendant, submitted that there was an implied term as to the quality of the customers.  But she did not specify such quality other than good financial stance.  I accept that there were implied terms in the Agreement, for example, the customers must be of sound mind or not with a disability so that she will have the capacity to enter into a contract.  But the defendant should specify the kind of quality she was referring to, and how the plaintiff breached such term. 

26.  Furthermore, it is noted that before the defendant made the first payment, the list of customers had already been verified and some customers had been removed from the list.  I do not accept such vague terms as contended by the defendant had been implied and there was also no evidence that the plaintiff had breached the term if it was implied.  The defendant could simply challenge the suitability of an individual customer and refuse to verify that customer for payment.

27.  As to whether the customers were genuine, no evidence had been submitted by the defendant challenging their genuineness.  The defendant actually had the telephone numbers of the customers for verifications.

28.  The plaintiff’s argument of non est factum has no basis and merits at all.

29.  I grant judgment for the plaintiff as claimed and dismissed the counterclaim.  The sum will carry interest calculated from 7 January 2016 at 2% p.a. to the judgment date and thereafter at judgment rate.

30.  Order nisi that costs of the action and the application, including reserved costs, with certificate for counsel, be to the plaintiff.  Unless application is made within 14 days, such order will become absolute 14 days thereafter.

31.  I thank counsel for their assistance.