SKYCHANCES INDUSTRIAL LTD v. WINSOURCE INDUSTRIES LTD

bjbj DCCJ 1721/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION CIVIL ACTION NO.1721 OF 2005 --------------------

BETWEEN

SKYCHANCES INDUSTRIAL LIMITED Plaintiff and

WINSOURCE INDUSTRIES LIMITED Defendant -------------------- Coram : Deputy District Judge S. T. Poon in Court Date of Hearing : 26th February 2nd March, 2007 Date of Delivery of Judgment : 28th March, 2007

J U D G M E N T Introduction The Plaintiff carries on the business of selling and manufac BfsO P[QX purchased moulds and products from them the prices of which had not been paid. The Plaintiff also alleges that it is a contractual term between the parties that the Defendant shall pay interests of 2% per month in default of payment. Dongguan Main and Houjie are companies registered in the Mainland. Dongguan Main is a limited company whereas Houjie is a so called to between C & K and Dongguan Main or Houjie, neither the Plaintiff nor the Defendant was a party to them. Alternatively, in the event that this court finds that the Defendant was a party, the Defendant counterclaims against the Plaintiff for wrongful detention of their moulds which are still in the Plaintiff s custody. There is no dispute that the purchase price of the subject plastic products and moulds had not been paid. Besides, there is also no dispute that the moulds of the Defendant (or Dongguan Main in the Defendant s case) are still retained by the Plaintiff. It is the Plaintiff s case that they have a lien on those moulds, albeit that some of them had been fully paid and some of them were not even manufactured by the Plaintiff. It is also not in dispute that the Defendant had all along been paying to the Plaintiff in Hong Kong for moulds and products manufactured by C & K and ordered by Dongguan Main and

Houjie. The most important issue in this case is thus, whether there was a contractual relationship between the Plaintiff and the Defendant. Evidence Moulds The purchase contracts of the moulds were evidenced by some written agreements with Dongguan Main and C & K stated as parties. The written agreements were drafted by Dongguan Main and !jwQ ame of Dongguan Main was printed also at the bottom as Party A for signature. There was no name printed as Party B at the bottom. Most of the Mould Agreements exhibited had been signed by someone on behalf of Dongguan Main but there was only one of them being also signed by someone for C & K. However, there is no dispute that these Mould Agreements represent the purchase contracts of the subject moulds. Miss Jessica Ma ( ) of the Plaintiff testified that C & K was an agent of the Plaintiff when entering into the Mould Agreements. It was however unclear and lack of particulars as to the basis upon which this proposition is made. Ma did mention that there had been discussions between Mr. Ha ( ), owner of the Plaintiff, and Mr. Wilson Wong ( Wilson Wong ), owner of the Defendant, about who would be the contracting parties and she was given to understand that the business transactions were conducted between the Plaintiff and the Defendant. However, this had not been pleaded in the Statement of Claim even in its re-amended version nor was it

mentioned anywhere in Ma s witness statement. Apart from not being stated anywhere in the pleadings and witness statements, what was discussed between Ha and Wilson Wong had not been particularised in Ma s testimonies. There was no indication whatsoever as to where and when those discussions took place and what had actually been discussed between them. The evidence of Ma in relation to the discussions was nothing more than what was mentioned in the previous paragraph. On the other hand, Mr. Wong Sai Keung ( Wong ), an accountant of the Defendant and also a younger brother of Wilson Wong, gave evidence that the Defendant had never intended to be a party of the Mould Agreements. Dongguan Main was not authorised to act as an agent of the Defendant at any time, the Defendant only paid the Plaintiff on behalf of Dongguan Main at it s request. Since there was a current account between the Defendant and Dongguan Main and also that the Defendant had to pay for goods supplied from them anyway, the Defendant agreed to such an arrangement. Mr. Ng, counsel for the Defendant, submitted that the names of the contracting parties were clearly stated on the Mould Agreements, by alleging that the parties stated therein had in fact acted as agents the Plaintiff is seeking to introduce evidence to directly contradict a written term of the contracts. Miss Yang, counsel for the Plaintiff, submitted

that there is documentary evidence supporting the fact that the Plaintiff and the Defendant were parties to the Mould Agreements. However, the documentary evidence referred to by Miss Yang was nothing more than the business cards of the staff of the Defendant and Dongguan Main, showing that they had the same addresses and numbers printed on the cards, and the accounting records of the Defendant, showing that it paid for the goods ordered from the Plaintiff. With respect, these are at most peripheral circumstantial evidence seeking to draw inferences in support of the Plaintiff s allegation. The only direct evidence to contradict the intentions of the contracting parties as stated on the written contract is the non-particularised late-coming hearsay evidence of Ma which I find it to be unreliable. Let alone the parol evidence rule, there is simply insufficient evidence to prove that Dongguan Main and C & K had acted as agents when entering into the Mould Agreements in the light of what was evidenced by the written contracts. I find that the Defendant was not a party to the Mould Agreements. Dongguan Main and C & K had entered into the contracts in their own capacity. It follows that the Plaintiff s case for the purchase price of the unpaid moulds against the Defendant must fail. Upon this finding, as the Defendant was not a party to the Mould Agreements, its counterclaim against

the Plaintiff must also fail. But for the fact that the Defendant was not a party to the contract, and hence not the owner of the moulds, I would have found that the Defendant has a valid claim against the Plaintiff for wrongful detention of their moulds. The subject moulds that are retained by the Plaintiff relating to the Defendant s counterclaim are either fully paid for or not manufactured by the Plaintiff or C & K. There is nothing agreed between any parties that the Plaintiff or C & K can have the right of lien or other rights whatsoever to retain those moulds should there be outstanding price of other goods not being settled. Products The sale contracts for the subject plastic products were neral manager of Dongguan Main, explained that the letterhead of the Defendant was used because of confusions occurred during the time when the company in Mainland was newly set up. It is unclear as to whether the company referred to by Wu was Dongguan Main or Houjie. I cannot accept Wu s explanation. His evidence in relation to this was vague. The purchase orders were prepared by the staff of Dongguan Main and according to Wu, they were at that time helping Houjie to set up a purchasing team for plastic products. It would be difficult to understand what confusions might cause the staff of Dongguan Main to use the letterhead of the Defendant in ordering goods from C & K and even more

difficult to understand why the names of Dongguan Main and Houjie were stated as authorised representatives. The only conclusion that could be drawn is that the Defendant had in fact placed purchase orders to C & K through Dongguan Main and/or Houjie. Having said that, however, the name of the supplier was only stated as C & K on all the purchase orders. There was no mention of the Plaintiff s name anywhere. Apart from the evidence of Ma saying generally that all business transactions were between the Plaintiff and the Defendant, there is no evidence to suggest that C & K was supplying the plastic products to the Defendant as agent of the Plaintiff. As evidenced by the purchase orders, the Defendant intended to contract with C & K rather than anyone else. There is also no evidence to suggest that C & K or the Plaintiff had ever made aware the Defendant of any agency relationship between the Plaintiff and C & K as regard the subject purchase orders. Although it is my finding that the Defendant shall be liable to C & K the unpaid price of the purchase orders issued under its letterhead, there is by no means sufficient evidence to make the Defendant liable to the Plaintiff for it. Conclusion Miss Yang stressed once and again that the relationship between the Defendant, Dongguan Main and Houjie was a close one. This I cannot disagree. Although witnesses of the Defendant tried very

hard to give an impression to the court that they were unrelated, it is unrealistic to conclude as such in view of the evidence as a whole. Be that as it may, the companies are separate legal entities and shall not be liable to liabilities of the others unless in exceptional circumstances. Quite contrary to what was suggested by Miss Yang, the present case is plainly not one that calls for the court to lift the corporate veil. It is for the Plaintiff or C & K to choose the proper party to sue and obviously they had made a wrong choice. In the premises, I order that the Plaintiff s claims and the Defendant s counterclaim be dismissed. I can see no reason why costs should not follow the event and I make an order nisi that costs of the original action be to the Defendant to be taxed if not agreed, with certificate of counsel. There be no order as to cost for the Defendant s counterclaim. This order nisi shall become absolute after 14 days from the date of handing down of this judgment. (S. T. Poon) Deputy District Judge Miss Eugenia Yang instructed by Messrs Stevenson, Wong & Co. for the Plaintiff. Mr. Tony Ng instructed by Messrs K. M. Tang & Co. for the Defendant.

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