- 1 -

A A

B B
HCA 816/2013
[2020] HKCFI 2642
C C
IN THE HIGH COURT OF THE
D D
HONG KONG SPECIAL ADMINISTRATIVE REGION
E COURT OF FIRST INSTANCE E

CIVIL ACTION NO 816 OF 2013

F F
__________________________
G G
BETWEEN
Plaintiff
H H
HONOUR STATE LIMITED
I I
And
J
Defendant J
GORGEOUS TEXTILLE COMPANY LIMITED
K __________________________ K

L L
Before: Hon Lisa Wong J in Court
M Dates of Hearing: 20, 21, 22 and 27 June 2017 M

Date of Judgment: 22 October 2020

N N

O _________________ O

JUDGMENT
P _________________ P

Q Q
1. This is a claim for the balance of price of goods sold and
R delivered. R

S S
Matters in dispute
T 2. Both the plaintiff and the defendant were at all material T

times garment traders. The plaintiff had connections with garment

U U

V V
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A A

B B
manufacturers and suppliers, and further set up its own garment factory in

C
2009, in Mainland China whereas the defendant was able to obtain orders C
for garments from overseas buyers. They started to deal with each other
D D
in about October 2007. During the period from about October 2007 to
E about December 2012, the plaintiff sold to the defendant, and the E

defendant purchased from the plaintiff, garments with a total f.o.b. value
F F
close to $60 million1.
G G

3. The defendant settled the plaintiff’s invoices in a number of

H H
ways. Other than payment in cash, by cheque, telegraphic transfers and
I back-to-back letters of credit, the defendant would also from time to time I

issue to the plaintiff debit notes by which the defendant set off against the
J J
amounts invoiced by the plaintiff various claims that the defendant had
K against the plaintiff. The defendant had in the said course of dealings K

between the parties issued nearly 400 debit notes2.

L L

M 4. In issue is the state of the final account between the parties M

as at 31 December 2012 when they ceased trading with each other.

N N
According to the plaintiff, a sum of $2,717,915.06 was due from the
O defendant to it whereas the defendant only accepted that it still owed the O

plaintiff $89,496.42. The difference is $2,628,408.64.

P P

Q 5. The liability for $2,398,188.61 of such difference turned on Q

whether the defendant was entitled to make deductions under 25 debit

R R
notes issued by it to the plaintiff, which I set out hereunder as they were
S S
1
Unless otherwise stated, all monetary figures in this judgment are in Hong Kong dollar.
T 2
T
Which the defendant had set out in 6 yearly tables attached to the further and better particulars of the
defence filed on 26 March 2014 [A/22-32]. These tables were produced in evidence by the defendant’s
U manager and main witness, Mr Wong Lap Patrick (“Patrick Wong”). U

V V
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A A

B B
enumerated in the agreed Scott Schedule and Schedule A to the 1st

C
supplemental witness statement of the plaintiff’s manager and only C
witness, Mr Wong Yau Keung Gary (“Gary Wong”):
D D

E
Debit Note Date Reasons for Deduction Amount in E
Number dispute (HK$)
1 DN-08/032 27.4.2009 “質量問題,客人扣款” in $1,454,207.40
F (“Disputed respect of style 26102 F
D/N 1”)
2 GTA-10035 20.7.2010 3.5% one-off interest for $26,250.00
G G
(“Disputed advanced payment
D/N 2”)
H 3 GTA-10042r 6.8.2010 2% one-off “factoring payment $36,666.37 H
(“Disputed interest charge”
D/N 3”)
I I
4 GTA-10055 1.9.2010 2% one-off “factoring payment $37,616.35
(“Disputed interest charge”
J D/N 4”) J
5 GTA-10065 1.9.2010 8.5% per annum interest for 2 $21,250.00
(“Disputed months for cash advance
K D/N 5”) K
6 GTA-10072 28.9.2010 2% one-off “factoring payment $59,483.82
L (“Disputed interest charge” L
D/N 6”)
7 GTA-11056 16.1.2012 “Interest charge” $8,000.00
M (“Disputed M
D/N 7”)
N 8 GTA-12007 5.4.2012 “Handing (sic) interest charge” $4,907.98 N
(“Disputed
D/N 8”)
O 9 GTA-12012 10.5.2012 “Handing (sic) interest charge” $4,000.00 O
(“Disputed
P
D/N 9”) P
10 GTA-12020 25.7.2012 Interest on “cash in advance” $10,975.603
(“Disputed RMB9,000 on RMB121,000 at
Q D/N 10”) RMB1 = HK$1.22 Q

11 GTA-12021 25.7.2012 Interest on “cash in advance” – $18,780.484

R R
(“Disputed RMB15,400 on RMB204,600
D/N 11”) at RMB1 = HK$1.22
S 3
S
The full amount of this debit note was HK$158,536.59 (converted from RMB). The plaintiff did not
dispute liability to repay the principal sum of RMB121,000 which it did receive.
T 4
T
The full amount of this debit note was HK$268,292.68 (converted from RMB). The plaintiff did not
dispute liability to repay the principal sum of RMB204,600 which it did receive.
U U

V V
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A A

B B
5
12 GTA-12027 8.8.2012 Interest on “cash in advance” – $13,414.63
C (“Disputed RMB11,000 on RMB139,000 C
D/N 12”) at RMB1 = HK$1.22

D 13 GTA-12034 31.8.2012 Bank fee (T/T handing (sic) $27,966.86 D

(“Disputed charges)
E D/N 13”) E
14 GTA-10049r 17.8.2010 5% export tax rebate the claim $27,057.19
(“Disputed of which defendant had
F D/N 14”) allegedly been deprived due to F
late delivery by plaintiff
G G
15 GTA-10050r 21.8.2010 5% export tax rebate the claim $60,822.27
(“Disputed of which defendant had
H D/N 15”) allegedly been deprived due to H
late delivery by plaintiff
I I
16 GTA-10070 24.9.2010 5% export tax rebate the claim $31,312.71
(“Disputed of which defendant had
J D/N 16”) allegedly been deprived due to J
late delivery by plaintiff
K K
17 GTA-10071 24.9.2010 5% export tax rebate the claim $21,179.34
(“Disputed of which defendant had
L D/N 17”) allegedly been deprived due to L
late delivery by plaintiff

M 18 GTA-10083 15.10.2010 5% export tax rebate the claim $32,314.01 M

(“Disputed of which defendant had
N D/N 18”) allegedly been deprived due to N
late delivery by plaintiff

O 19 GTA-10079 13.10.2010 Extra inland transportation $96,530.13 O

(“Disputed charges for 2 containers of
P
D/N 19”) goods allegedly incurred by P
defendant due to late delivery
of style FW0045
Q Q
20 GTA-10082 15.10.2010 Extra inland & sea $79,178.26
(“Disputed transportation & storage
R R
D/N 20”) charges for 2 containers of
goods allegedly incurred by
S defendant due to late delivery S
of styles 18096 & 18111
T 5
T
The full amount of this debit note was HK$182,926.83 (converted from RMB). The plaintiff did not
dispute liability to repay the principal sum of RMB139,000 which it did receive.
U U

V V
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A A

B B
21 GTA-10084 20.10.2010 Extra re-operation & inspection $48,464.63
C (“Disputed charges for 379 units of goods C
D/N 21”) allegedly incurred by defendant
due to late delivery of styles
D FW0045 D

E 22 GTA-10089 28.10.2010 Extra inland transportation $151,310.07 E

(“Disputed charges for 3 containers of
D/N 22”) goods allegedly incurred by
F defendant due to late delivery F
of style 110-152
G G
23 GTA-12032 30.8.2012 Bank T/T “handing (sic) $23,659.20
(“Disputed charge”
H D/N 23”) H
24 GTA-10034 15.7.2010 3.5% one-off interest on money $4,450.53
(“Disputed used to pay airfreight due to
I I
D/N 24”) late delivery by the plaintiff

J 26 GTA-09007 7.1.2009 Interest for advanced payment $98,390.78 J

(“Disputed by defendant at plaintiff’s
D/N 26”) request
K K
TOTAL: $2,398,188.61
L L

6. In the course of his testimony under cross-examination by

M M
Mr Gary Lam, counsel for the plaintiff, Patrick Wong dropped the
N defendant’s claims under Disputed D/Ns 7, 8 and 9. N

O O
7. The remainder of the difference between the parties
P ($230,230.03) depended on whether the plaintiff was entitled to charge P

$0.50 and $2.60 more per piece for styles 110-152 and 110-154
Q Q
respectively (“Disputed Item 25”):
R R

S S
Style number Quantity Extra unit price Total extra
invoiced by invoiced amount
T plaintiff (US$) (US$) T
110-152 18,121 pieces 0.5 9,060.50
U U

V V
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A A

B 110-154 7,941 pieces 2.6 20,646.60 B

TOTAL: 29,707.10
C x 7.75 HK$230,230.03 C

D The witnesses D

8. The key witnesses were Gary Wong for the plaintiff and
E E
6
Patrick Wong for the defendant. These gentlemen contradicted each
F other, and had been cross-examined, on numerous points. To maintain F

the focus of this judgment, I do not propose to resolve each and every
G G
point of difference between the witnesses and will address only those
H H
having a bearing on the findings that I have to make. In choosing whose

I
evidence to accept on a particular question of fact, unless otherwise I
indicated, it is unnecessary for me to resort to, and I have not relied on,
J J
the general impression that one may form as to the overall credibility of

K the witnesses. I prefer to consider the issues, and assess the veracity of K
the witnesses on each issue, individually, insofar as it is possible. In so
L L
doing, I have been guided by, and have derived assistance from, the
M inherent commercial plausibility of the witnesses’ accounts and the M

congruity of such accounts with the undisputed/indisputable facts and

N N
circumstances of the case.
O O

Plaintiff’s final sets of “settlement spreadsheets” before the action

P P
9. I shall in due course have to examine the validity of each of
Q the Disputed B/Ns. Before I give each such Disputed D/N individual Q

attention, this is a convenient point to mention the 3 sets of “settlement

R R
spreadsheets” emailed by the plaintiff to the defendant on 4 and 28
S December 2012 and 3 January 2013. S

T T
6
Mr Wong Garmen (“Garmen Wong”), a merchandiser of the defendant, and Mr Lam Man Hon, also
U a merchandiser of the defendant, also gave evidence in support of the defence. U

V V
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A A

B B
10. By way of background, to keep track of the account between

C
them, over the years, settlement spreadsheets would be prepared at C
regular intervals by one party to state the account with the other. Such
D D
settlement spreadsheets listed out the invoices issued by the plaintiff on
E the one hand and the payments made, and debit notes issued, by the E

defendant on the other. The documents would then be jointly reviewed,

F F
and, where appropriate, revised at “settlement meetings”. After the
G meetings, the party which compiled the spreadsheets would update them G

to take account of the agreed revisions. The spreadsheets so updated

H H
would then be sent to the other party for its record.
I I

11. The plaintiff initially assumed the responsibility of

J J
compiling the settlement spreadsheets. This continued until about 2009
K when the defendant began to query the way in which the plaintiff K

prepared the settlement spreadsheets and took over the task (for reasons
L L
that I need not go into).
M M

12. Then, in late 2012 and early 2013, sensing the dwindling of
N N
orders from the defendant and following an unpleasant incident at the
O defendant’s office in about October 20127, the plaintiff produced to the O

defendant 3 sets of settlement spreadsheets on 4 and 28 December 2012

P P
and 3 January 2013.
Q Q

13. The second and third such spreadsheets (“plaintiff’s Final

R R
Spreadsheets” collectively) both yielded a credit balance of only
S S
$341,400.16 (as opposed to the amount of $2,719,915.06 claimed herein)

T
in favour of the plaintiff. T

7
U In which Gary Wong felt that Patrick Wong had been rude to, or had cold-shouldered, him. U

V V
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A A

B B

C
14. Notably, the plaintiff arrived at the balance of $341,400.16 C
after giving the defendant credit for the amounts charged under Disputed
D D
D/Ns 1 to 24.
E E

15. Such accounting treatment was construed and put forward by

F F
the defendant as the plaintiff’s admission or acknowledgment of the
G defendant’s claims under these 24 debit notes. And the defendant G

questioned why the plaintiff should be permitted to resile from such

H H
admission or acknowledgment of its debts to the defendant.
I I

16. First, the answer in fact is that the plaintiff’s Final

J J
Spreadsheets, prepared by Gary Wong with the assistance of his wife,
K were not intended to be final binding documents. Rather, they were K

produced to facilitate the finalisation of the final account between the

L L
parties. He anticipated the parties would compare notes and jointly
M review, discuss and negotiate over such spreadsheets, as they had done in M

the past with every other settlement spreadsheet. In particular, he

N N
expected the defendant to provide him with supporting documents in
O relation to Disputed D/Ns 1 to 24, which he had orally asked for many O

times at the parties’ settlement meetings8. Gary Wong also expected the
P P
defendant to be prompted to issue all debit notes for claims that it may
Q have against the plaintiff. Q

R R
17. There was not a single letter or email from the plaintiff to the
S S
defendant relating to the supporting documents for Disputed D/Ns 1 to

T
24. Nevertheless, I accept Gary Wong’s evidence that he had orally T
8
As for Disputed D/N 26, it was the plaintiff’s case that it had never received the same from the
U defendant. U

V V
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A A

B B
sought documentary proof of Disputed D/Ns 1 to 24. Patrick Wong

C
stressed in paragraph 30(2) and (4) of his witness statement dated 22 C
August 2014 that when the defendant issued debit notes to the plaintiff, it
D D
would also send the supporting documents. However, it will be seen
E from the discussion below that the defendants had not disclosed any or E

any adequate supporting papers for at least some of the Disputed D/Ns.
F F
That was a reason why the defendant did not insist on the claims under
G Disputed D/Ns 7 to 9. In relation to these 3 items, all that the defendant G

could adduce were the debit notes. It is commercially inconceivable that

H H
the plaintiff would accept any debit notes from the defendant without
I sight of sufficient proof. I

J J
18. I was initially puzzled as to why the plaintiff should want to
K receive from the defendant more debit notes which, if valid, would reduce K

the credit balance in favour of the plaintiff. However, according to

L L
paragraph 23 of Patrick Wong’s said witness statement, during their
M settlement meetings, in addition to payment by the defendant, Gary Wong M

would also chase the defendants for the issuance of outstanding debit
N N
notes, because he needed the same in order to square the accounts with
O his own sub-contractors. O

P P
19. Second, as a matter of law, the plaintiff would not be bound
Q by any alleged admission or acknowledgment of the defendant’s claim Q

under a debit note unless the claim, or the acceptance thereof, was for
R R
consideration that could support a binding compromise. The burden of
S S
proof of the validity or enforceability of a Dispute D/N rests with its

T
issuer, the defendant. On this note, I now turn to the Disputed D/Ns. T

U U

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A A

B B
Disputed D/N 1

C
20. With regard to Disputed D/N 1, the defendant adduced C
certain settlement spreadsheets compiled by the plaintiff back in 2007 and
D D
2008, in which the plaintiff appeared to have split the amount of
E $1,454,207.40 charged under Disputed D/N 1 into 2 sums, one of E

$286,868.30 and one of $1,168,589.509, and appropriate them to partly

F F
settle the plaintiff’s invoices Nos 2007/15 and 2008/74 respectively. A
G notation “OK” was printed under each of such invoice numbers to denote G

that the invoices had been fully settled.

H H

I 21. It was not surprising that the defendant placed heavy I

reliance on these old spreadsheets. I do not propose to spend any more

J J
time on these pieces of evidence. The plaintiff could re-open its said
K accounting treatment of Disputed D/N 1 if the debit note itself was not K

issued for consideration or was otherwise unenforceable.

L L

M 22. In this connection, the sum charged under Disputed D/N 1 M

was described as being for “ 質量問題,客人扣款” in relation to style

N N
26102. From such description, this debit note was premised upon the
O defendant’s customer, Indipunt, having withheld payment from the O

defendant to the tune of $1,454,207.40 due to quality issues concerning

P P
style 26102. Patrick Wong had accepted under cross-examination that
Q Q
the defendant would not be entitled to impose any deduction on the

R
plaintiff if the defendant itself had not suffered any such corresponding R
loss.
S S

T T
9
These 2 sums added up to $1,455,457.80 which exceeded the amount of Disputed D/N 1. It appears
U that the plaintiff had made a mistake in its calculation here. U

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A A

B B
23. Although there was an abundance of email correspondence

C
between the plaintiff and the defendant and between the defendant and C
Indipunt, on various defects in the garments of style 26102, the defendant
D D
had not adduced a single document showing any deduction of payment to
E it by Indipunt. E

F F
24. Under cross-examination, Patrick Wong conceded that the
G defendant had in fact received full payment for style 26012 from Inidpunt G

but maintained that Indipunt had deducted $1.4 million from the payment
H H
due under some untraceable invoices for the price(s) of other style(s) of
I goods sometime in 2009. One would have expected such a considerable I

deduction (if made) to be contained or evidenced in some form of

J J
writing. One would have expected such documents to still exist at the
K commencement of this action in 2013. One would have expected the K

relevance of such documents to be realised. One would have expected

L L
such documents to be retrieved and disclosed once their relevance was
M appreciated. However, the defendant had not disclosed any invoice or M

debit note by Indipunt or other supporting document showing any

N N
deduction by Indipunt despite the plaintiff’s cry for supporting documents
O throughout this action. O

P P
25. I am unable to find that the defendant had suffered a loss of
Q $1,454,207.40 to pass onto the plaintiff just on Patrick Wong’s Q

unparticularised say so.

R R

S S
26. In the absence of any documentary proof of a deduction by

T
Indipunt against the defendant, it is commercially implausible that the T
plaintiff would have unreservedly agreed to absorb a $1.45 million loss,
U U

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A A

B B
for which it could not seek recourse from its own subcontractor for want

C
of proof. C

D D
27. In the premises, the defendant was not entitled to any
E deduction under Disputed B/N 1. E

F F
Disputed D/Ns 2, 3, 4, 5 & 6
G 28. These 5 debit notes were issued in July, August and G

September 2010 to charge one-off interest payments at a fixed percentage

H H
(2% / 3.5%)10 on principal sums, which the plaintiff had admittedly
I received from the defendant. I

J J
29. To avoid such interest charges, Gary Wong insisted that the
K plaintiff did not borrow from the defendant or ask the defendant to make K

advanced payments that were not yet due. Rather, the plaintiff was
L L
simply collecting outstanding purchase price from the defendant. In
M support, the plaintiff pointed to the fact that the defendant often settled M

the plaintiff’s invoices outside of the agreed credit periods. Reference

N N
was made to the defendant’s statements as at 19 May 2011, 24 August
O 2011, 19 November 2011 at C1/527, 538 and 547, which demonstrated O

that as at these dates in 2011, the defendant still owed the plaintiff money
P P
for invoices issued in 2010.
Q Q

30. In resolving the issue arising from such argument, I consider

R R
the spreadsheets exhibited as “WYK-3” to Gary Wong’s supplemental
S S
witness statement dated 13 May 2015 (“Chronological Spreadsheets”)

T
to be more precise and directly material. The Chronological Spreadsheets T

10
U Except for Disputed D/N 5 which charged interest at 8.5% per annum for 2 months. U

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A A

B B
are so called because they tracked all transactions between the parties (i.e.

C
invoices issued by the plaintiff, payments made and debit notes issued by C
the defendant and the balance resulting from each such due invoice,
D D
payment and debit note) from 2007 up to December 2012 in a strictly
E chronological order. One can therefore readily ascertain the state of the E

account between the parties on any given date by cross-referencing the

F F
Chronological Spreadsheets.
G G

31. Although, over the years, the defendant did often pay the
H H
plaintiff’s invoices late, sometimes well after the expiry of the credit
I periods resulting in an account in the credit in favour of the plaintiff for I

extended periods of time, according to the Chronological Spreadsheets,

J J
during the times material to these 3 debit notes, i.e. July, August and
K September 2010, the plaintiff in fact owed substantial sums to the K

defendant. Hence, the principal sums in respect of which these 5 debit

L L
notes charged interest could not have been paid to settle outstanding
M purchase price. I find that the defendant did make advances to the M

plaintiff as stated in Disputed D/Ns 2, 3, 4, 5 and 6.

N N

O 32. The plaintiff next questioned why it would agree to pay the O

defendant interest when it did not impose the same burden on the
P P
defendant when the defendant was late in paying the plaintiff.
Q Q

33. One has to look at all the circumstances. A circumstance

R R
that strikes me as being of considerable significance is the probable
S S
imbalance in the parties’ relative bargaining powers. On one hand, the

T
plaintiff is a one-man show. It had no staff. Gary Wong was from time T
to time assisted only by his wife. The defendant was the plaintiff’s single
U U

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A A

B B
largest customer, accounting for about 90% of the plaintiff’s turnover.

C
The plaintiff was in need of funds at the material times but, due to its C
business set-up, it may not be as resourceful as it wished to be in
D D
fundraising. On the other hand, the defendant obviously had a bigger
E operation. While maintaining more or less the same volume of orders to E

the plaintiff, by mid 2010, the defendant had started to look for and work
F F
with alternative garment suppliers in order to reduce its dependence on
G the plaintiff as a supplier. Against this background, one gets the sense G

that the defendant may weld relatively more and stronger bargaining
H H
power than the plaintiff.
I I

34. Further, unlike other Disputed D/Ns for which the plaintiff
J J
was asking, and waiting for, the defendant’s supporting documents, these
K 5 debit notes were straightforward. They set out the principal sums K

borrowed by the plaintiff, the applicable interest rate and, in one instance,
L L
the period for which interest accrued. Had the plaintiff not agreed to pay
M interest as charged, it should and would have just rejected these 5 debit M

notes, which it had not done.

N N

O 35. I find, on the balance of probabilities, that the plaintiff had O

agreed to pay interests as claimed under Disputed D/Ns 2, 3, 4, 5 and 6.

P P

Q Disputed D/Ns 7, 8 & 9 Q

36. These claims were abandoned in the course of Patrick

R R
Wong’s evidence.
S S

Disputed D/Ns 10, 11 & 12

T T

U U

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A A

B B
37. In support of each of these 3 debit notes, the defendant had

C
adduced proof of payment in Mainland China of a sum that was C
somewhat less than the amount of the debit note and claimed that the
D D
difference represented the interest element that had been deducted by the
E lender. E

F F
38. As in the case of the 5 debit notes discussed under the last
G heading, there was no dispute that the plaintiff had received the principal G

sums the payment of which the defendant had adduced documentary

H H
proof.
I I

39. However, Disputed D/Ns 10 and 11 were dated 25 July 2012

J J
in respect of payments of RMB121,000 and RMB204,6000 made on 6
K and 17 July 2012 respectively. I refer to the Chronological Spreadsheets, K

which showed that between 28 June and 25 July 2012, the defendant in
L L
fact owed just over $400,000 to the plaintiff. Had the defendant settled
M such account, the plaintiff would not have had to borrow. I therefore rule M

that the plaintiff should not have to pay the interest element under either
N N
of Disputed D/Ns 10 or 11.
O O

40. As for Disputed D/N 12, although, by 6 August 2012, the

P P
account between the parties had reversed in favour of the defendant, on
Q closer look, the small debit balance against the plaintiff was largely due Q

to Disputed D/N 10 and 11. It therefore follows from my above analysis

R R
and conclusion that the plaintiff would probably not have had to borrow
S S
the principals charged under Disputed D/N 10 and 11 had the defendant

T
settled its overdue account with the plaintiff that the plaintiff should not T
bear the interest element of Disputed D/N 12.
U U

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A A

B B

C
Disputed D/N 13 C
41. Garmen Wong prepared this debit note. 19 Standard
D D
Chartered Bank import bill update advices were disclosed by the
E defendant, purportedly to support, but actually did not show, the handling E

charge of 0.23% or 0.3% or the document fee of $200 or $300. Under

F F
cross-examination, it transpired that Garmen Wong had no personal
G knowledge of the matter as he got the percentages from a colleague called G

Ricky in the finance department. Ricky did not give evidence but his
H H
absence was not explained.
I I

42. On such evidence, the defendant had not discharged the

J J
burden of proving that the charges claimed under Disputed D/N 13 had
K been incurred. K

L L
Disputed D/Ns 14-18
M 43. There was no mention of any loss of opportunity to claim M

export tax rebate by the defendant in the body of its defence. However,
N N
these 5 debit notes were all included in the 2010 table of debit notes
O attached to the further and better particulars of the defence. This is, in my O

view, sufficient pleading of the defendant’s claim for lost tax rebate under
P P
these debit notes, bearing in mind that it was then unknown which debit
Q note(s) the plaintiff would challenge. Q

R R
44. The problem that I have with such claim is the 5% with
S S
reference to which the tax rebate was calculated. The defendant had not

T
adduced any evidence as to how such percentage was obtained or arrived T
at. In the absence of such evidence, I am not satisfied that these claims
U U

V V
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A A

B B
had been properly quantified. For this reason, the defendant was not

C
entitled to credit for these 5 debit notes. C

D D
Disputed D/Ns 19 & 22
E 45. The charges under these 2 debit notes were incurred because E

the plaintiff missed the original shipment booked by the defendant which
F F
then had to switch voyage to a different port of discharge and then caused
G the goods to be transferred from that port to the defendant’s customer’s G

warehouse by truck to make up for some lost time. The charges in

H H
question covered the extra inland transportation necessitated by the
I plaintiff’s delayed delivery. Gary Wong admitted under cross- I

examination that the styles in question11 were delivered late by the

J J
plaintiff. Subject to the provision of supporting documents, such
K additional costs should be borne by the plaintiff. The defendant did K

disclose the relevant debit notes from one ITX Trading SA. I find the
L L
plaintiff liable for Disputed D/Ns 19 and 22.
M M

Disputed D/N 20
N N
46. This debit note also appeared to cover extra inland
O transportation costs due to late delivery of 2 styles12 of goods by the O

plaintiff. Although references were made under the description to 2 debit

P P
notes by Indipunt, these supporting documents were not supplied by the
Q defendant to the plaintiff. I hold the plaintiff not liable for this debit note. Q

R R
Disputed D/N 21
S S

T 11
T
FW0045 & 110-152.
12
U 18096 & 18111. U

V V
 - 18 -
A A

B B
47. Patrick Wong explained that a random examination by its

C
customer of this batch of garments styled FW0045 revealed such serious C
defects that the customer decided to open and inspect all 379 pieces and
D D
then repacked the same. This debit note covered the costs incurred by the
E customer in doing so and was properly supported by the customer’s debit E

note. As the supplier of the garments, the plaintiff should bear such costs
F F
which was caused by the defective quality of the goods.
G G

Disputed D/N 23
H H
48. No witness from the defendant could explain the matter with
I which this debit note was concerned. Garmen Wong also confirmed that I

the document placed after the debit note in bundle “X” (another import
J J
bill update advice by Standard Chartered Bank) which was supposed to
K be the supporting document in fact had no relation to the debit note. On K

such evidence, the defendant had not discharged the burden of proving
L L
the expenditure charged under Disputed D/N 23.
M M

Disputed D/N 24
N N
49. There were 5 items of charges totalling $142,556.50 under
O this debit note. In issue was the fourth sum of $4,450.53. From the O

description, it appeared to represent a one-off 3.5% interest on the sum of

P P
$127,158 being the airfreight payable to one Scanwell Logistics (China)
Q Co Ltd Shenzhen Branch for the carriage of certain garments that were Q

delivered late by the plaintiff. Garmen Wong explained that the airfreight
R R
had to be prepaid; that the plaintiff did not have ready funds to make the
S S
payment; that the defendant also had to borrow in order to be able to

T
disburse the airfreight on behalf of the plaintiff first and that 3.5% was T
the defendant’s costs of borrowing.
U U

V V
 - 19 -
A A

B B

C
50. I notice that the time at which the airfreight was incurred C
coincided more or less with the times when the advances with which
D D
Disputed D/N 2 was concerned ($450,000 + $100,000 + $200,000) were
E made when the account between the parties was in the debit against the E

plaintiff. Much of what I have said about Disputed D/N 2 therefore

F F
should apply with equal force to Disputed D/N 24. It was more probable
G than not that the plaintiff agreed to bear this interest. G

H H
Disputed D/N 26
I 51. First, it was the plaintiff’s case that it had never received this I

debit note from the defendant. Mr Albert Yau, counsel for the defendant,
J J
very fairly pointed out in paragraph 31 of his closing submissions that
K this document was not mentioned in the settlement spreadsheet prepared K

by the defendant for the year 2009. I also note that the defendant had
L L
disclosed some emails by which certain debit notes identified by numbers
M were sent to the plaintiff. However, I could not find any reference to M

Disputed D/N 26 in such emails. The defendant had not disclosed any
N N
other email by which this debit note was sent to the plaintiff. On such
O evidence, I am not satisfied that the defendant had issued Disputed D/N O

26 to the plaintiff before this action.

P P

Q Disputed Item 25 Q

52. It was common ground that the respective agreed unit price
R R
between the parties for style 110-154 was US$11 and for style 110-152
S S
was US$9.

T T

U U

V V
 - 20 -
A A

B B
53. It goes without saying that the plaintiff could not unilaterally

C
increase these prices after contract simply because they turned out to be C
bad deals for the plaintiff. I am inclined to think that the increases to
D D
US$13.60 per piece for style 110-154 and US$9.50 per piece for style
E 110-152 in the plaintiff’s invoices were unilateral because they were E

persistently captured in the spreadsheets prepared by the defendant under

F F
the caption “PENDING FOR ASKING COMPENSATION” (emphasis
G added) [C1/527, 538, 547, 556 & 566]. G

H H
54. Indeed, even if the defendant had consented to the increased
I prices, it would not have been bound unless the consent had been given I

for consideration.
J J

K Was the plaintiff estopped from claiming more than $341,400.16? K

55. That leaves the defendant’s alternative defence of estoppel

L L
by representation by which, on the basis of the plaintiff’s Final
M Spreadsheets, the defendant sought to preclude the plaintiff from M

contending that the amount due from the defendant to the plaintiff
N N
exceeded $341,400.16.
O O

56. The relevant averments appear in paragraphs 5A to 5C of the

P P
Re-amended Defence as follows:
Q “5A. As appear hereinbelow, the amount claimed herein is Q
significantly larger than on the Settlement Spreadsheet compiled
R
and prepared by the Plaintiff as at December 2012. R

5B. The Defendant avers that, having regard to the course of dealings
S and the fact that the parties hereto conducted their business on S
the basis of the Settlement Spreadsheets compiled from time to
time, as far as the sum due from the Defendant to the Plaintiff at
T T
the date of the relevant Settlement Spreadsheet, the Plaintiff is
estopped or precluded from denying that the Defendant was
U U

V V
 - 21 -
A A

B liable to it in a sum greater than that appearing on that Settlement B

Spreadsheet.
C C
5C. The defendant would not have continued its business relationship
with the Plaintiff had it known that the Plaintiff would later resile
D from position as stated on the relevant Settlement Spreadsheet D
and in so doing disbursing during the business relationship from
E
time to time expenses on behalf of the Plaintiff and extending at E
times credit to the Plaintiff so as to enable it to fulfil its
contractual obligation as supplier. The Defendant could have
F looked for other suppliers of garments much earlier, thereby F
more effectively protecting its economic interests or avoiding
unnecessary financial risk.”
G G

H 57. The estoppel raised by these averments was identified as one H

by representation, the requirements of which are:

I I
(1) a statement or other conduct that constitutes a representation
J of fact; J

(2) its communication to the representee;

K K
(3) the representee’s justifiable belief in the truth and his
L alteration of position in that belief; L

(4) an attempt by the representor to contradict his representation;

M M
(5) prejudice to the representee as a result of his alteration of
N position if contradiction of the representation were N

permitted.
O O
nd
See, e.g. Handley, Estoppel by Conduct and Election, 2 Edition,
P paragraph 1-006. P

Q Q
58. Even if, for the sake of argument, the plaintiff’s Final
R Spreadsheet could constitute a representation by the plaintiff as to the R

final state of the account between the parties, there are a number of
S S
insurmountable difficulties in the defendant’s case of estoppel grounded
T upon such alleged representation. T

U U

V V
 - 22 -
A A

B B
(1) First, while Patrick Wong had given a detailed account of the

C
dealings between the parties, including their practice of C
preparing settlement spreadsheets and having settlement
D D
meetings regularly to sort out their account, neither Patrick
E Wong nor any other witness for the defence, had testified in E

terms that made out the said elements of an estoppel by

F F
representation with regard to the plaintiff’s Final
G Spreadsheets. G

(2) Second and to the contrary, the defendant must have

H H
implicitly considered such spreadsheets to be inaccurate. Its
I primary case was that it owed the plaintiff not more than I

$87,000,82. Any suggestion of a belief in the truth of a

J J
representation that the defendant owed the plaintiff
K $341,400.16 would contradict the primary defence case. K

(3) Third, there could be no alteration of position by the

L L
defendant caused by a belief in the truth of the alleged
M representation. M

(a) The defendant certainly did not pay the plaintiff

N N
$341,400.16.
O (b) The reliance and prejudice averred in paragraph 5C of O

the Re-amended Defence did not get off the ground as

P P
a matter of timing. As said earlier, from 2009
Q onwards, the settlement spreadsheets were prepared Q

by the defendant. The plaintiff’s Final Spreadsheets

R R
were produced on the eve of the termination of its
S S
business relationship with the defendant with a view

T
to facilitating the final settlement of account between T
them. By December 2012, the defendant had stopped
U U

V V
 - 23 -
A A

B B
placing any additional purchase order with the

C
plaintiff or disbursing any more expense for the C
plaintiff or extending any further credit to the plaintiff.
D D
On its own evidence, the defendant had set up its own
E factory and switched to garment suppliers other than E

the plaintiff well before it received the spreadsheets in

F F
question.
G G

59. I can find no estoppel against the plaintiff, based on the

H H
21.12.2012 Spreadsheets or 3.1.2013 Spreadsheets.
I I

DISPOSITION
J J
60. For the above reasons, the plaintiff is entitled to recover
K from the defendant $2,005,663.66, which I breakdown as follows: K

Description Amount (HK$)

L Amount claimed by $2,717,915.06 L
plaintiff
M
Less Disputed B/N 2 $26,250.00 M
Less Disputed B/N 3 $36,666.37
Less Disputed B/N 4 $37,616.35
N Less Disputed B/N 5 $21,250.00 N
Less Disputed B/N 6 $59,483.82
O
Less Disputed B/N 19 $96,530.13 O
Less Disputed B/N 21 $48,464.63
Less Disputed B/N 22 $151,310.07
P Less Disputed B/N 24 $4,450.00 P
Less Disputed Item 25 $230,230.03
Q $2,005,663.66 Q

R 61. The defendant should pay interest on $2,005,663.66 at 1% R

above the prime lending rate for Hong Kong dollars from the date of the
S S
writ to this date and thereafter at judgment rate until payment.
T T

U U

V V
 - 24 -
A A

B B

62. I also made an order nisi that the defendant should pay the
C C
plaintiff’s costs of the action on a party and party basis, to be taxed if not
D agreed. D

E E

F F

G G

H (Lisa Wong) H
Judge of the Court of First Instance
I I

J
Mr Gary Lam, instructed by Fu & Cheng, for the plaintiff J

Mr Albert Yau, instructed by Lau, Chan & Ko, for the defendant
K K

L L

M M

N N

O O

P P

Q Q

R R

S S

T T

U U

V V