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Cep Ltd v 无锡巿佳诚太阳能科技有限公司

Judgment Cited authorities 3 Cited in Precedent Map Related
Vincent
Judgment Date04 April 2014
Year2014
Judgement NumberHCCL12/2012
Subject MatterCommercial Action
CourtHigh Court (Hong Kong)
HCCL12A/2012 CEP LTD v. 无锡巿佳诚太阳能科技有限公司

HCCL 12/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACT0ION NO 12 OF 2012

(Transferred from High Court Action No. 181 of 2011)

_________________

BETWEEN
CEP LIMITED Plaintiff

and
无锡巿佳诚太阳能科技有限公司 (known in English as WUXI JIACHENG SOLAR ENERGY TECHNOLOGY CO., LTD. and as WUI JIACHENG SOLAR ENERGY TECHNOLOGYLIMITED COMPANY) Defendant
_________________
Before: Recorder Jat Sew-Tong SC in Court
Dates of Hearing: 2 - 5 and 13 December 2013
Date of Handing Down Judgment: 4 April 2014

_________________


J U D G M E N T

_________________

A. INTRODUCTION

1. The plaintiff (“CEP”) is and was at all material times a British Virgin Island company with an office in Beijing. Its business included consultancy and sourcing services as well as trading in photovoltaic components and products.

2. The defendant (“Jiacheng”) was a PRC manufacturer of photovoltaic components and products. It is a company in the ReneSola Group of companies, which is listed on the New York Stock Exchange.

3. The relationship between CEP and Jiacheng began in around February 2010, when CEP prepared an evaluation report for Jiacheng. By a written contract dated 27 April 2010 (“Sales Contract”), CEP agreed to buy from Jiacheng a total quantity of 7.056 megawatts (“MW”) of multicrystalline solar modules (“Modules”) at a unit price of €1.35/watt, for a total price of €9,525,600.[1]

4. Mr Gary Cicero (“Mr Cicero”) was a director and the driving force behind CEP in this matter. He played the leading role in negotiating and performing the Sales Contract on behalf of CEP.

5. Mr David Zhang (“Mr Zhang”), Jiacheng’s Sales Manager, was the person who mainly dealt with CEP. Mr Zhang reported to Mr Paul Li Pan Jian (“Mr Li”), Chief Executive Officer of ReneSola America Inc and Chief Operation Officer of ReneSola Limited.

6. CEP in turn sub‑sold the Modules to its customer in Italy, Sorgenia Solar SRL (“Sorgenia”), a power generation company. The sub‑sale contract essentially mirrored the Sales Contract, save that the price was different.

7. Under the Sales Contract, payment for the Modules was to be by way of irrevocable letter of credit (“L/C”), but the parties disagree as to which form of L/C was acceptable: CEP contends that the use of transferable L/C was permitted under the Sales Contract; Jiacheng claims that a direct L/C to be issued by CEP was required.

8. On 22 June 2010, CEP and Jiacheng signed a Supplemental Agreement II at Jiacheng’s factory, whereby the unit price of the Modules was varied from €1.35/watt to €1.40/watt. On the same occasion, a Commission Agreement was signed providing for the payment of a commission of €0.05/watt to CEP if Jiacheng successfully signed a sales contract with Ergy Capital group (“Ergy”), a customer introduced by CEP to Jiacheng. In the end, no sales contract was concluded between Jiacheng and Ergy. CEP claims that the Supplement Agreement II was signed under economic duress and is unenforceable, which claim Jiacheng denies.

9. Eventually Jiacheng did not deliver the Modules to CEP but sold them directly to Sorgenia at a higher price in circumstances which gave rise to this action. Essentially, CEP claims that Jiacheng was in breach of the Sales Contract by refusing to deliver the Modules on the pretext that transferable L/C was not acceptable; Jiacheng on the other hand claims that CEP was in breach of the Sales Contract by failing to open a compliant L/C in time.

B. ISSUES

10. Although the parties disagree over many issues, both factual and legal, they are broadly in agreement over the main issues that arise for determination. The following formulation of the issues is mainly adopted from the Closing Submissions of Mr Christopher Chain, counsel for CEP.

11. On liability, there are three main issues:

(1) Whether the Sales Contract permitted payment by transferable L/C and whether CEP had validly provided for payment by a valid transferable L/C on 5 July 2010 (“L/C Issue”).

(2) Did the conduct of Mr Zhang give rise to a waiver or estoppel so that Jiacheng could not rely on the transferability of the LC. This gives rise to questions over Mr Zhang’s authority to act on behalf of Jiacheng (“Waiver/Estoppel Issue”).

(3) Jiacheng also relied on other grounds of non-compliance of the L/C. These non‑compliance are admitted, but CEP says that there are technicalities and, by the conduct of Mr Zhang, Jiacheng had waived them or is estopped from relying on these grounds to refuse delivery. (“Non-compliance Issue”)

12. If CEP succeeds on liability, the following issues arise on quantum:

(1) whether the Supplement Agreement II was enforceable so as to affect the calculation of CEP’s damages (“Duress Issue”);

(2) whether clause 14 of the Sales Contract limits the damages payable by Jiacheng and whether CEP is entitled to recover loss of future business from Sorgenia (“Damages Limitation Issue”).

C. THE FACTS AND EVIDENCE IN DETAIL

C.1 Sales Contract

13. It is pertinent to begin with the Sales Contract, the material terms of which are as follows:

“1. Product and Branding:

As used in this Confirmation, ‘Product’ or ‘Products’ shall mean the solar modules JC220M-24/Bb-a & JC230M-24/Bb-a all made of Multicrystalline solar cells and manufactured by Seller. … The solar modules will be branded ‘RENESOLA’.

2. Quantity:

3,606,400W 230w Multicrystalline Solar Modules

(Type JC230M-24/Bb-a Power tolerance:-/+3%)

3,449,600W 220w Multicrystalline Solar Modules

(Type JC220M-24/Bb-a Power tolerance:-/+3%)

3. Take or Pay Agreement:

This Agreement is a “take-or-pay agreement” such that Buyer is absolutely and irrevocably required to accept and pay for the contracted volume of Product at the prices set forth in Article 5.

…

5. Price Delivery Schedule:

Unit price:

€o 1.35/W for Nominal Output CIF Main sea port of Europe

This price is fixed for the whole contract. And the total amount is EUR9,525,600 …

6. Delivery Schedule:

1. All of the Contracted goods will be delivered to Shanghai port of China in lots before 31st of July 2010. The first shipment will be effected within 3 weeks after the Seller has received the 5% down payment of total contract value.

2. The Seller keeps the right to modify the schedule a little bit according to the actual production.

7. Payment:

a. The 5% of total contracted value will be paid by T/T within 7 working days after the contract is signed by both seller and buyer. The 95% of each delivery will be paid by the irrevocable documentary Letter of Credit (L/C). The original L/C should be issued latest 20 days prior to partial delivery. All the terms of the L/C should be confirmed in writing by the Seller finally before the Buyer applies to the bank for the issuance of L/C; any delay will affect shipping date accordingly. The L/C is valid 12 months upon the issuance.

…

…

12. Termination

a) Termination by Buyer. Buyer may, at its option, terminate this Agreement prior to the expiration. Term only upon the occurrence of all of the following events: (i) failure by Seller to deliver a material amount of Products properly ordered by Buyer within the time frames specified in this Agreement; or failure by Seller to deliver a material amount of the Products properly ordered by Buyer which meet the Product Specifications, (ii) a failure by Seller to cure such delivery deficiency within one hundred and eighty (180) days of receipt of the notice of failure; and (iii) a Contingency, as further defined in Section 20,[2] has not occurred. If Seller rectifies any such failure of delivery or failure of Product to meet Specification, then Seller’s deficiency of performance shall be deemed cured and Buyer shall not be entitled to terminate this Agreement. Notwithstanding, the rights and obligations set forth under this agreement are fully assigned by the Buyer. Without limiting the generality of the expression, a “material amount” shall be deemed to mean greater than 50% of the Product deliveries in any three month period.

…

c) Termination by Seller. Seller may, at its option, terminate this Agreement in the event of a failure to pay or other material breach by Buyer if that breach is not cured by Buyer within Thirty (30) days after receipt of written notice. In the event of such termination, Seller will have the obligation to ship only the goods corresponding to the amount of payments received from the Buyer.

14. Damages Limitation:

Except as otherwise set forth in this agreement, neither seller nor buyer, or its or their direct or indirect subsidiaries, shall be liable for any loss, damage, or injury resulting from delay in delivery or the products, or for any failure to perform which is due to circumstances beyond its control. In no event shall seller or buyer, or its or their direct or indirect subsidiaries, be liable for any direct damages other than those described in sections 12, 16, or any indirect, incidental, consequential, punitive or special damages, including without limitation lost revenues, lost profits, and lost business opportunities, even if it has been advised of the possibility of such damages. These limitations shall apply notwithstanding any failure of essential purpose of the limited remedy set forth above.

16. Legal Interpretation:

This Agreement shall be executed in two counterparts in the English language. This Agreement shall be interpreted in accordance with the plain English meaning of its terms.”

14. By a Supplemental Agreement dated 4 May 2010, the delivery schedule under clause 6 of the Sales Contract was varied, so that shipment dates were changed from May to July 2010 to June to August 2010. Nothing turns on this Supplemental Agreement.

15. CEP paid the...

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