IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 1463 OF 2012
||FAR EAST SOURCING LIMITED
||MAN BOND INTERNATIONAL LIMITED
||KHAN JAWED ARIF
|Before: Deputy High Court Judge Sakhrani in Court
|Date of Hearing: 17,18,19 and 22 February 2016
|Date of Handing Down Judgment: 22 March 2016
J U D G M E N T
1. The plaintiff (“P”) is, and was at all material times, a company incorporated in Hong Kong carrying on the business of the import and export of goods.
2. Gobind Ramchand Changlani (“Gobind”) is, and was at all material times, a director of P.
3. Euro‑East Exports Limited (“EEE”) is, and was at all material times, a company incorporated in Hong Kong carrying on the business of the import and export of goods.
4. Madhur Naraindas Bhojwani (“Madhur”) is, and was at all material times, a director of EEE.
5. The 1st defendant (“D1”) is, and was at all material times, a company incorporated in Hong Kong carrying on the business of the import and export of goods.
6. Direktshop Inc (“Direktshop”) is, and was at all material times, a company incorporated in the United States of America (“USA”) carrying on the business of the import and sale of goods in the USA. Direktshop is, and was at all material times, based in California, USA.
7. The 2nd defendant (“D2”) is, and was at all material times, a director of D1.
8. D2 is, and was at all material times, also a director of Direktshop.
9. P’s claim in this action is for damages against D1 and D2 for breach of contract for the sale and purchase of goods known as Snuggle Pets or Pillow Pets (“the goods”) which P shipped and delivered to Direktshop in November 2010. P claims, in the alternative, against D2 on an oral personal guarantee for the indebtedness of D1 which was allegedly given by D2.
10. P also claims against D1 and D2 as the assignee of the debt allegedly owing to EEE by D1 and D2 under the assignment of debt made between EEE as the assignor and P as the assignee on 30 March 2012 (“the assignment”).
11. The total sum claimed by P against D1 and D2 is the sum of US$393,430.56 with interest and costs as set out and particularized at para 14 of the re‑amended statement of claim (“the RASC”).
12. The writ of summons together with the statement of claim was issued on 17 August 2012. The total sum claimed in the original statement of claim (“the SC”) was the sum of US$392,451.26 with interest and costs.
13. P entered default judgment against D1 on 9 October 2012 for the sum of US$392,451.26 with interest and costs. The default judgment against D1 remains unsatisfied.
14. D2 denies that he is personally liable to P or that he was ever personally liable to EEE.
15. D2’s case is that the contracts for the sale and purchase of the goods were contracts entered into between P and EEE respectively, as the sellers and Direktshop as the buyer. D2’s case is that he has never given any personal guarantee to P or to EEE and that he is not personally liable for payment of the sums claimed.
16. There is no dispute that the damages suffered by P are in the amounts claimed. The only question is whether P can establish that D2 is personally liable for the amounts claimed.
17. By an agreed list of issues dated 5 February 2016 which was supplied to the court, there were four agreed issues at the commencement of the trial. However, after the amendments that were made to the amended statement of claim (“the ASC”) on the first and second day of trial, the remaining agreed issues, as confirmed by counsel in closing submissions, are:
“1. Was D2 a party to the contract for the sale of the Plaintiff’s Goods (says P) or not (says D2)?
2. Was D2 a party to the contract of sale of EEE’s Goods (says P) ; or not (says D2)?
3. Had D2 given a valid and legally enforceable personal guarantee for the indebtedness of D1 (says P); or not (says D2)?”
The Evidence and Findings
18. I heard evidence from Gobind, Madhur and D2.
19. The undisputed evidence is that by 2010, D2 had been doing business with Gobind and Madhur for many years. Gobind used to work for his uncle Madhur at EEE under its former name Euro‑East Electronics Limited from 1993 to 1999. In 1999, Gobind set up his own company being P. He has been a director of P ever since.
20. Madhur is the uncle of Gobind and an elderly gentleman. He is well respected by D2 who addresses him as Madhur “Bhai”. By addressing him as “Bhai” D2 has given him due respect as his senior.
21. Gobind, Madhur and D2 are all experienced businessmen who have been in the import and export trade for many years.
22. There is no dispute that both Gobind and Madhur have dealt with D2 for many years prior to 2010 when D2 was representing D1. Gobind first dealt with D2 in 1997 and Madhur first dealt with D2 in 1995.
23. In all the transactions prior to the contracts entered into in 2010, P and EEE had been purchasing goods that were supplied by D1. D1 was the supplier of goods which P and EEE had purchased from D1 in the past.
24. There is also no dispute that in 2009, D2 had gone to live in the USA to set up Direktshop. This was known to Gobind as the evidence shows. By an email sent “From Direktshop Inc” by D2 from his Direktshop email address on 7 May 2009 (Bundle B1, p 1) to Gobind, D2 introduced Direktshop to Gobind by sending him photos of Direktshop’s operations in California, USA which were attached to the email.
25. Later on in the same year 2009, in early October D2 called up Gobind and also Madhur separately to offer a proposal to P and EEE. This was followed up by emails to P and EEE. Pursuant thereto, P and EEE respectively entered into contracts for the sale by them of the goods to be shipped to Direktshop.
26. The above facts are undisputed and I find them proved.
27. What is in dispute between the parties is: who were the contracting parties to the contracts?
28. Mr Babani, for P, opened P’s case on the basis that P’s primary case (“the primary case”) is that D2 was the contracting party who entered into a contract with P and another contract with EEE for P and EEE respectively, to supply the goods to Direktshop. He submitted that the primary case was that the two agreements were concluded between the P and EEE respectively, on the one part and with D2 on the other part.
29. The alternative case (“the alternative case”) was that the two agreements were concluded between P and EEE respectively, on the one part and with D1 on the other part. On the alternative case, the contracting parties were P and EEE respectively, on the one part and D1 on the other part. In respect of the alternative case, the claim against D2 is on a personal guarantee allegedly given by D2 for the indebtedness of D1. This is pleaded and particularized at para 16 of the RASC.
30. I would observe that, in the SC at para 3, it was pleaded that on or around 8 October 2010 the First Agreement was an agreement whereby P agreed to sell and D1 agreed to purchase the goods. And at para 5 of the SC, it was pleaded that on or around 8 October 2010, the Second Agreement was an agreement whereby EEE agreed to sell and D1 agreed to purchase the goods. Gobind verified the facts pleaded in the SC as being true by his statement of truth dated 17 August 2012.
31. I would also observe that it was on the cause of action as pleaded in the SC that the default judgment against D1 was entered on 9 October 2012.
32. However, by the ASC filed on 6 June 2014, paras 3 and 5 of the SC were amended by adding “and/or [D2]” so that it was alleged by the said amendments in the ASC that D2 was also the party that had agreed to purchase the goods in addition to or instead of D1. Gobind also verified the facts pleaded in the ASC as being true by his statement of truth dated 6 June 2014.
33. Mr Babani made it plain in his opening submissions that P was abandoning and was no longer pursuing the further alternative case pleaded and particularized at para 17 of the ASC and which was repeated at para 17 of the RASC. The plea made there is that, in the alternative, P claims against D2 personally as the agent of Direktshop pursuant to the agreements made between P and EEE respectively, and Direktshop as the contracting parties as particularized therein.
34. I would also observe that by deleting the words “and/or...