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North Asia Ltd v Jingdong E-commerce (Trade) Hong Kong Corporation Ltd

Judgment Cited authorities 6 Cited in Precedent Map Related
Vincent
JurisdictionHong Kong
Judgment Date13 July 2023
Neutral Citation[2023] HKCFI 1971
Subject MatterCivil Action
Judgement NumberHCA1006/2023
Year2023
HCA1006/2023 NORTH ASIA LTD v. JINGDONG E-COMMERCE (TRADE) HONG KONG CORPORATION LTD

HCA 1006/2023

[2023] HKCFI 1971

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1006 OF 2023

__________________

BETWEEN
NORTH ASIA LIMITED Plaintiff
and
JINGDONG E-COMMERCE (TRADE) HONG KONG CORPORATION LIMITED Defendant

__________________

Before: Hon K Yeung J in Chambers
Date of Hearing: 13 July 2023
Date of Decision: 13 July 2023

__________________

D E C I S I O N

__________________

A. Introduction

1. On 30 June 2023, this matter first came before me as the Summons Judge. That was the first hearing of the inter partes summons (the “Summons”) of 27 June 2023 taken out by the plaintiff (“P”) for an injunction to restrain the defendant (“D”) from presenting or enforcing a Standby Letter of Credit issued on 22 July 2022 which P has previously provided to D (“SBLC”).

2. One feature of the SBLC which bears upon the further conduct of the case is its expiry date. It is 23 July 2023. Hence, if any interim injunction, or even just interim-interim injunction, is to span beyond 23 July 2023, D could permanently be deprived of any benefit which it may otherwise derive from the SBLC.

3. In the light of that, during that hearing on 30 June 2023, and upon D’s undertaking not to present the SBLC on or before 13 July 2023, I gave parties by consent tight deadlines for filing evidence, and adjourned the Summons to 13 July 2023 for substantive hearing – hence the present hearing.

4. Ms Sheena Wong appears for P. Mr Martin Ho with Mr Ian Yu appear for D.

B. Relevant affirmations

5. On 27 June and 11 July 2023, P filed in support and in reply the affirmations of Cheng Chun Fung (“Cheng”, and “Cheng/Aff1” and “Cheng/Aff2” respectively). Cheng is a director and shareholder of P.

6. D on 7 July 2023 filed in opposition the affirmation of Pan Lan[1] (“Pan” and “Pan/Aff”). Pan is a senior sales manager of D.

C. Background facts

7. P engages in trading business.

8. Prior to its co-operation with D, to perform purchase orders placed upon it by its customers, P sourced its goods directly from its suppliers. Payment of cash to its suppliers upon delivery (“COD”) was required.

9. Sometime in July 2021, P started to co-operate with D. They entered into an agreement dated 21 July 2021, entitled “Master Sale and Purchase Agreement” (the “Master Agreement”). As explained in the affirmations, D allowed P thereby to place orders in its name for goods which P would otherwise have sourced directly from its suppliers. Both P and D would benefit from the arrangement. P would not be required to pay its suppliers on a COD basis, but only to D 20% of the price marked up by 1.6% as the initial deposits (the “20% Deposit Arrangement”), and would have a further period to settle the balance. P would also thereby have access to suppliers and the benefit of more competitive price as a result of D’s purchasing power. D would pay the suppliers directly, and would in return have the benefit of the 1.6% mark-up.

10. In relation to the Master Agreement, and in so far as relevant:

(a) Shipment and delivery are governed by Clause 3.2, that unless otherwise specified, D shall deliver to P or any other party designated by P as set forth in the purchase orders;

(b) It appears common ground that the goods so ordered would be delivered by suppliers to D’s warehouse. What is not agreed is the exact mechanism for pick up, and in particular the role of what P has described as “Pick Up Notes”, which it says is a prerequisite document for collection;

(c) Payment is governed by Clause 4: 20% deposit within 7 business days after submission of purchase order, and balance of 80% “within 30 calendar days after receiving Products”.

(d) According to Clause 8, the initial term of the Master Agreement shall be a period of one year from 21 July 2021, and shall thereafter be automatically renewed for additional successive terms of one year each unless at least thirty days’ written notice has been given before the last day of the current term;

(e) According to Clause 9.8, no modification or amendment to any of its terms shall be binding unless set forth in writing and signed by the parties.

11. In July 2022, a further agreement dated 6 July 2022 was entered into (the “Sales Agreement”).

12. The Sales Agreement is in English and simplified Chinese. The version in simplified Chinese is fuller. Some blanks in the English version were not filled in. According to Clause 11 of the Sales Agreement, in case of differences, the Chinese version prevails.

13. Clauses 2 to 4 of the Sales Agreement is in the following terms:

“2. Trade terms 贸易条款：买方自提

Port of departure 启运港：根据采购订单

Port of destination 目的港：根据采购订单

3. Acceptance method: The buyer and the seller inspect the goods in the seller’s warehouse and deliver the goods. The seller is only responsible for the appearance of the goods handed over to the buyer. After the delivery is completed, the ownership of the goods is transferred, and the seller no longer assumes any responsibility for the goods.

验收方式：买卖双方在卖方仓库验货交货。卖方只对交接给买方的货物外观负责。交付完毕后，货权由卖方转移到买方，卖方不再承担任何关于货物的责任。

4. Payment 付款：

T/T: 20% of the total order amount shall be paid within 5 days from the date of signing the contract order; the remaining [blank] % shall be paid within [blank] days. The buyer shall pay balance before delivery.

自合同订单签订之日起5天内支付订单总金额的20%；余款80% 60天内支付，支付余款后交货。

Other payment methods: The standby letter of credit for the specified amount shall be issued after the signing of the order, and 100% payment shall be paid before delivery.

其他付款方式：合同订单签订后开具指定金额的备用信用证，100%货款在提货前付清。”

14. For the purpose of the Sales Agreement, and on 25 July 2022, HSBC issued the SBLC in favour of D. The receiving bank is Standard Chartered Bank. P is the applicant. D is the beneficiary. The undertaking amount is US$8,000,000. It is available by sight. The “Document and Presentation Instructions” states inter alia that:

“BENEFICIARY'S SIGNED CERTIFICATE[2] CERTIFYING THAT BENEFICIARY HAS MADE SHIPMENT OF THE REQUIRED GOODS AND HAS SUPPLIED THE REQUIRED DOCUMENTS TO BUYER AND HAS NOT BEEN PAID AT SIGHT OF THE INVOICE DATE.”

15. About the same time when the Sales Agreement was signed, D suspended and eventually closed down its trading services.

16. Upon and despite the closing down of D’s trading services, there remained a number of outstanding purchase orders which P had placed with D (the “Outstanding POs”). According to Cheng/Aff2[3], there were 17 of them. They were placed between 29 June and 21 July 2022 – Batch (or Order) Nos 57 to 60 on 29 June 2022, 62 to 65 on 7 July 2022, 66 to 68 on 15 July 2022, and 69 to 74 on 21 July 2022. Also according to Cheng/Aff2, and supported by bank transfer documents[4], 20% deposits for all of them had been paid by book transfer by and via Standard Chartered Bank.

17. P says that all those orders were placed under the Master Agreement. It points to the payment of the 20% deposits, so that it says the use of the SBLC was not engaged.

18. According to Pan/Aff, P currently owes D more than US$15 million in outstanding payments. D places emphasis on Batch (or Order) Nos 63 to 68 (the “Outstanding POs 63-68”). They were placed between 7 and 15 July 2022, after the date which the Sales Agreement bears. The aggregate of Outstanding POs 63-68 is US$9,641,773.78, already larger than the undertaking value of the SBLC.

19. D had presented the SBLC once. P says that that was wrongful, as the SBLC was not provided to cover purchases under the Master Agreement. P says further that there could not have been the Certificate as required, as no Pick Up Notes had been issued. The presentation had subsequently been withdrawn. P bore the expenses of US$20,000. P says that D has threatened to present the SBLC again, regardless of whether it would be wrongful to do so.

20. On 27 June 2023, P took out the Writ herein with general indorsement. P seeks damages for breach of the Sales Agreement. It also seeks an injunction restraining D from presenting or enforcing the SBLC. On the same day, the Summons was issued.

D. Parties’ stances

21. Ms Wong submits that the Summons should be allowed. She submits that P has a strong case and good prospect of success on the merits. The threatened drawdown is a breach of the term that payment under the SBLC shall only be used as an alternative payment method. The Outstanding POs were all placed under the Master Agreement. 20% deposits had in fact been paid. The SBLC is not engaged. The threatened drawdown would further or alternatively be a breach of the implied term that D would not act dishonestly. Withholding the injunction sought would cause P irreparable harm. The contrary would not be true for D, and balance of convenience is in favour of grant.

22. Mr Ho submits that the Summons should be dismissed. He submits that letters of credit are treated as equivalent to cash. To obtain the injunction sought, P faces a higher merits threshold. But there is no term, express or implied, which restricts D’s right to present the SBLC to only those orders placed pursuant to the Sales Agreement. The Master Agreement and the Sales Agreement are not separate agreements. The sums due and owing have been treated as one composite debt. The SBLC covers the purchase of electronic components, with no distinction between the Master Agreement and the Sales Agreement. P’s case based on the Pick Up Notes is not understood, and is not consistent with the terms of the Sales Agreement. In any event, Outstanding POs 63-68 post-date the Sales Agreement. The total of their outstanding sums alone exceeds the value of...

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