Judgment no. 04/2019/KDTM-PT dated june 20, 2019 on dispute over contract for sale of goods

THE PEOPLE'S COURT OF KHANH HOA PROVINCE

JUDGMENT NO. 04/2019/KDTM-PT DATED JUNE 20, 2019 ON DISPUTE OVER CONTRACT FOR SALE OF GOODS

On June 18 and 20, 2019, at the headquarters of the People's Court of Khanh Hoa province, an appellate trial is conducted to hear the commercial case No. 02/2019/TLPT-KDTM dated January 15, 2019 on “dispute over contract for sale of goods”.

As the first-instance commercial judgment No. 01/2018/KDTM-ST dated November 27, 2018 of the People's Court of District C was appealed. Based on the Decision to Bring the Case to Appellate Trial No. 01/2019/QD-KDTM dated March 7, 2019; Decision to adjourn the court session No. 01/2019/QDPT-KDTM dated March 29, 2019; Notice of change of trial date No. No. 01/2019/TB-KDTM dated 22/4/2019; Notice of adjournment of trial date No. 02/2019/TB-KDTM dated May 15, 2019; Decision to adjourn the court session No. 03/2019/QDPT-KDTM dated June 5, 2019 between:

- Petitioner:  M Printing and Packaging Joint Stock Company

Address: 18 B, Ward H, District T, City M.

Legal representative: Mr. Trinh Huu M – Position: General Director

Authorized representative: Mr. Tran Thai D; Address: Room 702, Building K, 67 N street, District 1, city M (power of attorney dated February 17, 2017). Appearing in court.

- Respondent:  T Co., Ltd

Address: Lot F1, Industrial Park S, Commune T, District C, Khanh Hoa Province.

Legal representative: Ms. Truong Thi X – Position: President of the Member assembly, General Director.

Authorized representative: Mr. Nguyen Van H; Address: 44/23 Street B, Ward H1, City N. (power of attorney dated April 8, 2019). Appearing in court.

Appellant:  The respondent, T Co., Ltd.

FACTUAL AND PROCEDURAL BACKGROUND

According to the lawsuit petition and the case settlement process, the legal representative of M Printing and Packaging Joint Stock Company (abbreviated as Company M) and T Co., Ltd. (abbreviated as Company T) signed a contract for sale of goods No. 41-HD/KD-HDMB/14 on May 22, 2014 to buy and sell metal cans. In which Company M is the seller, Company T is the buyer. During the performance of the contract, Company M delivered the good in full at the request of Company T, but Company T did not pay in full under the contract to Company M. Company M required Company T to pay the outstanding amount (confirmed by both parties through the debt balance acknowledgement schedule dated April 2, 2015), which is: VND 352,042,030 and the interest accrued thereon due to late payment until November 27, 2018 is: VND 187.894.325.. In total, Company T still has to pay Company M an amount of: VND 539,936,355. In the voluntary statement and the case settlement process, the legal representative of the respondent confirmed the signing of the contract for sale of goods and owed Company M a purchase amount of VND 352,042,030 according to the debt acknowledgement schedule dated April 2, 2015. The reason Company T has not yet paid Company M is because the company has suffered damage due to the product of Company M failed to meet quality requirements. Company T does not agree to pay the late payment interest of VND 187,894,325 on the principal of VND 352,042,030 which Company M temporarily calculates until November 27, 2018 because on the date that both parties did the debt reconciliation, June 30, 2015, they only confirmed the principal, not mentioned that the late payment interest would be charged.

According to the counterclaim filed on March 15, 2017 and the process of settling the case, the legal representative of the respondent has stated as follows: Because the packages provided by Company M were rusty, after the finished products were packaged, entered warehouses awaiting consumption, and exported, the foreign customer discovered that the finished products were packed in rusty cartons and sent back thereafter. Then, Company T re-exported them at a lower price than the original and bore the costs related to the import of the returned goods, the cost of reselling the returned goods, and other related costs. On the basis of Clause 2, Article 5.1 and Clauses 2 and 3, Article 4 of the contract for sale of goods dated May 22, 2014, Company T requires Company M to pay damages in the amount of VND 355,241,925 and the interest accrued until November 27, 2018 of VND 62,471,716, totaling VND 417,686,641, offset against the amount owed by Company T to Company M is 352,042,030 VND.

The legal representative of Company M presents: The legal representative of Company M presents: Company M delivered goods to Company T and Company T checked the quality of the goods and confirmed the quality of the goods in the delivery record on May 23rd, 2014, June 2, 2014, June 7, 2014, and June 21, 2014. According to the sale contract No. 41-HD/KD-HDMB/14 dated May 22, 2014, the time limit for complaints about unqualified goods is 15 days from the date of delivery, but Company T did not give any complaint or response to Company M. In the contract in Article 5.2, Company M is not responsible for used goods, in this case, cans and can lids were found rusty by Company T after exporting goods to the foreign partner, i.e. cans and can lids were used, so company M is not liable for that. According to Article 5.2 of the Contract, Company T is responsible for inspecting and testing cans and can lids before being put into production, this process is called pre-production pasteurization process. In fact, the cans and can lids were found rusty by the foreign customer after receiving the goods, so the cans and can lids were rusty after Company T finished manufacturing and shipped them abroad; because, if the cans and can lids had been rusty before being put into production, Company T could not produce the finished products. Company M asserts that the goods sold to Company T were sufficiently good, so Company M does not accept the counterclaim of the respondent, Company T, asking Company M to pay damages of VND 355,241,925 and the interest temporarily calculated until November 27, 2018 is VND 62,471,716, totaling VND 417,686,641.

The first-instance commercial judgment No. 01/2018/KDTM-ST dated November 27, 2018 of the People's Court of District C, Khanh Hoa province. Pursuant to Articles 24, 44, 50, 55, 303, 306 of the Commercial Law in Viet Nam; Clause 4, Article 72, Article 147, Article 200 of the Law on Civil Procedure; Case No. 09/2016/AL dated October 17, 2016,

1. Accept the petitioner's request, forcing T Co., Ltd. to pay M Printing and Packaging Joint Stock Company the amount: VND 539.936.355.

2. Reject the respondent's counterclaim asking M Printing and Packaging Joint Stock Company to pay damages of VND 417.686,641.

From the date that M Printing and Packaging Joint Stock Company has a petition for judgment enforcement, if T Company Limited delays the payment, it must bear an interest on the amount of late payment at the average overdue debt interest rate in the market at the time of payment, which is 14.5%/year corresponding to the late payment period.

In addition, the first-instance judgment also declared court fees, responsibility for judgment enforcement, and the right to appeal of the petitioner and respondent.

On November 30, 2018 T Co., Ltd. filed an appeal against the entire judgment No. 01/2018/KDTM-ST dated November 27, 2018 of the People's Court of District C, Khanh Hoa province. At the appellate court hearing: The petitioner sustains the lawsuit claim. The respondent keeps the content of the appeal and confirms the amount of goods owed was: VND 352,042,030. However, we do not agree to pay the late payment interest from April 2, 2015 to November 27, 2018 (first-instance trial date), which is: VND 62,471,716, because it claims that Company M delivered the poor quality goods (including cans and can lids of 307 and cans of 603) to Company T as they were rusty. Since the foreign customer sent them back upon discovery that the goods were rusty, Company T had to re-export them to other customer at a lower price than the original, and then had to bear the costs related to the import of returned goods, the cost of re-selling the shipment, etc., causing damage to the Company, so Company T has filed a counter-claim, forcing the Company M to compensate for damage an amount of VND 355,241,925 and the interest incurred, totaling VND 417,686,641. The litigants fail to agree on lawsuit settlement.

Speaking at the trial, the procurator said that the judge, the court reporter, the trial panel, the involved parties and other procedure participants had strictly followed the Civil Procedure Code in Viet Nam.

As for the interest accrued due to late payment: Company T and Company M did not negotiate with each other or invite a professional intermediary to determine which party is at fault in letting the can rusty. Up to now, the error that caused the cans rusty during the production process has not been clarified, while earlier, on November 14, 2014, Company M used to receive the goods back due to its fault. Therefore, the court finds no good cause to charge the interest because Company T was late in performing its payment obligations as prescribed in Article 306 of the Commercial Law.

Alternatively, the first-instance Court ordered Company T to pay interest due to late payment from the date of late performance to the date of the second first instance trial (November 27, 2018). This is the damage to the respondent. Because the case was previously dismissed at no fault of the respondent.

Pursuant to Clause 2, Article 308 of Civil Procedure Code, the procurator proposes the Trial Panel to: Accept a part of the appeal of T Co., Ltd., correct a part of the first-instance judgment:

- Accept a part of the petitioner's lawsuit petition to force T Co., Ltd. to pay M Printing and Packaging Joint Stock Company the debt amount of VND 352,042,030;

- Do not accept a part of the petitioner's lawsuit petition to force T Co., Ltd. to pay M Printing and Packaging Joint Stock Company the late payment interest of VND 187,894,325;

- Do not accept the respondent's counterclaim to force the petitioner to pay damages in the amount of: VND 355,241,925 and the total interest incurred of VND 417,686,641.

JUDGEMENT OF THE COURT

Based on documents and evidences that have been examined at the court hearing, the results of the litigation at the trial, the opinions of the procurator, and law, the Trial Panel finds that:

 [1] Regarding proceedings: Due to the respondent's appeal against the entire first-instance judgment of the People's Court of District C, the People's Court of Khanh Hoa province’s acceptance of the case for appellate trial is deemed conformable with the jurisdiction specified in Article 285 of the Civil Procedure Code.

 [2] Regarding the respondent's appeal:

 [2.1] As for the principal: The first-instance commercial judgment has decided: Accepting the petitioner's lawsuit claim. Forcing the respondent, Company T, to pay Company M the outstanding amount of goods purchased: VND 352,042,030 This is considered an accordance with the sales contract of the parties and Article 50 of the Commercial Law.

 [2.2] As for the time when the interest starts to accrue: According to Article 5 of the Contract, in 5.1 it is stated that “…Party A’s packaging has a shelf life of 3 years from the date of delivery, etc.” (case file p.402 to 403). At the appeal court hearing, the parties confirmed that on July 2, 2015, Company M sent a balance acknowledgement schedule until June 30, 2015, Company T wrote that it did not pay the amount of goods purchased to Company M because the cans were rusty, the goods were in foreign warehouses, so the company had not been able make payment (case file p. 260 to 272). On the other hand, Company M's side filed the first lawsuit with the People's Court of District C on March 23, 2016 (case file p.01 to 32), proving that the parties have neither finalized the contract nor fixed the debt balance because Company T also requested to offset the amount of goods purchased due to the breach of the rusty cans, which means that there is still a dispute between the parties about the amount to be paid. Therefore, the court finds no good cause to charge the interest because Company T was late in performing its payment obligations as prescribed in Article 306 of the Commercial Law.

For the foregoing analysis, the Trial Panel finds that the first-instance Court was incorrect when compelling Company T to pay Company M the interest due to late payment from April 2, 2015 to November 27, 2018 (the date of the second first instance trial). This is the damage to the respondent because the case was previously dismissed at no fault of the respondent.

 [2.3] As for the counterclaim of the respondent: The Article 5.1 of the contract states that Company M is only responsible for compensating Company T in case the can and lid are damaged due to the Company M’s fault. However, when Company T shipped goods to the foreign partner and discovered that the goods were returned rusty, Company T should have requested a specialized agency to conduct an inspection to determine the cause of the rusty goods so as to lay the blame on Company M. There is no good cause for Company T to ask Company M to compensate for damage in the amount of VND 417,686,641.

The opinion of the representative of the People's Procuracy of Khanh Hoa province is consistent with the judgment of the Trial Panel and should be accepted.

 [2.4] As for court fee for first-instance commercial case: Adjusted according to the amount of money the respondent has to pay to the petitioner: VND 352.042,030. The petitioner must bear the court fee for the unaccepted money claim related to the interest: VND 187,894,325. [3] Regarding appellate fee: Due to the correction of the first-instance judgment, T Co., Ltd. does not have to bear the appellate court fee.

For the foregoing reasons, 

DISPOSITION

Pursuant to clause 2 Article 308 of the Civil Procedure Code 2015; Pursuant to Article 50; 306 Commercial Law;

Pursuant to Articles 26 and 29 of the Resolution No. 326/2016/UBTVQH14 in Viet Nam dated December 30, 2016 of the National Assembly Standing Committee on court fees and charges, collection, exemption, reduction, management, and use thereof.

1. Accept a part of the appeal of T Co., Ltd., correct a part of the first-instance judgment No. 01/2018/KDTM-ST dated November 27, 2018 of the People’s Court of district C, Khanh Hoa province as follows:

1.1. Accept a part of the petition of M Printing and Packaging Joint Stock Company.

1.2. T Co., Ltd. must pay M Printing and Packaging Joint Stock Company the debt amount of: VND 352,042,030 (three hundred and fifty two million and forty two thousand dong).

1.3. Do not accept M Company’s lawsuit petition to force T Co., Ltd. to pay the late payment interest of: VND 187,894,325 (one hundred and eighty seven million eight hundred and ninety four thousand three hundred twenty-five dong).

2. Do not accept T Company's counterclaim to require M Printing and Packaging Joint Stock Company to pay damages in the amount of VND 417.686,641 (four hundred seventeen million six hundred and eighty-six thousand six hundred and forty-one dong).

The Trial Panel holds that: From the date of the judgment creditor's written request for judgment enforcement until the execution of all sums of money, the judgment debtor must also pay interest on the remaining amount on a monthly basis at the interest rate of 10% specified in Clause 2, Article 468 of the Civil Code in Viet Nam, corresponding to the time when the judgment has not been enforced.

3. With reference to court fees:

3.1. Regarding first instance fee:: M Printing and Packaging Joint Stock Company must bear a commercial court fee of: VND 9,394,716 (nine million three hundred and ninety four thousand seven hundred and sixteen dong), but this is deducted from the amount of VND 10,495,000 (ten million four hundred and ninety five thousand dong) of the paid court fee advance according to the receipt No. AA/2012/0002319 dated May 16, 2016 of the Sub-Department of Civil Judgment Enforcement of District C.

3.2. Co., Ltd. T must bear a commercial business court fee of: VND 17,602,100 (seventeen million six hundred and two thousand one hundred dong) and the rejected part of the counterclaim of 20,707,466 VND (twenty million seven hundred and seventy seven thousand four hundred and sixty six dong), which is deducted from the amount of VND 8,880,000 (eight million eight hundred and eighty thousand dong) of the court fee advance paid according to the receipt No. AA/2012/0002725 dated April 27 2017 of the Sub-Department of Civil Judgment Enforcement of District C. T Co., Ltd also has to pay VND 29,429,566 (twenty nine million four hundred and twenty nine thousand five hundred and sixty six dong).

3.3 Regarding appellate fee: T Co., Ltd. is not required to bear an appellate commercial court fee. Refund to T Co., Ltd. VND 2,000,000 (two million dong) advance of the paid court fee advance according to the payment receipt No AA/2012/0002319 dated May 16, 2016 of the Sub-Department of Civil Judgment Enforcement of District C.

In case the judgment or court decision is enforced as per regulations in Article 2 of the Law on enforcements of civil judgments in Viet Nam, the judgment creditor and judgment debtor are lawfully allowed to reach an agreement on judgment enforcement, request judgment enforcement, be subject to voluntary execution or coercive judgment enforcement in compliance with regulations in Article 6, 7 and 9 of the Law on enforcement of civil judgments, and the effective period of judgment enforcement shall comply within provisions in Article 30 of the Law on enforcement of civil judgments.

The appellate judgment takes legal effect from the date of pronouncement.