Judgment no. 29/KDTM-PT on dispute over a service contract

SUPERIOR PEOPLE’S COURT IN HO CHI MINH CITY

JUDGMENT NO. 29/KDTM-PT DATED JUNE 30, 2020 ON DISPUTE OVER A SERVICE CONTRACT

On June 30, 2020, at the headquarters of the Superior People's Court of Ho Chi Minh City, an appellate trial was conducted to hear the case No.  45/2019/TLPT-KDTM on December 13 2019 in the matter of “Dispute over service contract”.  Since the first-instance commercial case No.  775/2019/KDTM-ST dated July 4, 2019 of the People's Court of Ho Chi Minh City was appealed.

Based on the Decision to Bring the Case to Appellate Trial No. 255/QDPT-KDTM dated March 1, 2020, between the involved parties:

Petitioner: CLS S.R.L Company. Address: Piazza Sant'Eufemia, 3-20122 Milano, Italy.

Authorized representative: Mr. Nguyen Tr, born in 1983. (appeared in court). Address: No. ** CBN, NCT ward, District 10, Ho Chi Minh City.

Respondent: G.L Joint Stock Company.

Address: No. ** P Street, BN Ward, District 1, Ho Chi Minh City

Authorized representative: Ms. Ngo Thi Kim Tr1, born in 1985 (appeared in court).

Address: 6th Floor, Paxky Building, No. ** PNT, Ward 6, District 3, Ho Chi Minh City (according to authorization letter dated October 24, 2018).

Defender of the respondent: Lawyer Nguyen Thi Minh H of LV Law Firm affiliated to Ho Chi Minh City Bar Association (appeared in court).

Appellant:  Petitioner, CLS S.R.L Company.

FACTUAL AND PROCEDURAL BACKGROUND

Petitioner, CLS S.R.L Company and legal representative presented:

CLS S.R.L Company (CLS Company) and G.L Joint Stock Company (G.L Company) signed the Letter of Appointment on May 23, 2016 on the new design of Runway Store (Letter of Appointment). According to the agreement, CLS Company was engaged by G.L Company to provide design and related services for a 12,000-square-meter store at Union Square, District 1, Ho Chi Minh City to display the fashion products and related products. The total value of the service is $500,000 (excluding value-added tax and other costs). Payment will be made within 10 working days of the proforma invoice issue.

The contract was signed by the legal representatives of the two parties, and according to Italian business practices, CLS Company does not care about the seal, the original contract but only needs the legal representatives of the two parties to sign for approval for entering into performing the contract, then the contract will come into force. CLS Company also determined that all communications related to transactions between CLS Company and G.L Company were exchanged via email, phone, etc., by wireless means due to the geographical distance between the two parties.

Immediately after signing the contract, on June 3, 2016, the respondent paid the Invoice No. 01 issued by CLS Company on May 27, 2016 with the first payment of USD 100,000. On July 19, 2016, CLS Company completed and handed over the product of the official design stage to the respondent and issued invoices No. 16, 20. However, the respondent did not respond. On August 31, 2016, the respondent sent an email to CLS Company, requesting the termination of the Letter of Appointment dated May 23, 2016 on the grounds that they had trouble with renting the premises. After that, CLS Company replied in writing (via email) on September 2, 2016, with the content: Agree to terminate the Letter of Appointment provided that the respondent must pay the amount of 02 invoices issued and the remaining fee of USD 200,000. If G.L Company approves it, CLS Company will no longer has any involvement in their trouble. After this email, the respondent still did not give any response to the petitioner.

According to the agreement in the Letter of Appointment dated May 23, 2016: On the payment date related to each mentioned stage, the CLS studio will issue a proforma invoice for the agreed amount. Invoices will be issued at the time of payment and must be made within 10 business days of the relative pro forma invoice date.

Thus, after completing the proforma invoices for the agreed amount, these invoices are legal under Italian law. And G.L Company also paid invoice number 01 according to the transfer order dated June 3, 2016. Therefore, the invoice number 01, 16, 20 issued by CLS Company are all valid for payment by G.L Company.

The design project was carried out by a group of construction units engaged by the respondent, in specific: CLS Company was in charge of the architect and interior drawing designer (represented by:  Davide A); A was in charge of project management and construction management (represented by: Bruno d' Arcangues, Mathieu Baudoin, Pham Ngoc Thien Tr2); VM- unleashed participated in the evaluation and monitoring of all products submitted by CLS Company related to the Project (represented by: Tim Radley). During the course of work, the parties will work mainly with three people in charge of the respondent's Project: Ms. Tran Thi Hoai A, Mr. Tran Doan Nam A1 and Ms. Tran Bich L. Before working together, the respondent has introduced these units to the petitioner and when starting work, the respective responsibilities will fall on each unit. Because of the teamwork process, the products in each stage are not necessarily sent directly to the respondent, but can be exchanged through the units corresponding to their role in each stage.

Payment by Letter of Appointment: Petitioner has provided enough products in each stage and has also issued corresponding proforma invoices, so the respondent must respect the agreement. Payment for products is not subject to any acceptance or refusal of the respondent to receive products as the two parties do not have agreed to this in the Letter of Appointment.

Ms. S.A's authority: Through many mergers, now CLS Company has changed its name to San Paolo In Converso S.L.R Company (San Paolo In Converso Company) according to the Certificate of history dated May 20, 2019 and Ms. S.A is still the legal representative of the company. At the first-instance court hearing, the petitioner identified the legal entity's name as CLS Company. The message of Mr. Davide A shown in the written evidence dated May 9, 2019 identifies that Mr. Nguyen Tr has the authority to log in to Mr. Davide A's davide.A@gmail.com email account to retrieve any correspondence and attached files related to the Project to protect the legitimate interests of the petitioner.

The petitioner requested the Court to force G.L Company to pay the petitioner an amount, specifically as follows: The service fee is USD 200,000 (equivalent to VND 4,535,000,000); and the interest on late payment charged from August 23, 2016 to February 1, 2018, with the rate of 12%/year on the amount of VND 4,535,000,000, which is VND 785,735,342. Total: VND 5,320,735,934. Respondent, G.L Joint Stock Company and legal representative presented:

In 2016, G.L Company had a plan to run a Runway Fashion Store at Union Square Trade Center, Ho Chi Minh City, Vietnam (abbreviated as Project), so it discussed with CLS Company about the provision of design services and construction instructions for the Project. However, the two parties have not officially signed a service contract as prescribed, but only signed a Letter of Appointment for the new design of Runway Fashion Store on May 23, 2016, with some simple contents about the scope of the service and service charges. Other specific terms on the rights and responsibilities of the two parties have not been mentioned. After that, CLS Company also did not perform the work as agreed in the Letter of Appointment, but due to the previous long-term relationship between the two parties and to assist CLS Company in solving financial difficulties, G.L. made an upfront payment of USD 100,000. In fact, CLS Company has only done a very small part of the work, that is, it has only provided the initial sketch drawings of the Project and has not been approved because the sketch completely did not yield to the demand of G.L. Company.

Opinion of G.L Company on the lawsuit claim of CLS Company:

According to the Lawsuit petition and the written explanations, CLS Company believes that it has performed the work as agreed in the Letter of Appointment, but G.L Company has only paid 100,000 USD for the first payment under Invoice No. 01 dated May 27, 2016 and so CLS Company continues to demand payment of USD 200,000, equivalent to VND 4,535,000,000 according to Invoice No. 16 dated July 28, 2016 and Invoice No. 20 dated August 23, 2016 plus late payment interest of VND 785,735,342.

G.L Company rejected and disagreed with CLS Company's lawsuit petition because it did not meet the conditions to be paid. The products provided by CLS Company have not been approved by G.L Company. Request CLS Company to provide evidence to prove specific products that have been made. In fact, CLS Company has only provided the initial sketches of the Project. CLS Company arbitrarily issued Invoice No. 16 dated July 28, 2016 and Invoice No. 20 dated August 23, 2016 to request payment but did not hand over the respective products, which did not meet the conditions to be eligible for payment.

According to the Letter of Appointment, CLS Company must make and provide G.L Company with specific products at each stage, and then issue a proforma invoice to request payment. The work implementation stages include: Department Store concept design and Design development phase, this phase includes: Definitive project development and Construction development phase.

At each of the above Stages, CLS Company will have to provide G.L with the finished products, specifically: At the Department Store concept design, CLS Company will perform the work and provide G.L with drawings at full scale, plans, drawings, sections; perspective drawings and sketches; 3D drawings; panels mixed of materials and colors for interior finishing; job description; coordination/implementation with building management; basic M&E system integration and analysis. At the Definitive project development, CLS will provide G.L. with the final full-scale architectural drawings, plans, drawings, sections of the shop within the budget; the client's final project that has been completed, with coatings and materials; final material palette: floor material, wall finishing material, colors. At the Construction development phase, CLS Company will perform the work and provide G.L Company with construction drawings to provide to the General Contractor; evaluate and approve the Contractor's soft file drawings; monitor the production, execution and installation; evaluate and approve Contractor's supplied materials; alternative materials proposed by the Contractor.

Thus, the scope of work has been clearly agreed by the parties, CLS Company is responsible for performing the right work and providing a full range of products for G.L.

According to the term concerning service charge in the Letter of Appointment, the payment obligation of G.L. Company to CLS Company also corresponds to the scope of work, accordingly: An amount of USD 100,000 is paid at the beginning of the project; an amount of USD 100,000 is paid on the release of the Definitive project development and an amount of USD 100,000 is paid on the release of the Construction development phase. Thus, according to the above agreement on payment conditions: After G.L pays USD 100,000 at the beginning of project (1st payment), CLS Company must perform and provide all the products mentioned in the Department Store concept design and the Definitive project development to require another payment of USD 100,000 from G.L (2nd payment). When completing and supplying products at the Construction development phase, CLS Company has the right to ask G.L Company to pay the next USD 100,000 (3rd payment).

Besides, although the two parties did not agree on a specific time that CLS Company must perform the work as well as a specific time that G.L Company must pay the fee, the term concerning service charge of the Letter of Designation states as follows: “On the payment date related to each of the phases set forth above, Studio CLS will issue proforma invoices for the agreed amounts.” It means that at the time of completing the work and handing over the product (release) of each stage, CLS Company will be paid, and CLS Company must issue an invoice to G.L Company to request payment. According to the conditions stipulated by the two parties, the time of completion of the work and the time of payment of charges must correspond to each other to ensure the interests of the parties.

In fact, CLS Company has not met the conditions to be paid, so it does not have the right to claim interest on late payment. G.L Company has advanced USD 100,000 but has not received the products as agreed, so the petitioner's claim is unfounded.

G.L's opinion on the petition filed by the petitioner with the Court:

Attached to the lawsuit petition dated February 1, 2018, the petitioner submitted to the Court a notarized translation document dated June 22, 2018 titled "Certificate of Business Registration". The content of this document shows the information of 02 legal entities including: CLS Co., Ltd., established on May 19, 2016; registered on May 25, 2016; tax code is 09524150969; only 01 CEO; the company's management board consists of 2 personnel and the tax code of A2 Di Davide A & C.S.N.C Company is 06440250964, registration date was March 9, 2017. The Board of Directors consists of 2 people:

S.A - Chairman of the Board of Directors, with the appointment decision approved on June 7, 2016, registered on July 18, 2016 and A Davide Giuseppe - Member of the Board of Directors with the appointment decision approved on June 7, 2016, submission for decision on July 7, 2016, registration on July 18, 2016.

The information does not include specific information of the legal representative and members of the Board of Directors of CLS Company; there is no basis to determine that the authority to represent CLS Company (including the authority to initiate lawsuits) falls under the Chairman of the Board of Directors alone or to the Chairman of the Board of Directors and authorized members as specified in the Business Registration Certificate; there is no basis to clearly define the relationship between A2 Di Davide A & C.S.N.C Company and CLS; there is no basis to determine the relationship between Ms. S.A and CLS.

Therefore, it is recommended that the Court consider returning the lawsuit filed by CLS Company in accordance with the law because the person signing the lawsuit is not competent.

Opinion of G.L Company on the documents provided by the petitioner:

The translation dated April 16, 2019 of the Business Registration Certificate does not have full content of the foreign language pages. Specifically, this document has 09 pages in foreign languages ​​but the translation into Vietnamese has only 04 pages. As such, this translation is not fully translated, so it does not guarantee the legality of the document and is not valid for consideration.

Written evidence number 2272/2019/VB-TPLQ5 dated April 9, 2019 created by the bailiff at the request of Mr. Tr to witness the event that Mr. Tr logged into Mr. Davide A's email account (davide.A@clsarchitetti.com) rather than Mr. Tr's email. However, Mr. Nguyen Tr failed to present the authorization letter from Mr. Dadive A allowing Mr. Tr to have the right to log in to the email account, and Mr. Tr could not provide any documents or agreements showing that this email account is under management and use rights of CLS. Therefore, Mr. Tr's arbitrary login and use of another person's email account is contrary to the provisions of Clause 3, Article 38 of the Civil Code on the right to privacy. As a rule, correspondence, electronic database and other forms of private communication of individuals are protected, kept safe and confidential; the opening of electronic mails and database of others is only done in cases prescribed by law. Therefore, the fact that Mr. Tr's login and use of the email davide.A@clsarchitetti.com was invalid and go against the law, so the written evidence number 2272/2019/VB-TPLQ5 has no legal value to be considered.

The documents and evidence related to proving the competence of Ms. Annamaria Scelova at CLS Company were filed by the petitioner with the Court on April 17, 2019 just one day before the date of first-instance court hearing. This does not conform to Clause 4, Article 96 of the Civil Procedure Code, so they should not be considered. It is not true that the respondent has introduced certain legal entities and individuals to the petitioner to coordinate the execution of the Project: The respondent only consulted with a number of units with in-depth expertise in design but the decision authority still rests with G.L Company. The design products presented by the petitioner have not been approved by the respondent, so payment cannot be made.

In the first instance judgment No. 775/2019/KDTM-ST dated July 4, 2019, the People's Court of Ho Chi Minh City held that:

Pursuant to Point g, Clause 1, Article 217 of the Civil Procedure Code 2015; Resolution No. 326/2016/UBTVQH14 dated December 30, 2016 on the rates of collection, exemption or reduction, payment, management and use of court fees and charges, declare:

Suspension of the settlement of civil case No. 113/2018/KDTM-ST dated August 1, 2018 on service contract dispute, between:

Petitioner: CLS S.R.L Company.

Address: Piazza Sant'Eufemia, 3-20122 Milano, Italy.

Respondent: G.L. Joint Stock Company

Address: 146AB Pasteur, Ben Nghe Ward, District 1, Ho Chi Minh City.

In addition, the first-instance judgment also states the court fee, right to appeal of the litigants.

On July 12, 2019, Mr. Nguyen Tr, the legal representative of CLS Company, appealed the first-instance judgment.

At the appellate court hearing, Mr. Nguyen Tr, the legal representative of CLS Company, upheld his appeal and presented: At the appellate stage, the petitioner did not ask for a defender of his/her legitimate rights and interests. The ground for the petitioner to sue is the Letter of Appointment dated May 23, 2016 of G.L. Company. During the implementation process, CLS Company finished the products as agreed and issued 3 invoices, but only 1 invoice was paid by G.L Company, which is USD 100,000. 2 unpaid invoices (numbers 16 and 20) are worth USD 200,000. The petitioner, CLS Company, at the first instance trial was San Paolo In Converso Company. San Paolo In Converso Company did not authorize Mr. Tr to participate in the proceedings, but this authorization was performed by CLS Company. At the first instance trial, CLS Company ceased to exist and was replaced by San Paolo In Converso Company. The only basis to determine that San Paolo In Converso Company inherits CLS Company’s right as the petitioner was the document certified by the Consulate General of Italy in Ho Chi Minh City on September 12, 2019 (filed with Court of Appeal) but the petitioner did not provide the Court with a document confirming that the Consulate General of Italy has the right to confirm the above content. According to Italian law, the competent authority to grant and confirm business registration is the Milan-Monza-Brianza-Lodi Interprovincial Chamber of Commerce. There is a contractual relationship between CLS Company and G.L Company. The Consulate General of Italy has confirmed that San Paolo In Converso Company is the successor of CLS Company, so the CLS Company has the right to sue. The first-instance court's suspension of the case was not correct. Propose the Trial Panel to reverse the first-instance judgment.

G.L Company presented: Disagree with the whole appeal of Mr. Nguyen Tr who is the legal representative of CLS Company. Propose the Trial Panel to affirm the first-instance judgment.

The defender of G.L Company presented: During the settlement process at the first instance level, the Court asked the petitioner, CLS Company, to provide documents proving the process of changing the Company. At the time of the first-instance trial, the petitioner determined that CLS Company no longer existed and was replaced by San Paolo In Converso Company, but could not provide evidence to prove that these two businesses are the same. The business registration license of San Paolo In Converso Company also does not show the relationship, inheritance of rights and obligations of CLS Company. The confirmation document of the Consulate General of Italy in Ho Chi Minh City is not the basis for determining the legal status of San Paolo In Converso Company because the Italian Consul General neither has business management duty, nor cite the Italian legal regulations as the basis for the confirmation. Therefore, it can only be referred to when solving the case. The first-instance court's dismissal of the case was grounded. Propose the Trial Panel to dismiss the appeal of CLS Company and affirm the first instance judgment.

Viewpoint of the representative of the Superior People's Procuracy in Ho Chi Minh City on lawsuit settlement: The case files and documents provided by the petitioner and the presentation of the involved parties at the appellate court session have no basis for determining that who is the legal representative of CLS Company. The documents provided by the petitioner do not prove that CLS Company and San Paolo In Converso Company are one, or if San Paolo In Converso Company has a right of succession to CLS Company. At the time of first instance trial, CLS Company no longer exists. The petitioner provided a document dated September 12, 2019 of the Consulate General of Italy in Ho Chi Minh City after the first-instance trial, which did not comply with the provisions of the Civil Procedure Code, so it was not accepted. Regarding the content of the confirmation in the above document was also not within the competence of the Consulate General of Italy. The first-instance court's suspension of the case was correct. Propose the Trial Panel to dismiss the appeal of the petitioner and affirm the first instance judgment.

JUDGEMENT OF THE COURT

Based on the documents and evidence in the case file, the results of the litigation at the trial and the opinions of the Superior People's Procuracy in Ho Chi Minh City, the Trial Panel found that:

Regarding proceedings:

[1] Mr. Nguyen Tr, the authorized representative of CLS Company, filed the appeal in accordance with Articles 271, 272, 273, 276 of the Civil Procedure Code, so it should be accepted. The petitioner did not withdraw the lawsuit petition or appeal. The litigants fail to agree on lawsuit settlement. The case was heard according to appellate procedures.

[Considering the petitioner’s appeal, it is found that:

[2] The case file shows: According to the documents provided by the petitioner, CLS Company was certified by the Milan-Monza-Brianza-Lodi Interprovincial Chamber of Commerce on May 25, 2016; established on May 19, 2016; tax code 09524150969; the administration system has 01 CEO; the management board of the company consists of 2 personnel. Document No. CEW/1522/2018/CMI1154 dated January 29, 2018 of the Milan-Monza-Brianza-Lodi Interprovincial Chamber of Commerce notes: Merger through establishment of A2 Di Davide A & C.S.N.C Company; tax code 06440250964;

Registration submission date: March 16, 2017; Decision date: March 14, 2017; under the decision dated April 26, 2017; Revision date: April 28, 2017. The Board of Directors consists of 2 people: S.A - Chairman of the Board of Directors, with the appointment decision approved on June 7, 2016, registered on July 18, 2016 and A Davide Giuseppe - Member of the Board of Directors with the appointment decision approved on June 7, 2016, submission for decision on July 7, 2016, registration on July 18, 2016. The business registration certificate of CLS Company does not identify the name of the legal representative. San Paolo In Converso S.R.L Company Registration Certificate issued by Milan-Monza-Brianza-Lodi Intercity Chamber of Commerce shows the names of the transferor company and transferee company: A2 Di Davide A & C.S.N.C and Untiled Homeware S.R.L. This Certificate does not mention that San Paolo In Converso S.R.L is renamed from CLS S.R.L.

[3] At the appellate trial, the Petitioner provided a document dated August 19, 2019 of the Consulate General of Italy in Ho Chi Minh City defining the legal status and legal representative of CLS Company, stating that: CLS Company has registered to change its name to San Paolo In Converso S.R.L and Ms. Annamaria Scevola is the sole legal representative of CLS S.R.L in the company registration certificates. The above confirmation also states that: “In accordance with Italian law, the above registration updates will not (i) create a new legal entity; (ii) invalidate any legal proceedings in which the company is a party; and (iii) any proceedings initiated and continued by the company or against the company under the old name will continue against the company under the new name. In addition, the tax code of CLS S.R.L. 09524150969 remains the same regardless of any registration updates.” [4] However, the confirmation dated August 19, 2019 does not specify when CLS registered to change its name to San Paolo In Converso. Point a, Clause 1, Article 478 of the Civil Procedure Code, regarding the recognition of documents sent to Vietnamese courts by foreign agencies, organizations and individuals stipulates:

"1. Vietnamese courts shall recognize documents made, issued and certified by foreign competent agencies and organizations in the following cases:

a) Notarized or certified documents and Vietnamese translations that have been consularly legalized”…

[5] According to Article 8 of the Law on overseas representative missions of the Socialist Republic of Vietnam, the performance of consular duties does not include the matters as stated in the confirmation dated August 19. 2019. The content of the confirmation dated August 19, 2019 cited Italian law. At the appellate court hearing, the petitioner confirmed that he could not provide documents from the Italian competent authority stipulating that the Consulate General of Italy in Vietnam has the authority to perform consular duties to provide the content as stated in the confirmation dated August 19, 2019, according to Article 481 of the Civil Procedure Code on the identification and provision of foreign laws for the Court to apply in the settlement of the civil cases with foreign elements. Besides, the confirmation dated August 19, 2019 of the Consulate General of Italy mentioned above was also provided by the petitioner after the Ho Chi Minh City People's Court conducted the first instance trial on July 4, 2019.

[6] On August 1, 2018, the first-instance court accepted and settled the case. At the first-instance court hearing, the petitioner still identified the legal entity's name as CLS Company. Thus, the statements and evidence provided by the petitioner failed to prove that at the time of initiation of the lawsuit, CLS Company still exists and the person signing the lawsuit petition is a competent representative as prescribed in Clause 3, Article 189 of the Civil Procedure Code 2015. Therefore, the first-instance court’s suspension of settlement of the case was lawful.  Therefore, the Trial Panel agreed with the opinion of the Procuracy, dismissed the appeal of CLS Company, and affirmed the first-instance judgment. CLS company must bear the appellate court fee.

For the foregoing reasons, 

DISPOSITION

Pursuant to Clause 1, Article 308; Clause 3 Article 189; Point g, Clause 1, Article 217 of the Civil Procedure Code 2015; the Resolution No. 326/2016/UBTVQH14 dated December 30, 2016 of the National Assembly Standing Committee, stipulating the court fees and charges, collection, exemption, reduction, management, and use thereof;

1. Dismiss the appeal of the CLS S.R.L Company.

2. Affirm the commercial judgment No. 775/2019/KDTM – ST dated July 4, 2019 of the People's Court of Ho Chi Minh City.

3. Suspend the settlement of civil case No. 113/2018/KDTM-ST dated August 1, 2018 on service contract dispute, between:

Petitioner: CLS S.R.L Company. Address: Piazza Sant'Eufemia, 3-20122 Milano, Italy.

Respondent: G.L. Joint Stock Company

Address: 146AB Pasteur, Ward BN, District 1, Ho Chi Minh City.

4. Court fee for first-instance commercial case:

[4.1] Regarding first instance court fee: CLS S.R.L. Company will receive a refund of the paid court fee advance of VND 56,660,368 (fifty six million six hundred and sixty thousand three hundred and sixty eight dong), according to the receipt No. AA/2017/ 0049210 dated July 27, 2018 of the Civil Judgment Enforcement Department of Ho Chi Minh City.

[4.2]. Regarding appellate court fee: CLS S.R.L Company must bear VND 2,000,000 (two million dong), which is deducted from the court fee advance, according to the receipt No. 0024107 dated August 2, 2019 of Civil Judgment Enforcement Department of Ho Chi Minh City. CLS S.R.L Company has paid in full.

5. The appellate judgment takes legal effect from the date of pronouncement (June 30, 2020)./


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Judgment no. 29/KDTM-PT on dispute over a service contract

Số hiệu:29/KDTM-PT
Cấp xét xử:Phúc thẩm
Agency issued: Tòa án nhân dân cấp cao
Field:Kinh tế
Date issued: 30/06/2020
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