Chen Ka and Others v. Tsang Kwong Mau and Another

CACV000026/1968

IN THE SUPREME COURT OF HONG KONG

APPELLATE JURISDICTION

CIVIL APPEAL NO.26 OF 1968

(On Appeal from Kowloon District Court
Civil Jurisdiction Action No.1135/68)

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Coram: Full Court: Rigby, S.P.J., Scholes and Briggs, JJ.

Date of Judgment: 22 November 1968

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JUDGMENT

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1. Since the grounds of appeal in this case are limited to two relatively simple points of law it is, fortunately, unnecessary to go in any detail into the somewhat complicated facts of the case.

2. The Appellant company - originally the fourth defendants in this action - are property owners. They employed the contractors - the third defendants - to erect a building on their land. The third defendants employed a sub-contractor - the second defendant - who in turn himself employed a sub-contractor - the first defendant. The first defendant, in turn, engaged the first and second plaintiffs as his own sub-contractors. It is, of course, clear that there was no privity of contract between the property owner and the various sub-contractors; each party necessarily looked for payment to the person who had employed him and that, of course, was equally true as between the various sub-contractors. As is not infrequently the case in such building contracts, in course of time difficulties as to payment arose. Again, as is not infrequently the case, it was the "tail end" of the sub-contractors, the minor workers - including the plaintiffs - who looked likely to be the real sufferers. The differences between the parties culminated in a meeting on the 11th of August 1967. This meeting took place in the work office of the property owners, the Appellants, and in the presence of a Mr. Au and a Mr. Chiu, both of whom were employees of the Appellants. The upshot of that meeting was that there was a general settlement or reconciliation between the contractors and the various sub-contractors as to the debts owing between them. Indeed, it is apparent from the evidence that it was largely due to the efforts and persuasion of Mr. Au that the parties were able to arrive at what at that time appeared to be such a satisfactory settlement of their affairs. Part of the settlement consisted of the third defendants, the principal contractors, handing over two receipts, for the sums of $915 and $3,000 respectively, to the plaintiffs. Those were receipts for sums of money still owing by the Appellants to the third defendants, the principal contractors. The whole purpose was to enable the plaintiffs to obtain from the Appellants the sum of $3,915 still owing by the plaintiffs to the third defendants and, on receipt of such payment, thereby to extinguish all the debts still outstanding at that time between the contractors and all the sub-contractors. It was, in terms and by its intention, an assignment by the third defendants, the principal contractors, to the plaintiffs of the third defendants' right to receive from the Appellants payment of the debt due from them to the third defendants. The reason and purpose behind such an agreement is not far to see; the plaintiffs - the "tail end" contractors - were apprehensive that if the principal contractors received payment from the Appellants of the monies due to the principal contractors, under the contract, they would fail to make payment in turn to their immediate sub-contractors and as a result, the remaining sub-contractors all the way down the line would not be paid. Hence their anxiety to ensure that in so far as the monies due to them, the plaintiffs, were concerned, they should receive such payment from the Appellants out of the monies still due and owing by the Appellants to the third defendants, the principal contractors.

3. Subsequently, the plaintiffs produced these two receipts to Messrs. Au and Chiu and asked for payment thereon. According to the evidence of the plaintiffs, which was accepted by the learned judge, when the plaintiffs sought for payment from Messrs. Au and Chiu both these two gentlemen kept on "stalling" them. Thereafter, on or about the 18th of August, the first Plaintiff produced to Messrs. Au and Chiu a document (Ex.P6), dated the 18th of August, 1967, bearing the chop of Walson & Co. (the third defendants) and addressed to the manager of the Appellants, and couched in the following terms:

Again, Messrs. Au and Chiu still tried to "stall" payment. Again, on or about the 23rd of August, the plaintiffs produced to Messrs. Au and Chiu a document (Ex.P7) dated the 23rd of August addressed to the Appellants. This document not only bore the chop of Walson & Co., but was also signed by Ng Wai Ping, the managing director of that company. It was written in these terms :-

It is relevant to observe that these two documents were only shown to Messrs. Au and Chiu but were actually still retained by the plaintiffs. The reason for that is, of course, obvious; they were valuable documents directly relevant as evidence of monies owing by the principal contractors to the workers and, as such, it was important for the plaintiffs to retain those documents in their possession. However, on the 19th of September the plaintiffs handed over to Messrs. Au and Chiu a document (Dll) addressed to the Appellants and signed by the first plaintiff and of the workers. The document is in the following terms:

Although it does not say so, the reference to "this amount has been registered with the office of your company" must, I think, be referring to the earlier document (Exh.P7) dated the 23rd of August which had been shown to Messrs. Au and Chiu. Again, the reference to the possibility of the amount falling into "the crook's hands" contains the implication that if the principal contractors were paid the probabilities would be that no part of that payment would pass into the hands of the sub-contractors.

4. Either at the time the document Ex.P6 was produced to Messrs. Au and Chiu, or shortly afterwards, the Appellants informed the plaintiffs that they had already settled the debt due to the third defendants. The plaintiffs communicated this information to the third defendants and it would appear that thereafter the third defendants, in fact, paid them $915 leaving a balance of $3,000 still due and owing to them. It is not entirely clear from the judgment - nor, indeed, from the evidence itself - as to whether it was established that the Appellants had in fact ever paid in full their debt - including the $3,000 - to the third defendants. But the defence raised by the Appellants in their pleadings was that they had received no valid notice of the assignment of the debt to the plaintiffs. Clearly, if they still owed the money to the third defendants the writ itself and the plaintiffs' Statement of Claim would, in themselves, constitute sufficient notice of the assignment of the debt, so that it would have been nonsense to plead in answer to the Statement of Claim that there had been no valid assignment of the debt. I propose, therefore, to consider the appeal on the basis that on the 11th of August 1967 the Appellants did owe the sum of $3,915 to the third defendants, but that sometime during the month of September 1967 - whether before or after the delivery of the document D.11, dated the 19th of September - they had settled that debt by payment to the third defendants of the full amount owing or, with his full consent and approval, some other amount in full satisfaction of that debt.

5. The grounds of appeal are two-fold. Both of them purport to be points of law, but both of them can, in my view, be very shortly and concisely dealt with upon the facts applicable. First, it is contended that the learned District Court judge erred in law in holding that sufficient notice of the assignment made by the third defendants to the Plaintiffs was given to the Appellants by means of the three documents, Exhs.P6, P7 and D11, to which I have referred. Secondly, it is said that even if the District Court judge was right in holding that sufficient notice had been given to the Appellants by means of the above documents or any of them, then the learned District Court judge erred in law in holding that notice to the man Au, the clerk of works of the Appellants, was notice to the Appellants.

6. The two grounds of appeal are closely related and may conveniently be taken together. A number of authorities were cited to us, but those cases do no more than endorse the principle, in different language, that an assignment of a debt is valid only if the fact of that assignment is clearly brought to the notice of the debtor before payment by the debtor to the creditor. Any informal notice is sufficient and such notice need not be in writing; it can be oral; the only essential requirement being, I repeat, that the fact of the assignment is definitely brought to the mind of the debtor or fund-holder prior to payment of the debt to the creditor. It is important to remember that the fact of the assignment - made on the 11th of August 1967 at the meeting held in the Appellants' work office and at which both Messrs. Au and Chiu were present - is not in any way disputed by the Appellants; Mr. Sanguinetti made this clear in the course of the hearing of the appeal. As I have already stated, it was Mr. Au who, at that meeting, was largely instrumental in bringing about the settlement between the contractors and the sub-contractors, which included the assignment - using that word in its normally accepted sense - of the receipts of $915 and $3,000 respectively by the third defendants to the plaintiffs. It must have been perfectly clear to Mr. Au at that time that the sole purpose and intention of that assignment was in order that his employers, the present Appellants, should pay the $3,915 to the plaintiffs direct instead of paying that sum of money to the third defendants, the principal contractors, in settlement of all or part of the debt that was due and owing to the third defendants by the Appellants. That very fact, in itself, was, in my view, sufficient notice of the fact of the assignment. However, the learned judge found as a further fact that the two documents of Exhs.P6 and P7 - I do not find it necessary to consider D11 - were shown by the plaintiffs at least to Mr. Au, "an officer of the fourth defendants" (i.e. the present Appellants) even if they were not also shown to Mr. Chiu. There was ample evidence to support that finding of fact. The learned judge went on to say - as must indeed be the case - that "the sole purpose of Exhs. P6 and P7 was to request the fourth defendants to pay the workers direct".

7. In my judgment, there was ample notice of the assignment. But, it is said, notice to Mr. Au was not notice to the company and there was, in fact, no other notice to the company. Mr. Sanguinetti referred us to passages in Halsbury's Laws of England, Vo1.VI, page 506, para.1042, and Vo1. VI, page 435, para.842, as to how notice to a company must be given and to a number of authorities in support of those passages. But in a case on facts which are as clearly established and beyond dispute as in the present case, it would be, I think, pure pedantry to refer to authorities. Mr. Au, as the Grounds of Appeal so state, was the Appellant Company's clerk of works. It was his admitted duty to make surveys from time to time of the work accomplished and as to how it was proceeding. He was the Appellants' representative and responsible employee at the Appellants' office and he supervised the work on the building site. It was admitted by the company's managing director that Mr. Au would "hand cheques to the workers" - that must mean to the sub-contractors and their employees. He was, to all intents and purposes, "the company's man", and virtually the medium of communication between the sub-contractors and the company.

8. Let me briefly recapitulate the facts: Mr. Au was present at the meeting when the receipts were assigned by the third defendants to the plaintiffs for payment by the Appellants; he had clear knowledge of the purpose and intention of those assignments. Subsequently, the plaintiffs approached him for payment. Instead of himself referring the matter to his employers, the Appellants, or telling the plaintiffs to go to the company's registered office and ask the directors or the secretary of the company for payment, he put the plaintiffs off by "stalling for payment". In my judgment, as the intermediary between the workers and the company, it was Mr. Au's clear duty to inform his employers, the Appellants, of the notice of assignment of the debt to the plaintiffs and, subsequently, of the repeated demands for payment made to him by the plaintiffs, and his failure to do so can afford no defence to his employers, the Appellants, who must be deemed to have had notice of the assignment of the debt. Whether that notice be deemed to commence as from the date of the actual assignment, the 11th of August 1967, or from the written documents dated the 18th of August or the 23rd of August, it was, in any event, before the Appellants, in breach of the notice of assignment which they must be deemed to have received, paid the debt to the third defendants.

9. I would accordingly dismiss this appeal with costs.

Scholes, J:

10. I agree.

Briggs, J:

11. I aggree.

Representation:

Sanguinetti (Peter Mark & Co.) for Appellants/4th Defendants.

Litton (Peter Mo & Co.) assigned for Respondents.

(1) Bowstead on Agency, 12th Ed., p.242