Komaia Deccof and Co Sa and Others v. Perusahaan Pertambangan Minyik Dan Gas Bumi Negara

CACV000008/1981

Headnote

O.11 r.1(1)(g) - Breach of contract within the jurisdiction - whether place of payment Hong Kong - proper approach to the ascertainment of the place of payment where contract is silent - relevant place of business where two exist.

BETWEEN

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Coram: Leonard, V. P., Power & Hunters JJ.

Date: 26 February 1982

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JUDGMENT

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Hunter, J.:

1. The plaintiffs are an associated group of companies, said at the material time to have carried on business in and from Hong Kong. The first two plaintiffs are limited companies, in fact incorporated in Liberia. The third plaintiff is a firm. The defendant, better known as Pertamina, carries on business exclusively outside the jurisdiction, having its head office in Jakarta, Indonesia. On 26th February 1980 the plaintiffs obtained the leave of Mr. Registrar Cameron to issue and serve upon the defendant the writ in this matter. By the statement of claim endorsed upon the writ the plaintiffs made various claims against the defendant which fall into two categories, namely first, those made under oral contracts, and secondly those under written contracts. The claims made under oral contracts were those made

The claims underwritten contracts were made exclusively by the 2nd plaintiff and form the subject matter of paragraphs 2B, C and D of the statement of claim. The defendants have sought to have the order as to the issue and service of the writ set aside upon the basis that the court has no jurisdiction to adjudicate upon the claims therein made. This application came before Mr. Justice Liu in Chambers and by order dated 13th of January 1981, he acceded to the defendant's application in part in that he ordered all the claims, herein before set out, arising under the oral contracts to be struck out. From that order the plaintiffs now appeal.

2. It is convenient to summarise at the outset certain matters which were common ground between the parties at the hearing of this appeal. Principally these matters were: -

(i) the plaintiffs accepted that they could no longer contend that the oral contracts in question were made in Hong Yong and that they could not rely upon the provisions of O.11 r.1(1)(f)(i).

(ii) At the opening of this appeal the plaintiffs' case was founded exclusively upon O.11 r.1(1)(g), namely, that this court had jurisdiction because a breach of each material contract had been committed within the jurisdiction. The breach complained of was a failure to pay, it being the plaintiffs' case that the contracts imposed a contractual obligation upon the defendant to pay in Hong Kong.

(iii) The sole issue was whether the plaintiffs could bring themselves within the provisions of sub-rule (g). It was not argued that if the plaintiffs could do so there were any grounds upon which the court could or should exercise its discretion against the plaintiffs.

(iv) In the words of O.11 r.4(2), "no such leave shall be granted unless it shall be made sufficiently to appear to the court that the case is a proper one for service out of the jurisdiction." It was common ground that the proper approach to that question was that set out in the speeches in their Lordship's house in Horni v. Korner⁽¹⁾ as paraphrased by the Court of Appeal in Brinkibon Ltd. v. Stahag Stahl⁽²⁾ as "somewhere between a prima facie case resting on an assertion ... and a case which satisfied the court that it would be proved at the trial'; per Stephenson LJ at p559.

We shall in this judgment use the phrase "good arguable case" to of describe this intermediate standard of proof.

3. In these circumstances the issue raised by this appeal was whether the plaintiffs had a good arguable case for contending that by failing to pay the sums claimed under these oral contracts the defendants had committed a breach within the jurisdiction because the defendant's obligation was to pay in Hong Kong. During the course of the argument it became clear that this issue could be said to depend upon the answers to two questions, each of which we will separately consider, namely

(i) have the plaintiffs a good arguable case for contending that they formed an associated group of companies whose trading activities vis-a-vis the defendant were conducted from Hong Kong.

(ii) If so, have the plaintiffs a good arguable case for contending that the defendant's obligation under the relevant contracts was to pay at the place from which the plaintiffs' activities were conducted, namely Hong Kong.

Question 1

4. The plaintiffs' original application was founded upon an affirmation of Miss Mary Fung made on 20th February 1980. Much criticism has been directed at this and particularly to the form of paragraph 1. The second sentence there reads:

"Unless otherwise stated, the facts herein affirmed to are known tome of my own knowledge or had been gleaned by me from the records of the intended plaintiffs".

We wish to say nothing to endorse this formula. It seems to us that the lady's personal knowledge of this matter must have been minimal, and that such knowledge as she did acquire was most likely to have been acquired from conversations with some persons unnamed on behalf of the plaintiffs themselves. If that inference be correct then she should have given her sources of information. Likewise it is not for a witness to draw inferences from documents which is what Miss Fung seems to us to be doing, but to put the documents before the court and to allow the court to draw its own inferences therefrom. It is upon such of the records as have been produced by the parties that we have principally relied.

5. A number of copies of original documents were exhibited to Miss Fung's affirmation. In addition the defendants produced two documents. The first was exhibited to an affidavit of Mr. Clarke dated 12th January 1981 and was a letter dated 8th October 1980; the second was produced by the defendants during the argument before us and was a letter dated 30th December 1972. It seems to us reasonable to infer that the documents produced are representative samples. They all point one way, namely that the plaintiffs' dealings with this defendant were in fact all conducted from an address in Hong Kong. As a matter of inference from the documents they seem to us to support the inference which Miss Fung herself drew in paragraph 2 of her affirmation, namely that the three plaintiffs had their place of business in Hong Kong, first at the one and later at the other address she there gives. It is also significant to our mind that the defendant has not sought positively to dispute this allegation. The documents produced by Miss Fung and particularly Exhibits 1 and 2 to her affirmation, speak of a great volume of trade having been done between the plaintiffs and the defendant. If any part of that trade had been done from an address other than Hong Kong it would have been very easy indeed for the defendants to put evidence before the court to that effect.

6. Instead the defendants relied upon two factors only, namely, the matters deposed to in the said, affidavit of Mr. Clarke and in a further affidavit of a Mr. Wong. The latter's failure to discover visible signs of the plaintiffs' presence at the plaintiffs' alleged business address on 30th October 1980 seems to us insignificant, especially when the defendants themselves produced and relied upon the letter dated 8th October 1980. Mr. Clarke deposed to the fact that the 1st and 2nd plaintiffs had never been registered at the company's register, and the 3rd plaintiff had ceased to be registered at the Business Register Office in June 1977. Neither of these facts is in fact inconsistent with the actual conduct of business in Hong Kong.

7. We therefore think that the evidence here is really all one way and that the answer to the first question we have posed is ''yes". We regrettably find ourselves unable to agree with Liu J. who said he was not satisfied that the 1st and 2nd plaintiffs were carrying on business in Hong Kong at the material times. This conclusion must we think have been based almost exclusively upon the failure to register, and we think with respect, that the learned judge attached too great significance to that factor.

Question 2

8. This was the area of real contest, where a crucial and decisive issue arose - namely, what was the right approach.

9. For the plaintiffs Mr. Gatehouse, QC contended that:-

(i) the place of payment was a matter of obligation - an essential term in the contract.

(ii) The correct approach and the correct inquiry involved' (if necessary) three stages.

(iii) The purpose of stage 1 was to enquire whether the parties had expressly agreed a place of performance.

(iv) The purpose of stage 2 was to investigate whether the .parties had impliedly agreed such a place. This stage was governed by the usual principles covering the implication of terms into a contract with the object of ascertaining the parties' real but unexpressed intentions.

(v) stage 3 was only reached if the inquiries at stages 1 and 2 produced no result. At this stage the court applied a rule of law, namely that a debtor had to pay the creditor at the creditor's place of business.

10. On the basis of this approach Mr. Gatehouse then contended that there was no express term in any of these oral contracts; that the plaintiffs asserted no implied term, and that therefore, the general rule applied if, as we have found above, the plaintiff's relevant place of business was Hong Kong. The defendant here, it was asserted, could only avoid that conclusion by stopping the enquiry at stage 2. To do this the defendants had to show that a term should be implied in each of the oral contracts governing payment, and to do this on sufficient evidence and with sufficient precision. This intermediate onus lay on the defendants and they could not discharge it.

11. For the defendants Mr. Alexander, QC did not dispute contention (iii), but he hotly contested contentions (i), (ii), (iv) and (v). The proper inquiry, he said, was a 2, not a 3-stage inquiry. Mr. Gatehouse's stages 2 and 3 being part of the same process. There was no need at stage 2 to imply anything as precise as a term into a contract and no onus lay upon the defendant. The overall onus lay on the plaintiff, and it was for the plaintiff to prove positively at stage 2 an implied obligation to pay in Hong Kong. It seems clear to us that Liu J. was persuaded to follow Mr. Alexander's approach, and if this approach was correct then his conclusions would inevitably follow.

12. In our judgment however, it is Mr. Gatehouse's approach which is correct and to be preferred. On the authorities which have been put before us it seems to us clear that the proper inquiry, (if necessary) proceeds through three stages and not two, and that there is a material difference between stage 2 and stage 3. At stage 2 the court is looking for the parties' real but unexpressed intentions: at stage 3 it is filling the vacuum which the parties have left by applying a rule of law. This approach seems to us to be supported by all the textbooks, see Chitty on Contract, 24th edition, Vol. 1, paragraph 1297; Benjamin on Sale of Goods, 2nd edition, paragraph 705; and 9 Halsbury's Laws (4th edition), paragraph 487. It seems to us most clearly to emerge from the Court of Appeal decision in the Eider⁽³⁾, where Lord Esher MR at p131, and Bowen LJ at p136, both founded on a "general rule"; whereas Lindley LJ founded upon "those principles of law by which lawyers are guided". To us this means that at stage 3 the court is not concerned with actual but with imputed intention and that this is the fundamental difference between the two stages.

13. It follows in our judgment that the inquiry at stage 2 is the same as that which has to be made whenever a term is said to arise in a contract by implication. We emphasise that what must be implied is a "term" in a contract. This is a matter of obligation and our concern is with the breach of such obligation within the jurisdiction. We can see no justification for Mr. Alexander's suggestion that in relation to the place of payment something less than a term can be inferred on less compelling evidence or to a lesser degree of precision. The proper principles governing the implication of terms in contract are well known, see for example Liverpool Corporation v. Erwin⁽⁴⁾. In every case the court has, to be satisfied on proper evidence, first that a term should be implied at all, and secondly what that term is. Furthermore the onus of proving such a term lies upon the person advancing it - in this case the defendants.

14. It follows that the plaintiffs have a good arguable case at stage 2 if they can show that the defendants are unlikely to be able to discharge this onus. This we think they have done. The material before us, is much too slender to enable the defendant to assert with conviction either the need for a term in every contract or the precise form of that term. All that can be said on the material before us, is that substantial sums were apparently received by the plaintiffs from the defendant in New York. But as has been pointed out the receipt and acceptance of money in country A is not necessarily inconsistent with an obligation to pay in country B, see Bowen LJ in the Eider ⁽³⁾ at p137, and Lord Esher MR in Thompson v. Palmer⁽⁵⁾. In each case one has to go to the terms of the particular contract. In most of the earlier contracts relied upon as constituting a course of dealing, these terms are quite unknown, so that the basic foundation for the inquiry is missing. Of the contracts in fact before us the charter parties contain express provision for payment in New York, which would be scarcely necessary if payment at that particular bank was automatic which was one contention put before us. On the other hand the Tug Boat sale contracts contain no such stipulation at all. In short the material here is quite insufficient for the defendant's purposes.

15. The question remains whether the plaintiffs have an arguable case for succeeding at stage 3. On our answer to the first question, we think that they have, unless there is substance in the last point taken by Mr. Alexander which was that the general rule is excluded if the plaintiff has two places of business because then the debtor could seek out his creditor at either place. No authority was advanced in support of this proposition which if true would materially qualify the general rule and deserve mention in the textbooks. Common sense and commercial sense would suggest in these circumstances that the plaintiff's relevant place of business is that from which he has dealt with the defendant in relation to the transaction in question. It is at that place that the plaintiff would be able to check the sufficiency of the sums paid or tendered to him; and it is from that place that the plaintiff would normally grant a receipt or a discharge of that obligation. This we think is also good law and is supported by the decision of the Court of Appeal in Thompson v. Palmer⁽⁵⁾ (supra). The plaintiff engineer in that case had to spend some considerable part of his time supervising construction in Spain. But this did not enable the creditor to seek him out and pay him there or in Lord Esher's words at p84 "ender the amount due at any remote part of the world" because he had dealt with him in and from Newcastle.

16. It follows in our judgment therefore that the second question falls to be answered in the plaintiff's favour also, which means that they have discharged the onus put upon them under O.11 r.1(1)(f)(i). It is therefore unnecessary for us to comment upon the application the plaintiffs mode during the course of the hearing to rely upon sub-rule f(iii) of O.11, and we do not do so.

17. In our judgment therefore, this appeal must be allowed end the order of Liu J. dated 13th January 1981 set aside.

(1) (1951) A. C. 869

(2) (1980) 2 Lloyd's Law Reports 556

(3) (1893) Probate 119

(4) (1977) AC 239

(5) (1893) 2 QB 80 at p84

Representation:

Robert Gatehouse, Q. C. & warren Chan (Yung, Yu, Yuen & Co.) for all Appellants

Robert Alexander, Q. C. & Andrew Li (Denton, Hall & Burgin) for Respondent