Ka Man Trading Co (A Firm ) v. Albert White & Co Ltd

HCA002548/1977

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Coram: Zimmern, J.

Date of Judgment: 2 February 1978

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DECISION

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1. This is an appeal by the Defendant against the decision of the learned Registrar giving the Defendant conditional leave to defend the Plaintiff's action upon payment into court $243,142.98 being the sum of four cheques drawn by the Defendant in favour of the Plaintiff and dishonoured when presented for payment. For the purpose of the appeal two further affidavits were with leave filed on behalf of the Defendant. Its counsel raised a new point. Without these new matters I would have come to the same decision as the Registrar but because of them I shall allow the appeal and order that the Defendant do have unconditional leave to defend the action for reasons following.

2. In December 1976 a garment manufacturer trading under the firm name of Carter Textiles under an agreement in writing agreed to buy from the Plaintiff 70,000 yards of denim at $5.75 per yard to be paid for by local letter of credit. The denim was required for the manufacture of garments to fulfil his export orders. He never opened the local letter of credit. His buyers' letters of credit in his favour arrived and apparently even with them he could not get packing credit from his bankers and he went to the Defendant who agreed to provide same. He then deposited his letters of credit with the Defendant who then took delivery of 43,046 ½ yards of the 70,000 yards of denim agreed to be bought by Carter Textiles. The Defendant drew in favour of and gave the Plaintiff four post-dated cheques totalling $243,142.98 due for payment on various dates in June and July 1977 being the price of the 43,046 ½ yards sold and delivered.

3. On or about 6th July 1978 at a time when Carter Textiles was owing the Plaintiff a sum of $14,039.41, why I do not know, the three parties met and there was an apparent agreement between them for thereafter the Plaintiff became the provider of the packing credit to Carter Textiles. The Defendant handed the two letters of credit in the sum of some US$120,000 to the Plaintiff and Carter Textiles wrote to his bankers advising that future negotiations of the two credits be fully credited to the Plaintiff's account with them.

4. The Plaintiff says he, on 6th July 1978, agreed with Carter Textiles to provide him with a packing credit upon deposit of the two letters of credit and notification to the bank of the Plaintiff's rights to the proceeds of any negotiation thereunder. Further it agreed with the Defendant with the consent of Carter Textiles not to present the Defendant's four cheques for payment on due dates until a balance could be struck on the packing credit account between the Plaintiff and Carter Textiles after the letters of credit have been exhausted. If the balance were in favour of Carter Textiles then it will be used pro tanto to extinguish the debt owed by the Defendant to him for the price of the denim. If the balance were adverse to Carter Textiles which he says it was he would present the four cheques for payment which he did in early September 1977 and payment on the four cheques had been countermanded.

5. The Defendant says the agreement on the 6th July 1977 was that in consideration of it handing over to the Plaintiff with the consent of Carter Textiles the two letters of credit the Plaintiff agreed not to present the four cheques for payment. It did hand over the two letters of credit whereby there having been both accord and satisfaction pursuant to the agreement its liability on the cheques was discharged.

6. It is not up to me in these proceedings to decide what was in fact the true agreement on the 6th June 1977 and the less I delve into the pros and cons the better. So long as I can find consideration in the Defendant's version of the agreement I ought to allow them to defend unconditionally. The Plaintiff had the Defendant's four cheques in hand which were as good as cash for the price of the goods. No benefit whatsoever could accrue to him by promising not to present the cheques for payment on the dubious security of a couple of letters of credit which were no more than an expectancy. The Defendant however could have suffered a detriment by the surrender of the letters of credit, its security for the price of the goods against Carter Textiles. I find that in law there could have been accord and satisfaction on the Defendant's version and allow it to defend unconditionally. Costs in the cause. Certificate for counsel.

Representation:

Patrick Chan (Tsang & Chau) for the Plaintiff.

Robert Tang (Yung, Yu, Yuen & Co.) for the Defendant.