Spicers Ltd v. The South Seas Printing Co (A Firm)
Read the full judgment text of HCA 1544/1972 on BabelCite. This High Court CFI judgment.
1. The plaintiffs in these proceedings are a limited company carrying on business, inter alia, as vendors of printing presses. The defendants are a firm who carry on business as printers. On the 7th July, 1970 and the 19th June, 1971 the parties entered into agreements (referred to hereafter as the 1st agreement and the 2nd agreement respectively) whereby the plaintiffs leased to the defendants two printing presses (hereafter referred to as the 1st press and the 2nd press) both of which were dul
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HCA001544/1972 IN THE SUPREME COURT OF HONG KONG ORIGINAL JURISDICTION ACTION NO. 1544 OF 1972 -----------------
----------------- Coram: Trainor, J. Date of Judgment: 30th November, 1973. ----------------- JUDGMENT ----------------- 1. The plaintiffs in these proceedings are a limited company carrying on business, inter alia, as vendors of printing presses. The defendants are a firm who carry on business as printers. On the 7th July, 1970 and the 19th June, 1971 the parties entered into agreements (referred to hereafter as the 1st agreement and the 2nd agreement respectively) whereby the plaintiffs leased to the defendants two printing presses (hereafter referred to as the 1st press and the 2nd press) both of which were duly delivered. It was alleged by the plaintiffs that it was an express term of each agreement that the defendants would be responsible for the loss, destruction of or any damage to the presses and that they would indemnify the plaintiffs for any such loss or damage. Unfortunately the premises of the defendants in which the presses were installed were destroyed by fire on the 2nd November, 1971 and the presses were a complete loss. The plaintiffs further alleged that they duly requested the defendants to indemnify them for the loss sustained but the defendants have refused so to do. 2. So far as the 1st machine is concerned the 1st agreement provided that $10,000 would be paid before delivery of the press and that forty-eight monthly instalments of $3,655 would be paid thereafter. The agreement further provided that on an additional payment of $470 the press would become the property of the defendants. 3. Save that the values of the machines were different and that the monthly instalments were to be $3,805 the financial and other conditions of the 2nd agreement were indentical to those in the first. 4. The plaintiffs now claim with respect to the 1st press the sum of $140,000, being the value they put on the press at the time of its destruction, or, alternatively, $121,085 being thirty-three instalments (the number outstanding at the date of the fire) plus the final payment of $470. With respect to the 2nd press they claim $160,000 being the value of the press at the time of the fire, or, alternatively, $171,695 being forty-five outstanding instalments at $3,805 plus the final payment of $470. 5. In their defence the defendants say that the plaintiffs are estopped from alleging or relying on the alleged express term in the agreements that the defendants shall be responsible for the loss or destruction of the presses or for any damage to them, or that they shall indemnify the plaintiffs in respect of such loss, destruction or damage. They say this is so, because they were induced to enter into the agreements by representations made during negotiations for the hiring of the presses by a Mr. Ko, acting for the plaintiffs, to the effect that the defendants need not insure the presses as the plaintiffs would do so and that the defendants need not concern themselves with the terms of the formal agreements to be executed except in so far as they related to financial matters. The defendants say that they acted on these representations to their detriment by entering into the agreements and not insuring except to a limited extent. They further say that although Mr. Ko was well aware that a Mr. Yip who was negotiating on behalf of the defendants knew very little English, Mr. Ko did not draw the attention of Mr. Yip to the particular clauses in the agreement but led the defendants to believe that the plaintiffs would never enforce any of the conditions other than the conditions as to the payment of instalments and the final payment. Because of these representations the defendants say they only insured machines installed in the premises, including the presses for the sum of $150,000. Finally they say that as the presses, the subject matter of the agreements are a total loss no further liability exists under the agreements. 6. The defence as originally delivered was amended to allege that both presses were defective resulting in both the quantity and quality of the output being lower than might be expected. This, it was alleged, was particularly so with regard to the 2nd press which never operated properly from the time of its installation. Although these allegation were made there is no counterclaim by the defendants for damages. 7. The defendants did, however, counterclaim seeking:" an order against the plaintiffs for the assignment of the benefit of their said insurance to the defendants, if they are held liable for any part of the claim herein. And/or a full indemnity for the amount of the claim if the plaintiffs have done anything, or not done anything that they should have done so that the said insurance becomes void or otherwise the insurance money becomes not recoverable." 8. I think from the foregoing it is clear that the case centres around two things: did the plaintiffs' agent, Mr. Ko, in his efforts to sell these presses hold out as an inducement to the defendants that they would not have to meet insurance premiums in respect of them as the plaintiffs would insure; and that the terms of the agreements other than the financial obligations might be ignored, as a result of which the defendants acted to their detriment and did not insure. 9. As a prelude to an examination of the oral evidence I think it would be helpful to consider the documentary evidence first. 10. With regard to each press an initial document called a Leasing Proposal was signed by the parties. The first is dated the 12th May, 1970 and relates to the 1st press, and the second, dated the 7th October, 1970 relates to the 2nd press. Again, the documents are identical save in such particulars as are the result of the presses being different, and the financial conditions and delivery dates varying accordingly. On the face of each were the words "This proposal is subject to the terms and conditions of the Leasing Agreement which I/we hereby agree to sign before installation of the above equipment." Overleaf are "Conditions of Sale" the first paragraph of which reads: "If, after being notified by the Company of their readiness to deliver the goods, the Hirers, ..... in the case of a deferred terms transaction or leasing sale to sign and accept the terms of the Company's Hire Purchase Agreement or Leasing Agreement within seven (7) days, the Company shall be entitled to forfeit without notice any deposit ..... paid to them ....." It was pursuant to these proposals that the Leasing Agreements earlier referred to were executed. 11. The condition in the agreements which gave rise to these proceedings is to be found in paragraph 4:-
12. I should mention that the plaintiffs transact their business in Hong Kong through an agent, a subsidiary company, Spicers International Limited of which Mr. Ko is the sales representative. It might also be opportune to recite paragraph 17 of the conditions of the Leasing Agreement:-
13. Mr. Ko was the first witness for the plaintiffs. He said he knew Mr. Yip when he worked for a firm of printers to whom the plaintiffs had supplied presses on the same terms and conditions as those delivered to the defendants. He said that sometime in March or April, 1970 Mr. Yip approached him with regard to acquiring a press. He said that after five or six meetings the transaction with regard to the first machine materialised and Mr. Yip signed the proposal form on the 12th May. At that time Mr. Yip's firm had not adopted a name nor had it acquired premises. The name of the firm, "South Seas Printing Company" and the address of its premises were subsequently added. The witness said that although the delivery date for the machine was stated to be May he waited until sometime in June, when the defendant firm had acquired premises, before approaching Mr. Yip again and delivery was arranged. 14. Before delivery of the press the 1st Agreement dated the 7th July, 1970 was executed. Mr. Ko said that he personally brought the original and three copies of the Agreement to Mr. Yip who told him that he could not read English, and asked that the documents be left with him so that he could show then to his partners and friends. Three days later Mr. Ko met Mr. Yip who signed the agreement in his presence. Prior to installation the matter of insurance was discussed he said. Mr. Yip asked whose responsibility it was and, Mr. Ko pointed out the stipulation in the agreement that it was the responsibility of the hirer. He said he was asked by Mr. Yip if the plaintiffs would not take it out and he said they would not and that it was better for the defendants to do it as if there was a fire they could deal directly with the insurance company; that if it were otherwise there would be a lot of trouble for the defendants in calculating what was payable to them as the compensation would be payable to the plaintiffs if they affected the insurance. He denied that he had ever told Mr. Yip that he need not worry about the terms of the agreement or that he need not insure. He said further that he had absolutely no authority to say so. 15. As to the second press the witness said that he had been to the premises of the defendants from time to time and as a result of the amount of work he saw being done he adviced them to place an order for a second press. A Leasing proposal was signed in October, 1970. The date of delivery was to be March, 1971. Although a deposit of $5,000 was payable on signing this was in fact not paid as Mr. Yip said that his firm had not then the money but that it could be budgetted for by the Chinese New Year. 16. Mr. Ko said in January 1971 he wrote to the defendants telling them of the imminent arrival of the press in Hong Kong, which, in fact, arrived in February. He said he had several discussions with Mr. Yip who sought a reduction in price or else he would cancel his order as he could get another press more advantage ously. Mr. Yip was told that if he were forced to cancel his order by reason of financial difficulties that might be tolerated by the plaintiffs but that if it were done to purchase another machine proceedings would be instituted. He said that the defendants reluctantly consented to take the machine and the 2nd Agreement was executed on the 19th June. An instalment of $5,000 was paid and another $5,000 about six weeks after installation. 17. Mr. Ko said that Mr. Yip never suggested that any of the terms in either agreement should be deleted or changed nor did he, Mr. Ko, tell him any of them could be ignored. The witness was referred to a lunch party in November, 1970 and he said that no discussion took place at it about the terms of the 2nd Agreement or about insurance. This question was in relation to an answer given by the defendants in reply to the plaintiffs' request for further and better particulars and is of some importance having regard to cross-examination of Mr. Yip. 18. The witness referred to the fire on the 2nd November, 1971 and said that on that date he would say from his experience of 22 years that the 1st press, which was then 15 months old, was worth $140,000 and the 2nd press, which had been in operation for four months was worth $160,000. 19. In cross-examination Mr. Miu put it to Mr. Ko that insurance was discussed by him with Mr. Yip at the very first meeting and that Mr. Ko had told Mr. Yip that if the plaintiffs effected the insurance the insurance company would pay up quickly. This was denied. It was also put to him that at a meeting on the 5th or 6th July, 1970 to finalise the transaction he confirmed that the plaintiffs had concluded the details of the insurance. The witness denied that insurance was discussed then. In the course of further cross examination by Mr. Bernacchi the witness denied that he had ever told three other customers that Mr. Bernacchi named that they need not take out insurance. He said he remembered he did tell some customers that the plaintiffs did insure but that the customers had to take out their own insurance. He said the insurance taken out by the plaintiffs was on a contingency basis i.e. payment was contingent on the plaintiffs being unable to recover from a customer. There was a lengthy cross-examination on this matter of insurance and the summation of the witness's answers was that he may have told some customers that the plaintiffs did insure on a contingency basis, but that it was always made clear to them that they were obliged to insure. Mr. Ko said he had no authority to alter any terms of the agreements, and in answer to one question he said that it was unlikely that he would tell a customer that he could ignore the terms of agreement and need not insure as he held a high position in his company and was neither a broker nor a fool. Mr. Ko was reminded of a telephone conversation with someone of the defendant firm after the fire and a subsequent meeting with two of the partners, a Mr. Tsang and a Mr. Wong at which insurance was a topic of discussion. He was asked if he had said the matter was "out of his hands and beyond his reach". To this he replied "Yes because Mr. Wong asked me to help them by receiving a lesser amount". He was asked "Did you say you were informed that unless this matter went to court you could not collect from your insurance company" and replied "Yes. I said that". 20. He was then asked "Did you express the wish that South Seas would win their case as if would save a lot of trouble" to which he replied: "Yes because I sympathise with their position". 22. Mr. Ko was further cross-examined about the Leasing Agreements. He said he briefly interpreted the 1st to Mr. Yip. He said he stressed two important points to him: the condition pertaining to insurance; and that until all payments were made the press remained the property of the plaintiffs. He said he did not explain the other conditions as he could not understand them all, but he left the first agreement with Mr. Yip before it was signed. 23. A Mr. Langston the Manager of Spicers International Ltd., the agents of the plaintiffs, gave evidence about the Leasing Agreements. He said they are printed and used by the plaintiffs in a form which is standard throughout Asia. He said that the typewritten parts are inserted locally to meet individual requirements; but as to the printed portion neither he nor Mr. Ko had any authority to alter them. He said Mr. Ko had no authority to tell customers they could ignore the terms and conditions of the agreement. 24. Mr. Yip, one of the partners in the defendant firm, gave evidence. He said that he made an appointment in 1970 to meet Mr. Ko as a result of which the Leasing Proposal was signed on the 12th May. He said that in the course of the discussion he told Mr. Ko that he knew the plaintiffs insured the presses which his former employers - Kwok Hung - used, and enquired if the plaintiffs would do the same in his case. He said that Mr. Ko said "our Spicers" had already insured but that Mr. Yip's firm could also insure if they wished, but there would be no problem if they did not. He said that Mr. Ko told him that if the defendants insured they would get their money quicker in the event of a claim; that if they did not insure and anything happened the defendants would have to wait until Spicers recovered from their insurance company. He said that he asked Mr. Ko to accept a lower price and a longer repayment period but Mr. Ko said this was impossible; he did however agree to accept a deposit of $10,000 as suggested by Mr. Yip. 25. As to the signing of the 1st Agreement Mr. Yip said he met Mr. Ko who had the agreement with him. He said Mr. Ko told him nothing about the agreement but he, Mr. Yip asked him about a few points as he did not read English. He said he asked if the price was included and again asked if the plaintiffs would insure According to Mr. Yip Mr. Ko said that the price was included and repeated what he had previously said with regard to insurance. Mr. Yip said he there and then signed and affixed the firm's chop or seal which he had brought with him for the purpose. 26. The witness said that business was very good, the machines were working all day and even on Sundays and later Mr. Ko suggested there was work for more than one machine and so another machine was ordered. He said this was done after a discussion between himself and his partner, Mr. Tsang, and Mr. Ko in the Show Boat Restaurant he thought in November 1970, but before the signing of the Leasing Proposal (dated 7th October, 1970). He said at this meeting insurance was discussed and he was told insurance was as in the case of the 1st press i.e. "it would be taken out by his company but we could also take out a policy if we wished to do so". 27. Mr. Yip said that on the morning after the fire he phoned Mr. Ko and told him the presses were damaged beyond repair and asked him to request payment from his insurance company. He said he was told that the company had not insured. He said he was surprised at this and told Mr. Ko that he had previously said he would insure and asked why had he suddenly changed. I was not told Mr. Ko's reply. Mr. Yip then told the court that in fact his firm had an insurance cover on the presses but only in a policy including other things and only to the extent of about $120,000. This figure was arrived at after adding up the instalments payable during the period covered i.e. 1st July 1971 to the 1st July 1972. The witness said had it not been for what Mr. Ko had told him he would have insured the presses for their full value. Mr. Yip produced the insurance policy for the year 1971/72. 28. In cross-examination Mr. Yip told Mr. Mills-Owens that there was a policy of insurance covering the year 1970/71 but he did not know where it was. He said it covered the presses but only to the extent of $100,000. He was cross-examined as to why the 1st policy and correspondence with regard to the claim against his insurance company had not been formally disclosed and he said, although he was not sure, it would appear he had not told his solicitors about them. In further cross-examination he agreed that the cover for the press for the year 1970/71, which, of course could only include that 1st machine was considerably in excess of the amount of the deposit he had paid and the outstanding instalments, $50,000 approximately. 29. When the witness was cross-examined as to the details in the Leasing Proposal he said he knew about them. When cross-examined as to the Leasing Agreement he said he knew what it was but did not understand it. He said he saw the conditions in the inner pages but could not understand them; he could not read them, but he knew the press was to be insured by Spicers. He said he never received the document to show it to his partners but signed it, thereby committing himself and them, without knowing what it contained other than what Mr. Ko told him. He said he did ask about insurance and Mr. Ko said that among Chinese merchants there had to be mutual trust and no one would double cross the other. It was at this stage of the cross-examination the witness said that Mr. Ko told him the Leasing Agreement was only a formality prescribed by the company. The witness said he signed saying "I fully trust you". He repeated this adding that Mr. Ko said the agreement was only a formality and that there must be mutual trust. 30. In further reply to Mr. Mills-Owens the witness said that copies of all documents concerning the first press, including the Leasing Proposal and the 1st agreement, were given to him and were in the possession of the firm before the 2nd press was acquired. 31. I do not propose to traverse the cross-examination further. I have only done so to the extent I have to demonstrate the high improbability that Mr. Ko ever told the defendants through Mr. Yip that they need not insure the presses and that the agreements were mere formalities, the terms of which need not be observed save those as to the various payments. I am satisfied that Mr. Ko gave the 1st agreement to Mr. Yip for perusal by him and his partners and that it was signed some days later by Mr. Yip on their behalf. I am quite satisfied that Mr. Ko, whatever he may have said about insurance, left the defendants in no doubt as to what their obligations were with regard to it and the agreements generally. For this conclusion I think a lot of support can be derived from the direct evidence of Mr. Yip's partner, Mr. Tsang, who was present when the hiring of the 2nd press was under consideration. He said "Mr. Ko said all the machines sold by Spicers in Hong Kong were insured and it was up to us to insure the machine we were going to buy. He also said if we took out insurance ourselves if we claimed we could do so directly to our own company. However, if insured by Spicers then a claim would have to be made through them and that would take longer time". 32. I have dealt at length with the evidence given with regard to insurance and I do not intend to dwell much further on it. Suffice it to say that I do not consider with any favour the defendants story that they were told they need not insure. I feel sure that if Mr. Yip had been told so and yet knew, as I believe he did, that there was a condition to that effect in the 1st agreement he would have had it deleted. Even if he did not read English (and I am far from convinced of this having seen him examine letters and identify them and their contents in the witness box) he must have seen that no clause had been deleted. He did talk of "mutual trust" but he did not do so in any context that suggested he had asked for the condition of insurance to be deleted. How much more unlikely is it that he would have allowed the second agreement to be signed without deletion having had the first in his possession for so long. 33. I find as a fact that nothing said or done by Mr. Ko led the defendants to conclude that the plaintiffs would insure so as to relieve the defendants from their liability under the Leasing Agreements. 34. As to the second point in the defence that the plaintiffs did not draw the defendants' attention to the particular clauses in the agreement I do not consider there is any substance in this point at all. Moreover, apart from that, I am satisfied Mr. Ko told the truth when he said the 1st agreement was in the defendants' possession that Mr. Yip and his partners might consider it, for some days before it was signed. I find the plaintiffs' claim to be indemnified for the loss of the presses established. 35. The problem now is to assess to what are the plaintiffs' entitled. 36. Condition 4(F) of the Leasing Agreement provides that in the event of the destruction of a press on the Hirer paying to the company the "prescribed amount" the Agreement shall terminate. Condition 4(H) states that the "prescribed amount" shall be an amount prescribed by the company being an amount not in excess of the replacement value. 37. This condition in my opinion is a rather loosely worded one and one that may one day lead to further litigation. For example if the company has not prescribed an amount and a press is destroyed when all instalments have been paid save one is the company to be entitled to receive by way of compensation a sum up to the replacement value? I do not think that such a proposition would be tenable and the position must be that the Hirer would be entitled to acquire ownership by fulfilling the terms of the agreement, that is by the payment of all outstanding instalments and the further option payment. In such circumstances the sum payable must be the outstanding instalments plus the last payment. But the maximum that the company is entitled to receive is the replacement value. 38. So far as the first press is concerned the amount outstanding for instalments plus the final payment is $121,085.00. Various opinions have been given as to the market or replacement value of it on the date of the fire. Mr. Ko said that in his opinion, and he had over 20 years experience, the value was $140,000 and the market was good at the time. This was the amount claimed in the statement of claim. As to the second press the outstanding instalments and last payment amount to $171,695. The amount claimed to be its value at the date of the fire is $160,000 and that is the value Mr. Ko put on it. 39. Mr. Yip who has been in the printing business some 7-8 years, when he gave evidence assessed the values of the presses at the time of the fine as about $18,000 and $100,000 -110,000 respectively. 40. A Mr. Yick Chi was called by the defendants to give his opinion of the value of the presses. He said he was the owner of a printing company and had been in the business for about five years. The previous 21 years he was occupied with making boxes but this he considered to be part of the printing business. This witness was quite useless except that he was able to say that he was once offered a 5-6 months old "Spicers" press at about 20% below cost. 41. In the course of the hearing I was told that within the first few weeks of installation the first press had broken down by reason of a defective spring and that this occurred frequently thereafter. Mr. Ko on cross-examination agreed this was so and that Spicers made the necessary replacement. He said however that this was not due to a defect in the press or the spring but to the way the press was worked. He said that the press had a specified maximum output which the defendants were exceeding. He said that he had been shown by an employee of the defendants how the specified maximum output could be exceeded and he had to warn the defendants against this. That the maximum output was exceeded was denied by Mr. Yip and his partner, Mr. Tsang. Mr. Yip said the press could not even attain the maximum and he had timed the output with a stop-watch and found it fell considerably below the output foretold by the meter. Mr. Tsang also denied the machine was over used to produce an output above the maximum. Indeed his evidence was that he was of the opinion that the maximum output obtainable was less than that mentioned in the specifications which was never achieved. He did say however that the machine was fully occupied; they were working" night, day and sometimes on Sundays. We worked up to 8 p.m. and sometimes on Sundays." 42. In my opinion this press was at the time of the fire in as good a condition as might be expected from a press of its age of 16 months. I do not consider the breaking of the spring, which I consider was due to the speed at which the press was operated, did anything to accellerate depreciation. I had in mind to allow about 20% reduction in value to arrive at its replacement value and this I find represents approximately the value of the instalment outstanding plus the final payment. I allow the plaintiffs $120,000. 43. The second press had a much more chequered career. Shortly after installation, the defendants through Mr. Tsang would say on the day of its installation, the press seized up and could not be used. After an operation by the plaintiffs' mechanics which required dismantling of the machine to a considerable extent and the use of a hammer and a saw to out off a piece of metal the cause of the trouble was located. It was, apparently, a flaw in the oil supply. Mr. Tsang said he was apprehensive about the permanent effect of this but a mechanic told him it could be put right. Mechanics worked throughout the night until 10 a.m. the next morning when the press was once more put in operation but, according to Mr. Tsang, the quality of output thereafter was poor. 44. Mr. Ko said he was aware of the trouble with the machine but did not agree as to when it occurred or as to the subsequent quality of output. He maintained it was some days after installation that the press seized up, but that after repair the machine worked normally. He could not explain how the trouble arose but was of the opinion it was due to mal-handling by the operators. However, he said, Spicers accepted the repairs to their account rather than make an issue of it. Mr. Ko said at this time there was some talk of spare parts for this press which he did not consider were the plaintiffs' responsibility nor were they necessary for the effective working of the press but nevertheless he ordered them. When they arrived, he said, the defendants would not permit them to be attached because they could not afford the time to stop the press, but said the replacing might be done when the defendants made the transfer of their business to new premises which they had already arranged. The fire occurred before that day. 45. The defendants maintain that the second press never worked satisfactorily. They said it was ineffective so far as colour production was concerned. Mr. Tsang said both he and Mr. Yip refused to sign a note to the effect that the repair work to the press had been done satisfactorily. It was maintained by Mr. Tsang and Mr. Yip that the spare parts were necessary to make the machine operable. 46. I do not intend to dwell on the mass of evidence on this matter. What I am satisfied of is that the spare parts were ordered on behalf of the defendants but the defendants would not permit their installation until the press was removed to the new premises. If, as was suggested by the defendants, the spare parts were necessary for proper output it was they who prevented them from being used. 47. I was not told by the defendants if the replacement of the parts would have left the press in the condition that one would expect to find a machine of that age to be if not abused. Nevertheless, I am satisfied that there must have been a depreciation of this machine beyond a normal rate. There was no great dispute that man-handling of the press was resorted to when it seized up due to the flaw in the oil flow. I have no doubt that such, and particularly the wear occasioned on the part involved as a result of running when not lubricated, must have a considerable bearing on the replacement value of that machine. I assess the value of this machine at $120,000. 48. I now proceed to consider the counterclaim. What in fact the defendants appear to be saying in it is this: if you get judgment against us for the presses then you must assign to us the benefit of the policy of insurance that you have. 49. I must confess I found it extremely difficult to see how such a proposition could be presented. I found it difficult to see how the plaintiffs, were they ever so willing, could unilaterally have imposed on their insurance company a party as a risk that the company had never contemplated. That would be the effect if the plaintiffs assigned their interest. I cannot see how a court in the circumstances could properly do what the plaintiffs could not do. Mr. Bernacchi argued that the court does not have to be satisfied that the defendants would necessarily succeed in a claim against the insurance company; he would argue: assign to the defendants and let them take their chance. No court would make such a futile order. 50. At the hearing the plaintiffs' policy of insurance was produced. One of the condition of it reads:
51. I would have held against the defendants on their counterclaim even if that condition did not exist and I find considerable support for my opinion in the case of Rayner v. Preston (1880-1881) 18 Ch.1. That was a case where the plaintiff entered into an agreement to purchase a messuage and workshops from the defendant but before the transfer was executed the premises were destroyed by fire. The premises were insured by the vendor but no reference was made about insurance in the agreement. On the destruction of the premises the vendor received a sum of money from his insurance company and the purchaser brought proceedings to recover the money or have it applied to the restoration of the premises. The Master of the Rolls dismissed the action and the Court of Appeal dismissed the appeal against his decision. In his judgment Cotton L.J. at 5-6 said
52. One can view the counterclaim in two ways:
53. Mr. Bernacchi cited to me Phoenix Insurance Co. v. Spooner (1905) 2 K.B. 753. That is a case on subrogation and is therefore different from the instant case, but it has an aspect that is relevant. The defendant insured her house against fire with the plaintiffs. During the currency of the policy a local corporation gave notice to treat under the Land Clauses Consolidation Act, 1845 to the defendant but before anything further was done the premises were destroyed by fire and the plaintiffs paid on foot of the policy. Subsequently the corporation paid to the defendant, pursuant to the notice, an agreed sum which was arrived at by taking into account the sum paid by the plaintiffs, and the corporation undertook to indemnify the defendant against any claim the plaintiffs might make. 54. The plaintiffs' claim in effect was, that having paid the defendant under the policy they stood in her shoes and would have been able to recover from the corporation by reason of the notice to treat a sum which would have included the amount they paid to her had she not by her wrongful act precluded them from recovering. The action was defended at the cost of the corporation on the basis that the corporation was entitled to the benefit of the policy of insurance which the defendant had with the plaintiffs. Bigham, J. held they were not and said:
55. I can find no support for the defendants' counterclaim in that case nor in another Mr. Bernacchi cited: Hepburn v. Tomlinson (Hauliers) Ltd. (1966) A.C.451. 56. I dismiss the defendants' counterclaim. I allow the plaintiffs the costs of the claim and the counterclaim. 57. Before departing from this case there is one further matter to be dealt with. 58. In the cross-examination of Mr. Ko Mr. Bernacchi asked him if he had told three, named, previous purchasers of presses from the plaintiffs that they need not insure, and he said he had not. On re-examination Mr. Mills-Owens asked him about the behaviour of these three as customers and elicited from the witness matters that were far from favourable to them. Before closing his case Mr. Bernacchi sought to call the three persons to prove that Mr. Ko had in fact told each of them when they were negotiating the purchase of presses that they need not insure, and Mr. Mills-Owens objected. 59. Mr. Mills-Owens based his objection on the ground that the evidence these men would give would give rise to an issue collateral to the issue before the court which was irrelevant and that Mr. Bernacchi was bound by the answer of Mr. Ko when he denied he had told them they need not insure. He also argued that to admit such evidence would give rise to an unending multiplicity of issues. He maintained that evidence of conduct on previous occasions was inadmissible and referred to the Brown v. Eastern and Midlands Rail Co. (1889) 22 Q.B.D. where Stephen J. at 393 said "You must not prove, for example, that a particular engine driver is a careless man in order to prove that a particular accident was caused by his negligence". He also quoted Cross on Evidence 3rd Edition p.16 and a case there referred to: Hollingham v. Head (1858) 27 L.J.C.P.241. In that case the defence to an action for the price of guano was that it was an express condition of the contract of sale that the guano would be equal to Peruvian guano. The defendant wished to call witnesses to prove that the plaintiff had entered into contracts with other customers containing a term similar to that for which the defendant contended but the Court of Common Pleas held that he was not entitled to do so. 60. If that case had been that the defendants wanted to introduce evidence to show that on previous occasions the plaintiffs had agreed to ignore a term in the contract rather than include a term that case and the instant case would be identical. 61. It was Mr. Bernacchi's contention that Mr. Ko was an agent of the plaintiffs with ostensible authority to commit them by making an agreement which could qualify or limit the effect of the formal agreement which could qualify or limit the effect of the formal agreement to be entered into, and that evidence was admissible to prove that he had done so before and, therefore, it was probable he had done so again. Alternatively he would argue that even if Mr. Ko had not such a general power as agent he had done it before with subsequent adoption by the plaintiffs; that it was permissible to establish by evidence that he had so done it before on three occasions and there had arisen a system of behaviour by the plaintiffs evidence of which is admissible to establish that it was resorted to in the present case. 62. In support of his argument Mr. Bernacchi referred to paragraphs 527 and 528 of Halsbury Vol.15, and cited Blake v. Albion Life Association Society (1878) 4 C.P.S.94; Woodward v. Buchanan (1870) 5 Q.B.285; Finanoings Ltd. v. Stinson (1962) 3 A.E.R.386. 63. What was cited by Mr. Bernacchi, in my opinion, gives scant support to the points contended for by him. So far as they go to establish the grounds on which agency may be proved Mr. Bernacchi was pushing an open door; it was never in contention that Mr. Ko was acting for the agent of the plaintiffs. But they do not, in my opinion, help Mr. Bernacchi's contention that evidence is admissible to establish that Mr. Ko on previous occasions had told customers they need not insure and therefore it was probable he did in this case, which was the first point he would have to establish. The paragraph in Halsbury 15 first referred to, 527, commences "Facts similar to a fact in issue are not, in general, admissible to prove either the occurrence of the fact in issue or the identity of its author". The second paragraph which is headed "General Exceptions" commences "when evidence of similar facts is relevant, that is, when there is a nexus between the similar fact and the fact in issue such evidence may be received to prove either the occurrence of the fact in issue or its author". 64. In a footnote to the opening sentence in the latter paragraph reference is made to Woodrow v. Buchanan (supra) the headnote to which reads: "On the trial of an action by the plaintiff against the defendant for work done and material supplied to certain houses on the order of a third person, the defendant denying that he is the owner of the houses or the real principal, evidence is admissible that other persons had received orders from the defendant to do work at the same houses, without showing that the plaintiff knew of these orders at the time of the work". In that case the nexus was clear; the work in both cases was done on the same houses, but the observation in the very last sentence of the judgment read by Mellor J. which was the judgment of the court, would appear to be completely opposed to Mr. Bernacchi's contention. "Had the evidence applied to other houses, the authorities might be in point against the admissibility of the evidence". I think Mellor J. was there indicating that had the evidence applied to other houses the court would have held the evidence to be inadmissible. 65. In the present case the agency of the company for which Mr. Ko worked was not in issue. His company was engaged in marketing the presses of the plaintiff. The authority of the company as agent was not an issue in the case or, at the best from the defendant's point of view, merely collaterally so. The authority or power of Mr. Ko to commit his company's principals by altering the terms of their standard contract was even more remote. To permit the evidence sought to be introduced would have given rise to a multitude of issues not proper to be tried in the present proceedings and only remotely connected with the issue, if there was a nexus at all. 66. There is a sentence in Cross on Evidence 3rd Edition 216C which aptly covers the position with regard to the evidence sought to be introduced in this case:
67. I refused permission to the defendants to call the witnesses Mr. Bernacchi sought to call. 68. When the above judgment was read this morning my attention was drawn to the fact that I had not disposed of the plaintiff's claim for interest, and the matter was adjourned to the afternoon to hear counsel on the matter, and, also, to hear an application by Mr. Bernacchi that execution be stayed pending the filing and hearing of an application that the defendant be permitted to discharge his obligation under the judgment by instalments. 69. In the afternoon by consent the matter was dealt with in chambers. Having heard counsel on both sides awarded interest on the sums found to be due at the rate of 8% payable as from the date of the issue of the writ until payment. I also directed that there be a stay of execution for one week to enable the defendants to take the necessary steps to apply to the Court for permission to query the judgment debt, interest and costs by instalments and in the event of the so doing that the stay be extended to the hearing of the application.
Representation: Mr. R. Mills-Owen (Deacons) for plaintiff. Mr. Bernacchi Q.C. & Mr. H.C. Miu (H.M. So & Co.) for defendant. |