Chinese Enterprises Ltd v. Kwan Lee Construction Co Ltd

HCMP000102/1968

IN THE SUPREME COURT OF HONG KONG

APPELLATE JURISDICTION

MISCELLANEOUS PROCEEDINGS NO.102 OF 1968

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Coram: Hogan, C.J. and Rigby, S.P.J.

Date of Judgment: 15 MAY 1968

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JUDGMENT

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1. This is an application for leave to appeal against a decision of a judge in the District Court whereby he found for the plaintiffs on a claim for $6,210.25 alleged to be due for goods sold and delivered by the plaintiffs to the defendants at their request to divers dates between 7th July 1967 and 21st September 1967.

2. The argument in the court below, if I understand it correctly, turned on the question not whether these goods had in fact been delivered but whether, the goods having admittedly been delivered, the defendants were liable to pay for these goods to the plaintiffs or to a firm named Luck & Company. It appears that this firm had acted as agents for the plaintiff company in obtaining orders for the supply of cement and the plaintiffs and defendants had entered into a number of transactions through the medium of Luck & Company. The defendants, however, contended that in respect of this particular transaction the arrangement made was one between themselves and Luck & Company as principals and therefore they were not liable to pay for these particular goods to the plaintiffs but were liable, if at all, only to Luck & Company. The judge did not uphold that contention and in the course of his judgment said: -

"... that for several years the defendant obtained supplies of cement from the plaintiffs through the medium of a broker or middle-man called LUCK Co. who is described in evidence as the plaintiff's agent".

At the conclusion of his judgment he said:-

"It is clear that over the years LUCK Co. became just as much an agent for the defendant as for the plaintiff. Luck Co. was a kind of go-between, and became clothed with a limited ostensible authority in acting as a 'go-between'. Thus when defendant wanted cement he contacted Luck Co. authorising them to order a certain quantity. The plaintiff had learned from experience that he could accept Luck Co. 's word that the defendant wanted cement and was unlikely to reject cement delivered at Luck Co. 's request. Of course that does not mean that the defendant would be prevented from rejecting any particular delivery of cement on the ground that he had not requested Luck Co. to order it for him. However, once the defendant had accepted the cement the plaintiff knew it could look to the defendant for payment.".

The judge went on to hold that there was nothing in regard to the particular transaction, the subject matter of the claim, to show that there had been a cancellation of the ostensible authority of Luck & Company, developed over a period of years, to place orders with the plaintiff for delivery to defendant.

3. Counsel for the defendant, in the course of a carefully prepared argument meticulously put before us says there were really two issues. The first was whether the goods were sold and delivered to the defendant in pursuance of the written contract, Exhibit P5; and secondly, whether these particular goods were supplied under various oral contracts as claimed by the plaintiffs. Developing his argument in relation to these issues counsel contends that if we look at a letter sent by the solicitors of the plaintiffs on the 25th January 1968, Exhibit D4, we will see that the plaintiffs in that letter, through their solicitors, claimed that the goods had been delivered as separate consignments on separate dates appearing on certain receipts to which reference was made, but that if we looked through the evidence given by the plaintiffs' witnesses we will see that there is a discrepancy in regard to these receipts, a discrepancy as to whether they were made out before or after the actual deliveries and who precisely made them out or, perhaps to be more accurate, filled in the details' on the receipts. As to the precise significance of these discrepancies, counsel says that they cast discredit on the plaintiffs' case as a whole, in other words that if what the witnesses had said was not entirely consistent with what was said in a letter from a solicitor of the plaintiffs written after the action was filed and therefore amounting to an admission, this would show that the judge was wrong in giving credence to the plaintiffs' case as a whole, although it had not been established whether any witness as such was unreliable or the solicitor had made a mistake in his letter. Counsel says it is unnecessary to come to any firm conclusion in regard to either of those propositions but that one could simply regard the plaintiffs' case as discredited by this divergence.

4. The alleged discrepancies were not put to any of the witnesses called by the plaintiffs and I must say for myself that on reading the latter and reading the evidence in question I am very far from satisfied that there is necessarily such a contradiction or divergence as counsel contends. Although on the face of it there does appear to be a possible divergence which might or might not have been cleared up and reconciled if the matter had been more fully pursued. But even if there was as divergence it does not seem to me that that materially affects the grounds on which the judge in the court below based his judgment.

5. Counsel's second argument was directed to the knowledge which the plaintiffs had or which might be imputed to them of the transaction embodied in Exhibit P5. Counsel contends that the judge was not justified in stating that it was shown positively that the plaintiffs were unaware of this document. He says that at most the evidence is neutral on this point, that it is not shown that they were unaware of it and that it was up to the plaintiffs to prove positively, which they failed to do, that they had no knowledge of it; otherwise, he contends, they are fixed with knowledge of it, because it was entered into by their agents, Luck & Company, and therefore the plaintiffs, as principals, are affected by knowledge of a fact which has come to the notice of their agent. In support of this counsel has referred us to certain authorities on doctrine of notice to an agent being imputed as notice to the principal. There is, I think, little doubt about the general extent of that doctrine but it seems to me that it must be dependent on the exitence of a relationship of principal and agent between the parties in question.

6. Counsel seeks now to invoke it for the purpose of establishing that the plaintiffs would be bound by the terms of Exhibit P5 - terms which he interprets as implying that the plaintiffs will no longer be the principals of Luck & Company - and will be fixed with these terms because Luck & Company were agents for the plaintiffs prior to the transaction embodied in this particular document. I think there is in this argument a fundamental flaw. If one accepts that a principal is fixed with knowledge which comes to the notice of his agent in the course of the transaction for which that individual is employed as agent, this implies, I think, that throughout the whole of the transaction this relationship of principal and agent is maintained and that the doctrine has no application when you come to the point of saying this is a new transaction in which, as between those two people, there is no longer a relationship of principal and agent. If a former agent purports to contract not as agent but as principal then normally the former principal is not concerned in the matter, neither has he rights nor is he liable under it. This may not however be a complete answer to the argument put up by counsel because counsel went on to develop the further point that the judge was not justified in holding that, in the present case, Luck & Company had moved from a position where they were merely agents of the plaintiffs to a position where they were a go-between, with a measure of authority to bind the defendants and to place orders on behalf of the defendants in a capacity which might be described as a double agent or broker.

7. I think there is a measure of validity in this further argument by counsel for the defendants although the question whether Luck & Company had been entrusted with a general authority by the defendants would of course be a question distinct from the narrower issue whether they had been endowed with any authority in respect of a particular transaction. But in so far as the present case is concerned there was evidence before the judge that acting through the agency of Luck & Company the plaintiffs, over a period of time, had entered into a number of transactions with the defendants. In pursuance of those transactions cement was delivered to the defendants and at or about the time of delivery the defendants received invoices or delivery notes which were expressed to be invoices from the plaintiffs to the defendants. The defendants accepted the cement on that basis and paid for it. In respect of the present transaction similar invoices and similar delivery notes were issued and accepted.

8. In these circumstances I should have thought that if the defence was, as I understand it to be here, that the defendants had entered into an entirely new and different type of transaction, namely one where Luck & Company were not purporting to contract as agents for the plaintiffs but were purporting to contract on their own behalf independently of the plaintiffs and the cement, although ostensibly delivered as before in pursuance of a transaction in which the plaintiffs were principals and the defendants were also principals, was now being delivered on an entirely different basis, although still delivered by the plaintiffs, but now by the plaintiffs acting on behalf of Luck & Company, and without having any right to recover for that cement themselves, I should have thought it would be necessary for the defendants to show that the plaintiffs had in fact agreed to supply it on this entirely new basis and that it would not have been sufficient to rely on the general authority which Luck & Company undoubtedly had previously enjoyed and used to enter into transactions on behalf of the plaintiffs as agents.

9. It seems to me that, in the present instance, the plaintiffs having shown that the cement had been supplied and accepted on foot of invoices directly from them to the defendants, the judge was justified in finding that the defendants were liable for payment of the price unless they could establish, as they have failed to establish, that a new and different transaction had been made between them and Luck & Company. In these circumstances I would not be disposed to grant leave to appeal against the decision of the judge in the court below.

RIGBY, J.: I agree with the judgment my Lord has delivered and there is nothing that I can usefully add but I would dismiss this application for leave to appeal.

Representation:

Ignatius Wong (Yung, Yu, Yuen and Co.) for Applicants (Defendants) Ex parte.