Wong Chun Kee Piece Goods Co v. Million Garment Factory Ltd

HCA004260/1978

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Coram: Mr. Commissioner Gittins, Q.C.

Date of Judgment: 30 November 1979

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JUDGMENT

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1. The Defendant admits that it owed the Plaintiff $166,704.20 for goods purchased from the Plaintiff but alleges that in July 1978 the Plaintiff agreed that this debt would be extinguished by the Defendant transferring quota for the export to West Germany garments in categories 6 and 6p to Well Done Garment Factory Ltd. ("Well Done"), a company controlled by Wong Chun, the sole proprietor of the Plaintiff.

2. It is common ground that quota was transferred by the Defendant to Well Done on 7th July 1978 and 10th August 1978 comprising 91,531 pieces, i.e. 7,627.58 dozen of combined categories 6 and 6p (long trousers) and 14,588 pieces, i.e. 1,215.66 dozen of category 6 (short trousers).

3. According to the Defendant the prices were $20 per dozen for the combined categories and $10 per dozen for category 6. On this basis the consideration came to $164, 708.20 and that Wong Chun on behalf of the Plaintiff agreed to waive the difference of $1,996.00. This extinguished the Defendant's debt to the Plaintiff.

4. The Plaintiff's case is that the transfer of these quotas had no relation to the Defendant's debt, that the agreed prices were $2.47 and $1.50 per dozen respectively, that the total consideration came to $20,663.00 and that Wong Chun gave Lam Pui-yuen of the Defendant a cheque dated 15th August 1978 drawn by Well Done in full payment for the quotas transferred.

5. In my view the determination of this case depends on the agreed prices at which the quotas were transferred. If the Plaintiff's version is true, the price fetched by the quotas would be only 12.4% of the debt so that there can be no question of the debt being discharged. If the Defendant's version is true the consideration for the quotas would be so close to the amount of the debt that the waiver of $1,996.00, or 1.2%, would be acceptable.

6. Lam Pui-yuen and Lam Pui-hung also known as Johnson Lam, managing director and president respectively of the Defendant gave evidence on behalf of the Defendant; and Wong Chun, sole proprietor of the Plaintiff and 99% shareholder of Well Done gave evidence on behalf of the Plaintiff. They generally gave evidence in support of their respective cases and in refuting their opponents.

7. Each party called an independent witness, presumably as expert, to testify to the market price of quotas at the material times.

8. Chan Chun-fong testified on behalf of the Defendant that respective quota prices were $20 - 25 and $15 in July 1978, $30 - 35 and $15 in August, $40 - 45 and $17 in September, and $52 - 55 and $17 in October. But he admitted to being only 19 years old, having been manager of his employer firm for 2 years and 2 years before that as assistant in the export section. However he produced 2 receipts purporting to be for combined categories 6 and 6P quotas dated 6th July 1978 at $22 per dozen and 25th October 1978 for 300 dozen at $45 per dozen purchased by his firm.

9. So Yu-Ling testified for the Plaintiff. His only experience of West German quotas was the purchase of 120 dozen of category 6 permanent quota, whereas the prices in issue are for temporary transfers. He estimated that the price for temporary transfers of combined categories 6 and 6P was $6 - $7 in June 1978, about $8 in August and about $10 in October. But that there was no limit to the price if the purchase was from a broker and that in October the price could be $35 or more if quota was required urgently.

10. Both Chan Chun-fong and So Yu-ling have close connections with the parties who called them so that their impartiality is suspect apart from the former's youthfulness and comparative inexperience.

11. I find that none of the witnesses were sufficiently impressive as witnesses of truth to enable me to come to a conclusion on their oral testimony.

12. However, some significant indications as to the truth of the oral evidence can be elicited from documents produced in evidence.

The cheque for $20,663.

13. Lam Pui-yuen said that this cheque was given to him personally by Wong Chun, partly as a loan and partly to settle gaming transactions, and that it had nothing to do with quota transfer.

14. Wong Chun said that he and Lam Pui-yuen were only business associates and did not meet socially; that he never gambled and had never lent money to Lam Pui-yuen. He maintained that this cheque was payment in full payment for the quotas transferred in July and August to Well Done. In his favour the drawer of the cheque is Well Done, the transferee of the quotas. This point is neutralised by the payee of the cheque being Lam Pui-yuen and not the Defendant as the transferor. His explanation for this is unsatisfactory particularly as he did not obtain a receipt from the Defendant or from Lam Pui-yuen on behalf of the Defendant.

15. Wong Chun denied that Lam Pui-yuen suggested that the quota transfers were to extinguish the debt owed by the Defendant to the Plaintiff but said that it was he who made the suggestion. So, whoever made the suggestion, it was in the contemplation of the parties that the object of the quota transfers was to extinguish the Defendant's debt. Wong Chun's evidence does not support even the partial discharge of the debt by the consideration for the quota transfers being applied against the debt as asserted by him. Instead the cheque was given to Lam Pui-yuen with no strings attached.

16. Wong Chun gave evidence that quotas for combined categories 6 and 6P were freely available in May 1978 at $4 - $5 per dozen, although some brokers required $50 per dozen. He told Lam Pui-yuen that he had a West German contract with a low profit margin and because of this Lam Pui-yuen agreed to accommodate him by letting him have category 6 quota at $1.50 per dozen and the combined categories 6 and 6P at $2.50 per dozen. Having allegedly obtained Lam Pui-yuen's agreement to these concessions he said that he knocked 3 cents per dozen off the combined categories price to $2.47 because he was paying cash. I find this quite amazing particularly as he did not pay for the July transfers until after the August transfers had gone through.

17. In Wong Chun's cross-examination it was demonstrated that the value of the quotas calculated in accordance with his prices of $2.47 and $1.50 came to $20,661.19 which is $1.81 less than the amount of the cheque.

18. Taking into consideration the admitted poor financial condition of the Defendant at the time I consider it most unlikely that it would make a reduction of about $12,500 on the Plaintiff's figures - 6,250 dozen at $2 ($4.50 - $2.50) = $12,500, when the agreed intention of the parties was to extinguish the Defendant's debt wholly (per the Defendant) or in part (per the Plaintiff).

19. Unless there is cogent evidence that the market price was about that claimed by the Defendant I would reject the Plaintiff's contention with respect to the cheque for $20,663.

The four documents dated 19th October 1978

20. Johnson Lam gave evidence that he was away from the Colony in July and August 1978 when the quotas were transferred by the Defendant through his brother Lam Pui-yuen to Well Done at the request of Wong Chun; that when he learned of these transactions on his return at the end of September he was angry that the quotas had been sold at $20 and $10 respectively because at that time the market price was $45 - $50 and $12 - $18 per dozen respectively; that he complained to Wong Chun about this and that in mid-October after several telephone conversations with him, negotiated a revised price for the combined categories 6 and 6P of $35 per dozen which was a compromise between $20 and $50. That he sent to Wong Chun at the latter's request four documents dated 19th October 1978 all addressed jointly to the Plaintiff and Well Done "For the attention of Mr. Wong Chun-kee", viz. a covering letter, a credit note for the admitted debt of $166,704.20, a debit note at the negotiated revised price for $279,117.50 and a "statement of accounts" striking a balance due to the Defendant by the Plaintiff of $112,413.30.

21. Wong Chun admitted only one telephone conversation with Johnson Lam, and of the latter's evidence he only admitted that Johnson Lam complained of the low price at which the quotas were transferred in July and August. He admitted receiving the four documents by registered post, that he was surprised to get them, that he telephoned Lam Pui-yuen and accepted his statement that the documents were useless. He did not write to the Defendant denying the truth of the statements in the documents nor did he instruct his solicitors to do so.

22. I consider that this is a point against the Plaintiff.

The Quota Prices

23. Although it is conceded that the onus is on the Defendant to prove that the quotas were transferred at $20 and $10 respectively, I hold that the onus is on the Plaintiff to prove his figures of $2.47 and $1.50, although if the Plaintiff fails in this respect it would not necessarily mean that the Defendant has discharged its onus.

24. Wong Chun said that the market price for the combined categories in May 1978 was $4 - $5, but that some brokers were asking $50. His witness So Yu-ling said the price was $6 - $7 in June and it went up to $8 in August and $10 in October, but that there was no limit to broker's prices and that in October it could be more than $35 if the quota requirement was urgent. Wong Chun also testified that he purchased combined categories quotas at $1.50, 2.50 and 3.50 per dozen, never more than $3.50, from about 10 suppliers of whom he named six. Yet he did not call a single one of them to support his figures.

25. In the circumstances, including those surrounding the $20,663 cheque, I find the figures of $2.47 and $1.50 unacceptable and I reject them.

26. As to the Plaintiff's case, both Wong Chun and So Yu-ling testified to the existence of prices of $35 and $50 per dozen for the combined categories although these prices were attributed to the manipulation of brokers speculating in the market. I cannot accept the proposition that brokers can manipulate the market at the higher figures when supplies were readily available at much lower prices. Therefore I find that the higher prices existing at material times testified to by Wong Chun and So Yu-ling support the evidence given by the Plaintiff's witnesses and contained in the documents of 19th October 1978.

27. Therefore I find that the market prices for the quotas were at least $20 and $10 per dozen respectively, that the Plaintiff agreed to these prices and for the quota transfers to extinguish the Defendant's debt of $166,704.20.

28. It was submitted on behalf of the Plaintiff that the Defendant's case was a purported set off which could not succeed because the debt sought to be set off was due from Well Done and not from the Plaintiff. Although both Lam Pui-yuen and Johnson Lam used words in their evidence which were translated to the effect that the transfer of quotas was to "set off" the Defendant's debt to the Plaintiff, the Defence pleaded not set off but accord and satisfaction. I hold that the transfer of the quotas by the Defendant to Well Done at the request of the Plaintiff satisfied and discharged the Plaintiff's claim against the Defendant.

29. The Plaintiff's claim is dismissed with costs.

Representation:

Anthony Neoh (Johnson, Stokes & Master) for Plaintiff.

Peter Cheung (Deacons) for Defendant.