Sun and Sun International Ltd v. Chi Keung Fashion Co (A Firm) and Another

HCA001790/1983

IN THE HIGH COURT OF JUSTICE

BETWEEN

Coram: Hon. Liu J. (In Chambers)

Date: 27th June, 1983.

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JUDGMENT

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1. I will, in due course, reduce my judgment into writing.

2. The facts are involved but, by no means, complex. The crux of the matter really boils down to this: Pursuant to two different contracts, on the 27th August 1982, in all, 1.050 pieces of rabbit skin were delivered by the plaintiff to the defendants. Allegations were many but suffice it for me to say that the defendants complained that of the 1,050 pieces, 750 pieces were found to be, upon the opening of the crates, of unmerchantable quality.

3. According to the defendants, the plaintiff was thereupon notified and a demand was made by the defendants to have the matter put right. But according to the plaintiff there was no such communication. The alleged complaints in support of the assertion of unmerchantable quality were also denied by the plaintiff.

4. The total value for the 1,050 pieces of rabbit skin was $31,500. There was a $3,000 deposit. By agreement, $2,500 out of that deposit was to be taken by way of part-payment towards this $31,500, thus leavihg a de facto deposit of merely $500. In the result, a sum of $29,000 was due for the deliveries of these, in all, 1,050 pieces of rabbit skin. The calculation of the net balance to be paid by the defendants to the plaintiff is common ground.

5. Before I turn to the merits so ably debated for my benefit by counsel in this case, I ought to make a remark or two as to the first impression that I gained. Miss Yuen, counsel for the defendants fairly conceded that she was unaware of what was submitted to the learned Master. I must confess that I was initially left with the impression that the answer offered to the plaintiff's claim on the cheques against the defendants in this Order 14 summons was an issue of defective goods. The matters raised, as I originally understood them to be, were straight-forward and clearly bound by decided authorities. I need say no more.

6. I will now turn back to the merits of the claim as presently advanced by counsel for the plaintiff and the defendants respectively. Alt is indisputable that payment by a bill of exchange is tantamount to payment in cash, but it is also site law that total failure of consideration is one of the valid limited defences available to the drawer of a bill of exchange. The controversy between the plaintiff and the defendants in these proceedings is, in the main, twofold: First, whether the inexplicable delay would defeat the plaintiff's right to apply for summary judgment under an order 14 summons; secondly, whether the defence has raised a bona fide arguable issue for adjudication.

7. An admission of a total lack of reasonable explanation for the delay was made. Counsel informed the court that matters were simply left as they were, and the Order 14 application was pursued only after the consented consolidation and consented transfer from the District Court to the High Court. Delay, if it should be and can be properly taken into consideration must be taken into account, but in the light of the very simple issue as I originally understood it to be and the uncomplicated issue even as it has now become, delay has caused no prejudice or injustice to the defendants. This summary procedure serves to bring litigation to a speedy conclusion. I would not, in the circumstances of this case, find in favour of the defendants on their contention of delay. As for the opportune time for making an application under Order 14, we have no less than three judgments in this court. The very first is by Mr. Justice Hooper as he now is in Timur Jaya Co. Ltd.v. United Asia Trading Co. Ltd. ⁽¹⁾. That was followed by a dissentient decision of Mr. Justice Fuad in Stephen P. Kaufman v. Maker Industrial Co. Ltd.⁽²⁾. A more recent analysis can be found in the judgment of Mr. Justice Hunter in WOC Finance Company Limited v. Fullrate Enterprises Limited and Others.⁽³⁾ It must now be accepted that no specific time is being prescribed for an Order 14 application. As I have intimated, the circumstances in this case do not warrant the shutting out of the plaintiff from the due exercise of his procedural right under Order 14 of the Rules of the Supreme Court.

8. Finally, I turn to the merits. It was not contended that there had been a total failure of consideration for the two cheques for $19,000 and $10,000 in their entirety. But it was strenuously argued on behalf of the defendants by Miss Yuen that the very alleged unmerchantable quality of the 750 pieces of the, so called, rabbit skin was not a mere question of defect, but a breach of condition which entitled the defendants to reject delivery. Delivery was made on the 27th August 1982 and the crates, so claimed the defendants, were opened between the 10th to the 15th of September 1982. The defendants claimed that the plaintiff was thereupon immediately notified of the unmerchantable quality of the 750 pieces so discovered on examination.

9. Miss Yuen leaned heavily on the speeches given in the House of Lords in particular the opinion of Lord Wilberforce in Nova (Jersey) Knit Ltd. v. Kammgarn Spinnerei GmbH, ⁽⁴⁾ where the learned law Lord had this to say:

"As between the immediate parties, a partial failure of consideration may be relied on as a pro tanto defence, but only when the amount involved is ascertained and liquidated."

The same line of arguments has indeed been run in this territory since as early as 1965, if not earlier, before Judge Williams in Celestial Traders v. Oriental Bead Arts Company.⁽⁵⁾

10. Mr. Remedios directed my attention to the case of Cebora S.N.C. v. S.I.P. Industrial Products Ltd., ⁽⁶⁾ particularly the judgment of Sir Eric Sachs at page 278, whereby emphasis was placed on the well settled principle that allegations of delivery of goods with defects would afford no "defence cognizable in Order 14 proceedings". Counsel was at pains to lay stress on the importance of upholding the general concept of a cash payment in the tender of a cheque, and it was urged that unless there were good reasons for disturbing the golden rule, no defendant sued upon a bill of exchange ought to be granted leave to defend. It was contended that even accepting as valid the defendants' counterclaim, it should not be permitted to defeat the plaintiff's right to a summary judgment under Order 14.

11. Mr. Remedios invited the court to hold that in substance, the allegation of the defendants in these proceedings was no more than a complaint of defective goods, which could best be described as substantial partial failure of consideration. The defects in Cebora case are distinguishable. Here, the allegation of the defendants is clearly one of unmerchantable quality. The 750 pieces were allegedly delivered not in accordance with sample or description. It is arguable, to say the least, that the contention advanced on behalf of the defendants does raise a bona fide issue of a pro tanto defence to the two cheques by way of, if I may put it more of precisely, total failure of consideration in part. It was criticised by counsel for the plaintiff that it had not been specified from which particular contract, these 750 pieces came about nor had it been pin-pointed by which cheque, such 750 pieces were or any of them was paid. But in my view, that would be introducing too subtle an argument at a stage such as this, an application under Order 14.

12. In the case of Montebianco v. Carlyle Mills, ⁽⁷⁾ a distinction was drawn between a contract, the performance of which was severable and a contract which was undivisable. It would seem to be suggested that the latter category would not admit a pro tanto defence of total failure of consideration in part. In the instant case, the two cheques were payment for part deliveries under the contracts. They were for 1,050 pieces under two contracts entered into between the plaintiff and the defendants. It did not appear to be objectionable to effect piecemeal delivery, be it 500 and 550 pieces or 300 and 750 or one by one. It would, in my view, be arguable that the principle enunciated in the speech of Lord Wilberforce in Nova Knit in their Lordships' House deserves a fuller argument and proper adjudication at the trial.

13. In conclusion, I form the view that an arguable issue to the extent of $22,500 by way of pro tanto defence in the form of total failure of consideration in part has been shown by and on behalf of the defendants. Conduct of the defendants has been criticized, in particular, in the uncertified translation of the contract. Specification for colour was there translated as "metal grey", and the certified translation reads "mixed rabbit". These criticisms, if justified, do not deflect me from the view that I have formed of the submissions advanced on their behalf by counsel. In the circumstances and with the benefit of the assistance given me, I order:

(1)     [1980] H.K.L.R. 768

(2)    [1982] H.K.L.R.   20

(3)    [1982] H.K.L.R. 474

(4)    [1977] 2 A.E.R. 463 at p.469

(5)    [1965] District Court Law Report 181

(6)    [1976] 1 Lloyd's Law Reports 271

(7)   [1981] 1 Lloyd's Law Report 509

Representation:

Mr. Leo Remedios instructed by Messrs. Bernard Wong & Co. for the Plaintiff.

Ms. Maria Yuen instructed by Messrs. Lau & Co. for 1st and 2nd Defendants.