Man Yee Gan Co (HK) Ltd v. Tang Bee Enterprise Co

HCA000842/1970

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 842 OF 1970

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CORAM: Briggs J. in Court

Date of Judgment: 5 January 1971

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JUDGMENT

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1. The Plaintiff is a Limited Company engaged in the manufacture of tins. In 1969 one of their regular customers was the Defendant, a firm, which among other things purchases tins and exports them to S.E. Asia. The type of tins with which we are concerned are tins for containing one pound of milk powder. Such tins were sold with a plastic covering and a plastic spoon and are printed with a design and the name of the milk which they are to contain.

2. By a contract numbered CAN 57 made on September 2nd, 1969 the parties agreed that the Plaintiff would sell 140,000 tins to the Defendant. The design to be printed on them by the Plaintiff was to be as mentioned in a previous contract between the parties, numbered 610. Though no mention is made of the plastic spoons and covers it was understood that these were included. The price was stated to be 54 cents per piece, one piece consisting of a single tin with plastic cover and spoon: the total amount payable by the Defendant under the contract was $75,000: and a deposit of $5,000 was to be made by the Defendant.

3. The contract provided that 62,000 pieces should be delivered first, commencing "as from 20th October, 1969." The rest of the tins were to be delivered in accordance with the instructions of the Defendant. Payment was to be upon delivery and when all the cans under the contract had been delivered the Plaintiff agreed to deduct the amount of the deposit.

4. The Defendant made a deposit of $5,000 under the contract on November 3rd, 1969. The Plaintiff's case is that they delivered 35,520 tins under this contract and that the Defendant has failed to pay for them. There is another claim in the Statement of Claim which I will deal with later in this judgment.

5. The Plaintiff produced certain invoices and delivery notes showing that 35,520 tins had been accepted by the Defendant between the dates December 7th, 1969 and January 19th, 1970. There were eight such deliveries and each delivery the Plaintiff says was made under the contract referred to above, CAN 57.

6. The contract as I have said provided for payment upon delivery. On January 10th, before the last delivery which was on January 19th, 1970, the Plaintiff wrote demanding payment of the amount then due. In reply the proprietor of the Defendant firm, Lee Sze Ching writing from Djakarta in Indonesia, referred to a different and previous contract between the parties numbered CAN 5. His letter was exhibited and it shadows the amended defence in this action. This is that the deliveries were made not under contract CAN 57 but under the previous contract, CAN 5.

7. On February 16th, 1970 the Plaintiff's solicitors wrote what is in effect a letter before action giving the details of their claim under contract CAN 57 and asking for payment. This remained unanswered and so these proceedings followed.

8. In his amended defence the Defendant admits that he has received the goods in question but he denies that they were delivered under contract CAN 57. He says that the parties entered into a contract numbered CAN 5 on April 2nd, 1969, that is, five months previous to CAN 57. And that the deliveries were made under that contract, CAN 5. Nothing has been delivered under contract CAN 57.

9. The Defendant produced what he called his copy of the contract CAN 5. It is made out on a form similar to CAN 57 and to 610 which was another previous contract made between the parties on November 26th, 1968.

10. CAN 5 is for the supply of 200,000 cans, the price of each to be 48 1/2 cents. The total amount payable under the contract is $97,000 and the cans are to be printed in accordance with the previous contract No. 610.

11. The Defendant is to deposit $20,000. The Defendant's case is that both parties signed this contract. And the Defendant adds that he paid the deposit personally to Robert Chang, the managing director of the Plaintiff.

12. It is clear that if the Defendant is correct and if there was a valid contract CAN 5 under which the deliveries were made, and if the deposit referred to in CAN 5 has been paid, the Plaintiff cannot succeed in this part of his claim, as the amount claimed under this head does not amount to $20,000, the amount of the deposit. However the Plaintiff denies that there ever was a valid contract CAN 5.

13. It is agreed that both documents CAN 5 and CAN 57 are in the writing of the Sales Manager of the Plaintiff, Tam Man Shing. Mr. Tam gave evidence for the Plaintiff. He told me that he was responsible for the negotiation of contracts for the Plaintiff. But that he had no authority to sign a contract on the Company's behalf. Only Mr. Chang, the managing director, could do that. He said that when he was ready to negotiate a contract with a customer he would write out the contract and then he would ask Mr. Chang the Managing Director to sign. Armed with this, he would negotiate the contract with the other party. When negotiations were settled he would leave the purchaser's copy of the contract with the customer. Mr. Chang agreed that though he was the only person in the Plaintiff Company who was authorised to sign contracts for the Company, that Mr. Tam was empowered to negotiate the terms of a contract.

14. As to contract CAN 5 both parties gave me their version of the circumstances of the transaction.

15. Mr. Tam said he prepared it: Mr. Chang said he signed it at his Company's premises. He did not go to the office of the Defendant. Mr. Tam said he delivered it to Mr. Lee, the sole proprietor of the Defendant firm, at his office. After certain negotiations Mr. Lee said he would like time to consider it further, and so he, Mr. Tam, left the purchaser's copy with him. At that time it was not signed by Mr. Lee for the Defendant. Mr. Tam said he asked Mr. Lee to sign it and to return it to him. But he never did. Mr. Chang said that no deposit was received by himself or by his Company under the contract. In fact this contract was never completed. After a while Mr. Tam destroyed his ...(illegible)

16. The defendant exhibited what purports to be his copy of CAN 5. It is a short document of one page and is written in Mr. Tam's writing. It is signed by Mr. Chang for the Plaintiff in blue ink and by Mr. Lee for the Defendant in black ink. Certain portions of the original writing in Mr. Tam's hand have been crossed out and three separate insertions have been made on its face, which have been made by a Chinese typewriter. Each of the three insertion is initialled by Mr. Lee and each is initialled with the letters "R.C."

17. According to Mr. Tam when he left the contract with Mr. Lee there were no erasures or insertions on the face of the document. He said that when he left the contract, there was (1) a provision as to the delivery of the goods reference being made to the previous contract, 610: and (2) the deposit was to be 1/10th of the contract price, i.e. $9,700.

18. These two provisions have been crossed out and two new provisions inserted in Chinese type script. Delivery is to be between 5th September and 20th December and failure to do so renders the Plaintiff liable for any loss suffered by the Defendant. The second insertion states that the deposit is to be $20,000 and that no separate receipt would be issued. These are two of the insertions: the third insertion states that the Plaintiff's guarantee that the quality and quantity of goods to be delivered shall conform to "International Powdered Milk Requirements". Finally the printed conditions of sale on the reverse of the document have been crossed through with a red line.

19. As I have said Mr. Tam said that none of these insertions and alterations were there when he left the document with Mr. Lee. In passing it may be mentioned that contract 610 was exhibited and shows alterations on the face obviously done in the writing of Mr. Tam. Not in Chinese typescript. Mr. Chang said of course that he never saw Mr. Lee concerning the contract at all. And he denied that the initials on the document were his or had been made by him. In particular they each said that it was their Company's practice to give a separate receipt for any sum deposited with the Company by a purchaser. And the stamped receipt given for the deposit made under contract CAN 57 was exhibited. Finally they also said that their company could not produce tins comparable to those used in the U.K. and America.

20. Mr. Lee's version of what happened is quite different. He said that Mr. Chang negotiated the agreement with him on March 31st 1969. On April 2nd he came to Mr. Lee's office with two copies of CAN 5. Mr. Chang signed and chopped these in his presence. Further negotiations occured and the insertions were agreed and included on the document. This was done by a Chinese typewriter in Mr. Lee's office. He said that the initials 'R.C.' were made on CAN 5 by Mr. Chang who used his, Mr. Lee's pen. He said he, Mr. Lee wanted to give Mr. Chang a check for $20,000 as the deposit. This was refused by Mr. Chang who said he wanted cash since it was in the afternoon. He told Mr. Lee, according to the latter that he was going to Macau. Mr. Lee said he phoned his wife at their home and she came to the office with $20,000 in cash which was handed over to Mr. Chang. He asked for a receipt but Mr. Chang said that CAN 5 was itself a receipt. It will be noticed that that document does not bear any stamp.

21. The defendant called two other witnesses, his wife and his Secretary or Assistant. The latter gave a very detailed description of what occured in the office closely following the version already given by Mr. Lee. The rest of his evidence however was muddled and when dealing with the receipt of money from abroad quite obviously wrong. Mr. Lee's wife deposed that she took $20,000 of her savings which she kept at home and handed them to her husband. She also said she received no receipt and that he has never replaced the money up until now.

22. After anxious consideration I have reached the conclusion that I should accept the version of the Plaintiff's witnesses and reject that of Mr. Lee and the witnesses called for the Defence.

23. The defendant witnesses gave me the impression that they were telling a well rehearsed story. The version of Mr. Lee and his assistant of what they said occured at the office was described with minute detail, which is most suspicious when what was described was something which was a matter of very little moment at the time, and occured over two years ago.

24. The version of the facts given by the Plaintiff is inherrently probable. There was a contract, contract CAN 5, prepared, ready for signature, but it was unacceptable to the purchaser.

25. If the Defendant is right, it would mean that at the time CAN 57 was signed there were three valid contracts for the sale of exactly the same article at varying prices in existence at the same time.

26. Contract 610 was made on November 26th, 1968 and there is evidence that deliveries were made at irregular intervals up to September 23rd, 1969. CAN 5 was made on April 2nd, 1969 and deliveries started on December 7th.

27. Contract CAN 57 was made on September 2nd. So on September 2nd the Defendant was bound by three existing contracts. CAN 57 provided for the deposit of $5,000. And the price of the tins was higher than that in CAN 5 and 610.

28. It is highly improbable that a contract would be made at a time when there was already in existence a previous contract dealing with exactly the same article. Improbability becomes incredibility when we notice that the price of the article in the second contract, CAN 5 is less than in the first contract of 610, which is the case here.

29. If the defendant is correct an enormous deposit of $20,000 was paid during the existence of the first contract 610.

30. Mr. Tam told me that until a deposit was paid his company would not begin to manufacture the goods referred to in the contract. The deposit under contract CAN 57 was paid on November 3rd, 1969 and the first delivery under that contract was on December 7th, 1969. This contract was obviously replacing contract 610. If the defendant is right it would mean that from April 2nd when contract CAN 5 was signed and the $20,000 deposit paid until December 7th the Plaintiff had the use of that deposit and had done nothing. Yet the contract calls for the first delivery as at September 5th.

31. Mr. Tam also said that the Company did not have two contracts running at the same time with the same customer for the same articles. They completed one contract before proceeding with a second contract. What I am saying is that ignoring contract CAN 5 the Plaintiff was continuously - if irregularly - supplying the Defendant throughout the whole period up to the signing of CAN 57 under contract 610. (See Exhibit T which was put in by the Defendant and which refers to CAN 57 not to CAN 5).

32. But the matter does not rest there. I was shown copies of certain delivery orders and invoices by the Plaintiff. They do not refer to CAN 57 or CAN 5 but they obviously were issued under CAN 57 because the price referred to is that contained in the latter contract. In one of the original invoices sent to the Defendant the expression 'CAN 5' is used. This does not appear on the carbon copy produced by the Plaintiff and I can only suppose that it is an error. This original invoice was produced by the Defendant. However the other original invoices were not put in evidence. Certainly the price contained in that document is worked out at the CAN 57 rate.

33. Further I found the story of the production of $20,000 according to Mr. Lee paid to Mr. Chang for himself and not for his company most unconvincing. I think that the wife of Mr. Lee stated what she did out of a mistaken sense of loyalty to her husband. $20,000 is a very large amount to have lying idle in a flat in North Point. And I am certain that she would have had some evidence to show she had parted with so much of her savings. Indeed if she is telling the truth she has never been repaid. I do not believe her story.

34. In the defence which Mr. Lee filed in person on June 25th, 1970 there is no mention of contract CAN 5. Nor is it there mentioned that the defendant's case was that he had $20,000 on deposit with the Plaintiff. The Plaintiff had written two letters at least on January 10th and February 16th - the latter being a solicitor's letter - clearly setting out their case and of course did not mention contract CAN 5.

35. The defendant exhibited a copy of a letter dated January 14th, 1970 written in Chinese type script which they said had been posted to the Plaintiff. The Plaintiff denied having received this. It mentions the contract CAN 5 and states that the deliveries made in December 1969 were based on the wrong contract price. No mention was made of CAN 57. If this letter was genuine it makes the failure of the Defendant to answer the Plaintiff's solicitor and to mention contract CAN 5 in his defence inexplicable.

36. To sum up I find as a fact that there never was a contract between the parties in accordance with the document CAN 5; and, indeed as is admitted, that the contract CAN 57 was a valid contract: that the Defendant has received 35,520 pieces under that contract i.e. contract CAN 57. Payment under the contract is stated to be due upon delivery and the Defendant has not paid. The amount of $19,180.80 is therefore due to the Plaintiff. However the Plaintiff has received the $5,000 deposit of the Defendant under that contract which must be accounted for.

37. There will be judgment therefore for the Plaintiff for $14,180.80.

38. The Plaintiff also claims $20,386.60 being the price of 26,480 tins etc. making up the 62,000 tins stipulated as the first part of contract CAN 57. This part of the claim of the Plaintiff is fully set out in the Statement of Claim. The first paragraph of the amended statement of defence traverses each and every allegation in the statement of claim save those which are admitted. This part of the Plaintiff's claim is not admitted.

39. No question were asked of the Plaintiff's witnesses the managing director and sales manager of the Company as to this part of the claim; and no document has been put in evidence to show that these 26,480 tins have been manufactured by the Plaintiff and offered to the Defendant, except a letter sent by the solicitor for the Plaintiff to the Defendant on February 16th, 1970. I have already referred to this. This gave notice to the Defendant that the Plaintiff terminated the contract CAN 57. It also contained a statement that the balance of tins due as the first delivery under that contract had been made and were ready for delivery. And the Defendant is requested to take delivery. Mr. Lee admitted that he received this letter and that he did not reply to it. He gave two reasons for this. There had been a serious fire in the defendant's godown and Mr. Lee was very worried: he also said he thought it was a trivial matter. He knew the letter was a tissue of lies but it could be dealt with later. The point remains however that no question as to that part of the letter dealing with the manufacture and non-delivery of the balance of the tins was asked of any witness. At the conclusion of the evidence I thought that this part of the claim of the Plaintiff had been abandoned. However counsel for the Plaintiff in his final address argued that since the figures of the number of tins to be delivered and their price were not disputed, that he was entitled to succed. With respect I do not think that that is right. The managing director of the company would know all about such a claim especially as Mr. Chang told us he worked inside the factory himself. There was no evidence on which it would be safe for me to find in the Plaintiff's favour on this point. I do not think that the solicitor's demand on February 16th is sufficient. It is at best secondary evidence and there is no explanation why there is no primary evidence. And the defendant had traversed the allegation as to this part of the Plaintiff's claim in the Statement of Claim. In my view the Plaintiff cannot succed on this part of his claim.

40. There will be judgment for the Plaintiff for $14,180.80 with costs.

41. As I have held that there was no binding contract CAN 5, and that the Plaintiff is not in breach of contract CAN 57 it follows that the counterclaim must be dismissed with costs.

5 JAN 1971

Representation:

S.K.S. Leung (P.K.H. Wong & Co.) for Plaintiff

J. Swaine (Gunston & Chow) for Defendants

Judgment read in Court