Granditme Developments Ltd v. Nentrial Ltd

HCA000519/1989

1989, No. A519

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Hon. Liu J. in Chambers

Date of hearing: 2nd day 1989

Date of delivery of judgment: 2nd May 1989

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D E C I S I O N

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1. The plaintiff claims against the defendant on a dishonoured cheque, the payment of which is said to have been countermanded by the defendant.

2. The parties attended at the Chambers of the Master when the Order 14 application was acceded to and judgment was accordingly granted against the defendant in favour of the plaintiff, hence the instant appeal.

3. At the inception, the plaintiff had some 200 metric tons of Ferro Silicon for disposal. The supplier was a Chinese company. The plaintiff was initially not very successful in its attempted resale of these 200 metric tons of Ferro Silicon. Then one Aster Commodities Limited approached the plaintiff, but the defendant was the ultimate purchaser of the same quantity of goods in Hong Kong.

4. A contract was entered into between the plaintiff and Aster Commodities Limited. Another contract was signed between Aster Commodities Limited and the defendant. As far as the contract between the plaintiff and Aster Commodities Limited is concerned, payment by Aster Commodities Limited was, by arrangement, to be effected by two cheques drawn by the defendant. It is disputed whether the contract between the plaintiff and Aster Commodities Limited was, in fact, a contract for the delivery of goods payable by two instalment payments or whether delivery of goods were to be made in two stages. However, the contract term in the transaction between the plaintiff and Aster Commodities Limited expressly provided that payment for the goods was to be made by two instalments.

5. Such peripheral dispute between the plaintiff and the defendant has little bearing on the crucial issues joined between the parties in the instant appeal.

6. It is argued, on behalf of the defendant, that the mere handing over of the cheques, including the one under consideration, by the defendant to the plaintiff would have the effect of involving the defendant in the transaction between the plaintiff and Aster Commodities Limited. In any event, so ran Counsel's argument, the giving of the cheques directly by the defendant to the plaintiff would per se render the relationship between the plaintiff and the defendant one susceptible to the usual incidents of a dishonoured cheque as between its drawer and payee. This is a submission which I am unable to accept.

7. So long as it is recognised that there were two separate contracts between the plaintiff and Aster Commodities Limited on the one hand and between Aster Commodities Limited and the defendant on the other, payment under the former contract by Aster Commodities Limited to the plaintiff by cheques drawn by the defendant would not introduce the defendant as a party interested in that transaction, nor would it have the effect of imposing upon the plaintiff any legal obligation under the Bills of Exchange legislation independently of, or otherwise extrinsic to that very contract between the plaintiff and Aster Commodities Limited.

8. Once it is accepted that there were two separate and distinct contracts, the only matter to be considered must be whether under the separate contract between the plaintiff and Aster Commodities Limited, good consideration had moved from the plaintiff to Aster Commodities Limited.

9. It is argued on behalf of the defendant that the combined effect of paragraphs 7, 16 and 19 of Mr Lau's first affirmation filed on behalf of the plaintiff is that property in the goods covered by the second instalment payment did not pass from to Aster Commodities Limited and that on the assertion of the defendant of unmerchantability of the goods in quality, there was a total failure of consideration for the cheque sued upon.

10. The first instalment payment fell on the 23rd December. There is some dispute as to what exactly transpired on that day, but the fact remains that on that particular day, release of goods had at one time been caused to be withheld or otherwise delayed.

11. Mr Fok, counsel for the plaintiff, readily concedes that after the handing over of the unqualified Delivery Order by the plaintiff to Aster Commodities Limited, the plaintiff was out of line, though successfully, in its attempt to interfere with the release of goods to Aster Commodities Limited and subsequently to the defendant on the 23rd December. That is Mr Fok's explanation for the facts averred in paragraph 16 of Mr Lau's first affirmation. As for the conversation between the supplier and the plaintiff deposed to in paragraph 7 of the same affirmation of Mr Lau, Mr Fok maintains that it was irrelevant and would have no impact on the plaintiff's contractual duties and obligations towards Aster Commodities Limited. But paragraph 19 of the same affirmation of Mr Lau contains a categorical assertion that the goods sold to Aster Commodities Limited under the contract between the plaintiff and Aster Commodities Limited were to be delivered in Hong Kong Ex Godown "against payment in full of the purchase price". This presumably accounts for the attempt made to withhold or delay release of goods on the 23rd of December. Whilst this assertion explains the stance of the plaintiff's previously adopted, such attitude did not seem to be authorized by anything falling squarely within the four corners of the contract between the plaintiff and Aster Commodities Limited. Under the contract, delivery was merely to be in Hong Kong, Ex-Godown, subject to the buyer, i.e. Aster Commodities Limited, taking delivery of the goods before the 28th December 1988 with all losses otherwise born by the buyer.

12. Delivery in the written contract was certainly not made conditional upon or to be made only against full payment. As Mr Fok rightly points out that the cheque and post-dated cheque, once accepted, were virtually as good as cash. The erroneous understanding and the loose statements made on behalf of the plaintiff do not, in my view, detract from the contract term that delivery was not, in any way, subject to full payment. As a matter of fact, in paragraph 10 of his supplemental affirmation filed subsequently to the attendance at the Master's Chambers on an Order 14 application, Mr Lau expressly made reference to compliance by the plaintiff of "its delivery obligations under its contract with" Aster Commodities Limited. I have had opportunity to refer to the Delivery Order given by the plaintiff to Aster Commodities Limited, which is referred to and exhibited as "SLSS-3" in the first affirmation of Mr Lau. The Delivery Order, as given by the plaintiff to Aster Commodities Limited, contains no such limitation. Indeed, delivery is now said to have been given by the plaintiff to Aster Commodities Limited under a separate contract independently from that between Aster Commodities Limited and the defendant.

13. In my view, consideration had thus been given for the cheque sued upon. If for any reasons, full delivery of the goods under the contract between the plaintiff and Aster Commodities Limited had not been or had not been effectively made to Aster Commodities Limited, with the plaintiff's willingness to wholly perform its contractual obligations towards Aster Commodities Limited and with the readiness of Aster Commodities Limited, without raising any complaint under the contract, to accept due performance, that is to say, the contract being very much alive with both parties looking forward to due performance, it would not lie in the mouth of the defendant to say that good consideration had not passed for the cheque in question by the plaintiff to Aster Commodities Limited.

14. The contract between Aster Commodities Limited and the defendant refers to certain specifications of goods. It is these specifications which the defendant now alleges the goods as having failed to meet. But the contract between the plaintiff and Aster Commodities Limited contains no specifications whatsoever. No evidence has been led before this Court that Aster Commodities Limited has queried or complained of the quality of the goods said to have been wholly delivered. The silence of Aster Commodities Limited may well be due to its acknowledgment of the low price of Ferro Silicon delivered under the contract, its holding of a different view or belief as to the quality; its doubting or nor-acceptance of the defendant's allegation of unmerchantability based on a subsequent Korean survey or at all; or perhaps for some other reasons best known to Aster Commodities Limited.

15. For a variety of reasons, Aster Commodities Limited has not chosen to repudiate the contract between itself and the plaintiff on account of unmerchantability or at all. It has taken no issue under the Bills of Exchange law on the enforceability of the cheque in the instant appeal. A cheque used in payment of an independant contract between the plaintiff and Aster Commodities Limited could hardly be impugned by any of these suggested grounds which none of the interested parties to that other contract has seen fit to support. It is difficult to imagine how the defendant could rely on such a ground not embraced by Aster Commodities Limited in respect to a cheque drawn by itself as payment by Aster Commodities Limited to the plaintiff under a contract with which the defendant was wholly unconcerned.

16. For all the reasons I have given, good consideration has been shown to have moved from the plaintiff to Aster Commodities Limited for the cheque and the other contention sought to be raised by Mr Yu founded on unmerchantability is, in my view, unmeritorious.

17. The appeal against the Master's decision, therefore, cannot succeed and the defendant's appeal must accordingly be dismissed with costs to the plaintiff. I so order.

Representation:

Mr J. Fok instructed by M/S Stevenson, Wong & Co. for the Plaintiff

Mr. B. Yu instructed by M/S Hastings & Co. for the Defendant