Cheng Tin Yau v. Matsui Commercial Co Ltd

HCA003168/1972

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 3168 OF 1972

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Coram: Trainor, J.

Date of Judgment: 3rd April, 1974.

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JUDGMENT

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1. The respondents commenced proceedings against the appellant in December 1972 by a writ of summons and the appellant filed a Defence and a Counterclaim on the 10th January, 1973. With what could scarcely be called "undue haste" the respondents applied to the Registrar in Chambers on the 3rd October, 1973 for liberty to amend the statement of claim and this was granted.

2. As I understand the position from the pleadings the position is as follows:

3. On the 16th August, 1972 the respondents agreed to sell, and the appellant to buy, 80 sets of Fish Finders. On the 19th of the same month a contract was entered into by the parties whereby the respondents agreed to sell, and the appellant to buy, 720 sets of Fish Finders, 80 of which to be those the subject of the agreement of the 16th August. The first 80 were the subject of, what was called, a Sales Contract to which the number HKC72-062 was given. It was alleged by the respondents that those goods were to be paid for by way of a bill of exchange payable 30 days after sight against delivery of shipping documents. They alleged that the goods were forwarded to the appellant by two shipments on the 2nd and 5th October, 1972 respectively. They alleged that they drew two bills of exchange on the appellant, dated the 11th and 12th October respectively, payable 30 days after sight which the appellant duly accepted. When the bills were accepted was not pleaded but they were presented for payment on the 1st December, 1972 and were dishonoured.

4. The appellant admitted in his Defence that the goods were shipped as alleged, but said that it was an express term of the contract that the goods were to be delivered by the respondents before the end of September and this was not done. He alleged that he rejected the goods by telephoning to the respondents in Japan on the 3rd of October and followed this up with a letter to them dated the 25th October. He did, however, admit that he accepted the two bills of exchange, but repeated the breach of contract by the respondents by reason of their failure to deliver in time.

5. The second 80 Fish Finders were the subject of a Sales Contract No, HKC72-060 made on the 5th September, 1972. The payment for them was to be made in the same way as for the first 80. The goods were shipped from Japan on the 27th October, 1972 and the respondents drew a bill of exchange dated the 31st October on the appellant. According to the pleadings the bill was accepted by the appellant but on presentation on the 7th December was dishonoured. In his Defence the appellant admitted the shipment of the goods, but again relied on an express term of the sales contract to the effect that the goods were to be delivered before the end of October. He further alleged that about the 6th November, 1972 he telephoned a Mr. Iga, the respondents' agent in Hong Kong, refusing to accept the goods and followed this by a letter to the respondents dated the 8th November. He said the respondents refused to take back the goods. Again, however, he admits accepting the bills of exchange.

6. The fourth bill of exchange concerns seven "Kamame" propellers for fishing junks. They were the subject of a Sales Contract No.1559 dated the 8th August, 1972. They were to be paid for by way of a bill of exchange similar in condition to the other three. The goods were shipped on the10th October 1972 and the respondents drew the bill of exchange dated the 10th October, on the appellant. This was duly accepted but when presented on the 23rd November 1972 it was dishonoured.

7. The appellant in his defence alleged that it was an express condition of the contract that the goods would be delivered within a month and a half from the receipt of the appellant's order but the respondents failed to do so. In addition, the appellant pleaded that when the goods were delivered on the 24th October it was discovered that the propellers had a 40" pitch instead of the 39 ½" ordered. The appellant said he rejected the goods and at the request of the respondents meetings were held on the 28th October, 1972 and the 6th November, 1972. At that meeting the appellant was present and the respondents were represented, as was the person who was to purchase the propellers from the appellant. The appellant alleged that at that meeting it was agreed that he and his customer would not reject the propellers and that the appellant and the respondents would enter into a collateral agreement. The effect of this agreement was that the respondents agreed to sell and deliver to the appellant eight further propellers within two months of the receipt of a letter of credit from the appellant in respect of them; and that the first seven propellers would be paid for "if and when" the second eight were delivered and found to be in accordance with the specifications. The appellant says that despite the fact that he established a letter of credit on the 2nd November, 1972 the respondent failed to deliver the propellers.

8. On the 28th November, 1973 the respondents moved for judgment before the Registrar, pursuant to Order 27 rule 3 of the Rules of the Supreme Court, on the admissions in the pleadings.

9. An affirmation was filed on the 27th November on behalf of the respondents deposing to the admissions in the appellant's defence and asking for judgment. On the return day of the summons the matter was adjourned to the 12th December and the appellant was granted leave to file a replying affirmation on or before the 7th December.

10. The appellant filed an affirmation on the 4th December, 1973 in which he reiterated his acceptance of the various bills of exchange and deposed that he had been advised and believed that for the reasons set out in his defence he had a good defence to the action.

11. On the 6th December, 1973 he filed a supplementary affirmation in which he deposed to certain exhibits. One exhibit was a letter alleged to have been written by the respondents to the appellant and dated the 20th October 1972. The letter referred to the Sales Contract HKC72-062 and purported to be: an acknowledgment by the respondents of the appellant's right to rejedt the goods shipped on the 2nd and 5th of October; a request to the appellant to facilitate them by accepting the bills of exchange to enable the goods to be released and transfered to the appellant's godown; an acknowledgment that within a month the respondents would pay damages to the appellant and his sub-purchaser; and an acknowledgement of liability to pay $800 per month to the appellant for godown and other charges if the goods were not removed from appellant's godown within a month. The letter also purported to exonerate the appellant from liability on the bills of exchange. The appellant in his affirmation deposed that this letter was a sequel to an agreement reached between the parties on the 14th October, 1973 which was reduced to writing and signed by the parties and to which their respective chops were affixed. The agreement was also exhibited.

12. With regard to the second consignment of Fish Finders, the object of sales contract HKC72-060, the depondnt exhibited a letter dated the 4th November, 1972, purported to have been written by the respondents to the appellant in answer to letters written by him to the respondents on the 27th October and the 1st November. In that letter it is said "..... you will remember that you are the agent of us, then we have already made an agreement which is signed on October 14, 1972. It is mentioned, if we have any problem on delivery of (Fish Finders) you will assist us to sign the bank document. Then it is no responsibility for you. Any mistake or problem will be taken up by ourselves. Your side is just an assistance on this matter.

13. Hoping for your co-operation and deeply thank you."

14. Copies of the letters to which the foregoing was alleged to be a reply were not exhibited.

15. Another letter was exhibited. This was a letter dated the 7th November from the appellant to the respondents. It referred (inter alia) to an alleged meeting between the parties at which the respondents

"..... promised to take up response of us to claim your head office in Osaka for our loses and customers loses, and we take our duty to deliver the goods into the godown. When everything was completed you would return the goods to Japan by this month November. As the goods would not deliver at the godown by the end of November, you agreed to pay the charge of the godown at HK$800 per month." There was exhibited an alleged reply dated 8th November saying ".....

16. So would you mind to wait for shortly for our latest confirmation. If we receive any information, we will inform you as fast as we can."

17. An affirmation was filed on the 12th December, 1973 on behalf of the respondents in which it was denied that the appellant rejected the goods. Late delivery was admitted but, it was deposed the appellant accepted the goods. The deponent alleged moreover, that the documents and letters exhibited by the appellant purporting to come from the respondents were forgeries; that the notepaper was not theirs; nor was the chop or signature.

18. The application came on before Mr. Registrar Oliver and on the 22nd December, 1973 and he ordered judgment for the respondents in the terms of the summons, and, by consent, imposed a stay of execution pending the outcome of the appellant's counterclaim.

19. Against the judgment the appellant filed a notice of appeal on the 27th December, 1973. Before the date fixed for the appeal the appellant filed on the 8th January, 1974 a further affirmation. In it he deposed that the allegation in the affirmation filed on behalf of the respondents that certain documents were forgeries was untrue. He exhibited certain further purported correspondence but I do not propose to deal with it in detail. It purports to support the appellant's contentions contained in the appellant's earlier affirmations. Ultimately an affirmation was filed on behalf of the respondents on the 11th February, 1973 purporting to refute the allegations made by the appellant.

20. Order 27(3) upon which the judgment appealed against is based reads:

"Where admissions of fact are made by a party to a cause or matter either by his pleadings or otherwise, any party to the cause or matter may apply to the court for such judgment or order as upon those admissions he may be entitled to, without waiting for the determination of any other question between the parties, and the court may give such judgment, or make such judgment, or make such order, on the application as it thinks just."

21. It is quite clear and requires no embellishment, that a party is not entitled to judgment on admissions as of right; the jurisdiction of the court is discretionary. However where there is a clear, unequivocal admission by a party to proceedings a court must, one would think, be very reluctant to refuse a judgment.

22. In considering this appeal resort must first be had to the pleadings and, I think, considerable assistance may be gained firstly by examining the claim with regard to the propellers. The respondents' case is simple and I have outlined it earlier. The appellant's defence to it is also simple. He admits he accepted the bill of exchange concerning them but says:

23. Mr. Bernacchi for the appellant would contend that on the first and second points alone his client would be entitled to have that part of the respondents' claim dismissed by reason of failure of consideration. If, however he were to fail on those grounds he would maintain that it was agreed that if the appellant fulfilled a certain obligation i.e. establish a letter of credit, the respondents would not present the bill until they had fulfilled their part of the agreement, i.e. shipped the other propellers as the respondents failed to fulfil their part of the agreement they could not succeed in their claim.

24. Mr. Zimmern for the respondents would, briefly, argue: the plaintiff has accepted a bill of exchange therefore he must pay on it. If he has a counterclaim for damages for breach of contract or, indeed, any right of action arising out of this transaction he may proceed on his counterclaim; but the respondents are entitled to judgment, and all the authorities support them.

25. If the matter were as simple and fine drawn as Mr. Zimmern would contend for the unquestionably he is right; but it is not.

26. The application before the Registrar was based on admissions; but such admissions must be clear and unequivocal. As Greene L.J. said in Ash v. Hutchinson & Co. (Publishers) (1936) Ch. 489 at 503:

"A plaintiff who relies for proof of a substantial part of his case upon admissions in the defence must, in my judgment, show that the matters in question are clearly pleaded and as clearly admitted."

27. I do not propose to enter into the arguments of the respective counsel as my decision with regard to this part of the case can he very easily stated. Mr. Zimmern would contend that the court ought not go outside the pleadings to decide what is in dispute. If one acts on that the position in a nutshell is that the respondents say: We shipped the goods as ordered on the 10th of October, 1972 from Japan to the appellant in Hong Kong and drew a bill of exchange on the 10th October, 1972. It was payable 30 days after date. The appellant admits accepting it. We presented it for payment on the 22nd November, 1972 and it was dishonoured. However, even if that is so there is the plea in the Defence that on the 24th October when the goods were delivered it was discovered that they were not the goods ordered; in other words there was a complete failure of consideration. The defence goes on to plead that the goods were rejected before the bill was presented and gives details of a subsequent arrangement.

28. In this part of the respondents' claim although there was an admission of acceptance by the appellant there was nothing admitted that clearly and unequivoccable entitled the respondents to judgment. What was pleaded amounted to an admission and avoidance by reason of failure of consideration and accordingly I would allow the appeal.

29. The remaining parts of the appeal are not quite so easy to dispose of. The first consignments of goods were shipped on the 2nd and 5th October, 1972. The appellant says he rejected them by long distance telephone call on the 3rd of October and by a letter of the 25th October because delivery would be out of date. Nevertheless he accepted the bills, which were drawn on the 11th and 12th October. Clearly on the face of the pleadings, so far as this part of the claim is concerned, the appellant accepted the bills of exchange after the date he says the goods should have been delivered. That being so, there is nothing to suggest that the bills were other than valid and subsisting bills of exchange as he would appear to have waived his right to reject for late delivery.

30. However, affirmations and supplementary affirmations were filed by both sides without objection which disclosed an amazing situation. Allegations of forgery were made by the respondents which if true and if the forgeries were made with the appellant's knowledge, could involve him in criminal proceedings. If on the other hand the documents did originate from the respondents then the respondents are involved in a very serious offence and the deponent to the affirmations filed on the respondents' behalf, possibly, liable to a charge of perjury.

31. I have given anxious consideration as to what should be done with regard to the appeal against the judgment on these two bills. It is quite true that the respondents would be entitled to judgment on them if the pleadings only were considered. I do not know who drafted the Defence or what instructions the drafter had but if he had at his disposal what was subsequently alleged in the affirmations one's mind boggles at the idea of it being omitted. Indeed it is difficult to understand why the Defence was not amended before judgment was given. Be that as it may there is before me evidence of criminal activity which concerns the justice of granting judgment at this stage. I am not at all satisfied that it would proper to allow the existing judgment to stand so far as these two bills of exchange are concerned and accordingly, in my discretion I allow the appeal on them also. In doing so I find considerable relief from the fact that execution was stayed by consent in the judgment of the Registrar. This means that apart from the extra trouble of proving their case the respondents will not suffer anything should they be successful at the trial.

32. With regard to the second contract for Fish Finders it was common case that the goods were shipped on the 27th October, 1972. The respondents pleaded that a bill of exchange dated the 31st of October, 1972 was drawn on, and accepted by the appellant. The appellant pleaded that the respondents failed to deliver the goods before the end of October in breach of an express condition of the contract and that he rejected them by a phone call to the respondents' agent on the 6th November, and subsequently by a letter dated the 8th November. There is nothing there to suggest, as in the case of the first consignments that the acceptance of the bill was after the date for delivery of the goods or after their rejection; but there is in the Defence, despite the admission of the acceptance of the bill, a plea of a breach of an express condition of the contract which amounts to a failure of consideration. So far as this part of the claim is concerned there is no clear admission, in fact there is no admission which standing alone would justify a judgment for the respondents. I allow the appeal on this part also.

33. The only outstanding question is that of costs. Clearly the appellant is entitled to his costs in so far as he has been successful on his appeal with regard to the 3rd and 4th bills. So far as the first two are concerned the position that exists with regard to them is due entirely to the inadequate pleading. Although he has been successful by reason of me exercising my discretion nevertheless the position would never have arisen had he pleaded properly.

34. I allow the appellant his costs as to the extent of one half before the Registrar and me and I order him to pay one half of the respondents' costs of the proceedings before the Registrar and me. I certify for counsel.

35. Finally, I direct that copies of the documents be forwarded to the Attorney General for his consideration and such action, if any, as he may see fit.

Representation:

Bernacchi, Q.C. & K.H. Woo (Tong & Ip) for Appellant.

Zimmern, Q.C. & C.Y. Lee (P.H. Sin & Co.) for Respondent.