Stateside Corporation v. Hing Cheong Hong

HCA000110/1947

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION No.110 of 1947

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Coram: Mr. Justice E .H. Williams.

Date of Judgment: 18 May 1948.

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JUDGMENT

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1. Plaintiffs' claim in a specially endorsed writ is for the sum of $49768.32 as money paid for a consideration which had failed. This sum is made up of three amounts paid to defendants on three contracts entered into between the parties viz. $18032 on a contract between them dated 16.12.46 for the purchase of sulphur black, $11901.12 on a contract dated 21.12.46 for the purchase of similar goods and $19835.20 on a contract dated 30.1.47 for the purchase of similar goods. These sums were 35% of the price as stated in the contract, being paid as deposit or "margin" money.

2. Defendants were given leave to defend.

3. In their Statement of Defence, defendants alleged that as regards each contract the parties had agreed before entering into the contract that the contract price was to be stated much higher than the real price. Thus in the first contract the price was stated to be $4.60 per 1b. - the actual price being only $3.95 per 1b. to enable plaintiffs to obtain a higher price from purchasers by showing them the contract naming the enhanced but untrue purchase price. A refund of this difference in prices amounting to $2548 was repaid by defendants; similarly as regards the second and third contracts, the defendants claimed they had refunded to plaintiffs $4351.30 and $4351.20 for the same reasons.

4. With respect to the amount which fell to be repaid owing to defendants' failure to deliver the goods, the defendants claimed in the defence that by mutual agreement between plaintiffs and the Pan Asia Trading Co. and at the requests of the plaintiffs the sum of $12952.02 was paid from the balance to the firm of Wilson & Co. At the hearing, this was amended on request of the defence by the substitution of the firm CHUNG TAI for Pan Asia Co.

5. The defendants admitted that only a sum of $24853.63 was due to plaintiffs and they paid this sum into Court, having also deducted $2452.75 as charges for "cancellation of the contract".

6. In their reply, the plaintiffs denied they were a party to the agreements mentioned in the statement of defence. With the pleading in this form the case came on for trial.

7. In my opinion - I have already said this in the course of the hearing - it was the duty of the plaintiffs, before the case was set down for trial, to obtain further particulars of the various alleged agreements and particularly so as to the names of the persons who acted for both sides in the making of such agreements. No dates even were mentioned in the Defence as to when the agreement between plaintiffs and Pan Asia Trading Corporation was made. As no effort had been made by plaintiffs to apply for any particulars, the way was left open to the defendants to give evidence of any fact tending to support their vague allegations.

8. The onus of proof of the alleged agreements being on the defence, they opened their case and application, at this late stage, was made by their counsel to amend their statement of defence by substituting the firm CHUNG TAI for Pan Asia Trading Corp. as one party to the agreement regarding the sum of $12952.02. No objection was raised by counsel for the plaintiffs to the application for such a vital amendment and so I permitted it. Clearly, if plaintiffs had previously secured particulars of this agreement, the application by the defence for leave to amend in this manner at this late stage would have been or should have been strenuously opposed.

9. Lengthy evidence was given by witnesses on both sides but I do not consider it necessary to analyse in detail such evidence.

10. The three contracts were signed respectively by LI Yuk Wang, then a partner in plaintiffs' firm on their behalf, and by K.S. Chan (Chan Kwan Sau) manager of defendants' firm. Wong Man Kai, a seller in plaintiffs' firm was the person who negotiated the contract on behalf of the plaintiffs. By the term 'negotiated the contract' was meant that in the course of his duty he interviewed defendants (sellers), ascertained the price at which they were willing to sell, carried out the usual bargaining, reported to his employers, and obtained a final consent to the price to be paid. Three crossed cheques were made out by the plaintiffs for the amounts mentioned in the Statement of Claim and were brought to defendants by Wong Man Kai. The name Wan Man Kai never appeared on any of the contracts or on the cheques.

11. I now come to the evidence of the defence as to the alleged agreement with the plaintiffs that plaintiffs were to get a refund of the amount paid above the real price. The defendants stated it was Wong Man Kai who arranged these refunds. They did not appear to me to consider that their conduct in being a party to such an agreement was in any way reprehensible - that it was so is clear for it was designed to mislead and deceive future buyers from the plaintiffs.

12. The defendants stated that about the 18.12.46 Wong Man Kai brought along a receipt for the refund of $2548 already written out bearing a signature LI MAN SHAM, the words 'Stateside Corporation' stamped and the signature of Wong Man Kai. The defendants' manager gave him the refund in cash on being told by Wong Man Kai that the name LI MAN SHAM was an alias of Li Yuk Wang. As regards the two later receipts for refunds, neither bore the signature Li Man Sham. Plaintiffs deny there is any person Li Man Sham known to them. The refunds were also paid in cash to Wong Man Kai.

13. No satisfactory explanation was given by the defendants as to why these refunds should be paid in cash instead of by cheque. The whole evidence regarding the refunds is of so unsatisfactory a nature that I incline to the belief that defendants were well aware any refund made was altogether for the benefit of Wong Man Kai and not for his employers. Wong Man Kai, I should state, took leave of absence from his employers soon after they began to press defendants for the return of the full deposit monies. He is, apparently, still on his vacation.

14. Even if I found that defendants genuinely made the refunds believing that Wong Man Kai was acting on behalf of his employers, that would not necessarily make the plaintiffs liable. I accept the plaintiffs' evidence that they knew nothing of the agreement between Wong Man Kai and defendants. I am satisfied he was never authorised by them to enter into such agreements nor was there anything in the plaintiffs conduct to amount to a representation that Wong Man Kai had their authority to make such agreements. Defendants were particularly lax in not questioning plaintiffs as to Wong Man Kai's exact position in the firm. The plaintiffs are not therefore liable in contract for Wong Man Kai's conduct but counsel for the defence in his arguments submitted that I should find them liable in tort for the fraud on defendants of Wong Man Kai e.g. the production of the receipt purporting to bear the signature of a partner of the plaintiffs. Even granted that the question is one of tort and not of contract, I cannot find that Wong Man Kai was acting in the apparent scope of his authority in making such verbal agreements and obtaining the rebates. There was not a single piece of evidence forthcoming in the case to show that the acts of Wong Man Kai were within the scope of his employment or even incidental to his employment. I therefore hold that defendants fails as regards this part of the case.

15. The evidence for the defence regarding the agreement that defendants should pay $12952.02 to Messrs. Wilson & Co. in accordance with an arrangement reached between plaintiffs and Messrs. Chung Tai was of the most nebulous description and I have no hesitation in rejecting it. I should mention one piece of evidence connected therewith which strikes me as being exceedingly improbable. A request was made to the defendants' manager by Lo Tau Man, an agent of the Chung Tai firm, that defendants should pay to that firm money which defendants owed to plaintiffs as plaintiffs in turn owed CHUNG TAI money. The manager, states he phoned the plaintiff firm - he asked for Wong Man Kai, but received a reply from a Mr. Li to whom he explained the matter. The answer he received was, 'You can do what you like.' He asked no further questions from the inquirer. I cannot believe that plaintiffs would authorise the defendants to make payment of such a large sum in this cavalier fashion. The plaintiff also succeeds on this part of the case.

16. As regards the sum of $2452.75 deducted by defendants as charges for cancellation of the contract, it was admitted defendants were in breach of their contract to deliver the goods - such charges were therefore payable by them and not by plaintiffs.

17. I therefore give judgment for the plaintiffs for the sum claimed.

18. On the question of costs, I am satisfied that if proper steps had been taken by plaintiffs' legal advisers to obtain particulars of the alleged agreements instead of being content merely to make a bare denial, the hearing of the case would have been shortened considerably. It lasted nearly 3 days - half the time should have sufficed. Plaintiffs, having no particulars of the agreements, called all 3 partners of the firm to deny such agreements - presumably if there were more, they would have called each in turn. This would have been unnecessary had the pleading been properly drawn up. The substantial issue was the authority of Wong Man Kai in the firm. Full particulars should have been asked for by letter in the first instance and if refused, an application should have been made to the Court. I therefore consider that Plaintiffs should not have the full costs and order that defendants pay 2/3rds of plaintiffs taxed costs.

Representation: