Ho Sau Ki t/a Winnie Plastic and Metal Manufactory v. Morita and Another

HCA000848/1967

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO.848 OF 1967

-----------------

Coram: Scholes, J.

Date of Judgment: 24 January 1969

-----------------

JUDGMENT

-----------------

1. This action consists of two parts. One is a claim by the plaintiff against the defendants and, secondly, there is a counterclaim by the defendants against the plaintiff. I propose to deal with the counterclaim first.

2. The counterclaim is based on the alleged contracts Exhibits L1 and L2. There is no direct evidence that the plaintiff ever saw those alleged contracts. The plaintiff gave evidence to the effect that he had never seen those documents and had never signed or made such contracts. I believe and accept that evidence. Furthermore, Mr. Akai, the Managing Partner of the defendant firm, is unable and nobody is able to say that the plaintiff ever signed those alleged contracts, for the simple reason, in my view, that he never in fact did so. Nor are the defendants able to produce either of the alleged contracts Exhibits L1 and L2 signed by the plaintiff, for the same reason. Furthermore, Exhibits L1 and L2 stipulate for Nylex brand, which was not made by the plaintiff, nor was it his brand but that of another firm which does make it, and I do not therefore think that the plaintiff would have agreed to make Nylex brand sandals and to the terms of the alleged contracts, Exhibits L1 and L2.

3. Again, the Letter of Credit, Exhibit D2, applied for by the defendants states that the buyer's article is No.685 but that the seller's reference to the sandals is No.6632/69, which was in fact the plaintiff's own brand of Holex sandals and the article stipulated for in the contract Exhibit B1, and the type of sandals which the plaintiff in fact actually produced to comply with the contract.

4. I am satisfied on the evidence that the contract which the plaintiff did sign and entered into was Exhibit B1 and that contract is before the Court typed on the defendant company's letter paper and signed by both the plaintiff and Mr. Akai, and that was the contract the plaintiff complied with and fulfilled and he was paid for it by the defendants.

5. The defendants' counterclaim, being based on the alleged contracts Exhibits L1 and L2, and as I have found that the plaintiff never entered into those contracts, it follows that the defendants' counterclaim fails and there will as a result be judgment for the plaintiff on the defendants' counterclaim with costs for the plaintiff.

6. In regard to the plaintiff's claim, I am satisfied on the evidence that the following occurred. First of all, it should be stated that one Mr. CHU Kai-keung was the export clerk employed by the defendants and he negotiated contracts on behalf of the defendants, although contracts were signed by Mr. Akai, and Mr. Akai admitted and agreed that as far as customers were concerned Mr.Chu would be the defendants' representative in negotiating the contracts. Mr. Chu suddenly disappeared from the defendants' employment on the 14th February 1967, and it would appear that this case has arisen on account of what he wrongly did.

7. Mr. Chu negotiated a contract concerning key rings with the plaintiff in 1966 and that contract is not denied but admitted by the defendants. I am satisfied on the evidence that Mr. Chu negotiated with the plaintiff the contracts on Exhibits B1 and F1, and then by a trick obtained the defendants' chop and Mr. Akai's signature to the two blank letter forms on which Mr. Chu then typed the contracts negotiated with the plaintiff, which letter forms are Exhibits B1 and F1, and that he typed them in duplicate and took them to the plaintiff, who agreed to the terms thereon, the plaintiff keeping Exhibits B1 and F1 and signing the duplicates, which he returned to Mr. Chu. I think that the plaintiff may have been mistaken when he said that two copies of each contract were signed by the defendants. Alternatively, it is possible that Mr. Chu copied out Mr. Akai's signature on the duplicates and then destroyed the duplicates after taking them away from the plaintiff, or that Mr. Chu had obtained other signed blank letter forms from Mr. Akai. In any event, I am satisfied that the plaintiff was shown the original and a duplicate of each contract, the originals Exhibits B1 and F1 being signed by Mr. Akai, and that the plaintiff signed the duplicates, whether or not the duplicates were signed by Mr. Akai.

8. I think that Mr. Akai could not have signed the blank letter forms on the 8th February 1967 and that he must have done so before that date, because the shipping document Exhibit E1 shows that certain shipments under contract 1088 and 1089 were made on the 6th and 8th February, 1967, and that document and the Letter of Credit Exhibit D2 dated the 1st February 1967 both refer to the plaintiff's number of 6632/69, which was the number of the plaintiff's Holex brand and not Nylex, and the plaintiff was clearly acting under the terms of contracts Exhibits B1 and F1 and could not have done so if they were not in existence and he could not have been acting under Exhibits L1 and L2 which he had never seen.

9. Why Mr. Chu acted in this way is open to speculation. He may have had some grudge against the defendants or there may be some reason which has not come out in evidence.

10. I am satisfied on the plaintiff's evidence that he considered that both contracts Exhibits B1 and F1 were genuine and that he acted on them and that he fulfilled his part under those contracts. The plaintiff is a businessman and I think that he would be quite prepared to enter into a contract which would give him a good profit.

11. In regard to the law, the principle laid down in the House of Lords case of Lloyd v. Grace, Smith & Co.⁽¹⁾ is this:-

"If an agent commits a fraud while acting or purporting to act in the course of the business which he is authorised, or held out as authorised, to transact on account of his principal, the principal, although innocent of the fraud, is liable for the fraud of the agent whether the fraud results in a benefit to the principal or not."

And I think that that applies to the present case and that the defendants are liable as a result. Other cases of this nature are Uxbridge Permanent Benefit Building Society v. Pickard⁽²⁾, Briess and Others v. Woolley and Others⁽³⁾, Ryan v. Pilkington and Another⁽⁴⁾ and Morris v. C.W. Martin & Sons Ltd.⁽⁵⁾

12. On the question of damages, I am satisfied that the plaintiff is entitled to $55,642 damages calculated as disclosed in the plaintiff's case, and I therefore award the plaintiff that sum as damages. There will therefore be judgment for the plaintiff on the claim for that sum, and under Order 6, rule 2(a) of the Rules of the Supreme Court 1967 I order interest in favour of the plaintiff on that sum at the rate of 8% per annum from the 2nd May 1967, the date before which the defendants should have taken delivery under contract Exhibit F1, until payment.

24th January 1969.

(1) (1911-1913) A.E.R. Reprint, p.51

(2) (1939) 2 A.E.R., p.344

(3) (1954) 1 A.E.R., p.909

(4) (1959) 1 A.E.R., p.689

(5) (1965) 2 A.E.R., p.725