Technical Waxes (Nz) Ltd v. Ho Hoa Meng and Others

HCCL000033/1980

Coram: Zimmern, J.

Date of Judgment: 4th September, 1980.

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JUDGMENT

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1. The Plaintiff in this case is a company incorporated in New Zealand and carries on business there. The 1st Defendant calls himself a merchant and resides in Singapore. The 2nd Defendant again calls himself a merchant and trades under the name of Sandler Textiles. He resides in Hong Kong. The 3rd Defendant is a corporation incorporated in Panama. The 4th Defendant is another foreign corporation but carries on business in Hong Kong which the 3rd Defendant does not. The 5th Defendant is the president of the 3rd Defendant company and a director and manager of the 4th Defendant.

2. The claim of the Plaintiff is in damages against all five defendants for conspiracy to deceive or to defraud the Plaintiff. Damages against each of them for negligence, damages against the 1st and 2nd Defendants for fraudulent misrepresentation, damages for breach of contract against the 2nd Defendant.

3. The story unfolds itself this way. The Plaintiff in the early part of 1979 was in the market for a few hundred tonnes of paraffin wax. It was a regular buyer from China but at that time China was not in a position to supply and it directed its attention to an associated company of theirs in Singapore, managed by one Jimmy Ong. Mr. Ong somehow or the other and I think it is through a relative of his a Mr. Lui contacted the 1st Defendant who obviously, as a conclusion I can draw, held himself out to be a dealer in paraffin wax when on the evidence before me he was nothing of that sort at all. He had in fact never dealt in paraffin wax in his life before. Be that as it may under the company name of Trisonda (Pte) Ltd. an offer was made to the Plaintiff's associated company in Singapore on the 21st February 1979 offering 350 tonnes of China paraffin wax semi refined at US$580 per tonne C. & F. New Zealand. This was orally accepted by the Plaintiff through its Singapore associates. Pursuant to this contract partly in writing and partly oral, the Plaintiff opened a letter of credit in favour of Trisonda (Pte) Ltd. and awaited for the shipment of 350 tonnes of paraffin wax. They waited month after month and there was not the slightest sign of shipment. Excuses were made by the 1st Defendant about increase in prices, about increase in freight rates and it is clear to this Court and it has been admitted by the 1st Defendant that he had never contracted to buy from any source what Trisonda had contracted to sell and indeed on the evidence he did not even say that he was in touch with any particular party which had reasonable prospects of supplying the 350 tonnes of paraffin wax. The Plaintiff was obviously a very patient company, it extended the validity of the letter of credit month after month to give Trisonda time. It was not till July of 1979 that the 1st Defendant went to Jimmy Ong and said he had then found a partner who could ship the 350 tonnes from Hong Kong and that a letter of credit ought to be opened in favour of Sandler Textiles in Hong Kong. This is contained in a telex which has been admitted to be authentic in Bundle A and it reads as follows:

"Mr. Ho has confirmed the new price of US$630 O & F New Zealand for both grades of chinawax to be shipped as follows:

4. The Plaintiff caused to be opened a letter of credit in favour of Sandler Textiles that is the 2nd Defendant and it was opened with stringent terms as to the certification of documents called for under the credit which had to be certified by the 1st Defendant before that letter of credit could be negotiated. The letter of credit was negotiated by the 2nd Defendant in the middle of August 1979 all the documents on the face of them purporting to comply with the requirements of the letter of credit. The shipment was purported to have been made on board a motor vessel called the Tonga but at material time the Tonga was never in Hong Kong. The negotiating bank in Hong Kong paid the 2nd Defendant. The Plaintiff was of course liable to its bankers in New Zealand and they have not received a drop of wax or indeed anything for the price they paid for the 350 tonnes of wax. That there was a fraud there can be not the slightest doubt but who are the planners of this fraud is something I have to deal with now.

5. I have already set out how the 1st Defendant entered into the contract in Singapore to sell 350 tonnes of wax. I have set out how he did not have those goods to sell. He had a letter of credit in his hands. The goods were eventually alleged to have been shipped by the 2nd Defendant from Hong Kong. The 2nd Defendant comes into the picture this way. He told the court that he heard of the 1st Defendant sometime in May/June 1979 and of the 1st Defendant's anxiety to lay hands on some wax and he told the court how he went to Singapore in June or July and met the 1st Defendant for the first time there. They both agreed that the meeting in Singapore was their first meeting. There they discussed the supply of wax from Hong Kong and the 2nd Defendant told the court that having had the discussion he returned to Hong Kong to make arrangements to see whether he could find or acquire the wax. On return he telephoned the 1st Defendant to inform him that he could acquire the wax but at $50 higher that is instead of US$580 per tonne he could only sell at $630 a tonne. This part of the 2nd Defendant's evidence was confirmed by the 1st Defendant but in my view on the evidence it completely falls to the ground. If it is true that the 1st and 2nd Defendants met for the first time in Singapore that meeting could not have been earlier than the 12th July 1979. The 2nd Defendant holds a certificate of identity as a travelling document. He admitted he could not get into Singapore without a visa and he never had a visa in the certificate of identity for entry into Singapore in June and the certificate of identity in fact shows that he entered Singapore on the 12th July 1979 and if that was the first time in his life he met the 1st Defendant there was no possibility that the 1st Defendant could have telephoned Jimmy Ong on the 13th July for Jimmy Ong to send out a telex which I have set out. It shows clearly that the 1st and 2nd Defendants had been working on this one for some time. What they were working on was that here the 1st Defendant had a letter of credit in his hands which he could not use and there in my view and so I hold a conspiracy started between them to persuade the Plaintiff to open a new letter of credit to Hong Kong so that the 2nd Defendant could use the letter of credit by fraudulent means. This view is supported by the evidence of the 2nd Defendant who produced to the court a document purporting to have been addressed to a Messrs. Hoi Fat Corporation by Sandler Textiles confirming purchase from Hoi Fat 350 tonnes of wax at US$620 per tonne C. & F. New Zealand. This document is dated the 6th July. On the 6th July the offer of a shipment from Hong Kong to New Zealand had not yet even been made to the Plaintiff by its Singapore office.

6. I now come to the 3rd, 4th and 5th Defendants. The 3rd as I have said is a corporation incorporated in Panama. It does not own any ships. The 4th Defendant again a foreign corporation but carrying on business in Hong Kong acts as agents for the 3rd Defendant and the 5th Defendant as I have said is a manager of the 4th Defendant. The 5th Defendant tells the court that the 3rd Defendant sometime in early August was appointed agents for a ship called the Tonga. He was told that the Tonga would be arriving in Hong Kong sometime round about the 13th August and he as a shipping agent was out to collect cargo for its return trip to Singapore via Bangkok. Out of the blue he says he received instructions from his principal to issue a switch bill of lading for a cargo of wax from Hong Kong to New Zealand upon receiving another bill of lading to be brought to him showing shipment of that cargo of wax from Singapore to Hong Kong for trans-shipment to New Zealand. Sometime towards the middle of August he says the 2nd Defendant produced that original bill of lading and he issued to the 2nd Defendant a bill of lading purporting to have received for shipment on the Tonga 350 tonnes of wax from Hong Kong to New Zealand trans-shipment at Singapore. His explanation of how he as a shipping man would issue such a bill of lading knowing that the ship was never in Hong Kong is beyond belief. I can appreciate a shipping man issuing a switch bill of lading in a case where he knows that the ship is really in port and that the cargo is on board. But the original bill of lading which he said he got from the 2nd Defendant and the 2nd Defendant denied that he ever gave it to him showed clearly that it was issued by the 3rd Defendant. It certainly does not make sense to any reasonable man that somebody would ship a cargo of wax from Singapore to Hong Kong so that the same goods would be shipped back on the same ship to Singapore for discharge and then trans-shipment to New Zealand. The evidence of the 5th Defendant that he could honestly rely on that bill of lading would not be accepted by any court. The issue of the bill of lading to the 2nd Defendant under his own signature was issued fraudulently knowing full well that the goods had not been loaded on board the vessel Tonga on the 13th August 1979 or any date. In Jenkinson & Co. Ltd. v. Percy Dalton (London) Ltd.⁽¹⁾, Morris L.J. had this to say about false statements and false bills of lading:

Very similar words were uttered by Pearce L.J. at page 638:

When the 5th Defendant signed the bill of lading said to have been issued by the 3rd Defendant with the 4th Defendant as agents he knew that the representations made therein were false. He knew when he handed that document to the 2nd Defendant that it was so issued and he handed it over so that that bill of lading would be used to the detriment of somebody by reason of its falsity. The 2nd Defendant knew perfectly well that that bill of lading was false and I do not accept the evidence of the 2nd Defendant that he had bought any wax from Hoi Fat Company or indeed any wax from anybody. His intent was to draw on that letter of credit from beginning to end if he could possibly do so.

7. Under the credit the cooperation of the 1st Defendant was required because the Plaintiff on the advice of his Singapore associates had imposed a burden on the 1st Defendant. He had to sign and execute various certificates before the letter of credit could be drawn. The 1st Defendant signed and executed the following documents. First document A35. The 1st Defendant certified that document as a correct document in terms of letter of credit. It is an invoice of the 2nd Defendant dated the 8th August 1979 showing the order number, the L/C number and the representation shipped per s.s. Tonga on 8th August 1979. The second document is certified A36. It is a combined certificate of value and origin, a government document. He again executed that document certifying the cargo to be shipped per s.s. Tonga sailing on 8th August 1979 for New Zealand. Third, A37, he executed a document to whom it may concern "This is to certify that goods have been shipped in terms of official order No. 1722 and company letter dated 16th August, 1979", and then followed a description of the cargo. Fourth A38 he certified an inspection certificate to the effect "I hereby certify that the check was made of the merchandise listed above and found that all the goods were compiled with the standard of execution required by the order and/or sample shown. The undersigned is fully satisfied with the Hongkong inspection."

8. The 1st Defendant told the court that he relied on the 2nd Defendant in that sometime in July he was brought to the Hung Hom Railway Station and shown a lorry load of wax. The 2nd Defendant challenged this and said he was shown wagons load of wax at the inspection. As I have said I do not for a moment accept that either the 1st or the 2nd Defendant inspected any cargo at all, there was indeed nothing to inspect or to ship. The two of them went to a Finance Company and after a few days succeeded in negotiating the credit. The conspiracy between all five of them is clear cut. The overt acts are as follows:-

9. 1st Defendant executed documents which he had to do under the letter of credit knowing same to be false from beginning to end. The 2nd Defendant as beneficiary made out and negotiated the documents which he knew to be false. The 3rd Defendant for permitting his bill of lading to be used by the 4th Defendant under the signature of the 5th Defendant and this being a fraud, all of them are liable. For the reasons given the Plaintiff succeeds in its claim in damages against all the defendants for conspiracy.

10. I have set out all of the overt acts in this case it must follow that if they are liable in conspiracy they are liable for the overt acts and there only leaves one minor matter against the 2nd Defendant in contract. I do not have to deal with it, but it appears to me that there was never any agreement between the Plaintiff and the 2nd Defendant for the purchase and sale of wax. The letter of credit opened by the Plaintiff was the offer and if there was ever any contract at all it would only be upon performance by the 2nd Defendant as beneficiary of the letter of credit.

11. The next question is the measure of damages. I am satisfied in this case the correct measure is to put back the Plaintiff in the position he would have been if the representations had not been made to it.

12. There will be judgment with costs against all the defendants in the sum of NZ$220,362.73 or the HK$ equivalent on date of payment with interests on that sum from the 24th August 1979 to to-day at the rate of 14½%. There will be a declaration that in equity the Plaintiff is the owner of the sums drawn by the 2nd Defendant under the letter of credit.

Representation:

F. Eddis (Sinclair Roche) for the Plaintiff

Thomas Lai (Kwan & Kwan) for the 1st Defendant

Brian van Buuren (Johnny T.K. Cheng & Tong) for 2nd Defendant

B.K. Ho (Howell & Co.) for 3rd, 4th and 5th Defendants

(1) [1957] 2 Q.B. @ 630