Foo Kwong (Cutlery) Metal Works Ltd v. Fan Man (or Ming) Kwong

HCA003009/1972

IN THE SUPREME COURT OF HONG KONG

(ORIGINAL JURISDICTION)

ACTION NO. 3009 OF 1972

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Coram: Trainor J. in Chambers

Date of Judgment: 11th June, 1973

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JUDGMENT

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1. This is an appeal from the decision of the learned Assistant Registrar whereby he permitted the defendant to file a defence on an application for final judgment made by the plaintiff under Order 14 of the Rules of the Supreme Court, but imposed a condition that the full sum of the plaintiff's alleged claim be lodged in court.

2. Counsel for the appellant has argued before me that there are good, solid grounds on which the defendant ought to be allowed to defend unconditionally. He maintains that it is open to the defendant to dispute the basis on which the plaintiff claimed. He said the plaintiff is claiming on an account stated and settled whereas there were many factors which suggest that the account was never settled. He pointed out that the statement of account filed as an exhibit to the affidavit of Jaffer Ebrahim, the Managing Director of the plaintiff company, had never been submitted to the defendant so that he could examine the credit and debit entries and agree them. He referred to a balance sheet for the year ending the 31st of March, 1966 of the partnership firm which initially incurred the alleged indebtedness and of which the defendant is now the sole proprietor which showed a liability then of the same amount as that claimed by the plaintiff, and pointed out that the exhibit to the affidavit of Mr. Ebrahim showed that the amount due by the partnership on that date i.e. the 31st of March, 1966, was in fact only $313,068.95. A balance to make up the amount that the plaintiff now claimed was shown in statement of account to have been incurred between the 31st of March, 1966 and the 31st of March, 1967. Counsel's point being that in such circumstances the account had never been settled and the proceedings wrongly constituted.

3. Counsel further referred to an agreement exhibited in an affidavit filed by the defendant. In that agreement, dated the 16th September 1966 the parties to which were the then directors of the plaintiff company and of whom the defendant was one, the indebtedness of the defendant's firm to the plaintiff company is purported to be extinguished. Counsel made the point that the company by virtue of this agreement by three of its directors, is estopped from repudiating what in effect is a wiping out of this debt.

4. Counsel further argued that any debt that might have existed between the plaintiff company and the defendant was incurred at a time which by now makes it statute batted. A letter was sent by the auditors of the plaintiff company to the defendant dated the 28th of November, 1968 stating that there was on the books of the plaintiff company a balance of $354,255.54, (the amount now claimed in the writ) which would appear to be due to the plaintiff by the defendant's firm and asking that this be confirmed to them, or if there was any discrepancy that it be pointed out. He maintained that although this letter, had an endorsement : "I confirmed (sic) the above balance correct" over the signature of the defendant it was not sufficient to prevent the operation of the Limitation Ordinance. His reason for this, he said, was to be found in the affirmation of the person who was Managing Director of the plaintiff company at the time the letter was written. That affirmation of a Mr. Ho, who was in December, 1968 the Managing Director of the plaintiff company, is to the effect that he, at the request of the plaintiff's auditors contacted the defendant by telephone and explained to him that as the partnership of which he and the defendant were once members had been indebted to the plaintiff company for the amount stated in the letter it was necessary for the defendant to sign the confirmation requested in that letter for the purposes of complying with accounting formalities. He stated in his affirmation that the plaintiff company had already released the defendant from liability for this sum before the letter was written. The appellant maintains that it was because of the phone call that he signed the confirmation.

5. Counsel maintained that the confirmation at the foot of the letter having been endorsed for this reason was not in fact an acknowledgement of the then existence of the debt and was inadequate to render the statute of Limitation Ordinance inapplicable.

6. Mr. Mills-Owens who appeared for the plaintiff argued that the proceedings were properly brought in that there was an account clearly stated and settled between these parties. He maintained that any differences there were between the statement of account as exhibited in the affirmation of the present manager of the plaintiff company and the balance sheet as prepared by the auditors of the partnership was insignificant and matters of detail; what really counted was that the final figure was agreed to by both parties. He denied that the plaintiff is now estopped from claiming, and maintained that an equitable estoppel was only available to the defendant if the defendant successfully established that it would be unfair or unreasonable for the plaintiff now to recover from the defendant.

7. Mr. Mills-Owens maintained that the letter with the confirmation indorsed by the defendant was a clear acknowledgement of the then existence of the debt and that the period of limitation only commenced with it.

8. In my opinion when an application is made pursuant to Order 14 of the Rules of the Supreme Court the issue with which the learned Assistant Registrar has to concern himself is based on the existence of a defence and the strength of the defence. In those cases in which the defence is negligible or flimsy he is justified in ordering that final judgment may be entered. In those cases in which there is an arguable defence but in which the learned Assistant Registrar clearly foresees that the plaintiff will succeed on trial then it is well within his discretion to attach conditions upon which the defendant will be permitted to defend. In the instant case I am of the opinion that there are grounds which will involve considerable argument and which will not be easily decided. There would appear to be an arguable case to the effect that by the agreement entered into by the three directors of the company the liability of the partnership which subsequently became sole responsibility of the defendant was extinguished. I think there is a very good argument apart from that to support the defendant's contention the amount claimed is statute barred. I think it could be argued that the confirmation in the letter of November 1968 did not constitute an acknowledgement sufficient to prevent the Limitation Ordinance.

9. In these circumstances I feel that what has been put up by the appellant is far from being a flimsy defence and it is not certain that the plaintiff will succeed. I consider the appellant ought to be allowed to defend unconditionally. Accordingly, I allow the appeal to the extent that I direct that no conditions be attached to the defendant's permission to defend. In so far as the periods of time fixed by the learned Assistant Registrar are concerned they should apply with the necessary allowance for the date of this decision. I award costs to the appellant and certify for counsel.

Representation:

Mr. Robert Wei (P. H. Sin & Co.) for Appellant

Mr. R. Mills-Owens (Deacons) for Respondent