Meggeson Co Ltd v. Kong Wing Cheong t/a Kong's Knitting Factory

HCA004021/1979

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

ACTION NO. 4021 of 1979

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Coram: Mr. Commissioner Liu, Q.C. in Court

Date of Judgment: 25th March 1980

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JUDGMENT

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1. The dispute between the plaintiff and the defendant is one of the simplest description. The plaintiff's claim is on a dishonoured cheque, and the defence is total failure of consideration on an allegation of non-delivery.

2. By agreement between the parties, the defendant was to carry the burden of proof.

3. The plaintiff's case is without any complexity. Mr. Tung, its Managing Director, testified that on the 20th January 1979 a contract was entered into between his company, the Meggeson Company Limited, and the defendant firm through the medium of a broker by the name of Cheung Chung Shan. The agreement, I was told, was for the sale of 2,000 lbs of woollen yarn to be delivered to the defendant's factory on a 60 days' credit payment term by a post-dated cheque. According to Mr. Tung, such post-dated cheque was to be given by the defendant on the date of delivery, but it transpired in his subsequent evidence that the post-dated cheque in question (document 7 in Bundle A) dated 24th March reached him nearly one month later on the 20th February. Be that as it may, let me turn back to the facts as related by Mr. Tung: He told the Court that pursuant to the agreement, he duly arranged for an equal quantity of goods to be released by his supplier and like preparation was made for the same to be delivered by a transportation company to the defendant's factory.

4. As far as Mr. Tung is concerned, from the Delivery Note subsequently coming into his possession, the 2,000 lbs woollen yarn were duly delivered by his transportation company to the defendant a factory premises on the 24th January. I pause here for a moment to recapitulate the situation as described by the two transportation companies. Mr.Ng of the transportation company originally entrusted with the undertaking explained to the Court that having accepted instructions from the plaintiff, his company was found shorthanded. Thereupon, a second transportation company was invited to render assistance. Mr. Tsang, a forthright and honest young man, came forward to and did assume responsibility of the first transportation company. Mr. Tsang caused to be obtained the Delivery Order and Delivery Note. Whereupon, with transportation and the aid of a forki, he secured a release of goods from the godown. 20 cartons of goods of not inconsiderable size of 100 pounds each were then delivered to the premises of the defendant. Mr. Tsang personally gained entry into the defendant's factory and communicated with a pair apparently associated with the factory. The initial notification to a lady was that goods, 20 cartons in all 2,000 lbs, were awaiting delivery into the factory premises of the defendant. All seemed to be in the usual course of business. Manually the 20 cartons of woollen yarn were removed from the lorry parked presumedly down-stairs of the building in which the defendant's factory premises were situated and taken upstairs to the factory. Mr. Tsang and his assistant delivered the 20 cartons of goods not merely by leaving the same at the entrance of the factory premises but in fact by stacking all the cartons inside the factory on the instructions of a gentleman who also appeared to have apparent authority to receive goods thereat for the defendant firm. Delivery was effected at about 6 p.m. and completed almost 7. Upon completion, a copy of the Delivery Note was signed. There was some dispute, during the course of the proceedings, as to whether a chop impression was one of the necessary indicia of validity in reception of goods on delivery. Mr. Tsang seemed to be concerned that he might have been negligent in not making sufficient enquiry or securing a receipt chop impression for the delivery of goods or in failing to notice or appreciate the alleged significance of the Chinese characters to the effect: "For and on before of". Mr. Tsang impressed me as a witness, and he struck me as one quick to yield unless he is on perfectly sure ground. Mr. Tsang has never professed to be conversant with the law or commercial practice. He was not engaged in the trade for any great length of time. He seemed to be search-ing for any possible oversight on his part, which might have caused the present discord. I do not, therefore, attach much importance to the concessions which he so readily made.

5. What must not be lost sight of is the contrast between the act of delivery and the formality of receipt. The absence of the latter does not necessarily negate the former. A copy of the initialled Delivery Note was duly returned to Mr Ng who in turn, according to Mr Tung, handed it over to the plaintiff company after a few days. That particular document has now found its way into Agreed Bundle A as document 3.

6. After delivery and after the handing over of the cheque in question (document 7) dated the 24th March 1979, sometime on or about the 21st of March, so ran the evidence of Mr. Tung, Mr. Cheung Chung Shan paid him a visit and pleaded with him on the financial difficulties of the defendant company. Mr. Cheung implored Mr. Tung to withhold the presentation of the cheque in question on the 24th March, then some three days away. The meeting was inconclusive. On the next day, Mr. Cheung allegedly approached Mr Tung with an alternative proposal, and it was suggested that a cheque of Mr. Cheung's was to be given to Mr. Tung by way of inducement qua security so that the defendant's cheque in this action was to be held in abeyance. The upshot of the conversation was that Mr. Tung acceded to the request. Mr. Cheung's cheque turned out to be document 16 dated 28th March 1979 in Agreed Bundle B. In effect, Mr. Tang was prepared to and did grant an extra four days' grace from the 24th to the 28th on the express condition that unless Mr. Cheung's cheque was honoured on due date, the defendant's cheque would be presented for payment. Mr. Cheung's cheque was duly presented and, according to Mr. Tung, was dishonoured. Thereupon, Mr. Tung forthwith instructed his employee to present the defendant's cheque for payment and at the same time warn the defendant accordingly.

7. It is common ground that the defendant's cheque was dishonoured. As a result of contact made with Mr. Kong of the defendant, a meeting ensued between Mr. Tung and Mr. Kong in the presence of, from time to time, one Mr. Chu in the office of the defendant's factory premises. According to Mr. Tung, the impression then gained from Mr. Kong was that he, Mr. Kong, felt that he had been deceived by Mr. Cheung Chung Shan. Mr. Tung told the Court that whilst Mr. Kong personally admitted to him the delivery made to his factory of the 2,000 lbs. woollen yarn, an issue was raised as to the defendant's liability for the goods which had allegedly been removed by Mr. Cheung. Mr. Kong further allegedly disclosed that Mr. Cheung had claimed to be owner of the delivered goods, that Mr. Cheung had requested the defendant "to issue the cheque on his behalf" for the plaintiff and that Mr. Cheung was permitted to remove the goods from his factory on the security of another cheque given to the defendant by Mr. Kong, which is document 6 in the Agreed Bundle, for a like sum of $51,200 but to mature on the 23rd March i.e. one day before the date of maturity of the cheque in this action issued by the defendant in favour of the plaintiff. The substance of the alleged disclosure from Mr. Kong is therefore that goods were ordered and paid for in the name of the defendant company merely to accommodate Mr. Cheung.

8. The evidence of Mr. Tung as supported by the evidence of the two transportation men, all of which I accept, clearly establishes the delivery made in the defendant's name and to his factory as well as acceptance thereof by a person found in the defendant's factory having the apparent authority to receive goods. The private arrangements between the defendant and Mr. Cheung were no concern of the plaintiff's.

9. Let me pass to consider the evidence of the defendant. Mr. Kong was driven to concede that there was an agreement to acquire goods from the plaintiff through Mr. Cheung. There was some dispute as to the date of the formation of the contract; but in the end such disagreement on date lost much of its prominence. Mr. Kong admitted that he gave the post-dated cheque to Mr. Cheung for the contract but with specific instructions to have the goods delivered to his factory premises for an intended inspection. It was explained in evidence by Mr. Kong that the cheque was deliberately post-dated by the defendant and given to Mr. Cheung for the plaintiff to ensure that the defendant would have ample time for inspection, but it was denied that there was any financial necessity for the same. However, Mr. Kong seemed to suggest that by this maneuvre, fund might be obtained from the ultimate buyers for financing the entire production.

10. Mr. Kong, so it was claimed in his evidence, also explained to Mr. Cheung that someone responsible in the factory would be ready for taking delivery after inspection. One Mr. Chu of defendant factory was said to be the only staff on whom the responsibility for accepting goods lay. At one time. Mr. Kong disclaimed any possibility of him accepting goods on delivery, but ultimately Mr. Kong agreed that in the absence of Mr. Chu, he did from time to time give a helping hand. Mr. Chu's working hours were 9 to 6, and he was quite adamant that there was no occasion on which the defendant firm ever accepted goods without the receipt chop in his safe custody and his own initials, but he conceded that on rare occasions when he was unavailable, Mr. Kong would assume such responsibility. However, it was left unexplained as to whether on those occasions, the receipt chop would also be used, but such may well be the implication. Several exhibits, documents 8, 9, 10, 12 and 14D were constantly paraded before this Court with a view to establishing the proposition that the receipt chop and an initial were the necessary ingredients for acceptance of goods by the defendant.

11. According to Mr. Kong, goods were expected in a week. Came end of February, but there was no delivery in sight. Mr. Cheung was allegedly demanded to return the cheque, and according to Mr. Kong, in response Mr. Cheung gave an implausible reply to the effect that the cheque could not be traced. Whatever the position, it was alleged that Mr. Kong did finally agree to accept from Mr. Cheung a replacement cheque. That Cheque is document 6 in Bundle A dated 23rd March 1979. It was not until June that the defendant allegedly sought and obtained substitute goods from Chan's company (Exh. D1 dated the 7th June 1979) but merely for 1,540 lbs.

12. Mr. Kong further maintained that after the conversation with Mr. Tung of the plaintiff, he was urged by Mr. Tung to fabricate facts to induce the Royal Hong Kong Police to search for Mr. Cheung Chung Shan. At one time, he seemed to suggest that Mr. Tung coached him to admit ownership of the goods after due delivery in order to substantiate a case of obtaining property by deception. At another time, it seemed, Mr. Kong was suggesting that Mr. Tung enticed him to acknowledge delivery to the defendant's factory premises for laying the foundation of the crime of deception. However, Mr. Kong agreed that he did give the statement to the police as in Exh. D2. From the agreed translation, it would appear that the allegations of Mr. Kong can in no way be supported. Reference was made in paragraph 3 of Exh. D2A, the agreed translation, to an alleged storage of goods by Mr. Cheung in the defendant's factory and Mr. Kong's accommodation of Mr. Cheung on the security of such goods. A different version of deception appears in the statement. I have had good opportunity in observing the demeanour of Mr. Kong who cut a poor figure in the witness stand. I prefer and accept the version of and given by Mr Tung insofar as evidence of Mr. Tung and Mr. Kong disagrees. The evidence of Mr. Chu does not take the defendant's case further in the light of the background. Mr. Chu gave an account of the defendant's usual practice of accepting goods. He maintained that in his course of employment he had never encountered any departure from that standard procedure, but his evidence has not altogether convincingly excluded all such possibilities.

13. In conclusion, I find that goods were duly delivered on the 24th January 1979 to the defendant's factory premises by the plaintiff's transportation company and that such goods were accepted by person or persons apparently having authority to receive the same on behalf of the defendant. In the result, not only has the defendant failed to discharge the burden of proving total failure of consideration, but indeed on the evidence, good consideration is shown to have moved from the plaintiff for the cheque in question. It remains for me to give judgment in favour of the plaintiff. I order: (1) Judgment for the plaintiff in the sum of $51,200 with interests thereon at 10% per annum from the 24th March 1979 to judgment and from judgment until payment and (2) Costs against the defendant.

Representation:

Mr. Herman Poon instructed by Iu & Lai for Plaintiff

Mr. Petras Chan instructed by C.Y. Kwan & Co. for Defendant