Stephen P Kaufman v. Maker Industrial Co Ltd

HCA002326/1981

Practice and procedure - 0.14 application for summary judgment made 3 months after delivery of defence - affidavit explaining delay desirable - application refused on merits.

Practice and procedure - plaintiff resident abroad - further security for costs ordered despite plaintiff's substantial connection with Hong Kong.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: Fuad, J.

Date of Judgment: 13th November, 1981.

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JUDGMENT

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1. Two matters are before me. The first is an application by the defendant in this action (and I will refer to the parties by their original appellations to avoid confusion) for further security for costs. There is also an appeal by the plaintiff against the decision of the Registrar refusing to give him summary judgment under 0.14. Without objection by counsel I decided to hear the two matters together for it seemed to me both logical and convenient to do so. Clearly if the plaintiff succeeds in his appeal there would be no justification for making an order for further security for costs on the grounds set out in the supporting affidavit. In view of the fact that counsel for the plaintiff considered that an important matter of practice was involved relating to the 0.14 procedure, I also decided to give my decision in open court.

2. The plaintiff issued his writ of summons on the 10th April, 1981. Appearance was entered on the 16th April and a defence was filed by consent out of time on the 26th May. The summons for summary judgment under 0.14 was taken out on the 26th August and the Registrar dismissed the application on the 28th October.

3. The learned Registrar did not give reasons in writing for his decision but Mr. Pirie who appeared both before him and before me informed the Court that the Registrar had applied the decision of Mr. Commissioner Hooper (as he then was) in Timur Jaya Co. Ltd. v. United Asia Trading Co. (1980) H.K.L.R. 768 in which he followed McLardy v. Slateum (1890) 24 Q.B.D. 504 and held that since there was nothing in the affidavits to show that the delay in applying for summary judgment was justifiable, on that ground alone the appeal against the Registrar's order would be allowed. In McLardy v. Slateum after a specially endorsed writ had been issued, the defendant delivered a defence and about a month after its delivery the plaintiff applied for judgment under 0.14. The master gave the defendant leave to defend upon condition of paying the whole amount claimed into Court. On appeal Field J. set aside the master's order upon the ground that an application under that Order could not be made after the delivery of a defence. The judgment of Pollock B. is short and is set out in full by Mr. Commissioner Hooper in the Timur Jaya Co. case. The Court took time to consider its judgment and consulted other judges, and the masters. Contrasting the view taken by the other judges and the masters with that taken by Field J., the Court agreed with the views of the majority that it was the intention of 0.14 that the plaintiff should apply within a reasonable time after the appearance of the defendant but added that it very often happened that a defence which had been delivered itself disclosed facts which made an application under 0.14 right and proper. The Court was therefore of the view that a plaintiff was not necessarily too late in making his application under 0.14 because a defence had been delivered but if he made his application after the ordinary time the onus was on him to show that the delay was justifiable in the special circumstances of the case.

4. Mr. Pirie did not attack the principle but submitted that since there was nothing in McLardy v. Slateum to indicate that an affidavit was necessary to justify the delay, Mr. Commissioner Hooper was wrong in requiring the justification to be deposed to in an affidavit and the Registrar was therefore wrong not to permit Counsel to explain the delay at the hearing of the summons. In my view the matter can be left safely to the discretion and judgment of the Registrar or judge dealing with the matter having regard to all the circumstances. Where, for example, a defendant delivers his defence before the expiration of the usual time, seemingly for the very purpose of defeating an 0.14 application (an example given by Pollock B. in McLardy v. Slateum), clearly an affidavit would not be required because the position would plainly appear from the record. However when such is not the case then I do not think a Registrar can be validly criticized for insisting on the facts justifying delay being set out in an affidavit, and it is surely good practice to require affidavit evidence in the normal course of events. It seems to me that the most convenient course would be for the supporting affidavit to acknowledge the new situation created by the delivery of the defence and explain why the 0.14 application was not earlier made.

5. Since an appeal from an order of this kind made by a Registrar is in effect by way of rehearing and since I have heard the merits of the application I propose to base my decision on the merits. Speaking for myself if the delay was not too great, provided a defence filed did not disclose any arguable case, I would be inclined to grant an application for summary judgment notwithstanding the delay, and consider penalizing the delay by an appropriate order for costs.

6. By his statement of claim the plaintiff, who describes himself as a Marketing Consultant, states that in the middle of June 1980 he started employment with the defendant company travelling from his home in the Philippines to Hong Kong on a weekly basis and making business trips elsewhere to solicit business for the defendant, for which he was paid emoluments up to and including the 15th September 1980. It is alleged that in breach of a contract reached on the 11th April 1980 whose effective date was the 1st June 1980, the defendant refused to pay for the plaintiff's travelling expenses and for his agreed salary after the middle of September. The plaintiff claims arrears of salary for 2? months at $25,000 per month and travelling expenses at the rate of $2,650 per week for 20 weeks, making a total of $115,500. In the alternative he claims that the defendant company represented that a new company would be created in which the plaintiff would have a 40% interest and the new company would receive 3% of the F.O.B. value of all products sold, and that acting on reliance of the defendant's representations, the plaintiff solicited and acted as agent for the defendant and suffered loss:-

7. Mr. Pirie did not suggest that the plaintiff should obtain summary judgment in respect of the whole of his claim but he did submit that he was entitled to summary judgment in respect of his salary, expenses, and perhaps his commission. He was also entitled to summary judgment for an account. The defence admits that the parties agreed that a new company should be set up and alleges that the defendant agreed to lend $40,000 to the plaintiff who would repay that sum from the profits of the new company. The capital of the new company was proposed to be $100,000 of which the defendant company would contribute $60,000, having advanced the other $40,000 to the plaintiff. It is also alleged by the defendant that the parties agreed that if the loss or expenses of the new company exceeded the proposed capital of $100,000 the business would be dissolved. The defendant also states that an account was opened in the name of the new company, whereby the expenses of the new company and the plaintiff's salary and expenses were paid out from the capital of $100,000. The defendant agrees that no salary was paid to the plaintiff after the 15th September 1980 but explains that by the end of that month the entire capital of $100,000 had been used up and therefore the plaintiff was not entitled to claim any further salary or expenses from the account of the new company. The defence lays blame on the plaintiff for not setting up the new company and counterclaims damages for breach of contract and for the return of the $40,000 lent to the plaintiff.

8. In his affidavit supporting his application for summary judgment, the plaintiff explains the background of events and negotiations which led up to the drafting of the letter dated 11th April 1980 which sets out the agreement of the parties regarding the joint enterprise. He speaks of the efforts he made to obtain the lease of a flat in Kowloon and how he had to live at his previous home in the Philippines commuting regularly to Hong Kong and staying at one of the leading hotels. He said that he continued to work for the defendant company until the end of 1980 and solicited business for them from substantial companies such as the two which he named in his affidavit. When he stopped receiving his pay cheques and reimbursement of his expenses, in October 1980 he wrote to Mr. Lawrence Lee of the defendant company pointing out that he was spending over 50% of his salary in commuting between Hong Kong and the Philippines and receiving no benefit for the substantial business he had transacted on behalf of the company. He said he had previously been put off by Mr. Lee who had stated that the expense of his moving to Hong Kong could not be justified. He had written two memoranda (which were exhibited) to Mr. Lee seeking to clarify the position but he had not received a satisfactory reply. Despite this he had continued to solicit orders for the company and to attend meetings with them and on their behalf; and further substantial sales for the company had resulted. He exhibited a bundle of orders which he said he had procured for the company.

9. He had continued to press Mr. Lee about the arrangements that should be made to transfer the agreed benefit to the new company but by early November 1980 it became clear that both Mr. Anthony Lee and Mr. Lawrence Lee were avoiding him. On his return on one occasion from the Philippines he had found that his expenses were not being paid and so he had sent a telex, which he also exhibited, to the company enquiring about the position. He had received a reply to his telex which had not satisfied him, and never had it been suggested in the telex or in any letter that he had borrowed $40,000 from the company or that all the capital of the new company had been exhausted. He had written again to Mr. Lawrence Lee on the 12th February 1981 setting out his position and had never received a reply. Moreover no reply was received to a letter dated 19th February 1981 from his solicitors repeating his complaints. In the circumstances the plaintiff says that there is no defence to his claim of arrears of salary or expenses. He claims also to be entitled to a commission which when calculated up to the date of the writ would substantially outweigh any counterclaim there might be against him. He had not agreed to contribute $40,000 initially; he had only agreed to contribute $40,000 of his share of the profits once the profits had been credited to the marketing company, but this had never happened. He agrees that the expense limit would be $100,000 but states that if the defendant had properly pursued the policies advocated by him and had credited the proper commission due to the new company's account then the funds would not have been exhausted.

10. In an affidavit filed opposing the application for summary judgment, Mr. Lawrence Lee repeats some of the matters set out in the defence and states that by about August 1980 when the plaintiff had located a flat in Kowloon the business introduced by the plaintiff had been minimal and the new company's capital had nearly become exhausted. It had therefore been agreed that in view of the huge rental that would be involved the plaintiff should delay moving to Hong Kong. In his affidavit Mr. Lee denies certain of the claims the plaintiff makes about the orders he procured and states that the plaintiff had repeatedly been informed that since the capital of the new company had been used up it was no longer possible to pay him further emoluments. The letters had not been replied to because the plaintiff had already been told of the position.

11. Before going any further I think it is necessary to set out the crucial letter of the 11th April 1980. It is addressed to the plaintiff and signed by him and by Mr. Lawrence Lee, as Managing Director of the defendant company. Although the paragraphs were unnumbered, I have numbered them for convenience, and the letter is in the following terms:-

12. Mr. Pirie submits that this letter makes it plain beyond reasonable dispute that the plaintiff was employed by the defendant company at a salary of $25,000 a month and that it is clear from the letter, too, that the defendant company was responsible for making all the payments and providing all the benefits set out in paras. 3 and 4. With the greatest respect to this argument, I do not think that the matter is by any means as clear as Mr. Pirie suggests. What is clear is that although the parties intended this letter to be a firm and binding document (para. 8), a formal and more comprehensive agreement was envisaged. In my judgment the submissions made by Mr. Peter Cheung on the true interpretation of the letter cannot at this stage be dismissed out of hand. Of course the proper interpretation of the agreement reached by them will depend on the intention of the parties revealed either in the express or implied terms of this letter or to be inferred from all the surrounding circumstances.

13. The principles upon which a Court can properly exercise its discretion to enter summary judgment under 0.14 are too well known and settled to be repeated. It need hardly be said that a crucial, if not the most crucial, task the trial Court will have to face is to decide upon the true construction of the letter of the 11th April 1980. There will undoubtedly be cases where only one reasonable interpretation can be placed on the words the parties have used, but where the surrounding circumstances are hotly disputed and the meaning of the various clauses in the contract is fairly open to more than one interpretation, a Court will not be inclined to give summary judgment. Apart from the dispute as to the facts which must be tried, it is surely not an untenable argument to contend that the proper construction to be placed on the letter of the 11th April is quite otherwise than that put forward by Mr. Pirie. Whatever may have been the reasons for the fact that the new company was not in fact formed and whoever might have been to blame for this, it is open to reasonable argument that the parties were only agreeing to set up a company whose capital would be $100,000 and that the plaintiff's emoluments were to come out of a sum set aside in the defendant company's ledgers for the new company and advanced to it. As regards the true construction of para. 5 of the letter, it does seem to me possible to argue that the commission was to be paid to the new company only if and when it was formed. In my judgment the defendant company has shown that it has a good defence to the claims on the merits and without hearing evidence I could not say that such a defence is not bona fide. In all the circumstances there is no doubt whatever in my mind that it would be quite wrong to enter judgment in favour of the plaintiff for any part of his claim on the material before me and as the matter now Stands. I therefore dismiss the appeal against the Registrar's order.

14. As regards security for costs, the history of the matter is as follows. On the 29th April this year the defendant's solicitors wrote to their opposite numbers requesting them to confirm that the plaintiff would pay the sum of $5,000 into Court as security for the defendant's costs since the plaintiff is ordinarily resident outside the jurisdiction. On the following day this was agreed but no notice of payment into Court was received and so the defendant took out an application by way of summons for the total sum of $10,000 to be paid into Court as security for costs on the basis that the original sum sought would be inadequate. The matter came before the Registrar on the 28th October and the plaintiff agreed to pay a further sum of $5,000 into Court so that the total security thus far given was $10,000. The further sum now sought is $7,500 in relation to the appeal against the Registrar's decision under the 0.14 procedure. In an affidavit opposing this application it is acknowledged that the plaintiff is resident in Manila. The point is made that he possesses a class "A" visa for Hong Kong. It is said that he is an international businessman with an American passport who spends most of his time travelling throughout Southeast Asia and North America, Hong Kong being his most frequent port of call. It is also said that he has a permanent reservation with the Sheraton Hong Kong Hotel, and that he is the director of two Hong Kong registered companies; and that he has a current account, a Hong Kong dollar savings account and a U.S. dollars savings account, all with the Hong Kong & Shanghai Bank. As to the plaintiff's business, it is all concerned with electrical manufactured goods, the majority of which are made in Hong Kong and it is said that the plaintiff therefore considers Hong Kong to be vitally important to his business activities.

15. It was submitted on behalf of the plaintiff that the Court should exercise its discretion in the plaintiff's favour since his connection with Hong Kong was sufficiently strong to obviate the need for a further order. I may remark in passing that the Registrar did not, as perhaps is usual, provide in his order the stage of the proceedings up to which the security had been awarded. It may well be that he was not asked to make such an order, but I do think that parties would be well advised to seek such directions in appropriate cases. It is well settled that there is no longer any inflexible rule that a plaintiff resident abroad must be ordered to give security for costs; the matter is entirely within the discretion of the Court. However it is usual to require a foreign plaintiff to give such security and I see no reason to depart from this just and sensible approach. Having regard to the amount already deposited in Court and the likely costs of the action I do not consider that it can be said that the further sum of $7,500 sought is oppressive or in any way unreasonable. I therefore order the plaintiff to deposit the sum of $7,500 as further security for costs within 14 days and stay any further steps that may be taken by the plaintiff in these proceedings in the High Court until that sum has been paid into Court. Unless there is an appeal to the Court of Appeal (where different considerations might arise) I think that should be the end of the matter and the Court should not be asked to order further security.

Representation:

Mr. Nicholas Pirie (Fairbairn & Kwok) for plaintiff

Mr. Peter Cheung (Hastings & Co.) for defendant