Nikko Boeki Kabushiki Kaisha v. Motivasia Hong Kong Ltd. and Another and John Michael Tatham (Third Party)

HCA012870/1995

HCA12870/95

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.12870 OF 1995

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Coram : The Hon Mr Justice Stone in Court

Dates of Hearing : 1 - 5 March 1999

Date of Handing Down Judgment : 16 June 1999

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J U D G M E N T

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The Nature of the Action

1. This is an action between the Plaintiff, Nikko Boeki Kabushiki Kaisha ("Nikko"), a Japanese exporter of porcelain products manufactured in Japan, and the 1st and 2nd Defendants, Motivasia Hong Kong Limited ("Motivasia") and Herald Holdings Limited ("Herald"), both trading companies in Hong Kong which were parties to the sale and purchase of the porcelain the subject matter of this action.

2. At bottom, the Plaintiff's claim may be simply stated : it had a contract with each of the Defendants for the purchase of a certain quantity of porcelain, and has suffered loss and damage by reason of the Defendants' refusal to accept, and to pay for, any more than 50% of their respective contractual obligations.

3. Accordingly, whilst the details are many, the basic shape of the case is relatively straightforward, a situation which in turn has been assisted by the agreement of Counsel that this Court should deal initially with the issue of primary liability only, there being relatively little controversy in terms of the calculation of damage, given that both sides broadly agree that the porcelain remaining unpurchased by the Defendants was sold off at roughly 30% of cost.

4. But that is to get ahead of the story. In order to place the two primary factual disputes in this case into their proper context, it would perhaps assist to sketch in some background detail.

The Facts in Outline

5. The Plaintiff, Nikko, is, as I have said, a Japanese trading company specialising in the export of Japanese porcelain. The evidence shows that its moving force (at least prior to his retirement) was Mr Noriko Hayashi ("Mr Hayashi"), whose name figures prominently in this case.

6. Over the course of several years, Mr Hayashi had formed a commercial relationship with a Mr John Tatham, one of the directors, and indeed then part-owner of the 1st Defendant, Motivasia. Motivasia was and is a subsidiary of the 2nd Defendant, Herald, a publicly-listed company in Hong Kong of which the leading lights were Mr George Bloch, the Chairman, and Mr Robert Dorfman, his stepson, who at the material times was a director both of Herald and of Motivasia.

7. Motivasia, I am told, had developed a degree of expertise in the area of supermarket promotions; in fact, it was precisely one such promotion, with the 'Wellcome' chain of supermarkets in Hong Kong, which has spawned this litigation. The idea was that Motivasia was to sell to Wellcome a very substantial quantity of "French Garden" porcelain table-ware for use in a customer promotion. This porcelain was made available to supermarket customers at a substantial discount via the use of bonus stamps issued to customers consequent upon the purchase of other Wellcome goods; assuming the desirability of the discounted promotional product, the inducement to customers to spend at the Wellcome supermarkets is self-evident.

8. The fine details of the scheme do not, perhaps, greatly matter. For present purposes what is significant is that Motivasia was to supply Wellcome with very large quantities of such porcelain upon a sale or return basis; in fact, a contract for the supply of over 800,000 pieces of porcelain (ranging from lasagne dishes to rice bowl, plate and spoon sets) was signed by Motivasia with Wellcome on 20th October 1994.

9. The porcelain the subject of this contract had, of course, to be sourced, and in this connection, Mr Tatham of Motivasia had already been in touch with Mr Hayashi, with whom in the past he had successfully collaborated in promotions of this type. It was decided that Nikko was to arrange for the manufacture and supply of the porcelain, and accordingly, on 26th October 1994, less than one week after the conclusion of the Wellcome contract, negotiations between Nikko and Motivasia resulted in a Purchase Order No.009/94, pursuant to which Motivasia ordered from Nikko a total of 800,745 pieces of French Garden Porcelain Tableware for a price of ￥547,154,691 FOB Japan, which sum amounted to approximately US$6 million at the exchange rate then prevailing.

10. Under this Purchase Order, payment terms were to be 50% by confirmed and irrevocable Letter of Credit at sight in favour of Nikko, and 50% D/A at 45 days. So far as the shipping details were concerned, the first shipment was to depart Japan before 1st February 1995, with 50% of the total stock to be ready for shipment before 21st February 1995 and the remaining 50% to be so ready no later than 28th March 1995. Curiously, although nothing of significance appears to turn on this, this Purchase Order was signed by a Mr Jarvis on behalf of Motivasia but was (and apparently remains) unsigned by Mr Hayashi on behalf of Nikko.

11. Whatever the niceties, however, it is not disputed that both Motivasia and Nikko regarded themselves as bound by this initial Purchase Order, and the evidence is that upon, or shortly after, the issuance of Purchase Order No.009/94 Mr Hayashi turned his attention to his own manufacturing sources in Japan; given the size of the order there was understandably the need for a number of factories to be involved in the production of these porcelain goods.

12. However, although Mr Hayashi was busy putting the manufacturing process in train, he was apparently unhappy with certain aspects of the deal with Motivasia, in particular the payment arrangements thereunder and the possibility of a substantial part of the order being paid by D/A and not by Letter of Credit. For its own part, Motivasia regarded this as a very substantial order, and it appears that even prior to issuing the initial Purchase Order it had been aware that it alone did not possess the financial muscle to meet the payment obligations that were involved; indeed, there is in evidence correspondence between Mr Tatham of Motivasia and Mr Dorfman of Herald, wherein Mr Tatham sought to involve Herald, and Herald's resources, with this project, the prospects for the success of which Mr Tatham then appears to have believed were reasonably bright.

13. Once again, the precise details do not assume great importance, save to set the scene for the nature and extent of Herald's involvement in the deal, which is an aspect of this case which has assumed considerable significance.

14. Herald's participation formally began at a meeting that was convened with representatives of the three parties on 3rd November 1994. I shall return to this meeting, not least because specific findings of fact with regard thereto require to be made, given that precisely what transpired is a matter of controversy. For the present, suffice to say that subsequent to this meeting, which was attended, inter alia, by Mr Bloch and Mr Dorfman on behalf of Herald and by Mr Hayashi on behalf of Nikko, Motivasia's existing obligation to purchase the entire 800,745 items of porcelain purportedly was varied to permit of Herald's participation in the restructured deal by means of four new Purchase Orders which were issued on 20th December 1994. These were numbered PO 009/94-01, -02, -03 and -04 respectively; the first and third of these recorded Motivasia's revised obligations to purchase 50% of the total quantity of porcelain, and the second and fourth reflected Herald's participation in terms of the purchase of the other 50%. However, crucial to the obligations recorded therein was a provision appearing in both sets of Purchase Orders. In Purchase Order 009/94-03, issued by Motivasia, this reads as follows :-

"Other

The Purchaser has placed P.O. No.009/94-01 on the same date as this Purchase Order and shall confirm its commitments under this Purchase Order on or before February 28th, 1995 in writing.",

whilst an identical paragraph was present in Purchase Order 009/94-04, issued for and on behalf of Herald, save that in that instance the cross-reference in the first line of the Purchase Order was to PO No.009/94-02.

15. It was to this aspect of these two Purchase Orders that Mr Hayashi took exception, and to which he asserted that he had never agreed. In any event, for reasons which are not totally clear, albeit nothing seems to turn on it, these two Purchase Orders of 20th December 1994 issued by Herald were in fact replaced by revised Purchase Orders of 25th January 1995, containing the like clause, both of which remained unsigned by Mr Hayashi.

16. In broad terms, what actually occurred in this case is that, the issue of an overshipment of a quantity of rice-bowls apart, the quantities of porcelain representing the first half of the total order were duly delivered and paid for, Motivasia and Herald thereafter disputing liability to accept or to pay for the remaining 50%, which by the end of March 1995 were piling up in Japan.

17. The only other factual landmark in what is, in my view, an unfortunate case, is a meeting between the parties which took place on 22nd March 1995, and which has assumed prominence because of the settlement agreement that was reached at that meeting, albeit the precise ambit of this agreement is subject to controversy. As is the case with the earlier November 1994 meeting, this further meeting of March 1995 necessitates further scrutiny.

18. As an historical postscript, the porcelain promotion with Wellcome turned out to be a commercial disaster, and all parties involved lost significant amounts of money. Mr Hayashi had to sell his undelivered and unaccepted porcelain off at 30% of cost, and Motivasia and Herald had to reimburse Wellcome a significant sum in terms of the porcelain that was returned unsold after the end of the promotion.

The Plaintiff's Case

19. It is unequivocally Nikko's case that at the meeting on 3rd November 1994 agreements were made between itself and Motivasia and Herald that instead of Motivasia purchasing the entire 800,745 items of porcelain, Motivasia and Herald would each purchase 50% of this quantity. This has led to the relief presently pursued by Nikko against its two contracting partners, namely a claim for the price of the goods ordered and purchased by Motivasia and Herald respectively, but accepted and paid for in terms only of one quarter each of the total amount of porcelain and half of their alleged respective contractual obligations.

20. It is important to note that Nikko does not put its case in any alternative way against either Motivasia or Herald. So that, for example, it is not disputed that as the result of subsequent events, Motivasia was released from its liability under its initial agreement with Nikko of 26th October 1994 to purchase the entire quantity of the porcelain.

21. Although this case is larded with very significant amounts of detail, the question of the contractual liability can thus be distilled into an examination of two specific issues which require decision, viz :-

(1) Was an agreement made, as alleged, on 3rd November 1994?;

(2) Was the settlement agreement entered into by the parties on 22nd March 1995 conclusive in terms of the liability issue?

I address these aspects in turn.

(1) The Meeting on 3rd November 1994

22. As Mr Houghton, who appeared for the Plaintiff, rightly suggested, the primary question in this case is as to whether the contractual arrangements were those contended for by the Plaintiff, or those propounded by the Defendant, and no doubt the matter is currently before the Court because the actual formation of the contract relied upon by the Plaintiff is said by the Plaintiff to have taken place orally in a meeting which occurred several years ago. With the assistance of an helpful skeleton argument, Mr Houghton urged the Court to find the existence of a sufficiently certain agreement arising at this meeting, and in this context he has drawn my attention to the frequently cited summary of principle contained in the judgment of Bingham J. (as he then was) in his judgment at first instance delivered in Pagnan S.p.A. v. Feed Products Limited [1987] 2 Ll.LR 601 at 610-611.

23. It is common ground that the November 1994 meeting was convened at the Herald offices, and was attended by Mr Bloch, Mr Dorfman and Mr Tang (the Herald company secretary) on behalf of Herald, by Mr Hayashi on behalf of Nikko (who also attended with one of his manufacturers), and by Mr Robertson on behalf of Motivasia. It appears that Mr Tatham of Motivasia was not present and was not in Hong Kong at the time. It was strongly argued by Mr Houghton that at the date of this meeting all parties were aware of the existence of the Motivasia contract with Wellcome, the quantities involved, the requirement for early manufacture, given the promotion timetable, and the need in the circumstances for a steady supply of goods to be 'on-stream' as the supermarket promotion continued. And whilst Herald's executives claimed not to have been told of the existence of the initial Motivasia Purchase Order of 26th October, they could not have been ignorant of the relevant details and, of course, of the primary Motivasia commitment to Wellcome. So that although there were discussions as to payment, which involved questions of bank facilities and whether all or part only would be paid for by means of Letter of Credit, there was no question that Nikko would be the supplier of the goods that Motivasia had committed to provide to Wellcome, and that subject to finalisation of the financial details, the deal would go forward. And that clearly, and importantly, the possibility of Herald and/or Motivasia committing only to 50% of the total quantity was never raised, and does not appear to have been contemplated at the time of the meeting. So that, submitted Mr Houghton, the quantity of the porcelain involved and its price were certain, and the focus of the meeting was very much on the precise terms of payment since one of the reasons Mr Hayashi of Nikko had attended was to assess Herald's financial worth in view of the proposed D/A payment arrangements. There was no doubt that, save for the commitments clause, the December Purchase Orders reflected the November agreement alleged, and that it is a matter of record that Nikko and Herald were content to proceed without formal documentation in place; it was obvious to all, said Mr Houghton, that (as was necessary in the circumstances) Nikko had commenced manufacture prior to the formal issuance of the Purchase Orders in December 1994, and did not insist on them being signed even then.

24. Moreover, said Mr Houghton, the purchase of the 'additional' rice-bowl sets could only be consistent with the contract alleged by the Plaintiff, since they were not part of the 'confirmed' December 1994 Purchase Order; indeed, as a matter of history the Plaintiff completed the manufacture of the entirety of the goods ordered, regularly informing the Defendants of the progress of production and supply schedules, and Mr Hayashi was not asked to stop (when of course the debacle of the porcelain promotion had become clear) until the end of March 1995, by which time it was far too late.

25. Looked at overall, submitted Mr Houghton, there was clearly a sufficiently certain enforceable agreement which was commercially workable, and Motivasia and Herald should be held to their obligations thereunder. The December 1994 Purchase Orders were advanced as counter-offers, and had not been accepted by Nikko. Mr Hayashi had consistently refused (understandably given his commitments to the manufacturers) to reduce the order by half, and would not sign on those terms. In addition, the sourcing of the Wellcome contract requirements could not have been fulfilled if, as per the disputed clause, 50% of the total amount of the goods were only ordered at the end of February 1995.

26. In response, Mr Harris argued that the only unqualified offers from Herald to buy porcelain from Nikko were with regard to the quantities of porcelain specified in Purchase Order 009/94-02 dated 20th December 1994, together with the additional quantities of rice-bowls overshipped by Nikko. So far as Herald was concerned, the clear and sole purpose of the meeting of 3rd November 1994 was the discussion of financing arrangements, and he stressed the evidence of both Mr Bloch and Mr Dorfman that they understood that this meeting was part of the negotiations for the placement of an order by Herald with Nikko, that so far as they were concerned they were not thinking in terms of concluding an agreement on 3rd November 1994, and that, to the contrary, such was not concluded. Moreover, Mr Bloch, Mr Dorfman and Mr Tang all gave evidence that on the date of that meeting they were not aware of the fact that Motivasia had sent to Nikko the Motivasia Purchase Order of 26th October 1994. Whatever Mr Hayashi may have thought, said Mr Harris (or had been led to think), on the Defendants' evidence the parties were not ad idem and no agreement between Herald and Motivasia came into being at that meeting in early November 1994. If this be correct, he said, the contractual position was that at the conclusion of that meeting Motivasia remained bound by the earlier Motivasia Purchase Order of 26th October 1994, albeit it is accepted now by both parties that the original agreement with Motivasia was subsequently varied, and that Motivasia was released from its pre-existing liability to purchase the entire quantity of the porcelain. Accordingly, either Motivasia became liable to purchase 50% of the original order (as was pleaded), or it remained liable to purchase the original entire quantity less whatever was purchased by Herald (which is not pleaded). And if and in so far as the Purchase Orders issued by Motivasia and Herald in December did not 'bite', alternatively perhaps Herald was bound upon the basis of a quantum valebant, although that was not pleaded either, and in any event Herald had paid for all the goods it had received. So that so far as Herald was concerned, prior to December 1994 and the issuance of the four Purchase Orders in question, that company had entered into no contractually binding commitment.

27. This matter has given me pause for considerable reflection. In terms of the all-important evidence of what actually happened at the meeting on 3rd November 1994, I am minded to accept the evidence of Mr Bloch, Mr Dorfman and Mr Tang that so far as they were concerned this meeting was solely for the purpose of negotiation, although (and on analysis this may not much matter) I find it odd that Mr Dorfman and Mr Tang at least were unaware of Motivasia's contractual position as at that date. Be that as it may. I am unable in all the circumstances to find the evidence to visit upon Herald the contractual obligation contended for by Nikko (or indeed any contractual obligation) as crystallising at that meeting. Not only did Mr Bloch and Mr Dorfman testify that financing arrangements were being discussed at this meeting - they said, and I accept, that Mr Hayashi had told them that the financing arrangements proposed were subject to the approval of Nikko's bank and to the placement of a firm Purchase Order - but it was also Mr Hayashi's evidence that he preferred payment for the entire quantity to be made by Letter of Credit, not D/A, that he was worried about the general financing of the deal, citing concerns that "the Japanese Ministry of International Trade and Industry would not approve the payment term of D/A under the name of Motivasia as Motivasia was not a famous company, not enough financial company ..."

28. Nor am I able to accept the beguiling submission that the four December 1994 Purchase Orders merely constituted counter-offers, as Mr Houghton suggested. To the contrary. In my view the December Purchase Orders represented Herald's first purported contractual commitment, prior to which, of course, Motivasia had been on the hook for the entire amount. Accordingly, I think it fair to say that following receipt of the four new Purchase Orders, Mr Hayashi proceeded on the basis that the Motivasia original Purchase Order had been replaced and attempted, in the event unsuccessfully, to persuade the Defendants that the option clause inserted in respect of the second tranche of porcelain should be removed. As to which, I think that it is probably correct, and I so find, that the question of Herald and/or Motivasia committing only to 50% of the total quantity of porcelain emerged only after the meeting on 3rd November 1994 when a week or so later Mr Tang alerted senior executives of Herald, in particular Mr Dorfman, to the very significant element of financial risk involved should the project be unsuccessful. But in any event, in my view it was open to Mr Hayashi, upon being confronted with this clause, either to revert to the original contract with Motivasia, which he plainly chose not to do, or to go forward with the situation as had arisen, and to hope that problems would not arise, which is what seems to have happened. But in my judgment what Mr Hayashi is unable to do is to affix Herald with liability solely on the basis of the events of that first meeting.

29. At bottom, therefore, upon reviewing the entirety of the evidence, I entertain no doubt that the Plaintiff has not made out its case that there was a binding agreement reached at the 3rd November 1994 meeting in the terms alleged by the Plaintiff. In fact, Mr Hayashi's evidence itself fails to bear this out, as the following extracts from his cross-examination (at pages 65-66 of the transcript) tend to reflect :-

"Q : ... The only document that you ever received from Herald, or documents, were the two purchase orders dated 20th December which clearly told you that Herald was not confirming an order for 400,000 items of porcelain; that is correct, is it not?

A : Yes, that is the first time I knew.

Q : At no time did Mr Bloch, Mr Dorfman, Mr Tang or Mr Thong ever tell you anything different from that which appeared in the purchase orders -

A : Before December 20th, nothing."

30. And further, when the question was put again by Mr Harris at the behest of the Court, which was concerned that Mr Hayashi might not properly have understood the first exchange, the following dialogue took place :-

"Q : We know, Mr Hayashi, because you have just agreed, that Herald sent you documents which made it quite clear that they were not placing a confirmed order for the entire quantity of the goods. I am now concerned with whether anybody said anything at a meeting, or during a telephone conversation to you, and I am not concerned with Mr Tatham or Mr Robertson, I am just concerned with the representatives of Herald now.

A : Directly to Nikko?

Q : Yes.

A : No, nothing."

31. It follows from the foregoing, therefore, that the answer to the first issue must be in the negative, namely, that there was no agreement made, as alleged, on 3rd November 1994. I so hold.

32. Whilst in my judgment this conclusion necessarily follows on the case as put and on the evidence before the Court - and is a conclusion which in itself is sufficient to decide this case - this is not in the circumstances a result which provokes any great enthusiasm. Mr Hayashi struck me as a dignified and honourable man who felt, perhaps with reason, that in the event he had been shabbily treated in his relations with Motivasia and Herald in terms of this porcelain contract. It may well be that he took too much for granted in commencing production of the porcelain without having in place a contract or contracts which firmly met his requirements, and also those of the Japanese Ministry of Trade. It may be, also, that he had reposed too much trust in his relationship with Mr Tatham, who regrettably did not appear at this trial to give evidence, and to whose hearsay statement I am disinclined in the circumstances to accord much attention or weight. It is of course also possible that Mr Tatham may not have given Mr Hayashi the full story, in which connection I bear in mind the evidence of Mr Dorfman that at the meeting in March Mr Hayashi had commented that he wished Mr Tatham had explained the position more clearly to him earlier, and also the content of Mr Hayashi's handwritten note of complaint to Mr Tatham, apparently written from the Hong Kong Hotel.

33. But whatever the strict legal position on the evidence before the Court, there is little doubt, after the release of Motivasia from the first contract and the entry onto the scene of Herald, that steps were taken on the part of Motivasia and Herald to redistribute the very significant financial risk inherent in this porcelain promotion. And that this was achieved by the insertion of the 'option to confirm' clause in Purchase Orders 009/94-03 and -04, which served to leave the Plaintiff exposed in the event (which in fact transpired) that the promotion was unsuccessful; in this context, the evasions which met Mr Hayashi's frequent requests, after his receipt of the December Purchase Orders, for the removal of this option clause in my view speak volumes. And although ultimately I have concluded that this does not affect the contractual analysis on the case as put up, there is little doubt in my mind that Mr Hayashi was subjected to a form of commercial 'squeeze' which left him to bear a greatly increased risk than hitherto had been the case, and which represented a hard-nosed approach very different from the manner in which this transaction was conducted by Mr Hayashi on behalf of the Plaintiff.

(2) The Settlement Agreement of 22nd March 1995

34. As I have earlier observed, the decision on the primary issue as to the November 1994 agreement is, in effect, dispositive of the Plaintiff's case. The issue of the settlement agreement of 22nd March 1995 is canvassed in the alternative by the Defendants, and I now go on to consider it lest I be wrong on the primary issue.

35. The body of the particular document relied upon, as signed by Mr Hayashi of Nikko, Mr Thong of Herald and Mr Tatham of Motivasia, reads as follows :-

"March 22nd, 1995

This agreement is made between Mr. N. Hayashi representing NIKKO BOEKI K. KAISHA ('NIKKO') and Mr. Michael Thong representing Herald Holdings Ltd, Herald (Hong Kong) Ltd ('Herald') and Mr. John Tatham representing Motivasia Hong Kong Ltd ('Motivasia') on March 22nd, 1995.

Nikko has shipped to Herald under D/A 50 days terms against the purchase order issued by Herald (PO No. Herald 009/94-02) dated December 20th, 1994. It is hereby agreed by all parties that Herald will pay ￥36,513,456 under the D/A bill covering Nikko's invoice No. MA-8/95 dated March 9th, 1995 on its maturity on April 29th, 1995 and the balance of ￥15,212,358 on June 20th, 1995.

Herald has opened Letter of Credit No. 6055IM228747/95 in favour of Nikko which expires on May 7th 1995. Nikko has agreed to the cancellation of the outstanding balance of this Letter of Credit effective immediately. Herald, subject to confirmation from its bank that the Letter of Credit has been accepted for cancellation by Nikko, will accept the above mentioned D/A bill on the terms specified above.

All parties agree that Nikko will not ship any further goods to Herald and Motivasia without written authorization from Herald and that neither party has any further claims regarding this matter." (emphasis added)

36. Clearly, it is the final clause which provides the ambiguity. In a nutshell, does the phrase "any further claims regarding this matter" operate, as the Defendants contend, as a settlement of the entire case, or is it confined, as was submitted by the Plaintiff, to the vexed issue merely of the overshipment of the rice-bowl sets?

37. Mr Houghton maintains that this agreement was not put to Mr Hayashi at the meeting as a 'wrap-up' of all outstanding disputes, and was not signed by him as such; indeed, in this context, Mr Hayashi was scornful of the suggestion that this constituted a global settlement. Mr Houghton further says that the circumstances of the meeting give rise to no other inference. Nikko had by then delivered substantial quantities of goods to Hong Kong, in some instances exceeding the quantities in the Purchase Order, and some had been shipped on a D/A basis when Herald would have preferred to have paid under a Letter of Credit. Having received them, Herald at first did not wish to pay, but later relented and agreed to pay for them on a D/A basis. It was this discrete issue of payment, therefore, that Mr Hayashi came to Hong Kong to discuss. Moreover, he said, the evidence regarding the meeting was that the discussion did not touch on the further deliveries, but simply addressed the allegations of overshipment.

38. To the contrary, Mr Harris suggested that, in terms of the context of the meeting, it was inconceivable that the question of the Defendants' refusal to confirm the second tranche of the porcelain was not discussed, given that this had been the subject of constant concern for Mr Hayashi since the end of December 1995, and that it was his evidence that he understood the Defendants' complaint concerning overshipment to arise from the fact that he had shipped rice-bowl sets in excess of Purchase Orders 1 and 2, so that any discussion of the overshipment necessarily involved consideration of the larger issue as to the Defendants' obligations with regard to the entire second tranche of the porcelain.

39. In my view, Mr Harris is correct in this latter regard. In these particular circumstances I find it difficult to accept Mr Hayashi's recollection, which may well have dimmed with the passage of time, that the issue of the second tranche of porcelain (which, by the time of the meeting, he had caused in large part to be manufactured) did not arise in the context of a broader discussion about whether Motivasia and Herald would require further shipment. The probabilities, I should have thought, are entirely the other way. And in so far as it be relevant, I further recognise, as is the fact, that after the meeting no more porcelain was in fact shipped from Japan to Hong Kong, although apparently Mr Hayashi remained in contact with Mr Tatham, with whom he had an arrangement concerning the disposal of this porcelain through other sources.

40. But in terms of a decision on this second issue, I am, nevertheless, disinclined to hold that it has the effect for which the Defendants contend. In my judgment, Mr Houghton is correct when he says that upon the true construction of this document, the subject of the 'settlement' is "this matter", and that the only 'matter' under discussion was payment for the goods to which reference was made in the document. And such "further goods" are stated to be delivered only upon written authorisation from Herald, which is as consistent with a revised delivery date as inconsistent with a recognition that the deal was totally at an end.

41. At the end of the day, therefore, I have decided this issue purely as a matter of construction, and I further agree with Counsel for the Plaintiff that in any event this document should be construed contra proferentem, it being common ground that Herald drafted and produced the document at the conclusion of this meeting on 22nd March 1995.

42. As to the second issue, therefore, I am against the Defendants, albeit as earlier observed this decision is of relevance only if and in so far as my finding under the first head, namely, as to the absence of an agreement concluded at the November 1994 meeting, should be held to be incorrect.

Order

43. It follows from the foregoing that the Plaintiff's claim against the 1st and 2nd Defendants is dismissed, and I so order.

44. I make an Order nisi that the Defendants are to have the costs of this action, to be taxed if not agreed. Should there be any contention to the contrary, I will hear the parties on a date to be fixed.

45. I thank both Counsel for their considerable assistance.

Representation:

Mr Anthony Houghton, inst'd by M/s Horvath & Giles, for the Plaintiff

Mr Jonathan Harris, inst'd by M/s Richards Butler, for the Defendants

Remarks:
On appeal by Plaintiff to the Court of Appeal: Appeal dismissed on the substantive issue. Please refer to CACV000262/1999.