Hanwa Kozai (HK) Co. Ltd. v. Hangyiu Limited and Another

HCA005258A/1994

1994 No.A5258

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: The Hon. Mr. Justice Keith in Court

Dates of Hearing: 6, 7, 8, and 9 February 1995

Date of Handing Down of Judgment: 10 March 1995

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J U D G M E N T

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INTRODUCTION

1. For some years, the Plaintiff supplied materials to the 1st Defendant, Hangyiu Ltd. ("Hangyiu"). Some of those materials were not paid for. In this action, the Plaintiff claims the balance of the price of the materials from Hangyiu. Hangyiu has no defence to that claim. However, the judgment to which the Plaintiff is entitled against Hangyiu is of little value to the Plaintiff. That is because Hangyiu has ceased to trade, and it does not have the money to settle its debt to the Plaintiff. That is why the Plaintiff wishes to obtain judgment against the 2nd Defendant, Ng Siu Ho, as well.

2. Mr. Ng was a director of, and a shareholder in, Hangyiu. The basis of the Plaintiff's claim against him is that he agreed to pay to the Plaintiff the sums due to the Plaintiff from Hangyiu. The Re-Amended Statement of Claim pleads that the consideration for that promise was the Plaintiff's agreement (a) to accept payment from Mr. Ng by instalments, and (b) to accept orders from another company once the sums which Hangyiu owed to the Plaintiff had been paid. By their Defence, the Defendants deny that there was any agreement at all that Mr. Ng would pay to the Plaintiff the sums due to the Plaintiff from Hangyiu, but that if there was such an agreement, it was unenforceable for want of consideration.

THE COURSE OF DEALING BETWEEN THE PLAINTIFF AND HANGYIU

3. Hangyiu's business was the manufacture of watch-bands. Stainless steel coils were used in their manufacture. The Plaintiff's business includes the supply of stainless steel coils for use in the assembly of watch-bands, and in September 1991 it began to accept orders for stainless steel coils from Hangyiu. The orders were normally placed over the telephone with one of the Plaintiff's sales representatives, Lee Cheung Man, by Wat Yuen Ling, Mr. Ng's wife, who worked for Hangyiu.

4. The Plaintiff's terms were 60 days' credit, though in practice customers were permitted to settle their invoices within 90 days. By the beginning of January 1993, there had been occasions when the Plaintiff's invoices to Hangyiu had been outstanding for more than 90 days, but all the invoices which the Plaintiff submitted to Hangyiu up to the end of 1992 were eventually settled by Hangyiu. The materials which Hangyiu did not pay for, and to which the Plaintiff's claim relates, were those materials covered by invoices dated January - April 1993. Those invoices amounted to $250,265.10.

THE INCORPORATION OF LEXCAN

5. In March 1993, Lexcan Ltd. ("Lexcan") was incorporated. The plan was that it would take over Hangyiu's business. Its original share-holders were Mr. Ng and Miss Wat, but in May 1993 its share capital was increased. Mr. Ng and Miss Wat were alloted additional shares, and two new shareholders were alloted shares in it in return for providing the finance necessary for Lexcan to trade. The upshot was that Hangyiu ceased to trade in April or May 1993, and it surrendered the tenancy of its office in the Hi-Tech Industrial Centre, Castle Peak Road, Tsuen Wan, when the tenancy expired at the end of May 1993. Its business was taken over in May 1993 by Lexcan, which used the same factory and plant in China which Hangyiu had used and took on Hangyiu's workforce. However, it did not acquire either the debts which Hangyiu's customers still owed to Hangyiu, or the debts which Hangyiu still owed to the Plaintiff. Its office was in Lai Chi Kok.

6. The reason for the incorporation of Lexcan and its acquisition of Hangyiu's business was explained to me by Mr. Ng and Miss Wat as follows. In February 1993, Au Pui Lam, one of the three shareholders in, and a director of, Hangyiu, had disappeared, leaving behind a number of personal debts. Mr. Ng and Miss Wat did not want Hangyiu's goodwill to be affected by the fact and circumstances of Mr. Au's disappearance. Mr. Adrian Bell for the Plaintiff suggested a different reason. He invited me to infer that Lexcan's incorporation had little, if anything, to do with Mr. Au's disappearance. Hangyiu was already in financial difficulties, and Mr. Ng and Miss Wat had Lexcan incorporated so that they could continue to trade through a corporate vehicle without honouring Hangyiu's debts and without exposing themselves to personal liability. I do not propose to make any findings as to the reason for the incorporation of Lexcan, because I do not believe that it assists me in deciding the central issue in the case - namely, the nature of the agreement made between the Plaintiff and Mr. Ng in about September 1993 for the settlement of Hangyiu's debts to the Plaintiff.

THE CONVERSATIONS RELATING TO THE SETTLEMENT OF HANGYIU'S DEBT TO THE PLAINTIFF

(i) Mr. Lee's evidence. Mr. Lee first heard rumours about Mr. Au's disappearance in about May 1993. He did not mention those rumours to anyone at Hangyiu at the time, because he did not believe them to be true. However, he pressed Miss Wat for payment of the sums due to the Plaintiff by Hangyiu, both over the telephone and when he visited Hangyiu's office in Castle Peak Road. By September 1993, the rumours had become so persistent that he went to Hangyiu's office to speak to Miss Wat about them. She confirmed that she and Mr. Ng were no longer in touch with Mr. Au. The conversation, though, turned to the money which Hangyiu owed the Plaintiff. It amounted, so he thought, to about $400,000.00 at the time. She told him that the outstanding amount would be paid.

7. Following this meeting, Mr. Lee received two cheques amounting to about $200,000.00 drawn on Hangyiu's bank account. However, since Hangyiu still owed about $250,000.00 to the Plaintiff, Mr. Lee went to see Miss Wat again at Hangyiu's office. She told him that Hangyiu would pay the outstanding amount as soon as Hangyiu had been paid what it was owed by its customers. In that connection, she said that Hangyiu was owed about $1m. by its customers.

8. Mr. Lee's evidence was that he had other meetings with Miss Wat at that time. On one occasion, he went with his boss to discuss with her the mechanics of setting up a factory in China, though on that occasion Hangyiu's debt to the Plaintiff was not discussed. Accordingly, the meeting on which the Plaintiff's case against Mr. Ng rests was another meeting between Mr. Lee and Miss Wat, which Mr. Lee said probably took place in October 1993 - at Hangyiu's office in Castle Peak Road, or so he thought.

9. According to Mr. Lee, Miss Wat told him at that meeting that it was proving very difficult to recover the money which Hangyiu was owed by its customers. However, she said that no matter how difficult it was going to be, "they" would settle the amount owed to the Plaintiff, even if "she" had to do it herself. Later in his evidence, he qualified that by saying that Miss Wat has said that they would endeavour to pay off the debt owed by Hangyiu to the Plaintiff. He did not ask who would be paying to the Plaintiff the amount owed by Hangyiu, but he did not think that Mr. Ng's name was mentioned in the conversation (or, for that matter, in any subsequent conversation about the payment of Hangyiu's debt). As for how Hangyiu's debt was to be paid, Mr. Lee said Miss Wat told him that the outstanding amount would be paid by instalments of $10,000.00 a month until the whole of the debt had been paid. Mr. Lee accepted that proposal.

(ii) Miss Wat's evidence. Miss Wat said that Mr. Lee first raised with her the question of Mr. Au's disappearance when he came to Hangyiu's office in February or March 1993. He asked her if Mr. Au had indeed disappeared. She told him that she was not sure. He asked her what Hangyiu was going to do, and she told him that Hangyiu was going to carry on as normal. She said that that was the last time she saw Mr. Lee. She added that no meeting could have taken place in September or October 1993 at Hangyiu's office in Castle Peak Road because they had moved out of the office when the tenancy had expired at the end of May 1993.

10. Miss Wat's evidence was that business had dropped off after Mr. Au disappeared, and Hangyiu's cash flow problems were exacerbated by some of Hangyiu's customers failing to pay their debts to Hangyiu. By June 1993, Hangyiu was owed about $300,000.00 by its customers. A debt-collecting agency had been engaged to recover those debts, and by September 1993 she and Mr. Ng were still hoping that the debts would be paid, though she admitted that she had said in her witness statement that they had realised by June 1993 that the debts were irrecoverable.

11. It was against that background that she discussed with Mr. Ng how Hangyiu's debt to the Plaintiff would be paid if Hangyiu's customers did not paid their debts to Hangyiu. They knew Hangyiu's debts had to be paid because the new shareholders in Lexcan had said, when they had provided the finance for Lexcan to trade, that Hangyiu was not to have any outstanding debts. Accordingly, Miss Wat suggested to Mr. Ng that the two of them should pay the sums due to the Plaintiff by instalments of $10,000.00, because those were sums which she and Mr. Ng could afford. Mr. Ng's response was to ask her to check whether they had the resources to do that, though she admitted that in her witness statement she had said that Mr. Ng had told her that he wished to pay off the debts owed by Hangyiu to the Plaintiff. For his part, Mr. Ng's evidence was that he and Miss Wat decided to pay what he could afford to the Plaintiff by instalments of $10,000.00.

12. However, before she got in touch with Mr. Lee to put that suggestion to him, Mr. Lee telephoned her. Her evidence about that conversation changed while she was in the witness-box. The conversation, she said, took place in September 1993. Mr. Lee had been becoming increasingly anxious about the money which Hangyiu owed to the Plaintiff, and in this conversation he asked for payment of the money owed. She told him about debts of about $300,000.00 which it was proving rather difficult for Hangyiu to recover from its customers, and that as soon as Hangyiu was paid by its customers, Hangyiu's debt to the Plaintiff would be paid. Mr. Lee told her to do her best to recover the sums owed to Hangyiu by its customers.

13. Miss Wat's initial evidence was that nothing was said in this conversation about payment by instalments of $10,000.00, and that she never spoke to Mr. Lee again about the payment of Hangyiu's debt to the Plaintiff. Later in her evidence, she admitted that she had spoken to Mr. Lee again at least twice over the telephone after she had begun to pay off Hangyiu's debts by sending Mr. Lee cheques for $10,000.00 drawn on her husband's bank account. However, when she was cross-examined, her version of events changed again. She said that in her conversation with Mr. Lee in September 1993 she had told him that Mr. Ng would pay Hangyiu's debt to the Plaintiff for the time being. She has said that they would try to repay the debts by instalments of $10,000.00, but she went even further a little later in her evidence and said that she had told Mr. Lee that the debt would be paid by instalments of $10,000.00, and not merely that they would do their best to pay by instalments of $10,000.00. She agreed that the figure of $10,000.00 came from her, and not from Mr. Lee.

SUBSEQUENT PAYMENTS TO THE PLAINTIFF

14. It is common ground on the pleadings that three cheques, each for $10,000.00, were paid to the Plaintiff on about 20th October 1993, 28th December 1993 and 10th March 1994. Those cheques reduced Hangyiu's debt to the Plaintiff to $220,265.10, which is the sum claimed by the Plaintiff in these proceedings. The cheques were all drawn on Mr. Ng's bank account. Mr. Lee's evidence was that he was surprised when he noticed that the first cheque had not been drawn on Hangyiu's bank account. Indeed, he claimed that he did not know why they were drawn on Mr. Ng's bank account. His evidence was that he never asked Miss Wat why the cheques were drawn on her husband's account: the fact that the cheques were in favour of the Plaintiff was sufficient for his purposes.

FINDINGS

15. I regarded Mr. Lee as a truthful witness. He gave his evidence in a measured and thoughtful way. He did not tailor his evidence to make the Plaintiff's case against Mr. Ng stronger than it was. For example, it took all of Mr. Bell's forensic skills to extract from Mr. Lee his evidence about the crucial conversation which he had had with Miss Wat, and even then he never claimed that Miss Wat had promised that the husband would settle Hangyiu's debt to the Plaintiff. Had he wished to embellish the Plaintiff's case, it would have been easy for him to claim that that was what Miss Wat had promised. Again, he was plainly telling me the truth as he remembered it when he said that he was surprised to notice that the first cheque for $10,000.00 had not been drawn on Hangyiu's bank account: after all, he would not have been surprised to see that it had been drawn on Mr. Ng's account if Miss Wat had promised that Mr. Ng would settle Hangyiu's debt to the Plaintiff. However, although Mr. Lee was, in my view, a truthful witness, there was no doubt that there were times when his memory played tricks on him. For example, the crucial conversation in September 1993 could not have taken place in Hangyiu's office in Castle Peak Road, because I am quite satisfied that Mr. Ng and Miss Wat had moved out of that office some months earlier.

16. As for Miss Wat, I did not regard her as a reliable witness. Her version of the crucial conversation changed so substantially whilst she was giving evidence that at times I was in doubt as to what her evidence really was. I did not think that she was deliberately telling untruths. However, I regarded her recollection of that conversation as being so hazy that little weight could be attached to it.

17. Having considered the evidence with care, my findings of fact are as follows:

(i) By September 1993, Hangyiu had ceased to trade. It owed about $250,000.00 to the Plaintiff. Mr. Ng and Miss Wat wanted that debt to be paid because the new shareholders in Lexcan had insisted that Hangyiu was not to have any outstanding debts. Although Mr. Ng and Miss Wat had hoped that Hangyiu would be able to pay off its debts to the Plaintiff from the sums which Hangyiu's customers owed to Hangyiu, they knew by then that those debts were irrecoverable. So Mr. Ng and Miss Wat decided that between them they would pay off Hangyiu's debt to the Plaintiff themselves by instalments of $10,000.00.

(ii) The offer which was made to Mr. Lee was made when he telephoned Miss Wat in September 1993. I do not accept Mr. Lee's evidence that the offer was made at a meeting. If the offer was made at a meeting, it could only have been made at the office in Castle Peak Road, because Mr. Lee never said in evidence that he had visited Lexcan's office in Lai Chi Kok. But as I have already found, Mr. Ng and Miss Wat had given up the office in Castle Peak Road some months earlier.

(iii) The offer which was made to Mr. Lee was not that Mr. Ng would pay off Hangyiu's debt, but that the two of them would. On this issue, I prefer the evidence of Mr. Lee to that of Miss Wat. If she had said that it was Mr. Ng who would be paying off Hangyiu's debt, I am sure that Mr. Lee would have remembered it. In any event, for her to say that Mr. Ng would be paying off Hangyiu's debt would have been inconsistent with what she claimed she and Mr. Ng had decided to do before she spoke to Mr. Lee on the telephone.

(iv) The offer which was made to Mr. Lee was that the debt would be paid off by instalments of $10,000.00 a month until the whole of the debt had been paid. On this issue, I again prefer the evidence of Mr. Lee to that of Miss Wat. There would have been no point in the offer simply being an offer to pay off the debt by instalments of $10,000.00. She would have realised that that would not have satisfied Mr. Lee because he would in those circumstances have had no guarantee that a sufficient number of instalments would be paid to discharge the debt.

(v) The offer which was made to Mr. Lee was that she and Mr. Ng would pay off the debt by instalments of $10,000.00 a month, and not that they would merely do their best to pay off the debt by instalments of $10,000.00 a month. That is what Miss Wat finally admitted in her evidence. I appreciate that Mr. Lee in his evidence gave both versions at different times, but when he agreed with Mr. Lawrence Ng for the Defendants in cross-examination that she had merely said they would endeavour to pay off the debts sold by Hangyiu, I do not think that he was alive to the subtlety of the question. I think that he thought that he was merely agreeing to the proposition that "they", and not Mr. Ng alone, would be paying off the debt.

(vi) Nothing was discussed as to when the first instalment would be paid by. However, had that been pointed out to Mr. Lee and Miss Wat at the time, they would, I think, have agreed that the first instalment had to be paid by no later than the end of the following month, i.e. by 31st October 1993.

18. I was troubled for a while by Mr. Lee's surprise when he saw that the cheques for $10,000.00 had not been drawn on Hangyiu's bank account. That would have been a significant fact if Miss Wat's evidence had been that there had never been any suggestion that anyone would try to pay off Hangyiu's debt to the Plaintiff. However, since she admitted that there was a conversation in which it was said at least that an attempt would be made by someone other than Hangyiu to pay off Hangyiu's debt to the Plaintiff, Mr. Lee's surprise (strange though it is) does not advance the Defendants' case further.

19. Accordingly, I find that the offer which Miss Wat made to Mr. Lee in the course of the telephone conversation in September 1993 (and which Mr. Lee accepted) was that she and her husband would themselves pay off Hangyiu's debt to the Plaintiff by instalments of $10,000.00 a month until the whole of the debt had been paid. Whether Mr. Ng's liability under this offer was joint or several, there is nothing which prevents the Plaintiff suing Mr. Ng alone, provided, of course, that the offer (a) was made by Miss Wat with Mr. Ng's authority, and (b) was supported by consideration.

MISS WAT'S AUTHORITY

20. I have already found that Mr. Ng and Miss Wat decided to pay off Hangyiu's debt themselves by instalments of $10,000.00. I infer from that that Mr. Ng gave Miss Wat his actual authority to make that offer to Mr. Lee when she next spoke to him. But I cannot infer from my finding as to what they had decided to offer that she had had his actual authority to offer that the debt would be paid off by instalments of $10,000.00 a month until the whole of the debt had been paid. Mr. Bell realistically recognised that. Accordingly, he submitted that I should find that Miss Wat had Mr. Ng's ostensible authority to make such an offer.

21. I agree with that submission. By making the offer, Miss Wat was representing to Mr. Lee that she had Mr. Ng's authority to make it. That representation by her amounted in law to a representation by Mr. Ng if "he can be regarded as having in some way instigated or permitted it, or put [her] in a position where [s]he appears to be authorised to make it": Bowstead on Agency, 15th. ed., Art.76, p.286. Mr. Ng can be regarded as having put her in a position where she appeared to be authorised to make the offer of payment by instalments of $10,000.00 a month by authorising her to make an offer of payment by instalments to Mr. Lee.

CONSIDERATION

22. Consideration for Miss Wat's promise that she and her husband would themselves pay off Hangyiu's debt to the Plaintiff by instalments of $10,000.00 a month until the debt had been settled is said to be found in the Plaintiff's agreement (i) to accept orders from Lexcan once Hangyiu's debt to the Plaintiff had been paid, (ii) to accept the payment of Hangyiu's debt by instalments, and (iii) not to sue Hangyiu.

(i) Orders from Lexcan. There is a conflict of evidence between Mr. Lee and Miss Wat on this issue. Mr. Lee's evidence was that during the conversation in which the offer was made, Miss Wat asked him if the Plaintiff was prepared to supply materials to Lexcan on credit. He told her that the Plaintiff would only supply materials to Lexcan on credit once Hangyiu's debt had been paid. In her evidence, Miss Wat denied that Mr. Lee had told her that. Her recollection was that she had asked Mr. Lee whether the Plaintiff was prepared to accept orders from Lexcan (which I take to mean on their normal terms, which would have included 90 days' credit), and that he had said that the Plaintiff was.

23. I accept Mr. Lee's evidence on this issue. I do not believe that Mr. Lee would have been prepared to accept orders from Lexcan on the Plaintiff's normal credit terms before Hangyiu's debt had been settled. For all he knew, Lexcan would be just as unable to pay its bills as Hangyiu then was. I know that the Defendants say that there was a time - in May 1993 - when the Plaintiff accepted an order from Lexcan knowing that Hangyiu was having difficulties paying its debts, and that the Defendants say that Mr. Lee knew that that order was being placed by Lexcan, and not Hangyiu, because Miss Wat claimed to have sent Mr. Lee a fax saying that the order had been placed on Lexcan's behalf. However, the hard copy of that fax has not been produced, and it is common ground that the invoices which related to that order were addressed to Hangyiu. That supports Mr. Lee's evidence that he believed that the order was being placed by Hangyiu, not Lexcan.

24. However, although I accept Mr. Lee's evidence as to what he said, there are two reasons why I do not believe that what he said constitutes consideration for Miss Wat's promise. First, his statement that the Plaintiff would only supply materials to Lexcan on credit once Hangyiu's debt had been paid did not amount to a promise that the Plaintiff would supply materials to Lexcan once Hangyiu's debt had been paid. The proper construction to be placed on the words Mr. Lee used is that he was refusing to supply materials to Lexcan until Hangyiu's debt had been paid. I am sure that Mr. Lee would be surprised if it was said that he had committed the Plaintiff to supply Lexcan with materials on the Plaintiff's usual credit terms once Hangyiu's debt had been paid.

25. Secondly, even if what he said amounted to a promise that the Plaintiff would supply materials to Lexcan once Hangyiu's debt had been paid, that promise was not, in my view, a promise which was given in return for the offer by Miss Wat of payment by her and Mr. Ng of Hangyiu's debt to the Plaintiff. The promise and the offer were, on Mr. Lee's evidence, not linked in any way. Mr. Lee's evidence was that after he had told her that the Plaintiff would only be supplying materials to Lexcan on credit once Hangyiu's debt to the Plaintiff had been paid, Miss Wat nodded. (I interpose to say that she could not have done that in view of my finding that the conversation was on the telephone). Mr. Lee added (according to my note of his evidence): "Since it had already been discussed as to how the money [was to be] settled, Miss Wat did not make any other indication". In other words, by the time the question of the supply of materials to Lexcan was raised, Mr. Lee and Miss Wat had already completed their discussion as to how Hangyiu's debt to the Plaintiff should be settled.

26. I recognise, of course, that "[i]n determining whether consideration is past, the courts are not ... bound to apply a strictly chronological test. If the giving of the consideration and the making of the promise are substantially one transaction, the exact order in which these events occur is not decisive": Chitty on Contracts, 27th.ed., vol.1, para. 3 - 023. However, I regard the promise to pay off Hangyiu's debt and the promise to supply Lexcan in the future (if, contrary to my view, there was such a promise) as not being part of the same transaction. The fact that the latter was dependent on the performance of the former did not make the latter a promise given in return for the former.

(ii) Acceptance of offer. I do not see how the Plaintiff's agreement to accept the payment of Hangyiu's debt by instalments can amount to consideration moving from the Plaintiff. The mere acceptance by A of an offer for payment from B to discharge the debt of C cannot in law amount to some quid pro quo being given by A in return for B's offer, unless A agreed not to sue C for the time being. It is therefore whether there was a forbearance to sue to which I finally turn.

(iii) Forbearance to sue. There is no evidence whatever that the Plaintiff expressly agreed not to sue Hangyiu. Mr. Lee did not give evidence of any such agreement at all. But I have no doubt that Mr. Lee impliedly promised that the Plaintiff would not sue Hangyiu for the debt so long as Miss Wat and Mr. Ng paid sums of $10,000.00 a month to the Plaintiff to settle the debt. If it had been pointed out to Miss Wat and Mr. Lee at the time that Mr. Lee had not given an express promise to that effect, they would both have said that it was so obviously part of their agreement that Mr. Lee did not need to mention it to make it a part of their agreement. Such an implied promise to forbear to sue means that I do not have to address the difficult question of law as to the precise circumstances in which an actual forbearance to sue can constitute consideration, even if the creditor has not made an express or implied promise to forbear.

CONCLUSION

(i) Judgment. For these reasons, the Plaintiff is entitled to judgment against Hangyiu in the sum of $220,265.10. The implied promise to forbear from suing Hangyiu was only so long as Miss Wat and Mr. Ng paid sums of $10,000.00 a month to the Plaintiff. Since it is common ground that they did not keep up these payments, the implied promise to forbear lapsed. The Plaintiff is also entitled to judgment against Mr. Ng. That follows from the promise which I have found Miss Wat made to Mr. Lee, and from my conclusion (a) that she had Mr. Ng's ostensible authority to make that promise, and (b) that the Plaintiff's implied promise not to sue Hangyiu for the time being amounted to consideration for that promise.

27. Since the three cheques for $10,000.00 should be attributed to the monthly instalments due in October, November and December 1993, the instalments which Mr. Ng had failed to pay by the date on which the writ was issued, i.e. 31st May 1994, were the instalments for January, February, March and April (the instalment for May 1994 being due at any time until midnight on 31st May 1994). There was no term, whether express or implied, of Miss Wat's agreement with Mr. Lee that the failure to pay one of the instalments of $10,000.00 in time would result in the whole of Hangyiu's debt becoming payable by them immediately. The Plaintiff has not sought leave to re-re-amend the Statement of Claim to claim the instalments which have become payable since 31st May 1994, nor to claim damages. It follows that I can only give the Plaintiff judgment against Mr. Ng in the sum of $40,000.00, but I shall also declare that Mr. Ng has been, since 31st May 1994, and continues to be, liable to pay the sum of $180,265.10 to the Plaintiff at the rate of $10,000.00 a month.

(ii) Interest. I have not been addressed on the appropriate rate of interest, or from when interest should be payable. In the normal course of events, I would leave it to the parties to agree those matters, giving them liberty to apply in the event of their failing to agree. However, I do not want the parties to incur further costs if it can be avoided: after all, the claim, though important to the parties, is not a comparatively large one. I propose, therefore, to make an order nisi in relation to interest, giving the parties liberty to apply, within 14 days of the handing down of this judgment, if they wish to argue against it.

28. Technically, Hangyiu's liability was incurred 90 days after the date of each unpaid invoice (but was suspended during the period during which the promise to forbear was operative), and was reduced by $10,000.00 on each of the three days when the cheques for $10,000.00 were credited to its bank account. However, I propose to deal with the question of interest broadly, and the order nisi I make is that Hangyiu must pay interest to the Plaintiff on the sum of $220,265.10 from 1st November 1993 at the rates determined from time to time by the Chief Justice as the rate of interest on judgment debts. As for the instalments payable by Mr. Ng, I do not propose to order him to pay interest on the three late cheques, but since the $40,000.00 for which I have given judgment should have been paid by instalments of $10,000.00 by 31st January, 28th February, 31st March and

29. 30th April 1994, I propose to make an order nisi ordering him to pay interest on the sum of $40,000 from 31st March 1994 - again at the rates determined from time to time by the Chief Justice as the rate of interest on judgment debts.

(iii) Costs. I make an order nisi that the costs of the Plaintiff's claim against Hangyiu be paid by Hangyiu to the Plaintiff to be taxed if not agreed. However, the Plaintiff has succeeded against Mr. Ng only by establishing consideration for the agreement which was not pleaded: neither a promise to forbear from suing, nor actual forbearance, were pleaded as consideration at all. In the circumstances, the order nisi I make as to the costs of the Plaintiff's claim against Mr. Ng is that there be no order as to costs.

THE WITNESS STATEMENTS

30. At the beginning of the trial, I raised with counsel the question whether the witness statements which the parties had exchanged pursuant to the order of Master Jennings should stand as the witness' evidence-in-chief. Mr. Ng said that they should. Mr. Bell argued that they should not. I ruled they should not stand as the witness' evidence-in-chief. I said that I would give my reasons for that ruling when I gave judgment in the action. This I now do.

31. Mr. Bell's original ground for wanting the witnesses to give their evidence-in-chief orally was that he feared that Mr. Lee's witness statement might be incomplete. Although he had no express instructions on the point, he thought that the fact that Master Jennings had not ordered that the statements stand as the witness' evidence-in-chief might have resulted in Mr. Lee's statement being less detailed than it might otherwise have been. If this ground had been persisted in, I would not have been attracted by it. In Ng Kam Chun Stephen v. Chan Wai Hing Janet (HCA 3036/92), I said that "[t]he witness statement should contain the whole of the witness' evidence in the detail in which the witness would have given it if his evidence had been elicited by oral questions at the trial". That obseration has been widely publicised within the profession: see New Gazette, August 1994, p.55. In my view, that practice should prevail whether or not the master has at the same time ordered that the statement should stand as the witness' evidence-in-chief. I see no room for a witness statement which represents a half-way house between the pleadings (which are limited to the assertions which the parties seek to prove, and are not intended to incorporate the evidence which the parties propose to call to prove those assertions) and the witness statements (which are intended to set out the evidence which the parties propose to call to prove the facts asserted in the pleadings).

32. To be fair to Mr. Bell, he did not press this ground when he realised that he was not able to obtain express instructions as to whether the fact that Master Jennings had not ordered the statements to stand as the witness' evidence-in-chief had contributed to the form in which Mr. Lee's witness statement had been prepared. Instead, he based his resistance to the witness statement standing as the witness' evidence-in-chief on the fact that the case turned so much on the credibility and reliability as witnesses of Mr. Lee and Miss Wat relating to their discussions in September and October 1993.

33. I agree with that argument for two reasons. First, I know from my own experience at the Bar how frequently witnesses fail to come up to proof even in evidence-in-chief. It does not follow that their witness statements necessarily reflect at the date of trial their recollection of the events to which the statements relate. When witness statements reveal a significant conflict of evidence between two or more witnesses, it would be unwise to assume that the witness statements represent the witness' last word on the topic. If a witness gives evidence-in-chief orally, the risk that the witness' statement may not truly represent the witness' recollection at the time of trial can more easily be eliminated.

34. Secondly, I think that the judge is likely to be assisted in resolving the conflict in the evidence which the witness statements reveal if he hears the witnesses give their evidence-in-chief orally. He would be better able to assess for himself the reliability and credibility of the witness than if the witness' oral evidence was limited to cross-examination and re-examination. As Donaldson MR said in Mercer v. The Chief Constable of the Lancashire Constabulary [1991] 1 W.L.R. 367 at p.371G, where "the evidence of a particular witness is likely to be controversial and his credibility is in issue ... the way in which he responds to oral examination in chief may be of great importance". Indeed, in Richardson Greenshields of Canada (Pacific) v. Tze Yim (HCA 6690/87), Kaplan J. declined to permit a witness statement to tand as the witness' evidence-in-chief where the statement was a short one and there was "a head on clash of evidence".

Representation:

Mr. Adrian Bell, inst'd by Messrs Robertson Double, for the Plaintiff.

Mr. Lawrence Ng, inst'd by Messrs Woo, Kwan, Lee & Lo, for the Defendants.