Asia Televison Ltd v. Mak Chi Kin t/a Wilson & Top Marketing Promotion Co and Another

CACV 148/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 148 OF 2006

(ON APPEAL FROM DCCJ 5940 OF 2004)

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BETWEEN

Before: Hon Cheung JA and Hartmann J in Court

Date of Hearing: 7 July 2006

Date of Judgment: 7 July 2006

Date of Reasons for Judgment and Decision on Costs: 11 July 2006

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REASONS FOR JUDGMENT
AND
DECISION ON COSTS

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Hon Cheung JA :

REASONS FOR JUDGMENT

1.We allowed the plaintiff’s appeal against the decision of H H Judge C B Chan who refused its application for summary judgment against the 1^st defendant.  Leave to appeal was granted by a single judge of this Court.  We now give the reasons.

The parties

2.The plaintiff is the well-known broadcaster operating the Asia Television (‘ATV’) station in Hong Kong.  The 1^st defendant is engaged in the business of marketing promotion.  The 2^nd defendant is an advertising agency.

Appointment of Agency

3.The 1^st defendant had placed advertisement on ATV through the 2^nd defendant.  By a letter entitled ‘Appointment of Advertising Agency’ (‘the Letter’) dated 19 September 2003 and addressed to the plaintiff, the 1^st defendant confirmed to the plaintiff that effective from October 2003 the 2^nd defendant

‘has been appointed by us and is acting as the agent of our company (the “Principal”) to act on our behalf in all matters relating to the advertising of our Company’s product : Isqueen product line on Asia Television Limited (“ATV”), including without limitation, booking of commercial airtime, scheduling of advertising spots and payment for advertising spots in accordance with your prevailing rate card.’ 

4.The Letter further stated that

‘We also confirm that the Agent is duly and fully authorised by us to bind us in all matters concerning the said business and we hereby ratify what the Agent had done or undertaken or will do or undertake in relation thereto.  Such authorisation shall remain valid and effective until ATV actually receives and acknowledges our written notice of cessation of the agency herementioned.

We undertake to indemnify ATV and keep ATV fully indemnified against all losses and damage of ATV arising out of any default of the Agent in or relating to the said advertising.’

The Commitment Agreement

5.By a Commitment Agreement No. H24076 dated 12 December 2003 which is entitled ‘Advance Commitment Discount Scheme 2004’) (‘the Agreement’) the 1^st and 2^nd defendants who were described as the ‘Participating Advertiser’ and the ‘Participating Advertising Agent’ respectively agreed to join the Advance Commitment Discount Scheme 2004 (‘Scheme’) of the plaintiff in respect of the advertisement of the 1^st defendant’s ‘Isqueen’ product.  The committed amount was stated to be HK$3,181,000.  The Agreement further provided that

‘The Participating Advertiser and the Participating Advertising Agent shall, jointly and severally, be liable to all obligations and liabilities hereunder.  The Participating Advertiser and the Participating Agent warrant and confirm to ATV that the Participating Advertising Agent has full authority to do all such acts of and relating to this Commitment Agreement.

This Commitment Agreement has to be signed by ATV, the Participating Advertiser and the Participating Advertising Agent to be binding and enforceable against the parties hereto.  (emphasis added)’

The claim

6.The plaintiff claimed against the 1^st and 2^nd defendants jointly and severally for the sum of HK$889,854 being outstanding balance of the plaintiff’s charges for airtime advertisement broadcasted by the plaintiff under the scheme at the defendants’ request.

7.The plaintiff on 20 December 2004 obtained judgment against the 2^nd defendant by reason of its default in giving notice or intention to defend.

The issue

8.The issue before the judge was whether the liabilities of the two defendants were joint and several. 

The principles

9.It is sufficient for the purpose of this judgment to give a brief statement on the nature of joint liability on one hand and joint and several liability on the other hand and also their respective consequences.

1) Joint liability

Joint liability arises when two or more persons jointly promise to do the same thing.  There is only one obligation, and consequently, performance by one discharges the others.  Joint liability is subject to a number of strict and technical rules of law.

2) Judgment against one joint debtor

Among the technical rules is the effect of a judgment against one joint debtor.  At common law, the general rule was that a judgment against one joint debtor operated to bar an action against the others, even though the judgment was not satisfied.  (see King v. Hoare (1844) 13 M&W 494 and Kendall v. Hamilton (1879) 4 App. Cas. 504)  This was explained on the ground that the debt was merged in the judgment, and also on the ground that joint debtors had a right to be sued together: but neither ground was satisfactory, and the rule was capable of working hardship.  The rule has now been abrogated by section 5 of the Civil Liability (Contribution) Ordinance (Cap. 377) which is based on Section 5 of the English Civil Liability (Contribution) Act 1978.

3) Joint and several liability

Joint and several liability arises when two or more persons in the same instrument jointly promise to do the same thing and also severally make separate promises to do the same thing.  Joint and several liability gives rise to one joint obligation and to as many several obligations as there are joint and several promisors.  It is like joint liability in that the co-promisors are not cumulatively liable, so that performance by one discharges all; but it is free from most of the technical rules governing joint liability. 

4) Judgment against one joint and several debtor

When the liability is joint and several, a judgment against one debtor did not, even at common law, bar a several action against another.

(see Chitty on Contracts 29^th Edition Vol. 1 para. 17–002, 17–003, 17–015 and 17–016)

The cases

10.In the court below and in this Court the 1^st defendant relied on the case of Moore v. Flanagan and wife [1920] 1 KB 919 in which the plaintiff sued a husband and wife claiming against them jointly to recover the price of goods supplied to the wife.  A judgment was obtained by the plaintiff against the wife.  The English Court of Appeal relying on the earlier case of Morel v. Earl Westmorland [1903] 1 KB 64 found the husband not liable on the following basis : if a person has a claim against two persons, one of whom is in fact an agent for the other, and judgment is signed against the one who turns out to be the agent, that is a conclusive bar to an action against the principal (see judgment of Bankes LJ at page 923 and 924).  Two matters should be noted.  First, Morel relied upon King and Kendall.  Second, in Moore the evidence was that the liability of the husband and wife was not joint. 

11.The Morel line of cases is a problematic area.  Apart from the adverse comment by Chitty, it has also been criticised by Bowstead and Reynolds on Agency 17^th Edition Para. 8–115 and has not been followed in other jurisdictions such as New Zealand in L C Flower and Suns Limited v. St. Stephens College Board of Governors [1991] 3 NZLR 304. 

Joint and several liability

12.This is clearly not the place to review the correctness or otherwise of the Morel line of cases nor is it necessary to construe the nature of the liabilities of the defendants because the Agreement itself (Clause 3) clearly stated that their liability is joint and several.  If that is the case the judgment against the 2^nd defendant is not a bar to the plaintiff’s claim.

13.The contention that has been raised is that the 1^st defendant had not signed the Agreement.  There were three signature clauses in the Agreement.  The 2^nd defendant and the plaintiff had signed but the part for the 1^st defendant’s signature was left blank. 

14.In my view, the absence of signature by the 1^st defendant is not determinative of whether the Agreement is binding on the 1^st defendant or not.  This is because one has to construe the Agreement by reference to the factual background of the case.  Let me say immediately that if the relationship of the parties was governed by the Agreement alone then, of course, the case is not suitable for the purpose of a summary judgment application.  However, in this case, one important piece of evidence is the Letter by the 1^st defendant informing the plaintiff of the appointment of the 2^nd defendant as its agent.  The appointment was stated to be in wide terms, namely, the 2^nd defendant was the agent to act on the 1^st defendant’s behalf ‘in all matters relating to the advertising of the 1^st defendant’s products’ and that the 2^nd defendant was authorised ‘to build us (i.e. the 1^st defendant) in all matters concerning the said business and we hereby ratify what the agent had done, or undertaken or will do or undertake in relation thereto’.  Furthermore this appointment shall remain valid and effective until the plaintiff actually received and acknowledged the 1^st defendant’s written notice of cessation of the agency. 

15.This Letter was followed very shortly by the Agreement which is a commitment by the advertiser to advertise with the plaintiff.  With the wide authority granted by the 1^st defendant to the 2^nd defendant, I am of the firm view that the authority of the 2^nd defendant clearly included the authority to sign the Agreement for and on behalf of the 1^st defendant. 

16.The 1^st defendant’s case is merely that he was not asked to sign the Agreement.  He did not say that he had no knowledge of the Agreement at all.  It would be most surprising given the subsequent commitment by the 1^st defendant in terms of payment of advertising charges that he would not have knowledge of the Agreement. 

17.In the light of the Letter, the signature of the 2^nd defendant on the Agreement must be given in two capacities.  First, on its own behalf and second on behalf of the 1^st defendant as well.  In my view Clause 5 of the Agreement has been satisfied because the Agreement was indeed signed by the 1^st defendant and the 2^nd defendant. 

18.On this basis the judgment against the 2^nd defendant is not a bar to the plaintiff’s claim against the 1^st defendant. 

New Evidence

19.This is sufficient to deal with this particular objection.  But the plaintiff also applied for leave to adduce new evidence to show that the liability of the defendants were joint and several.  Mr Cheung, counsel for the 1^stdefendant had initially objected to the application and relied upon the restrictions imposed by Ladd v. Marshall [1954] 1 WLR 1489.  In my view the restrictions are not applicable because this rule only applies where there has been ‘a trial or hearing on the merits’.  An order refusing summary judgment is not a trial or hearing on the merits (para. 59/10/9 of the Hong Kong Civil Procedure 2006).  No other grounds have been advanced on why the evidence should be excluded.

20.The new evidence is in the form of Rate Cards for 2003 and 2004.  Clause 16 of the General Terms & Conditions (‘the Conditions’) of these cards stated that

‘The Advertiser and the Advertising Agent jointly and severally undertake to pay all amounts due under the contract on or before the due date(s) as stipulated on the relevant invoice’.

21.The Letter clearly referred to ‘payment for advertising spots in accordance with your prevailing rate card’.  This being the case Clause 16 of the conditions applies and this means both defendants are jointly and severally liable and the judgment against the 2^nd defendant is not a bar to the plaintiff’s claim against the 1^st defendant.

Was the 2nd defendant authorised to place advertising orders on credit?

22.The 1^st defendant argued that he did not know that the plaintiff would allow the 2^nd defendant to settle the plaintiff’s invoices with credit terms.  He did not know the 2^nd defendant had defaulted in payment until he received demands from the plaintiff 10 months after the 2^nd defendant’s default.  He relied on a passage in Chitty on Contracts, Hong Kong Specific Contracts para. 1–044 where it is stated that,

‘An agent may not have the authority to buy on credit or sell on credit unless it is usual or implied in the circumstances.’

23.This is not a defence of substance.  The 1^st defendant had held out the 2^nd defendant as its general agent to the plaintiff including payment of the advertising charges.  In view of the wide authority granted to the 2^nd defendant as stated in paragraphs 3 and 4 of the judgment, the 1^st defendant can hardly rely on this limitation.

Conclusion

24.There being no other challenge to the plaintiff’s claim, there ought to be judgment given in favour of the plaintiff against the 1^st defendant.

25.Accordingly, we allowed the appeal and entered judgment for the plaintiff against the 1^st defendant in the sum of HK$899,854.  The interest on the judgment sum was agreed by the parties at the rates specified in the judgment against the 2^nd defendant. 

DECISION ON COSTS

^26.The plaintiff is entitled to the costs of this appeal together with the costs to adduce new evidence and of the costs below.  The 1^st defendant is entitled to the costs of the application to adduce new evidence.

Hon Hartmann J :

27.I agree and have nothing further to add.

Mr. Richard Zimmern, instructed by Messrs Boase, Cohen & Collins, for the plaintiff

Mr. Ivan Cheung, instructed by Messrs Tam, Pun & Yipp, for the 1^st Defendant