Airborne Freight Corporation v. Ma Kim Chee

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISIDICTION

ACTION NO. 1402 OF 1969

________________________

Coram: Pickering, J.

Date: 18th December, 1972.

________________________

JUDGMENT

________________________

1.  The Writ in this action was issued on the 11th November, 1969. It contained five paragraphs under which the plaintiff company claimed from the defendant the sum of $2,062,260.48 in respect of air freight said to be due and owing by the defendant to the plaintiff company under numerous contracts between the plaintiffs as carrier and the defendant as shipper. A Statement of Defence was filed on the 7th of March, 1970 in which the whole of the facts alleged in the Statement of Claim, with the exception of the existence of the plaintiff company, were traversed in the usual form. The Defence was substantially to the effect that the defendant was employed by the plaintiffs and was operating the Hong Kong Shippers Association on behalf of and for the profit of the plaintiff company; that the Association had retained no profits earned from its operation which profits had been transferred to the plaintiff company. On the other hand that company, it was said, was indebted to the defendant in respect of commissions due on business introduced to the plaintiff company by the defendant in the form of split charters in contravention of I.A.T.A. regulations. There was a Counterclaim for an account and payment of a sum equal to ten per cent of the net profit found to have been earned by the plaintiff company upon the taking of the account.

2.  No Defence to the Counterclaim had been filed when, in December 1971, the plaintiff took out a summons to amend their Statement of Claim and to permit the defendant to amend his Defence and Counterclaim. Leave to amend the Statement of Claim was granted in January 1972 with liberty to the defendant to amend his Defence and Counterclaim. An Amended Statement of Claim was served on the 19th of January 1972 in which the plaintiff company maintained its claim to $2,062,260.48 but, in the alternative, claimed that an account be taken of all sums collected by the defendant in the name of the Hong Kong Shippers Association and payment over to the plaintiff of the amount found due therein; in the further alternative to the claim for $2,062,260.48, there was a claim for damages for failure to exercise reasonable skill and care in collecting debts due to the Hong Kong Shippers’ Association and in a yet further alternative there was a request for an enquiry into all sums which the defendant should have collected and for payment over of those sums. The original five paragraphs of the Statement of Claim swelled to nine in the Amended Statement of Claim.

3.  No defence was filed to the Amended Statement of Claim and, in September 1972, the plaintiffs took out a summons asking for judgment for an account under O.27 r.3 or alternatively, for an account under O.43 rr.1, 2 and 3. The result of that summons was that the plaintiffs obtained leave to enter judgment against the defendant pursuant to O.27 r.3 for an account and for damages to be assessed, and it was further ordered that the time for serving a Defence to the Counterclaim be extended for fourteen days from the date of the Order, which was 12th October 1972.

4.  According to an affidavit of Mr. Charles Sin, solicitor for the defendant, the reason for failure to file an Amended Defence consequent upon the amendment by the plaintiffs of the Statement of Claim, was that counsel, having been instructed on the 8th of February 1972 to settle an amended Defence, had asked for further papers in order so to do. The solicitor instructed that counsel be supplied with the necessary papers but “due to an unhappy series of circumstances, my order was either misunderstood or not obeyed.” There ensued a number of telephonic reminders from counsel’s clerk to one of the solicitor’s clerks which did not reach the solicitor, whose Affidavit continues, “For reasons which I do not fully understand, the additional papers were not sent to counsel”. In the end, counsel received the papers only when he was either just leaving for, or already in, England on leave.

5.  The matter became further complicated when, the summons for judgment having been adjourned to a date to be fixed in consultation with counsel, and adjourned hearing date was obtained without such consultation with counsel for the defendant. An assistant solicitor of Mr. Sin’s firm attended upon the hearing of the summons, apparently with instructions to inform the Registrar that counsel, who had not been consulted, was unable to appear before him on that date. From the record of the proceedings before the learned Registrar, it appears that the assistant solicitor conveyed that latter piece of information but not the failure to consult counsel as to a date and, as I have related, judgment for an account was given.

6.  The summons now before me is taken out by the solicitors for the defendant and asks that the learned Registrar’s Order for judgment for an account and for the assessment of damages be set aside and that the plaintiffs be granted an Order, under the provisions of O.43 r.2, that an account be taken of all sums collected by the defendant in the name of Hong Kong Shippers’ Association, such sums as may be found due to be paid into court and not to be paid out until after judgment has been given on the Claim and Counterclaim herein. The summons also seeks further consequential directions.

7.  Mr. Jackson-Lipkin, for the defendant, urged that the failure to file a Defence to the Amended Statement of Claim was no fault of the defendant, who had given instructions for such a Defence; there had been no judgment on the merits, there was a Counterclaim and another Action between the parties and in those circumstances it was unjust that accounts should be taken under a judgment rather than by way of order. It was proper, counsel conceded, to say that the defendant was an accounting party and accounts should indeed be ordered, but not in the form of judgment for accounts; under O.27, admissions must be clear and it could not be said that in view of paragraph 3 of the original Defence that admissions were sufficiently clear to justify judgment. On the other hand, if the judgment were to stand, payment should be made into court and not to the plaintiff company. As an alternative to this argument counsel suggested that the defendant’s legal advisers and not the defendant himself, might be penalised.

8.  Mr. Ching, for the plaintiff company, said that the pleadings having been deemed to be closed, the plaintiffs had required leave to amend their Statement of Claim which leave was obtained by an Order of the 5th January, 1972; under that Order the defendant was to be at liberty to amend his Defence in the light of the Amended Statement of Claim; that was permissive, not mandatory, and the defendant was under no obligation to amend his Defence; he did not do so and, therefore, under O.20 r.9 the Order giving liberty to amend had ceased to have effect; the only Defence filed had pleaded merely to the unamended Statement of Claim which spoke only of airway bills and breach of contract, whereas the Amended Statement of Claim alleged that the defendant was the agent of the plaintiff company, was under a duty to account to the latter and under a further duty to exercise reasonable skill and care in collecting all monies owing to the plaintiff company; the Amended Statement of Claim had gone on to assert that the defendant had wrongly failed to account for and/or pay over, to the plaintiff company all sums collected by him in the name of that company and had particularized certain items which it was alleged the defendant had received and failed to account for, and others which he had failed to collect. There had been no pleading at all in regard to these additional matters raised in the Amended Statement of Claim and that being so those matters must be deemed to be admitted wherefore judgment was given on the basis of admissions. Moreover, the plaintiff’s summons under which judgment was obtained upon admissions had also asked for judgment in default of Defence and, the hearing before me being a re-hearing, it was open to me to give judgment in default of Defence;the defendant, moreover, had put forward no facts to support his assertion that there should be adjudication before judgment.

9.  Whilst the assertion of defence counsel, that the failure to file any Defence was no fault of the defendant, might well be true, the plaintiffs’ counsel argued, it was even more true that it was no fault of the plaintiff company and, if it was discovered that defence counsel was in England by the time complete instructions had been sent to him, why had no summons been taken out to extend the time for filing a Defence and why had no other counsel then been engaged?

10.  As to the suggestion that any money found due should be payable into court until the outcome of the Counterclaim, Mr. Ching argued that this was not the practice unless the Claim and Counterclaim were inextricably mixed up – a proposition which Mr. Jackson-Lipkin denied whilst asserting that, in any event, the two were in fact inextricably interwined.

11.  Replying to Mr. Ching’s argument, defence counsel referred to the well-known principle, set out at Note 20/5-8/2 of the White Book (1970 Edition) that an amendment duly made, with or without leave, takes effect, not from the date when the amendment is made, but from the date of the original document which it amends; that being so, the Defence filed stood in answer to the Amended Statement of Claim and the defendant was deemed to join issue on all the allegations made by way of amendment in the amended pleading. This proposition was derived from the third paragraph of Note 20/3-4/5 of the same edition of the White Book and Mr. Ching attacked that note upon the grounds that O.20 r.3(6) had no application to an amendment of pleadings with leave, that rule being headed “Amendment of pleadings without leave”. However that may be, O.18 r. 14(3) provides that there cannot be a joinder of issue, implied or express, on a statement of claim or counterclaim. Even if it be argued that this does not apply to an Amended Statement of Claim, examination of the denials contained in the Defence reveals considerable gaps when those denials are related to the plaintiff company’s allegations in its Amended Statement of Claim. Mr. Jackson-Lipkin sought to rely upon paragraphs 5 and 6(c) of the Defence which alleged that the Association retained no profit earned in its operation by the plaintiff company, earned no profit for itself from such operations, from time to time, and regularly, transferred the net profit earned by the plaintiff company by its operation of the Association to the bank account of the plaintiff company and which asserted that the defendant, at the date of his dismissal by the plaintiff company, had transferred from the Association’s bank account to that of the plaintiff company the whole of the net profit earned by the plaintiff company by its operation of the Association up to that date. These assertions, when contrasted with certain of the allegations contained in the plaintiff company’s Amended Statement of Claim cannot be regarded as more than general traverses. The Amended Statement of Claim referred to a specific sum received from a specific customer and alleged that the defendant had failed to account for that sum to the plaintiff company; further specific sums, which it was alleged that the defendant had failed to collect from named customers, were also catalogued and there was a specific claim that the defendant, after his dismissal had, without the authority or consent of the plaintiff company, withdrawn money from that company’s bank account in the sum of $50,648.63 and failed to account for that sum or to pay any part of it to the plaintiff company. These very specific allegations and claims go untouched by the Statement of Defence and there was ample material from which the learned Registrar could come to the conclusion that the plaintiff company was entitled to judgment for an account upon admissions.

12.  I do not think that anything turns upon the failure to consult defence counsel as to the date of the hearing of the summons for judgment and the lacklustre performance of the hapless assistant solicitor who attended in counsel’s place. If the learned Registrar was deprived of the benefit of argument from counsel on either side upon the hearing of the summons before him, the matter had now been thoroughly ventilated before me by counsel on each side.

13.  A further, though subsidiary, consideration is that it is the defendant’s assertion that upon the taking of accounts no monies will be found to be due and owing by him to the plaintiff company. If that assertion be true, there can be little merit in the present application to set aside the judgment for an account upon admissions and to substitute for it an Order for an account under O.43 r.2, unless possibly on the question of costs which is a matter of which cognizance can be taken at a later stage should the defendant’s assertion be proved correct.

14.  There remains the question whether or not I should order that any sums found to be due from the defendant to the plaintiff company, upon the taking of an account, should be paid into court pending the outcome of the Counterclaim. I think there is merit in Mr. Jackson-Lipkin’s contention that claim and counterclaim are inextricably interwined and, in the circumstances of this case, I consider that such an order is the appropriate one. I order accordingly and, ex abundante, will add “or until further order of the court”.

15.  Paragraph 1 of the defendant’s summons asks that the Registrar’s order, giving the plaintiff liberty to enter judgment under the provisions of O.27 r.3 for an account and for damages to be assessed, be set aside. Paragraph 2 asks that an account be ordered under the provisions of O.43 r.2. Paragraph 3 asks that such sums as may be found due and owing to the plaintiff on the taking of “such account” (that is an account under O.43 r.2) be paid into court, not to be paid out until judgment shall be given on the Claim and the Counterclaim herein. Paragraphs 4, 5, and 6 seek consequential amendments to the pleadings. The prayer under each of paragraphs 1 to 6 of the defendant’s summons must be dismissed.

16.  Paragraph 7 of the summons asks that no order be made on a summons taken out by the defendant on the 14th November 1972. There having been no hearing of that summons, there will be an order in terms of paragraph 7 of the present summons.

17.  In addition I order that the Order of the learned Registrar, filed on the 23rd October 1972, be amended by the deletion in paragraph 1 of the words “payment over to the plaintiff” and in paragraph 2 of the words “payment over” and the substitution in each case of the words “payment into court pending judgment on the counterclaim or until further order of the court”.

18.  After hearing counsel as to costs, I order that the defendant pay two-thirds of the plaintiff’s costs of this summons and that plaintiff pay one-third of the defendant’s costs. Certified fit for counsel.

19.  It remains for me to question seriously whether this luckless defendant should in fact be required to pay costs occasioned by what appears to have been, at best, a breakdown of communication within the office of his solicitor, and whether those costs should not be borne by the latter in person. That particular solicitor is not before me this morning and he is, of course, entitled to an opportunity to show cause why no order for personal payment of costs should be made against him. On defence counsel’s undertaking to communicate with the solicitor and thereafter to inform my clerk of either the solicitor’s willingness to bear personally the costs to which I have referred, or alternatively, of his wish for an opportunity to show cause, I adjourn this aspect of the matter .

C. Ching (Wilkinson & Grist) for plaintiff.

M. Jackson-Lipkin  (P.H. Sin & Co.) for defendant.