UNION PCB LTD. v. CHAN CHI ON AND ANOTHER

1988, No. A8007

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The plaintiff claims against the defendants trading as Pakai Company for goods sold and delivered under three separate Purchase Orders. The defence is, in essence, alleged late delivery causing loss and damage.

2. The parties attended at the Chambers of the Master who granted unconditional leave to defend. The plaintiff feels aggrieved and now takes the matter before this Court on appeal.

3. Divers issues are raised on behalf of the plaintiff by Mr Hung. It is submitted the small quantities allegedly delivered late under the said Purchase orders could not have legitimately led to or otherwise justified the alleged drastic ending of the defendants' own Sub-Contracts for as many as 560,000 articles having been wholly frustrated. I need not go into detail relied upon by Mr Hung, counsel for the plaintiff. Suffice it to say, the plaintiff through its counsel seems to have assumed too readily that the comparatively small quantities would not have played any significant role in causing inability on the part of the defendants to perform their Sub-Contracts. It is not impossible that the defendants had waited for the delivery of all the quantities before commencing manufacturing. It is possible that the defendants had withheld completion without all the quantities. It is also possible that for good cause the defendants had chosen not to substantially perform their own Sub-Contracts for these 560,000 articles before production of the entire bulk. No circumstances have been disclosed to exclude any of these possibilities. It cannot be truly said that "quantities" alone has cast any suspicion on the case of the defendants. The contention based on what has been described as small quantities in late delivery, therefore, would not take the plaintiff's appeal further.

4. Next, it is complained on behalf of the plaintiff that among the various matters brought to the attention of the Master, some reflect on the defendants' insincerity in a case which is not satisfactorily supported : first, the defendants claim extra costs said to have been incurred by delay in the sum of $25,000. Initially, that claim related only to one of the defendants' customers. This particular sum of $25,000 is said to have now been inflated to $37,519 by paragraph 5(a) of the draft Defence and paragraph 3 of the affirmation of solicitor for the defendants, Mr Fredrick Fung. But such extra costs are now said to be the loss of two customers. Secondly, some $48,000 is claimed as a result of one of the defendants' Hong Kong customers, "Wai Ko" allegedly refusing to accept 20,000 component parts. The component parts under complaint are PK-63, but in Wai Ko's Order No. 1637, exhibited as "FLYL-1" to the said affirmation of Mr Fredrick. Fung, the reference of the article was given as M-63. In Wai Ko's statement, "CCO-4" to Mr Chan Chi On's affirmation filed on the 31st January 1989, the $48,000 claim for such refused delivery of these 20,000 component parts was made on M-63 and not PK-63. Thirdly, the further damages to the extent of $14,551, elaborated now as the additional air freight under Wai Ko's Order No. 1653, could not be tidily linked to any information in the last-mentioned statement, the $14,551 claim in which refers only to "PK88-133 $49,904". The Court is not assisted as to what relevance PK88-133 has, and "$49,904" does not link up with any of the figures set out in Wai Ko's said Order No. 1653. Fourthly, counsel for the plaintiff draws my attention to the fact that delay for component parts MH-238A in the first Purchase Order was not even being complained of in the said affirmation of Mr Chan. Defendant Chan merely claimed excess delivery. Alleged delay is only raised in the draft Defence and paragraph 5 of the said affirmation of Mr Fredrick Fung.

5. Whilst the oral agreement for the first Purchase Order between the plaintiff and the defendants was reached at the end of March 1988, some of the defendants' Sub-Contracts in Exhibit "CCO-3" to the said affirmation of Mr Chan, bear dates later in time between 21st April to 3rd May 1988. Wai Ko's Orders No. 1637 and 1653 were even in June 1988. Counsel for the plaintiff suggests that the Purchase Orders of the defendants from the plaintiff would not likely have been placed for the execution of these Sub-Contracts as alleged and that therefore these Sub-Contracts were probably unconnected with the plaintiff's claims under the said Purchase Orders. I do not, however, indorse such speculation which can cause no real damage to the case of the defendants. For the same parity of reasoning, oral agreements for these Sub-Contracts of defendants could also have been much earlier in time. The speculative time element cannot be material.

6. For the first Purchase Order, the allegation of the defendants is that of the stipulated June delivery 300,000 pieces, 82,000 pieces were delivered late in July. The contract delivery date for the last 200,000 pieces in this Purchase Order was for July 1998. Mr Hung submits for the plaintiff that even on the defendants' assertion, there was, in fact, no delay because the remainder of the pieces were, according to the defendants, all delivered on the 18th July 1988. Counsel seems to be confused in the instalments for delivery. The late delivery complained of by the defendants is the one for June. The contract delivery date for the last instalment of 200,000 pieces in July has no relevance.

7. Paragraph 5 of Mr Fung's said affirmation sets out an alleged late delivery of 82,000 component parts MH-238A in the first Purchase Order, but no attempt has been made to clarify for me the further in formation volunteered by Mr Fung as to a delivery of "378,000 pieces out of which 96,000 were in excess which had already been returned by the Defendant". Defendant Chan in paragraph 17 of his said affirmation referred to excess delivery of 150,000 pieces over and above the ordered 900,000 pieces of PK-238A (be it noted, not MH-238A). I am still at a loss as to what significance may be attached to these new 96,000 pieces.

8. Counsel for the plaintiff also takes the point that the figures in the draft Counterclaim have deliberately been inflated close to the net claim of the plaintiff in the sum of $105,383. As a matter of fact, the aggregate of the three figures $37,519, $48,000, $14,551 would, I am told, be $100,070, some $5,313 short of the claim of the plaintiff. Mr Poon, Counsel for the defendants, hastens to add that the claim for other damages by the defendants would exhaust this remaining sum of $5,313. Hence, it is submitted that a bona fide defence has been raised as against the whole claim of the plaintiff.

9. What is of crucial importance, is the suspicion surrounding the mode of the defendants presenting their defence. The allegation of extra cost of $25,000 being inflated to $37,519 is not supported by any affirmation of any of the defendants. It is introduced by paragraph 3 of the said affirmation of Mr Fredrick Fung, solicitor for the defendants. That paragraph provides interesting reading and it reads :-

"In paragraph 13 thereof, due to an oversight on the Defendant's part, what the Defendant meant to say was as a result of the delay in delivery of the said parts, the Defendant was only able to fulfil the said sub-contracts made with two and not one as previously deposed [to] in the Defendant's affirmation of its Hong Kong customers, namely Goldwill Trading Company and Wai Ko Electronics Company with extra costs incurred in the sum of $37,519 and not $25, 000 as previously deposed [to] in the Defendant's early affirmation in having to engage gage overtime's staff to complete the assembling of the electrical parts."

10. None of the defendants, Mr Chan or Mr Wong has verified this statement made by Mr Fredrick Fung; nor has Mr Fund himself disclosed the source of his information. Mr Fung merely states that having conduct of the proceedings on behalf of the defendants, he has been authorized by the defendant to make his affirmation and unless otherwise stated, the facts and matters deposed thereto are within his personal knowledge and/or derived from documents and are true to the best of his knowledge, information and belief. Mr Fung has not specified the documents that he has perused or from which the alleged information was gleaned. Mr Fung has not indicated how he came by his personal knowledge of the information disclosed, particularly the increase of the alleged $25,000 to $37,519. The additional claim is said to have been necessitated by an "oversight" on behalf of the defendants. Without verification from the defendants and without disclosure of the source of information by Mr Fredrick Fung, little capital may be made out of the increased claim of $37,519. As for the $25,000 originally claimed, there is no explanation whether it is now sought to be tied to one customer or another or to both. The same may also be said for the $37,519. The defendants are left with a bare inflated figure of $37,519 for which there is no proper verification or sufficient particulars. Some areas, as I have pointed, in the unverified version of Mr Frederick Fung are not consistent with matters disclosed in Defendant Chan's affirmation. It is an unusual attempt to set up a bona fide defence.

11. Apart from the originally alleged $25,000, the rest of the Counterclaim of the defendants are, therefore, supplemented only by Mr Fung's bald assertions. Even for the $25,000, I feel somewhat disturbed by it for the reasons I have given.

12. As for the claimed $48,00 in respect to comonent parts PK-63 and $14,551 alleged air freight, these are now sought to be elaborated by Mr Fung's highly inadequate affirmation. I have earlier set out matters which cause concern.

13. In view of the mode of presenting the defendants' case here, one is driven to query the genuiness of the defendants' defence and counterclaim. For what good reasons should a defence or counterclaim be so inadequately presented? There is no doubt in my mind that this is a fit case for ordering payment into Court.

14. I would be prepared to give the defendant the maximum benefit of doubt. Hence, the original extra costs claim for $25,000 arising from the alleged late shipment, though rendered uncertain by the unverified new figure of $37,519, should perhaps be given credit for our present purpose. I am equally anxious as to the defendants' mode of presenting their claim even on this sum of $25,000, but with some reluctance I would order a payment-in of only a smaller sum. Therefore, of the plaintiff's claim of $105,383, in this sense, there remains a balance of $80,383 unaccounted for. That is the sum I order the defendants to pay into Court before they or their firm are allowed to come in to defend.

15. The appeal of the plaintiff therefore succeeds in part. The order of the Master is accordingly set aside. The defendants do have leave to defend conditional upon the defendants paying into Court within 14 days from today a sum of $80,383. Counsel for the defendants requests viva voce in the well of the Court for a period of a month. I am certainly not prepared to allow the defendants that extraordinary indulgence. After all, the writ was issued in mid December 1988. Fourteen days would, in my view, suffice. Unless the defendants so pay into Court $80,383 within 14 days from today, the draft Defence and Counterclaim may not be filed and thereupon the plaintiff be at liberty to sign judgment against both defendants Chan Chi On and Wong Chiu Wa.

16. Subject to what counsel have to say, I order that costs of this appeal and costs before the Master be 4/5 ths to the plaintiff. (No submissions made on costs). The formal order that I make is as follows :

(1)    Appeal allowed;

(2)    Order of the Master set aside;

(3)    Defendants to have conditional leave to defend upon payment into Court of $80,383 within 14 days from today;

(4)    Unless the defendants so pay into Court $80,383 within 14 days from today, the plaintiff be at liberty to thereupon sign judgment against both defendants;

(5)    cost of the appeal be 4/5ths to the plaintiff;

(6)     cost of hearing before the Master be also 4/5ths to the plaintiff.