Intergulf Express H.K. Limited and another v. Delta Asia Credit Limited

IN THE COURT OF APPEAL

1997, No. 184

(Civil)

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J U D G M E N T

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Godfrey, J.A. :

Introduction

1. This is an appeal from His Honour Judge Gill, sitting as a deputy judge of the High Court (now the Court of First Instance) in a case in which the judge gave judgment on 27 June 1997. The parties to the action before him were Intergulf Express H.K. Limited and the Airfreight Master Limited (the "plaintiffs") and Delta Asia Credit Limited (the "defendant"). The plaintiffs' action against the defendant was an action for damages for breach of contract. The judge dismissed the action. The plaintiffs now appeal.

Background

2. As the judge noted, the plaintiffs are associated companies incorporated in Hong Kong. They are freight forwarders. In the ordinary course of their business, they receive, for services rendered, cheques or drafts in foreign currencies.

3. Since 1981, the plaintiffs have dealt with most of these by negotiating them for Hong Kong dollars with the defendant, a foreign exchange dealer licensed to carry on that business.

4. The dispute between the plaintiffs and the defendant which we have to resolve on this appeal concerns the content of the defendant's obligations to the plaintiffs. It is clear that the defendant was prepared to do business with the plaintiffs only on certain terms. These included the giving by the plaintiffs to the defendant of an "Undertaking and Indemnity". This is dated 15 October 1981, and reads, so far as is material, as follows :

"I/We hereby request and authorise you to purchase cheques from me/us from time to time. In consideration of the purchase of cheques by you,

I/We, [the plaintiffs]

hereby agree without reserve to bind myself/ourselves to the terms and conditions as set forth below :-

.....

(5) It is my/our understanding that foreign exchange transactions are settled by Hong Kong Dollar crossed cheques in my/our favour, and only at my/our written request or standing instruction, acceptable by you, will cash be paid.

Whereas you have adhered to my/our request, I/we agree without reserve to waive the rights for any claim against you."

5. There are seven other clauses in the "Undertaking and Indemnity", each of which declares a term upon which the defendant is prepared to do business with the plaintiffs. There is no comparable instrument which recites the obligations undertaken by the defendant when it agrees to purchase a cheque from the plaintiffs.

The issue

6. The question is whether, as the plaintiffs contend, there is an obligation on the part of the defendant to settle with the plaintiffs, for a cheque accepted by the defendant by way of purchase, by, and only by, a Hong Kong dollar crossed cheque.

The casus belli

7. What happened here was that the defendant, without any written request from the plaintiffs, settled certain of its transactions with the plaintiffs by cash, and not by Hong Kong dollar crossed cheques. These cash payments were unfortunately intercepted by a fraudster in the employ of the plaintiffs and were never received by the plaintiffs.

The task of the court

8. The task of the court in these circumstances is to search for some contractual obligation, on the part of the defendant, of a breach of which the plaintiffs are entitled to complain. In my judgment, no such obligation can be derived from the terms of the "Undertaking and Indemnity". That is clearly a unilateral document, which, so far as it imposes obligations on any party, imposes them on the plaintiffs alone.

9. It follows, as it seems to me, that no question of construction of the "Undertaking and Indemnity" arises. It contains nothing at all which imposes any obligation on the defendant. Its function is limited to recording an understanding on the part of the plaintiffs as to how settlement is to be effected, recorded because the defendant wants to ensure that it cannot be called on to settle any transaction in cash; at any rate, not in the absence of a written request or standing instruction which it has accepted. The claim of the plaintiffs against the defendant in the action was based entirely on an assumption that clause (5) of the "Undertaking and Indemnity" imposes an express contractual obligation upon the defendant. This, in my judgment, is completely misconceived.

Conclusion

10. The conclusion to which I come therefore is that the judge was right to dismiss the plaintiffs' action. I come to this conclusion with some reluctance. Looking at the course of dealings between the parties, and in particular to the fact that the defendant proferred, for the plaintiffs' signature, the "Undertaking and Indemnity" containing as it did clause (5), it seems to me that it might have been pleaded, and proved, that the defendant represented to the plaintiffs that its practice was to settle these transactions by way of Hong Kong dollar crossed cheques and that that would be the only way in which these transactions would be settled in the absence of express agreement to the contrary. That might have given rise to a case based upon an implied term, or an estoppel. But the plaintiffs' case was never put on that basis, and at this stage it would be an injustice to the defendant, whose counsel conducted its defence below on the plaintiffs' case as pleaded, to allow any such new case to be raised now.

11. For these reasons (although, as I say, with some reluctance) I have no hesitation in concluding that we must dismiss this appeal.

Liu JA:

12. The only issue in this appeal is the effect of clause 5 of the Undertaking and Indemnity signed by the plaintiffs alone. Clause 5 clearly created no contractual obligation on the part of the defendant to settle foreign exchange transactions by crossed cheques. But insofar as clause 5 evidenced any term of the contract between the plaintiffs and the defendant, which may be said to give rise to the effect alleged by the plaintiffs, that term, if any, could only be one implied. No implied term was pleaded. Further, the real situation, not having been properly canvassed at the trial, may never be known. I agree with the conclusion reached by my Lord, Mr Justice Godfrey. I, too, would dismiss this appeal.

Keith J. :

13. I agree that this appeal should be dismissed. In my view, clause 5 of the Undertaking and Indemnity (which was one of the Defendant's standard forms) did three things:

(i) It identified what the Defendant's practice was. That practice was to settle foreign exchange transactions by Hong Kong dollar crossed cheques payable to the customer, and that practice was only departed from when there was a written request or standing instruction from the customer.

(ii) It amounted to an acknowledgment by the Plaintiffs that they knew what the Defendant's practice was.

(iii) It provided that if the Plaintiffs requested the Defendant in writing to depart from its practice, no claim would be made by the Plaintiffs if payment in cash caused the Plaintiffs loss (because, for example, the cash was diverted and never reached the Plaintiffs).

For the reasons given by Godfrey J.A., I do not see how any of the clauses in the Undertaking and Indemnity (being a unilateral document) imposed any obligation on the Defendant, let alone how clause 5 can be construed as imposing an obligation on the Defendant to settle foreign exchange transactions in accordance with its practice.

14. As Godfrey J.A. said, it may be that such an obligation could be implied, or that the Defendant could be treated as estopped from asserting that it was entitled to depart from its practice. But that was not pleaded, and Mr. Warren Chan S.C. for the Defendant told us that the case would have been conducted differently if the case which he had had to meet was something other than breach of an express term.

15. In those circumstances, it would not be appropriate for us to consider what the legal effect would have been if an implied term or estoppel had been pleaded.