DA MAO ENTERPRISES LTD v. MING LEE STATIONERY MANUFACTORY LTD AND ANOTHER

cacv 119/2005

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 119 of 2005

(on appeal from DCCJ NO. 4683 of 2004)

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REASONS FOR JUDGMENT

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Hon Le Pichon JA:

1.  This is an appeal from the judgment dated 27 September 2004 of HH Judge S Chow dismissing the plaintiff’s summons dated 13 September 2004 for an order that certain goods be delivered to the plaintiff by the 1^st defendant within 24 hours of the order to be made on the summons.  At the conclusion of the appeal hearing, the appeal was dismissed with costs with reasons to be handed down later which we now do.

2.  In its pleaded case, the plaintiff based its claim on a written purchase contract dated 2 June 2004 (“the first contract”) entered into with the 1^st defendant whereby the plaintiff agreed to buy and the defendant to manufacture and sell certain stationary items made in accordance with the plaintiff’s specifications with the side mark “MUJI MICRO OFFICE SET” (“the goods”) for onward sale to the end-buyer.  It relied on the 1^st defendant’s invoice No. MLD04/0027 dated 23 August 2004 from which it appears that the terms were cash on delivery, the net sum payable being $74,017.44.  It is common ground that payment was made and a receipt issued on 27 August 2004.

3.  The plaintiff took out a summons on 13 September 2004 under “inherent jurisdiction and/or O. 29 r.6 of RDC” for an order that “the first lot goods therein described in the statement of claim be delivered to the plaintiff by the 1^st defendant within 24 hours of the order to be made herein.”  The judge considered that the only issue before him was whether rule 6 applied.  He dismissed the summons having found that rule 6 had no application.  There is no appeal against the judge’s ruling as regards rule 6.  The present appeal has been brought on the basis that the judge erred in not giving any consideration to the alternative basis for relief which, whilst couched in terms of inherent jurisdiction, was said to be based on O. 29, r.1.

4.  It is not entirely clear whether there is any material difference between the court’s powers under O. 29, r.1 and its inherent jurisdiction.  See the annotation at 29/1/4 of Hong Kong Civil Procedure 2004.  Be that as it may, Mr Cheung who appeared for the defendants was content to accept that the court had the necessary power to make the order sought but that on the facts of the case, such an order was inappropriate.

5.  The parties argued the appeal on the basis that the issue is whether on the evidence before the judge, he ought to have granted an injunction pursuant to his powers under O. 29, r.1.  It was said that the injunction sought was a mandatory injunction to compel the 1^st defendant to deliver the goods to the plaintiff.  I have some difficulty with that submission in that in reality and in substance, the relief sought was nothing less than summary judgment on the plaintiff’s claim and specific performance of the first contract.  In my view, the grant of an injunction would be tantamount to the grant of a decree of specific performance; it would be specific performance by the back door.  But the application was never made under the applicable rules relating to summary judgment or to specific performance.  To criticise the judge for not granting a decree of specific performance in the circumstances would appear to be less than fair.  I would dismiss the appeal on this basis alone.

6.  Even if I am wrong about that and the judge ought to have considered whether or not to grant a decree of specific performance, as will become apparent, the appeal still falls to be dismissed because the facts of the case do not warrant summary judgment.  In summary, the plaintiff’s title to the goods is disputed and, in my view, that is a matter that must go to trial.

7.  The plaintiff grounded its case on the first contract, the invoice dated 23 August 2004 said to evidence the first contract and the fact of full payment of the purchase price by 27 August 2004.  The defence appears in the affirmation filed by the 2^nd defendant on 21 September 2004 in opposition to the plaintiff’s summons.  In that affirmation the 2^nd defendant explained that the plaintiff and the 1^st defendant had had prior business dealings and as at 21 May 2003, the outstanding balance owing by the plaintiff was just under $900,000.  The parties entered into an arrangement for the discharge of the outstanding balance (“the first arrangement”) whereby as from July 2003 the debt would be repaid by monthly instalments of $100,000 and so long as monies were outstanding, the plaintiff would pay cash for any new orders.  But by December 2003, instead of $600,000 the plaintiff had repaid less than $200,000. 

8.  The parties then entered into another arrangement (“the second arrangement”) whereby the plaintiff agreed to repay the outstanding balance by monthly instalments of $30,000-$50,000.  But the plaintiff also failed to honour this promise: between February and May 2004, the aggregate repayment was less than $92,000.  The plaintiff was then informed that no further orders would be accepted until the outstanding balance had been cleared.

9.  On 2 June 2004, the plaintiff sent the 1^st defendant a cheque for $30,000 as payment of the monthly instalment and faxed a purchase contract of that date to the 1^st defendant.  The plaintiff was informed that the 1^st defendant would not be accepting the order.  After further negotiations, it was agreed that the 1^st defendant would accept the order if (a) cash were paid upon taking delivery; and (b) the outstanding balance settled at the same time.  According to the 1^st defendant, this was “the third arrangement”.

10.  The plaintiff then asked for an invoice so that a cheque could be drawn for payment before taking delivery.  The 2^nd defendant agreed but insisted on condition (b) being fulfilled.  It was in those circumstances that the invoice relied upon by the plaintiff came into existence.  A cheque was duly sent to the plaintiff and presented for payment.  The plaintiff then asked for delivery of the goods whereupon it was asked when condition (b) would be fulfilled.  It was left that Madam Hung of the plaintiff would make contact.  On 30 August 2004, Madam Hung contacted the 2^nd defendant and made a proposal that the plaintiff would settle the outstanding balance by 10 equal monthly instalments with 10 post-dated cheques to be delivered as a security before taking delivery of the goods.  Eventually the parties agreed that the outstanding balance would be settled by six monthly instalments with six post-dated cheques to be delivered to the 1^st defendant and a personal guarantee to be executed by Madam Hung (“the fourth arrangement”).  A meeting was arranged for the following morning, 31 August 2004, at the office of the 1^st defendant’s former solicitors for the post-dated cheques to be handed over, the guarantee executed and for delivery of the goods to the plaintiff.  Madam Hung failed to keep the appointment.

11.  Mr Chan who appeared for the plaintiff relied on a statement of account dated 31 August 2004 sent by the 1^st defendant to the plaintiff a week after the issue of the invoice in question.  The plaintiff referred to the following part of the statement of account:

“

Received from your Company the cheque of HK$74,017.44 dated 27th August 2004 for payment of the price of goods under P/O PC/A4053175(REV.) and INV. NO.ML04/2237 and the cheque(s) of HK$30,000.00 for part of INV. NO.ML03/2239 being payment for the month of August 2004. Thank you (Pending to check with the bank whether the cheques are cleared). In accordance with the parties’ agreement made over the telephone : Your company has agreed to pay HK$30,000 – HK$50,000 per month commencing from February 2004 for instalment payment of the outstanding price of goods until the same was paid in full. Regarding newly ordered goods you will credit our factory’s account before taking the goods. As the outstanding debt is now at HK$496,664.47, we hope that your Company could pay the instalment for the month of September this year as soon as possible. If any inconvenience causes to you, please forgive us. Thank you for your patronage.”

It was submitted that given that statement emanating from the 1^st defendant, no agreement as alleged by the 1^st defendant could have existed, that therefor the defence is to be disbelieved and summary judgment given.

12.  Although the August statement is dated 31 August 2004, there is no evidence as to when it was created, who created it, and in what circumstances it was sent to the plaintiff.  There was no reason for the 1^st defendant to have adduced evidence on these matters when opposing an application made under the court’s inherent jurisdiction and/or O. 29, r.6.  It could not be said that the explanation given by the 2^nd defendant was unbelievable.  There may well be an explanation as to why the August statement was written in that way.  It has to be borne in mind that the third arrangement did not come into existence until about 23 August 2004 and within a week, in fact on the day prior to the date of the August statement, it had been superseded by the fourth arrangement.  Absent evidence that the statement was written by the 2^nd defendant, without a trial, it would not be possible to say that there is no defence to the plaintiff’s claim.  Moreover, it is clear that the 1^st defendant had an accounting clerk and it may well be that at the time the August statement was written, he had no knowledge of either the third or the fourth arrangements. 

13.  In any event, for the court to grant specific performance, it has to be shown that damages are not an adequate remedy.  There is simply no evidence on that issue from the plaintiff.  Although Mr Chan referred to paragraph 22 of Madam Hung’s affirmation to the effect that the end-buyer had warned that unless the goods were delivered on or before 30 September 2004, the contract between the plaintiff and the end buyer would be discharged by breach, that is hardly sufficient to demonstrate irreparable damage were the plaintiff to lose that particular end-buyer as a customer.

Hon Suffiad J:

14.  I agree with all that has been said by Hon Le Pichon JA and have nothing to add.