SMELOAN HONG KONG LTD v. TODAY’S MASTER LTD t/a MASTER GRAPHIC

CACV202/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 202 OF 2004

(ON APPEAL FROM DCCJ NO. 3376 OF 2002)

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J U D G M E N T

Hon Rogers VP: 

1.  This is an appeal from a decision of Her Honour Judge Chan given on 27 April 2004.  The claim in this case is made by a finance company, which financed Precision Proofing Company Limited (“Precision”), for the continuation of its business. 

2. The system of operation between the plaintiff and Precision was this: once the plaintiff had approved the loan, which was secured against the receivables, the borrower, namely Precision, would send by   e-mail or, at any rate, enter onto the plaintiff’s website, details of all the invoices which were issued. 

3. One of the clients of Precision was the defendant and Precision and the defendant had a continuing business relationship.  That appears to have been in respect of small jobs of work which the plaintiff was able to undertake rapidly, partly because the plaintiff apparently worked 24 hours a day.

4. The claim in this case amounts to $99,459.25 which is the amount said to be outstanding for work which was done in September, October and November of 2001; there was a 45 per cent discount which Precision allowed the defendant. 

5. The defendant did not dispute the invoices issued prior to September 2001 and has paid them.  The interesting thing about that is that the computer records of the plaintiff in respect of those corresponded exactly to the invoices up to September.  What was in dispute in this case were the invoices from September onwards. 

6. Precision had not kept its copies of the invoices.  They had been lost in the confusion which had occurred when Precision’s business closed down.  The creditors came calling for their money and the landlord distrained for rent.  The judge has accepted that, as a result, there is a valid explanation as to why the invoices which Precision issued in those three months are now missing.

7. However, the computer records are still there in the plaintiff’s computer and the printout was put in evidence.  There was nothing raised at trial as to why those records were inaccurate in any way.  The plaintiff’s witness was cross-examined.  She had never seen the actual invoices but relied entirely on what Precision had told the plaintiff by    e-mail from time to time. 

8. One of the important findings of fact by the judge was that Mr Chan, who had been the managing director of Precision, was a truthful witness.  Mr Chan gave evidence, in very succinct terms, that not only had Precision done business with the defendant in those three months, but invoices had been issued.  The important point to my mind in this case is that those invoices which were issued to the defendant have never been produced by the defendant.

9. Mr Kong who gave evidence on behalf of the defendant, denied that any work had been done by Precision for the defendant.  He said that the decision had been taken by the defendant’s directors not to give Precision any further work.  The judge disbelieved him.  The judge accepted that Precision had done work on behalf of the defendant.  The judge had therefore accepted that invoices have been issued.  In those circumstances, it is clear that the defendant has not produced those invoices.  If the defendant wished to challenge the computer records, it seems to me that it had to produce those invoices to show that there was some reason for challenging the plaintiff’s claim.  In my view, the plaintiff is entitled to rely upon the principle in the case of Armory v Delamirie (1721) 1 Stra 505, that those who do not produce something which they should produce may well suffer from having it presumed against them that that thing or document if produced would have supported the counter-party’s case. 

10. In this case, the judge, when considering the computer records, has made a number of observations.  The first was that some of the details of the invoices had not been entered into the computer records.  That, on its own, cannot be a point because the data which was entered included the number of the client, the client’s name, the number of the invoice, the date of the invoice, the amount, the balance, the date of entry, and the state of acceptance.  That, it seems to me, should have been sufficient. 

11. Then relying upon section 49 of the Evidence Ordinance, the judge observed that the staff of Precision who made the various entries had not been called to give evidence and the judge referred to the computer records as therefore being double hearsay.  Furthermore, the judge observed that there was no evidence that there had not been unauthorised interference with the computer and that the computer’s operation was perfectly normal.

12. All these things, to my mind, are of course true.  But the fact remains that the computer records prior to September were in immaculate order and nothing has been said to challenge those.  There is no reason to my mind, on any of the evidence in this case, to suppose that there was any inaccuracy in the computer records after August.  But given the fact that the defendant has not produced the documents which it should have produced, it seems to me that the case has to go against the defendant and that this appeal has to be allowed.

Hon Le Pichon JA: 

13. I agree.

Hon Stone J:

14. I also agree.  In my view, the judge was too easily derailed by what, for convenience of reference, may be termed the ‘hearsay point’ which was raised by the defendant.  Against the backdrop of the judge’s findings, the computer records were the best available evidence upon which the plaintiff could rely and, as my Lord the Vice President has recounted, the judge fully accepted the plaintiff’s evidence and rejected that of the defendant. 

15. There was no evidential basis for suggesting that the computer records were in error or that the computer in question had in any way malfunctioned.  This was simply speculation raised, in my view, by an opportunistic defendant whom, as my Lord has already commented, appears not himself to have discovered the relevant invoices.

16. In the circumstances, I have no hesitation in holding that the ‘persuasive burden’, to the existence of which my attention specifically has been drawn by Mr Cheng, has been discharged by the plaintiff.  I respectfully consider that the judge below was in error.

17. For my part, I too would allow this appeal.