SHUN SHING ECONOMIC UNITED v. HONG KONG HUMIN CO LTD

1989, No. A2778

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. This case is a simple straightforward one. The plaintiff contracted to sell certain quantity of T.V. sets to the defendant under four separate contracts. The defendant sub-sold to a Hainan buyer in China.

2. T.V. sets under the first three contracts were delivered by the plaintiff to the defendant. The total amount came to some $2.795m. Under the 4th contract, the value of T.V. sets delivered was $1.008m.

3. At the time when dispute arose between the plaintiff and the defendant, payment for the goods delivered under the first three contracts had been made and payment for the T.V. sets under the 4th contract was made by way of a post-dated cheque. The cheque for the 4th contract in the sum of $1,008,000 fell due on 10th September 1988. The cheque was countermanded, but very little is know as to what immediately followed between the plaintiff and the defendant.

4. What is now being alleged by the defendant is : a little later, there was an oral compromise effected between the plaintiff and the defendant sometime in October 1988, whereby part of the goods allegedly defective under the first three contracts were returned to the plaintiff by the defendant. The value of the returned goods to the tune of some $1.115m. was pitted against the amount of the dishonoured post-dated cheque of $1,008,000, yielding a balance due from the-plaintiff to the defendant in the sum of $107,000. There was no claim made for the defendant's expected profits, but the plaintiff was to give an indemnity to the defendant against all claims from the Hainan sub-buyer for any defects of the T.V. sets which had already been delivered. Moreover, the defendant allegedly agreed to request the Hainan sub-buyer to effect repair to 1,000 T.V. sets under the 3rd contract. That is the totality of the alleged October compromise between the plaintiff and the defendant.

5. According to the defendant, subsequent to the compromise, it constantly pressed the plaintiff for the payment of the $107,000 and upon receipt of a claim from its Hainan sub-buyer on the 22nd December 1988 for US$19,359.27, the defendant also orally demanded an indemnity from the plaintiff.

6. That is all I need to refer to for the purposes of the present proceedings. The party went before the Master on an 0.14 summons for summary judgment. The Master granted conditional leave to defend, conditional upon the defendant paying into Court the amount on the dishonoured cheque of $1,008,000 by tomorrow.

7. The defendant feels aggrieved by the conditional leave so granted hence the instant appeal.

8. Before me, counsel have been exceedingly helpful and the points at issue are clear-cut. Mr Ismail, counsel for the plaintiff takes three points. It is more convenient to deal with the points raised by Mr Ismail, but one must not overlook the fundamental that it is for the defence to show a triable issue. In analysing the points advanced by Mr Ismail, the contention from both sides could coneniently be resolved, and I propose to take that course.

9. First, counsel for the plaintiff submits that the defendant has failed to show any consideration for the alleged October compromise. If in fact, so it is contended, it is a case of forebearance to sue on the claim arising out of the alleged defective goods under the first three contracts, it must be specifically pleaded. What in fact has been pleaded by the defendant is a set-off and in other paragraphs of the Defence, it is alleged that the defendant repeatedly demanded payment of the net balance of $107,000 from the plaintiff pursuant to the October oral compromise.

10. I have no wish to be discourteous, but having given this matter considerable thought in the course of submissions from both sides, the facts are clearly, in my view, sufficiently pleaded to allow the defendant to resort to a forebearance to sue on alleged defects under the first three contracts. It is abundantly clear that the defendant's right on the alleged defects in the T.V. sets delivered under the first three contracts is said to have extinguished in the alleged compromise. It would have been nonsensical for the defendant to make repeated oral demands thereafter for only $107,000 otherwise. In addition, Mr Yu, counsel for the defendant has directed my attention to matters which could arguably constitute good consideration. Counsel refers to the return of only part of the goods under the first three contracts, the absence of any claim for the defendant's loss of expected profits, the acceptance by the defendant of only $107,000 together with an indemnity against future claims of its Hainan sub-buyer and the defendant's agreement to request its Hainan sub-buyer to effect repairs to 1, 000 sets under the 3rd- contract. There is much substance in Mr Yu's submission that in addition to forebearance to sue, these other matters could arguably provide good consideration for the alleged oral October compromise.

11. Secondly, counsel for the plaintiff seeks to make much of "uncertainty". The point of uncertainty is sub-divided into two : (1) on the aspect of the net balance of $107,000 and (2) on the alleged indemnity procured by the defendant form the plaintiff. On both these matters, it is argued on behalf of the plaintiff that the defendant has failed to condescend upon particulars. More specifically, it is complained that it has not been pleaded when and how the net balance of $107,000 was to be paid - the parties having a history of accepting other mode of payment, for instance, a post-dated cheque. Further, as for the alleged indemnity, it has not been disclosed as to whether any time limit, for instance was set. On both aspects, Mr Ismail submits that too many lacunae were left in the alleged oral October compromise to make it stand otherwise enforceable.

12. As for the net balance of $107,000, the Defence has pleaded that payment was demanded from the plaintiff repeatedly. In fact by the 15th April 1989, the defendant was allegedly invited by the plaintiff to attend at its office for payment, where a document to which I shall return was produced.

13. When $107,000 is pleaded to be payable by the plaintiff to the defendant without more, in the light of the subsequent pleading of repeated oral demands, it is implicit that in the alleged compromise, the net balance was to be payable forthwith or as soon as practicable. There is hardly any uncertainty on the aspect of payment of the net balance by the plaintiff to the defendant.

14. As for the provision of indemnity, it is a plain indemnity against any future claims made on the first three contracts by the Hainan buyer. As pleaded in paragraph 16(4)(b), it is one whereby "the plaintiff should indemnity the defendant against all claims made by the (Hainan Sub-buyer) against the defendant as a result of the plaintiff's said breach of the 1st, 2nd and 3rd contracts". As it stands, it is arguably a valid indemnity clause. If there had been other terms agreed, obviously it would have been more desirable for those terms to be also set out. But as it is pleaded without any further affidavit evidence at this stage of an Order 14 application, the indemnity as pleaded cannot be said to be incontestably bad. Despite the efforts of Mr Ismail, there is no substance in the contention on "uncertainty".

15. Lastly, counsel seeks to embrace the conditional order of the Master on account of an alleged shadowy defence. In substance, it is the lack of documentary evidence and the absence of legal process which form the main criticism levelled at the defendant. But the matter has, in my view, to be examined in its proper overall perspective. There is likewise no documentary evidence at all emanating from the plaintiff. The parties seemed to have been content without confirmation in writing. Circumstances cannot be said to be suspicious.

16. The defendant had apparently returned a substantial quantity of T.V. sets under the first three contracts to the plaintiff, to the tune of some $1.115m on the 24th October 1988, after the alleged October compromise. The return to, acceptance of and retention of his quantity of T.V. sets by the plaintiff is not a matter in dispute. There has also been no disclosed documentary evidence from the plaintiff as to why this arrangement for such a huge quantity of T.V. sets had been so made. In fact, for and on, behalf of the plaintiff, except for a bare denial of the alleged October compromise, very little explanation as come forward as to why these sets were returned. The cheque is dated the 10th September 1988 and dishonoured on the same date, but not until the 17th May 1989 was a notice of dishonour given. The action against the defendant in this case was commenced some ten days afterwards on the 27th. The plaintiff has not given its version as to why the cheque was not immediately sued upon. In any case, no documentary evidence has been disclosed by the plaintiff explaining the delay or inaction on its part for this dishonoured cheque. The T.V. sets returned were accepted against a written receipt on which no further information was endorsed by the plaintiff.

17. The defendant has disclosed no documentary evidence for its oral demands for payment allegedly made after the October compromise. When the defendant was notified by the Hainan sub-buyer of the claim of some US$19,359.27, again there has been no documentary evidence disclosed in these proceedings that the plaintiff was ever notified in turn by letter. All the defendant has alleged in this case is oral repeated demands for the payment of $107,000, verbal notification to the plaintiff of the Hainan sub-buyer's claim and oral invitation from the plaintiff to attend at its office on the 15th April 1989 for payment. But the parties seemed to have been in the habit of not communicating in writing.

18. On 15th April 1989, by a document "AKC-7", exhibited to the affirmation of Mr Au Kwong Chi filed on the 3rd August 1989, the plaintiff proposed to pay the defendant with a 45 days' post-dated cheque. On the tenor of this document dated 15th April 1989, it is contended by Mr Ismail, counsel for the plaintiff, that it was a first offer ever made by the plaintiff to the defendant for settlement. According to the defendant, it was a request for further time to pay under the alleged October compromise by a 45 days' post-dated cheque. The phraseology of the document is such that it could be read consistently with both interpretations.

19. For matters that I have canvassed during submissions of counsel, in the absence of any explanations from the plaintiff in these proceedings, the document would seem to be more consistent with the defendant's version than that of the plaintiff's. Many T.V. sets had been held, no action was taken on the cheque in question drawn by the defendant until five/six months thereafter, and this document of 15th April 1989 was produced for signature by the defendant only much later in time. It does suggest that there must have been some form of a concluded agreement in the past.

20. The defendant rejected the payment by a 45 days' post-dated cheque. According to the plaintiff, there was thus no settlement. The defendant's version is : there was no indulgence granted. An issue is joined and it must be resolved.

21. I have, during the course of counsel's submissions, also been led carefully through various criticisms directed against the defendant's Defence. Suffice it for me to say that in all the circumstances, none of which has cast any justifiable suspicion against the defendant in either the mode of presenting its case or its allegations. The defendant has established a triable issue as regards the dishonoured cheuqe and the matter must go to trial. Therefore, the conditional leave granted by the Master cannot, in my view, be supported. Consequently, the appeal is allowed and the plaintiff's cross-appeal made today be dismissed. The Master's order be affirmed with the modification that leave to defend granted to the defendant be wholly unconditional. Costs of today's appeal, subject to what counsel have to say, should be costs in the cause.

(Submissions on Costs made)

22. It is always easy to criticise with hindsight. I have decided overwhelmingly against the contentions raised on behalf of the plaintiff, but there are certainly matters op to legitimate arguments only they be demonstrated by the written submissions, prepared twice on behalf of the plaintiff. I have listened attentively to the request made on behalf of the defendant, but in all the circumstances, a just order should be the one as I have proposed. I order (1) appeal be allowed; (2) cross-appeal be dismissed; (3) Master's affirmed with modification leave to defend be unconditional; lastly, (4) costs before the Master and today be costs in the cause.