NISSEI SANGYO AMERICA LTD v. PHILIP LAWRENCE CHOY

Civil Appeal No 38 of 1991

HEADNOTE

                Claim for damages for deceit struck out pursuant to RSC 182 r 19(1) for want of a memorandum in writing signed by the defendant as required by s 13 of the Law Amendment and Reform (Consolidation) Ordinance (Cap 23)

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JUDGMENT

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Kempster, JA:

1. This is an appeal from an order of Mayo J, made on 11 February of this year in relation to proceedings in the commercial list, refusing to strike out the whole of the Statement of Claim and to dismiss the action and condemning the defendants in 75% of the plaintiffs' costs. The judge did order that paragraphs 18 to 23 inclusive and paragraphs 5 and 6 of the prayer should be struck out. The defendant seeks from this court an order striking out the whole of the Statement of Claim and dismissing the action; alternatively a stay on the basis of forum non conveniens. For their part the plaintiffs. cross-appeal against the order of Mayo J insofar as the contents of the Statement of Claim were thereby affected and they were ordered to pay costs.

2. It is alleged in the Statement of Claim that on 1 September 1987, by reason of false representations made by the defendant, the plaintiffs concluded a "Sales Representative Agreement (SRA)" with Camaro Trading Corporation Ltd ("Camaro") whereby they appointed Camaro their exclusive agents for the sale of certain cassette mechanisms to the Chrysler Corporation in Alabama and paid commission without deduction of tax. It is further alleged that the plaintiffs have incurred legal fees in negotiating with the Revenue and have been rendered liable to the authorities, contingently at least, for the tax which should have been withheld and for further penalties. The false representations alleged were that Camaro was a United States or an Alabama corporation or a foreign company licensed and able to do business in Alabama. As is common ground, Camaro is a Hong Kong and not a United States corporation.

3. The material paragraphs in the pleading are, I think, to be found first of all in paragraph 13 which reads : -

(1)	The plaintiff made the commission payments without withholding any tax and without requiring Camaro to provide a relevant exempting statement or Form IRS 4224 as aforesaid;
(2)	The plaintiff was led to believe that Camaro itself was liable to discharge tax on the commission payments as part of its normal taxable income.

4. And then paragraph 15 "......

Particulars of Fraud

I now turn to the facts from which the representations are alleged to have been inferred: -

(1)

The SRA (the agency agreement) expressly described Camaro as "having an office in 1805 University Drive, Huntsville, AL 35801" in its recital.

(2)

By clause 14(a) of the SRA, all notices and other communications under the SRA to Camaro were to be addressed as follows: -

Camaro Trading Co., Ltd 1805 University Drive Huntsville, AL 35801.

(3)

Clause 14(a) of the SRA further provided that the telephone and telex numbers of Camaro were both Alabama numbers, namely 205-533-9281 and 810-726-2194 respectively.

(4)

The SRA designated Camaro as the plaintiff's "exclusive sales representative" for a single product, namely, the Shinwa cassette mechanism, to a single customer, namely, Chrysler, at a specific location, namely, at Huntsville, Alabama.

(5)		By clause of the SRA, it was provided that Camaro should use its best efforts and skill to sell, promote and generally create a demand for the said, product in Huntsville. The personal nature of such service by Camaro was reinforced by clause 16 of the SRA which provided that neither party should assign the SRA or any rights or obligations thereunder without the express consent of the other party.
(6)		The SRA was signed in Alabama by Domer Ishler on the express authority in writing of the defendant. Domer Ishler was known to the plaintiff to be a resident of Huntsville, Alabama, and was an individual with whom and with those companies, trading at the aforesaid address in Huntsville, the plaintiff has previously dealt.

(7)

By procuring Domer Ishler to sign the SRA on behalf of Camaro with an unqualified signature and by enlisting Domer Ishler's participation in signing the same, the defendant impliedly represented to the plaintiff that Camaro was an Alabama corporation or. enterprise carrying on business at such address.

(8)

At or about the end of 1984, the defendant on behalf of Camaro purchased a 33-foot Trojan International pleasure boat named the 'Eagle' which was docked at Ditto Landing, Huntsville during the period from the end of 1984 to March 1989 for the purpose of entertaining customers of Camaro, including in particular representatives of the plaintiff acting in relation to the SRA."

5. At the opening of the defendant's appeal this Court was concerned as to whether or not any tribunal could infer a misrepresentation on the basis of the particulars just read; particularly as each of the matters of fact pleaded as, cumulatively, grounding the claim for damages for fraudulent representation is accepted to be true. However, in the face of this difficulty Mr Rogers, on the defendant's behalf, applied to add certain amendments: -

If the amendments were allowed it could well be contended that in entering into the agency agreement with Camaro in reliance on the implied representations of the defendant, the plaintiffs had assumed and been entitled to assume that the other contracting party, Camaro, must have been either an Alabama or a United States corporation or a company licensed or registered to transact business in the State of Alabama and the pleading saved.

6. Another issue arises, namely the absence of any averment in the Statement of Claim that the representations or assurances relied upon had been made in writing in the terms of s 13 of the Law Amendment and Reform (Consolidation) Ordinance (Cap 23). This section reproduces s 6 of the Statute of Frauds Amendment Act 1828; "An act for rendering a written memorandum necessary to the validity of certain promises and engagements". S 13 reads: -

Submissions on the effect of this section were invited by the court and Mr Rogers spent a number of uncovenanted hours researching authorities on the English Statute; no Hong Kong authority on s 13 of the Hong Kong Ordinance having been discovered. These authorities show that s 6 of the English Statute was subject to certain ambiguities; particularly as to whether it applied to proceedings other than those involving a representation such as actions grounded in contract or negligence and, even more importantly, where fraud was not alleged. We have been referred particularly to Lyde v Barnard [1836] 1 M&W 101; Tatten v Wade [1856] 18 CB 371 and Banbury v Bank of Montreal [1918] AC 626.I find certain passages significant. In Lyde v Barnard at p 119 Lord Abinger CB said: -

The mischief that the authorities appeared to identity is the frequency of claims in deceit, following Pasley v Freeman (1789) 3 TR 51, whereby the provisions of the Statute of Frauds requiring an instrument in writing in relation to a guarantee were thought to have been evaded. Mr Rogers is, I think, right in submitting that the authorities cited deal with situations where credit was given. This may explain a further extract from the judgment of Lord Abinger in. Lyde v Barnard at p 123: -

And a passage from the speech of Lord Atkinson in Banbury v Bank of Montreal at p 692: -

"there cannot be any possible doubt as to what was the cause and necessity of the passing of Lord Tenterden's Act. (That is a reference to the draftsman of the English Statute) It was the evasion of the 4th section of the Statute of Frauds by the decisions in those actions for deceit, of which Pasley v Freeman was the first. In these actions the parties were made liable, not for innocent representations and assurances, but for false and fraudulent representations and assurances of a third party's solvency, made by parol with intent to deceive, and acted upon by those to whom they were made."

Ninety-nine cases out of a hundred claims for damages for deceit are doubtless based on representations as to the credit worthiness of a third party. I am nonetheless satisfied that the representations relied upon in the instant case, albeit of a somewhat different nature, come within both the letter and the intent of s 13. Referring to Pasley v Freeman Lord Atkinson went on at p 693: -

"It was to remedy the inconvenience resulting from the frequency of those actions that Lord Tenterden introduced the statute ... In my opinion the object of Lord Tenterden's Act was somewhat similar, namely, to secure that in all actions for deceit, such as Pasley v freeman, the false and fraudulent representation relied upon should be proved by a written document signed by the party to be charged, and in no other way."

7. Turning again to the pleaded facts with s 13 of the Law Amendment and Reform (Consolidation) Ordinance in mind the allegations of the plaintiffs, as I understand them, are that the defendant mane a representation or assurance, to be inferred from, for example, the agreement he procured and from his acquisition of a boat, concerning the character, conduct, credit, ability, trade or dealings of Camaro. He is alleged to have done so by representing, falsely, that it was either an Alabama or a United States corporation or a foreign company registered or licensed to carry on business in Alabama and having the ability to discharge its obligations arising under the agency agreement and to engage in appropriate dealings. The expression "character" is wide enough to cover the place where a company is registered, resident or domiciled. Seeking to construe the words" to the intent or purpose that such other person (Camaro) may obtain credit, money or goods thereupon" it is difficult to accept that money can be obtained on credit. As I read them the word "thereupon" refers to the representation or assurance.

8. In the absence of any pleaded reference, which there could hardly be when only inferences were relied upon, to a document in writing reciting the representations and signed by the defendant, I find the claim for damages for deceit unsustainable and clearly and obviously so. Accordingly I would presently allow the defendant's appeal and strike out that part of the prayer in the Statement of Claim dependent on the cause of action in deceit pursuant to RSC Order 18 rule 19(1).

Penlington, JA:

9. I also agree that this appeal should be allowed. It seems to me that even without the provisions of section 13 of the Law Amendment and Reform (Consolidation) Ordinance the plaintiffs' claim, as containing the proposed amendments, would present the gravest difficulties. It seems to me that the allegation that there was an inducement or fraudulent representation made by reason of the fact that Camaro had an office in Alabama could not possibly support the claim and, indeed, it is interesting to note that in an affidavit filed by the plaintiff's vice-president, Mr Steven Snoke, he himself says that there is no reason to suppose that having an office in Hong Kong made Camaro a Hong Kong corporation. The same must apply, I think, to Camaro's Alabama office. Be that as it may I am satisfied that s 13 does clearly cover the situation and that there was a representation made as to the character, conduct, credit, ability, trade or dealings of Camaro as a result of which the defendant fraudulently procured the payment by the plaintiff to Camaro of Federal Tax which otherwise it would have withheld

Bewley, J:

10. I agree with both judgments just delivered and have nothing to add.