GREAT TREASURE INTERNATIONAL LTD. v. MIMASU (HK) CO. LTD.

CACV 222/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 222 OF 2002

(ON APPEAL FROM DCCJ 16767/2001)

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J U D G M E N T

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Hon Rogers VP:

1. This is an appeal from the judgment of Deputy Judge Kwok given in this action on 22 January this year on an application for summary judgment. The action was a claim on a cheque, the total amount being $119,369. The cheque was given by the defendant to the plaintiff in respect of goods, namely, men's woven pants which had been manufactured in China and were to be shipped to Japan.

2. There were questions which arose as to whether there were defects in the goods, in particular it appears that one of the matters which the defendant required was that care should be taken that needles were not left in the goods. The goods were shipped to Japan and difficulties did arise fairly soon after they were shipped. On 6 September there was what appears to have been an email or a fax setting out some complaints about the goods and suggesting that inspections were going to take place; the goods were going to be recalled from the shops in Japan and inspected.

3. In another letter, of which we have a translation, dated 6 September - this time from the defendant to the plaintiff - a complaint is made about the poor workmanship, the uneven stitching, broken stitching and missing stitches and also the size, and where it is said that the "Customer will reject the pants and return them to our company because of the serious wrong size. We reserve our right to pursue against your company".

4. However, despite these communications, a Mr Noda made an affirmation on 14 November of last year in which he said, amongst other things, in paragraph 12: "The defendant was demanded by their customers in Japan to make compensation and threatened to return the goods to the defendant; and the defendant subsequently agreed to bear the cost on making good of the defects and such transportation charges. Fukunaga called Wong to ask him how to deal with the matter." Now that, in my view, is clearly a statement that although there were defects in the goods they were perhaps such as could be remedied.

5. Subsequent to that there was another affirmation, this time by Miss Peggy Chong Pui-kee - and this is dated 3 December of last year, shortly after Mr Noda's affirmation - in which it is suggested that the Japanese customer has rejected the goods. It is not known on what legal basis the Japanese customer has rejected the goods. What the legal rights in Japan are to reject goods is not known. Hence, this is possibly a confirmation that there were defects in the goods, but from all the documents which have been shown to this court, it is not clear that the goods were so totally defective that the defendant received nothing.

6. In this case the judge below rejected the defence which was based upon conditional delivery of the cheque, but he found that there was a defence that had been total failure of consideration. On that basis he dismissed the plaintiff's summons for summary judgment. In my view there is no basis here for saying there has been total failure of consideration and, therefore, there is no basis for dismissing the plaintiff's summons. The correct course in this case must be that judgment should be entered for the plaintiff for the amount of the cheque, plus, of course, any interest which arises on it. If the defendant sees fit to bring proceedings in respect of defective goods, then that is the defendant's choice and it may do so, but in the meantime, the principle that the cheque must be treated, in effect, as cash must be applied and the plaintiff is entitled to judgment.

Hon Le Pichon JA:

7. I agree.