DAYS INTERNATIONAL LTD v. SHYAM NARAINDAS KIRPALANI

IN THE COURT OF APPEAL

1988 No. 42

(Civil)

_____________

______________

J U D G M E N T

______________

Macdougall, J

1. On 16th June we dismissed this appeal and stated that we would hand down our reasons in writing later. This we now do.

2. The hearing of the action to which the appeal relates began as an assessment of the amount, if any, which the respondent was liable to pay under a guarantee. It was not until the third day of the trial when the respondent sought and was granted leave to re re-amend his points of defence that the issue with which this appeal was almost entirely concerned emerged.

3. A brief history of the action is as follows. In November 1982, on learning that the respondent, who is normally resident in Nigeria, was in Hong Kong, the appellant applied ex parte to a judge and obtained an order pursuant to Order 44A prohibiting him from leaving the jurisdiction.

4. In support of his application for a discharge of the order, the respondent filed an affirmation in which he admitted that he had signed the guarantee on which the action was founded, but claimed that there was at least a triable issue either as to whether it had been given for no valuable consideration or, if consideration had been given, as to whether it covered all the goods which the appellant had previously contracted to supply to the respondent or only those goods which would form the subject of contracts entered into after date of the guarantee.

5. At the hearing of the application for discharge of the order before Kempster J (as he then was) the respondent admitted on affirmation that he had signed the guarantee, but claimed that the statements of account submitted by the appellant were incorrect and that it was not he who owed money to the appellant but the appellant who owed money to him. The outcome of these proceedings was that Kempster J discharged the order on condition that the respondent pay the sum of US$50,000 into court.

6. On 30th November 1982 the respondent filed a defence to the statement of claim and admitted that he had signed a letter dated 29th October 1977 in which he had agreed to be responsible to the appellant for the price and interest thereon of all such goods as the appellant might thereafter supply to the respondent's company Esenkay (Nigeria) Limited ("Esenkay")

7. On 10th January 1984 he filed points of defence in paragraph 4 of which he was more specific in that he admitted that the letter dated 29th October 1977 was a guarantee and that he had signed it and had not revoked it. He then set out the terms of the guarantee, which are as follows

"M/s Days International Limited,

G P O   Box 1959,

Hong Kong.

Dear Sirs,

Re : Esenkay (Nig) Ltd

    In consideration of your having agreed at my request to supply Messrs. Esenkay (Nigeria) Ltd of 118, Nnamdi Azikiwe Street, Lagos, Nigeria with goods I agree to be responsible to you for the price and interest thereon of all such goods as you may hereafter supply to them. This guarantee is to be a continuing guarantee and my liability under it shall not be affected by your giving time or any other indulgence to them.

    I reserve the right to revoke by notice this guarantee at any time as to all future dealings by the above with you after the date of such notice."

8. In April 1986 he filed amended points of claim in which he adhered to his admission that he had signed and had never revoked the letter of guarantee. On lst August 1986 he re amended the points of defence containing, yet again, the same admission. It was not until 16th September 1987, the third day of the trial before Barnett J, that he sought leave to re re-amend the points of defence to aver that, although his signature appeared on the letter of guarantee, he had not signed the guarantee or any guarantee and that he had never discussed with the plaintiff or anyone the existence or contents of the guarantee or of any guarantee.

9. The proposed amendment further averred that he had given to a Mr Nanik Dayaram of the appellant company a number of blank sheets of Esenicay notepaper which he had signed in order to enable the appellant to make prompt insurance claims on any losses. which might arise on any of the appellant's shipments to Esenkay. The respondent further sought to aver that the first time he had become aware of the guarantee was when he was arrested pursuant to the order obtained ex parte in the Order 44A proceedings.

10. Not surprisingly, this application for leave to re re-amend the points of defence was vigorously opposed by counsel for the appellant on the basis that it was of a fundamental and belated nature. The appellant sought and was granted a brief adjournment to consider his position. At the resumed hearing counsel renewed his objection and informed the judge that had not yet considered whether an estoppel might have arisen. The judge indicated that, if he decided to allow the amendment, the matter of whether an estoppel existed would still be arguable, and that, if counsel wished to argue estoppel, he should apply to amend the reply.

11. The judge then granted leave to the respondent to make the proposed amendment on the basis that, although it was of a radical nature and had arisen at a late stage, the interests of justice required that the real issue between the parties should be tried as there was no prejudice that might be sustained by the appellant that could not adequately be compensated for by an order for costs.

12. It is convenient to summarise at this stage how the respondent explained his astonishing volte face. He testified that on consulting his solicitor after his arrest he had informed him in the presence of a Mr Lackman and a Mr Raj that, although the signature on the letter of guarantee was his, he had not signed the guarantee. He explained that had signed blank sheets of his company's notepaper and had given them to the appellant for insurance claim purposes.

13. The 0.44A hearing was then adjourned to allow the respondent to be represented by counsel. On the following morning the respondent attended a conference with his solicitor and his counsel. The counsel, it should be made clear, was not Mr Mitchell who represented the respondent at the trial and at the hearing of this appeal. At the conference the respondent repeated to counsel what he had told his solicitor on the previous day. According to the respondent's account of what was said, counsel had advised him that he had seen many similar cases and that as the respondent had admitted that the signature was his, it would prove difficult to persuade the court that he had not signed the guarantee. Therefore, his best advice was that if the respondent wanted to leave Hong Kong to obtain documentary evidence with which to fight the case on other grounds he should admit that he had signed the guarantee.

14. The solicitor testified before Barnett J that he recalled that the respondent had denied having signed the guarantee. Indeed the solicitor's notes of what the respondent had told him clearly confirm that the respondent had made such a denial, but 'that' he had changed his mind after the conference with cousel. The solicitor could not recall the respondent having said anything about blank notepaper. However, he confirmed that at the conference with counsel the respondent had denied having signed the guarantee, and that counsel had replied that he had previously seen defendants run defences like that but had got nowhere. Counsel added that he did not think that the respondent would be believed. On being told this, the respondent held a conversation with Mr Lackman and Mr Raj in Sindhi after which he said that he would admit having signed the guarantee.

15. The solicitor also agreed that at a subsequent meeting with the respondent, and Mr Lackman the respondent again raised the question of the genuineness of the guarantee, and that this caused the solicitor to exclaim to Mr Lackman "What's this guy talking about? He has admitted the guarantee." Mr Lackman then spoke to the respondent and the topic was closed.

16. Shortly after the trial began and during an adjournment in the course of the testimony of Mr Dayaram, the principal witness for the appellant, the respondent again complained to the solicitor that he had not signed the guarantee. After further consultation the solicitor raised the matter with the respondent's present counsel, Mr Mitchell, and as a result the application was made to the judge to re re-amend the points of defence. Mr Poll, who represented the appellant both on the appeal and in the court below, did not seek to cross examine the solicitor. He frankly conceded to this Court that he fully accepted the accuracy of the solicitor's notes.

17. Mr Lackman confirmed that at the first meeting with the solicitor, the respondent had denied having signed the guarantee. He recalled that at that meeting the respondent had also explained that he had earlier signed some blank sheets of paper and had given them to Mr Dayaram of the appellant company in order to facilitate insurance claims, and that the sheet on which the guarantee appeared must be one of those. Mr Lackman also substantially confirmed the testimony of the respondent and the solicitor as to what had been said during the conference with counsel. He added that on several subsequent occasions the respondent had repeated to him that he had not signed the guarantee.

18. Mr Dayaram testifed that in about early 1975 he began doing business with the respondent on a regular basis, in the course of which the plaintiff company in Hong Kong supplied goods to Esenkay in Nigeria. After some time, however, Esenkay fell into arrears in its payments to the appellant. And, according to Mr Dayaram, he discovered in early 1977 that the respondent had cheated him in respect a consignment of shirts and pyjamas which the respondent had undertaken to sell on his behalf in Nigeria.

19. This placed Mr Dayaram in a difficult situation. He thought that if he were to terminate his business relationship with the respondent he would encounter difficulty in obtaining payment of the outstanding monies from Esenkay. On the other hand, he feared that by continuing to do business with the respondent he ran the risk of increasing his financial exposure. He therefore decided to take the security measure of obtaining a personal guarantee from the respondent. Accordingly, on 28th October 1977 when the respondent was in Hong Kong, Mr Dayaram raised the matter with him. The respondent agreed to think it over and promised to return to Mr Dayaram's office on the following day.

20. At the meeting on 29th October the respondent consented to sign a personal guarantee, and a discussion then followed as to the form it should take. The respondent was unwilling to have a lawyer draft the document or to use a pro forma bank guarantee. After agreeing that the form should be as simple as possible, both parties then set about drafting it Mr Dayaram began the task of composition and the respondent made various suggestions which Mr Dayaram accepted and amended the draft to incorporate them. The second paragraph, which relates to revocation, was entirely the idea of the respondent and was included at his request. When the draft had been completed, the respondent read it and, after making a few corrections, accepted it. It was then sent to one of Mr Dayaram's typists for typing.

21. At the same meeting the respondent, at Mr Dayaram's request, prepared a letter to the manager of his bank in London requesting him to remit the sum of US$9,500 to the appellant in Hong Kong and to debit his account accordingly. There is no dispute that this letter was typed for the respondent by one of Mr Dayaram's typists. It was later retrieved by the respondent from the bank of the purpose of the trial, and we refer to it again later because it is unusual in that the respondent signed it twice, each time with a different pen.

22. In the course of cross examination Mr Dayaram was closely questioned as to how he had drafted the guarantee. He said that the words had come from his head but had been based on his discussion with the respondent and suggestions made by him. When pressed as to whether he had use a precedent in the preparation of the draft, the respondent finally claimed that, although he had taken guarantees from other customers on previous occasions and thus presumably had the form of wording at the back of his mind, he did not on this occasion have a precedent before him from which to copy.

23. When Mr Mitchell showed him the following standard legal precedent for a guarantee Mr Dayaram said that he had previously seen something like it.

"GUARANTEES RELATING TO THE SUPPLY OF GOODS

1:2

Continuing guarantee for the supply of goods to a trader:

short form

[Address of guarantor]

[Date]

To [supplier] of [address]

Dear Sir,

    In consideration of your having agreed at my request to supply [trader] of [address, etc] with goods for his business I agree to be responsible to you for the price of all such goods as you may hereafter supply to [trader] [to a limit of whether or not any part of such price shall be paid to you] but so that my liability to you shall in no event exceed the sum of. This guarantee is to be a continuing guarantee and my liability under it shall not be affected by your giving time or any other indulgence to [trader].

    I reserve the right for myself or my personal representatives by notice to revoke this guarantee at any time as to all future dealings by the said [trader] with you after the date of such notice.

Yours etc

[Signature of guarantor]"

24. It is at once apparent that, apart from a few minor alterations, the wording of the guarantee on which the respondent's signature appears as guarantor, is identical to that of the precedent.

25. When questioned about the two signatures on the letter to the bank, Mr Dayaram could not recall the respondent having signed twice he explained that to the best of his recollection he had left the office for a few minutes at the time when the respondent had signed it.

26. The respondent testified that, when he saw the letter after it had been typed, he was initially surprised to see that his signature was already on it. However, he then realised that this was one of the several sheets that he had earlier signed in blank and had given to Mr Dayaram for the purpose of facilitating insurance claims. He explained that he had signed his name again on the letter for record purposes. Indeed it is plain from an examination of the document that the upper signature was written in blue ink whereas the lower one was written in black ink.

27. A Mr Chan, who had previously been employed by the appllant, recalled that on one occasion the respondent had retrieved a letter from the postage counter in the appellant's office and had borrowed a ball point pen from him to sign it. Mr Chan particularly remembered the incident because, after the respondent had signed the letter, Mr Chan noticed that it had been signed twice. He drew this, to the respondent's attention and received a reply to the effect that he liked to sign it or that it was none of Mr Chan's business.

28. The existence of two signatures on the bank letter is certainly strange and, not surprisingly, the judge analysed the evidence relating to this matter in some detail in an attempt to extract such significance from it as he could. He arrived at the conclusion that the only reasonable explanation for the second signature was that advanced by the respondent. In this Court Mr Poll frankly conceded that no sinister significance attaches to the presence of the two signatures and that their existence is of no assistance to the case of either party. He was also unable to offer any other reasonable explanation for the presence of the additional signature. He sought, however, to suggest that the judge had somehow fallen into error in observing "what is wrong with the [bank] letter is the second signature."

29. It seems plain to us that, in using the word "wrong" in this introduction to his analysis of the evidence on this topic, the judge meant nothing more than that the existence of the two signatures was strange. Indeed his ensuing treatment of the evidence indicates that that is what he meant.

30. Apart from the subject of the guarantee the respondent testified extensively about his business history with the appellant and in particular his dealings with Mr Dayaram. It is not necessary to refer to this evidence in any detail. Suffice it to say that the judge formed a poor opinion of the respondent and found much of his testimony to be unsatisfactory and inherently unbelievable. On some matters he rejected his evidence entirely.

31. In contrast he found that Mr Dayaram gave generally convincing or satisfactory explanations of various documents and accounts that were the subject of the dispute on quantum. There were, however; several aspects of his evidence that, as the judge expressed it, "damaged his air of injured innocence". In particular, the judge considered that it was wholly improbable that, if the wording of the guarantee had been reached in the manner described by Mr Dayaram, it should so closely have resembled the precedent. He therefore concluded that much depended on the actual document of guarantee itself.

32. In this regard he had the assistance of two experts. Dr Nutten, a well known and highly regarded local expert with 32 years experience in the scientific examination of documents, submitted a written report and gave testimony. Mr Radley, an expert in England who Dr Nutten described as "the best in the field", submitted a report but did not attend the trial and was therefore not subjected to cross examination. The judge observed that Mr Radley, who had considered Dr Nutten's report and had arrived at a different conclusion, had apparently misunderstood Dr Nutten to have been relying on documents other than those or which he had actually based his opinion.

33. In the final analysis the judge was of the view that Mr Radley's report was of little value. Without intending to show any disrespect to Mr Radley we think the judge was right. The instructions given to Mr Radley were twofold. First, to examine the intersection point of the typewriting and the first signature on the letter to the bank in order to offer an opinion as to the sequence of production, that is, whether the typewriting was superimposed on the ink or vice versa. Second, to comment on Dr Nutten's report. There is no apparent reason why Mr Radley should not have been engaged by the appellant's advisers to undertake the same take as that requested of Dr Nutten by the respondent's advisers, namely, to determine whether the signatures on the guarantee, the bank letter, and a receipt allegedly signed by the respondent, were written before or after the documents to which they related had been typed. Strangely, Mr Radley was not asked to make this determination in respect of the guarantee.

34. However, he was instructed to determine whether, in regard to the overlap of part of the respondent's signature and his typewritten name appearing immediately under that signature, the signature had been superimposed on the typewritten name or vice versa. Mr Radley said that since he had refrained from employing destructive instrumental techniques, he was unable to arrive at any conclusion. For the same reason Dr Nutten was likewise unable to express a concluded view.

35. The receipt to which reference has been made, and which is dated 15th, January 1977, was tendered by the appellant as one that had been signed by the respondent as an acknowledgment of payment of US$15,000 by the appellant to the respondent in respect of compensation for various late shipments in 1976. The respondent was unable to recall ever having signed this receipt.

36. Once the re re-amendment of the points of defence opened the issue of whether the respondent had signed the guarantee or had merely signed a sheet of paper which, apart from the Esenkay letter head, was otherwise blank, this receipt assumed great significance.

37. When the Esenkay letter heads on the guarantee, the bank letter and the receipt are aligned it is plain to see that the respondent's signature both on the guarantee and the receipt, and his upper signature on the bank letter, appear in almost identical positions on each sheet of paper. This coincidence in itself lends support to the respondent's claim that he had signed blank sheets of Esenkay notepaper and had given them to Mr Dayaram to be used in the event that insurance claims were to be made.

38. That which lends much greater support to the respondent's contention, however, is the fact that there is an abnormally large space between the last typewritten line in the body of the receipt and the signature of the respondent below. For a person to leave such an enormous gap strikes us as being contrary to normal human behaviour. The judge himself concluded that the coincidence of the placement of the signatures on these three entirely different documents was remarkable.

39. Taking into consideration the striking similarity between the form of wording of the guarantee and that of the legal precedent, when, according to Mr Dayaram, he and the respondent had jointly composed the wording of the guarantee without resorting to the use of any precedent, the situation becomes even more remarkable.

40. The judge also took into account Dr Nutten's opinion that, on comparing the guarantee with the control documents submitted to him for comparison purposes, the guarantee had an unnatural appearance. It is apparent from the control documents that when he signs a letter the respondent displays a total lack of concern whether the loop of the letter "y" in his signature "N.K. Shyam" encroaches on his typewritten name or title whenever such appears below his signature. In other words, he makes no attempt to confine his signature within the space provided for it by the" typist between the last line of the body of the document and the typewritten name or title below.

41. The control documents reveal that the loop of "Y" in the signature invariably crosses an imaginary horizontal line drawn through the typewritten name or title. Depending on how close the typewritten name or title is placed to the right hand side of the notepaper, the loop either encroaches on or falls to either side of and below the typed name or title.

42. Although it is true that on every control document the gap between the last typewritten words above the signature and the typewritten name or title below is smaller than that on the guarantee, it is noticeable that on the guarantee the respondent's signature fits neatly between the typewritten words "Yours faithfully", and the typewritten name "NK Shyam" This is not inconsistent with the typist having typed the name "NK Shyam". after the signature had been placed on the document, for it certainly runs counter to normal practice for a typist to type a name or title over part of the signature to which it relates.

43. On a consideration of all the factors outlined, the judge found on the balance of probabilities that, notwithstanding the generally poor view he had formed of the respondent, the guarantee had not been signed by him.

44. Although Mr Poll industriously led us through every passage in the evidence that could reasonably be said to bear on the issue of whether the respondent signed the guarantee, and highlighted those aspects which in his submission tended to undermine the judge's finding, we are not persuaded that the judge was wrong in coming to the conclusion to which he did. Indeed, we do not find it to be in the least surprising.

45. We now turn to a consideration of two other interrelated grounds of appeal. First, it is contended that as the substance of the proposed re re-amendment of the points of defence was contrary both to the respondent's previous admissions at the 0 44A proceedings and to those in his affirmations and pleadings, the judge was wrong to have permitted him to make the amendment.

46. Mr Poll informed us that Mr Dayaram's father, who was allegedly present at the first meeting between Mr Dayaram and the respondent at which Mr. Dayaram requested the respondent to execute a guarantee, had died before the hearing of the action. Moreover, subsequent to the application for leave to make the amendment, every attempt to locate two of the three typists engaged by the appellant at the relevant time and who might be expected to recall the incident, had failed. Had the respondent initially put forward the defence that he belatedly raised at the trial there can be little doubt that any evidence that these witnesses could have given would have been available at the trial.

47. But these matters were not raised before the judge. Had the objection to the amendment been made on the ground that the appellant's case had been seriously prejudiced because of the fact that the evidence of these witnesses was no longer available, it is almost certain that the judge would not have granted leave to make the amendment.

48. Moreover, the appellant did not apply for an adjournment to enable Mr Dayaram to locate the typists. Had such an application been made it is inconceivable that in the circumstances the judge would not have granted it.

49. The judge was clearly concerned to see that the real dispute between the parties was adjudicated upon. On the arguments addressed to him he was of the opinion that any injustice that might be done to the appellant by allowing the amendment could be compensated for by an appropriate order for costs. While we accept that an application to make an amendment as radical as that in the present case should be subjected to the closest scrutiny, we are unable to say that he was wrong to take the view that he did.

50. The final ground of appeal is that having granted the appellant leave to re-amend its reply so as to allege that the respondent was estopped from denying the authenticity of the guarantee, the judge wrongly ruled, when counsel for the appellant began his closing address, that it was then too late to develop this point.

51. At the hearing of this appeal Mr Poll conceded that the arguments he would have advanced on this so called point of estoppel were really no different from those which he had unsuccessfully raised on the respondent's application for leave to re re-amend the points of defence. It is somewhat perplexing as to why the  judge allowed the Appellant to re-amend its reply to plead this matter. Perhaps the explanation is that as counsel for the respondent had raised no objection to the re-amendment of the reply, the judge assumed at that time that it involved something other than the matters that had previously been argued, and that it was not until counsel sought to repeat his original arguments in his closing speech that the judge realised that this was not so.

52. Be that as it may, we are of the view that the judge was right in declining to hear argument at that stage of the trial on a matter on which he had not only earlier ruled but as to which evidence had already been given.

53. The appellant filed other grounds of appeal, but as these hinged on the success of the first part of the appeal which, for the reasons given, we resolved in favour of the respondent, it did not become necessary to consider these other grounds.

54. We make an order nisi that the appellant pays the respondents costs of the appeal.