UNIFRUIT LTD v. CAPITAL YEARS INTERNATIONAL LTD

DCCJ5798/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5798 OF 2002

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JUDGMENT

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1. The plaintiff applies for summary judgment under Order 14 of the Rules of the District Court.

2. The plaintiff's pleaded case is as follows. By a contract in writing contained in or evidenced by a letter dated 30 January 2002 from the defendant to the plaintiff, the defendant agreed to sell and the plaintiff to buy 51.01 metric tons of garlic at a price of US$36,472.15, to be delivered to Southampton, U.K on or before 19 March 2002. Pursuant to the contract the plaintiff paid the price in full to the defendant. The defendant failed to deliver the goods on the due date or at all. By a letter dated 26 April 2002 the defendant undertook to deliver the goods or refund the price on or before 31 May 2002. Despite the guarantee and in breach of the contract the defendant has neither delivered the goods, nor refunded the price thereof. The plaintiff now claims return of the purchase price of US$36,472.15 and exchange losses amounting to GBP$2,493.23, which arise because the plaintiff paid the defendant in sterling, and the dollar to sterling exchange rate then applicable is different from that applicable at the date of the writ.

3. There is no dispute that the plaintiff paid the full purchase price and that the defendant failed to deliver the goods or refund the money. Indeed the defendant's director, Mr. S. K. Wong, says that the defendant agreed to refund it. However, he says that at the end of May 2002 he and the plaintiff's director, Mr. Tolia, agreed that the plaintiff would accept more garlic instead of the refund. Mr. Wong was to purchase garlic for shipment directly to the plaintiff's customers in Bahrain. It was agreed that 125 metric tons would be shipped. The value of it was US$39,250.00. The balance after deducting the debt owed to the plaintiff would be paid to the defendant. Pursuant to this agreement, two shipments, one of three containers and one of two, were made to the plaintiff's customer Nader & Ebrahim s/o Hassan Co. ("Nader"). The shipments arrived in Bahrain at the end of July and on 5th August 2002 respectively. They were duly released to the customer.

4. Mr. Tolia's evidence in response is that Mr. Wong approached him with the suggestion that instead of making a refund, for which the defendant did not have the money, the defendant would deliver garlic by way of compensation. It was indeed agreed that 125 metric tons would be delivered to Nader. Neither the plaintiff nor Nader was to pay for it. When it was delivered, the price would be paid by way of a set-off of the sum which the defendant owed, and the surplus of the price would be applied towards the exchange loss suffered by the plaintiff. However, when the two shipments arrived in Bahrain, the shippers, i.e. the defendant's garlic suppliers, refused to release the garlic because the defendant had not paid them for it. The shippers were respectively Jining Hongtu Trading Co. Ltd. ("Jining") and Jiyang Foreign Economy and Trading Co. Ltd. ("Jiyang"). Nader had to buy the garlic from them, rather than have it returned. Nader also had to pay demurrage and other charges. In the circumstances, the defendant had failed to fulfil its arrangement of acquiring and delivering replacement goods, and is still indebted to the plaintiff for the sum sued for.

5. The plaintiff's case on the pleadings is quite simply that there was a contract of sale and purchase which required the defendant to deliver the goods by a specified date. The goods were not delivered. Subsequently the defendant guaranteed delivery of the goods or repayment of the price by another specified date, but failed to deliver or to repay. Therefore the defendant owes the money.

6. The plaintiff's case on as it appears from the affidavit evidence is that the original contract was for delivery by a specified date, or repayment of the purchase price seven days later. Neither delivery nor repayment was made. The plaintiff demanded repayment and the defendant agreed to repay. The defendant was indebted to the plaintiff. However the parties entered into a further agreement. This required the defendant to buy goods to a value somewhat in excess of the sum for which it was liable to the plaintiff, and deliver them to a third party. Subject to adjustment of the balance, this would discharge the debt. But the defendant breached that contract too, in that it did not buy the goods which it caused to be shipped to the third party. Therefore the original debt was not discharged and is still owed.

7. The defendant's first argument is that an application for summary judgment will be dismissed if the statement of claim is defective or contains omissions. Here the statement of claim is defective. In the first place, while the plaintiff pleads breach of the agreement dated 30 January 2002, it does not plead acceptance of repudiation which would bring the contract to an end. In the second place, the further agreement has not been pleaded. The plaintiff's claim is not based on the original agreement but on the further agreement that the plaintiff would arrange a new shipment of garlic for delivery in lieu of the refund. There are also arguments based on privity and unjust enrichment, in respect of the further agreement.

8. I do not see that there is anything in the first point. On the pleadings, the defendant having failed to deliver gave a further guarantee of delivery or repayment by a specified date. He failed to do either by the due date. This was total failure of performance, and total failure of the consideration for which the plaintiff had paid over the purchase price. In any event, on the Mr. Wong's evidence Mr Tolia demanded the refund of US$36,472.15. This would amount to clear acceptance of repudiation.

9. As to the second point, it is clear that the plaintiff's claim is not based on the further agreement. The plaintiff is suing for a debt which became due, and is admitted to have become due. The further agreement was not something which took over and thereafter regulated the parties' contractual relationship. At best it was an alternative arrangement for discharging an existing debt. On Mr. Wong's evidence, he was to buy garlic for shipment to the plaintiff's customers, and "the balance after deducting the debt owed to the plaintiff would be paid to the defendant". See also the plaintiff's fax message of 7 June 2002 where Mr. Tolia says that he has "no objection if you do not wish to ship garlic. You have option to send T.T. to me...".

10. The defendant relies in support of this point in particular on the case of Super Electric Motor Ltd. v Pai Chung Ying, CACV 225 of 1994 where Bokhary JA (as he then was) said in setting aside a summary judgment:

That judgment can only be justified if it is clear that there is no real defence to the plaintiff's pleaded case of its entitlement to that sum from the 1st defendant. In my judgment, that is not clear.

As it was pointed out by the court itself at a very early stage of this hearing, it is at least reasonably arguable that the way in which the plaintiff has pleaded its case and the basis on which the judge decided the case in its favour do not match. That being so, none of the other points really matter.

Summary judgment, if it is to be given, is to be given on the pleaded case.

11. It also relies on dicta of Bokhary JA in Aktieselskabet Dansk Skibsfinansiering v Wheelock Marden & Co. Ltd. on the subject of "what pleadings must do". His Lordship said at page 269:

What those things are is to be gathered from the decided cases. That exercise has been performed by the learned editors of the 1993 Supreme Court Practice. And, as one sees from note 18/12/2 at pp 307-308 of volume 1 thereof, the things which properly particularised pleadings must do are to:

(1) inform the other side of the nature of the case they have to meet as distinguished from the mode in which that case is to be proved;

(2) prevent the other side from being taken by surprise at the trial;

(3) enable the other side to know what evidence they ought to be prepared with and to prepare for trial;

(4) limit the generality of the pleadings, the claim and the evidence;

(5) limit and define the issues to be tried, and as to which discovery is required; and

(6) tie the hands of the party so that he cannot without leave go into any matters not included (although if the opponent omits to ask for particulars, evidence may be given which supports any material allegation in the pleadings).

12. In my view it is possible for the court in the instant case for the court to give judgment on the pleaded case. It does not depend in any way on the further agreement. Also, I do not think it was necessary for the plaintiff to plead the further agreement, in order to comply with the list given above. What is pleaded is the debt owed by the defendant as a result of non-performance of the original agreement. That is the plaintiff's case. I do not think the plaintiff need plead a further agreement to give the defendant a chance to settle in an alternative manner, when that was not done. If the defendant is allowed to defend it may plead that the debt (which on the evidence it admits) was settled in the alternative manner, and the plaintiff can plead to that by way of reply.

13. The plaintiff's case does not fail in limine as the defendant argues. The question is whether for the purposes of Order 14 the defendant has succeeded in showing that there is a triable issue. The issue here is, obviously, whether the defendant has discharged the debt owed to the plaintiff. The defendant raises various points about privity of contract, late delivery, the role of Nader and whether or not the plaintiff will be unduly enriched. These points all relate to the further agreement, on which the defendant says the plaintiff's claim is based. But on my finding, what is concerned here is not the further agreement, but the original agreement. There is no need to deal with these points.

14. Mr. Wong in his affirmation gives evidence that two shipments, totalling 125 metric tons of garlic were made to Nader. He produces bills of lading and other documents in support, and says that by reason of the shipments the defendant has fully complied with the further agreement and is not indebted to the plaintiff as claimed. Mr. Tolia however produces documents which appear to show that, according to Jining and Jiyang, the defendant had not paid them for the garlic; that, according to Nader, it bought the shipments from Jining and Jiyang and that it paid Jiying US$7,255.00 and Jiyang US$5,000.00. There are also lists of freight, demurrage and other charges which Nader will say that it incurred.

15. These are, of course, hearsay documents. They are produced by Mr. Tolia who is not their author. More important is a letter dated 15 July 2002 from the defendant to the plaintiff. Mr. Tolia says that this shows that the defendant was aware of the suppliers refusing to release the shipments and that the defendant had no title to transfer the same. In the letter the defendant says, at least in respect of the Jiyang shipment "China supplier still not transfer the authorisation of shipment to Capital Years Int'l Ltd". I accept that this letter which comes from Mr. Wong himself tends to show that his assertion that the defendant has fully complied with the further agreement is untrue.

16. The question for Order 14 is whether the defendant's assertions are believable, rather than whether they are to be believed; Ng Shou Chun v Hung Chun San [1994] 1 HKC 155. A as Bokhary JA put it in Re Safe Rich Industries Limited, Civil Appeal No.81 of 1994, unreported, 3rd November 1994 :-

"The test at the summary stage is indeed as simple as whether the defendant's assertions are believable. But it must be recognised - because failure to recognise it would create a debt-dodgers' charter - that whether the defendant's assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as either undisputed or beyond reasonable dispute."

17. Taking the defendant's assertions against the contemporaneous documentation, and particularly the document coming from the defendant itself, it is clear that the assertions are not believable.

18. There will accordingly be judgment in favour of the plaintiff for the sums of US$36,472.15 and GBP$2,493.23, or their equivalents in Hong Kong currency, with interest thereon at the judgment rate from the date of the Writ until payment, and costs of the action, including the costs of this summons, to be taxed if not agreed.