AJAX INTERNATIONAL CO LTD v. ALLIED TRADERS LTD

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JUDGMENT

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Penlington, J.A.:

1. This is an appeal arising from a decision of District Judge Wong to dismiss the defendant's application to strike out the statement of claim herein on the grounds that it was frivolous, vexatious and disclosed no cause of action. He held that there were issues of law and fact which should be tried and that this clam was not a plain and obvious case showing no cause of action fit to be tried as would justify the granting of such an application.

2. The claim by the plaintiff is for $72,780, the price of two consignments of goods sold to ultimate buyers in Japan. There are two invoices upon which the plaintiff relied and also two forms of contract, which are identical, in relation to these goods. In themselves these contracts appear to show that the defendants were not acting as principals but were agents for principals although not named in the contract. There seems no dispute that the name of these principals was known to the plaintiff. The contracts have been signed by the defendant "for and on behalf of buyers" which words were held in Dragages et Travaux Publics and ors. v. Gladhover and anr. 1988 HKLR 298 to be a very strong evidence that the party so signing was not accepting personal liability. That, however, does not dispose in the matter because it is alleged by the plaintiff that there was a collateral oral agreement entered into the parties by which the detendant did accept liability in default of payment by the principal.

3. It is argued here by Miss Lam, counsel for the appellants, with considerable ability in view of the difficulties that she faces, that this allegation is illogical - why should the defendant assume this liability? However it does seem clear that the terms and conditions of payment for these particular goods were changed from the previous terms and that, instead of a letter of credit being taken out, payment was to be made in Hong Kong by the defendant in cash. We cannot say that unlikely that, in view of those changes in the terms of payment, the plaintiff did seek some undertaking by the defendant that, in the event of default by the principal in Japan, they would assume liability.

4. As in almost all oral collateral agreements there may well be considerable difficulties to be overcome by the plaintiff in this matter. One such difficulty here is the fact that on the 2nd of November a letter was sent by their solicitors to the plaintiff's solicitors which claimed to set-off the $72,280 against other amounts which were alleged to be owing by the plaintiff. This letter is relied on as showing that, at that stage the defendant did not dispute liability. That, in the circumstances under which that letter was written, would be a matter for evidence.

5. Miss Lam relies strongly on an extract from the leading textbook, Bowstead on Agency 15th Ed. p. 449 regarding the admissibility of extrinsic evidence where there is a written contract and in particular, that such extrinsic evidence is only admissible to show that there was a custom or usage in the particular trade or business which renders the agent liable in addition to the principal.  We are satisfied, however, that the statement in Bowstead, should not be taken as saying that is the only occasion in which extrinsic evidence can be called and that the general principle, that extrinsic evidence is admissible to show a collateral oral contract, even if seems contrary to the terms of the written agreement, is, arguably, applicable to the present circumstances.

6. We consider that while the onus on the plaintiff to prove the collateral oral contract may well not be easily satisfied, the district judge was right in coming to the conclusions that there are triable issues raised here and that the claim should not be struck out.

7. A further matter has been raised regarding the form of the statement of claim and, as the basis that what was being sued on was the alleged collateral oral agreement, that statement of claim does not seem to be happily worded. There is a reply and defence of counterclaim which does set out in detail the plaintiff's case but again the question of the pleadings is a matter to be gone into at the trial.

8. This appeal is dismissed.

9. The defendant is entitled to its costs.