XCHRX BAYER POLYMERS CO. LTD. v. THE INDUSTRIAL AND COMMERCIAL BANK OF CHINA, HONG KONG BRANCH

HCCL307/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.307 OF 1998

---------------

______________________

J U D G M E N T

______________________

THE APPLICATION

1. This is an Order 14 application pursuant to a summons dated 23 December 1999, the plaintiff herein applying for final judgment in the amount claimed in the Points of Claim (namely, US$325,326.63), together with interest and costs.

THE FACTUAL BACKGROUND

2. The background can be shortly stated. The plaintiff ("Bayer") entered into a contract dated 4 March 1997 whereby it agreed to sell to one Wuxi Joyray Import and Export (Group) Corporation ("Wuxi Joyray") 306 MTS of Lustran San 31-2060 at a unit price of US$900/MT.

3. It was a term of the contract that payment should be made by drafts at 90 days sight drawn on the defendant bank under an irrevocable letter of credit opened with that bank by Wuxi Joyray.

4. By a telex dated 18 April 1997, the defendant informed the Thai Farmers Bank, as agents of the plaintiff, that an irrevocable letter of credit, No.LC3210297089, had been opened with them in favour of the plaintiff for the amount of US$275,400 available by drafts drawn on the defendant accompanied by a specified set of shipping documents. It was a term of the credit that the plaintiff would courier 1/3 of the set of bills of lading to the defendant within four days of the departure of the vessel carrying the goods the subject of the underlying sale contract.

5. Bayer duly shipped the relevant goods on board the vessel "N Asia V.6157", and a bill of lading was issued (in a set of three) on 25 April 1997. On 29 April 1997, one original bill of lading was couriered to the defendant ("ICBC") by Bayer through a courier company named Airborne Express. On or about 2 May 1997, the remaining documents specified by the letter of credit (including the bill of exchange and the other two originals of the bill of lading) were presented to ICBC by Bangkok Bank on behalf of ICBC.

6. Bayer alleges that at 9 a.m. on 7 May 1997 the bill of lading was delivered to ICBC - its basis for so asserting are documents exhibited from its freight forwarder Airborne Express. Later that day, that is on 7 May 1997, Wuxi Joyray (the letter of credit applicant and the buyer of the cargo), took delivery of the cargo upon presentation of the bill of lading. It is not clear precisely how Wuxi Joyray came into possession of that bill of lading.

7. The regrettable fact is that Bayer has neither received payment for the cargo from Wuxi Joyray, nor has it received payment from ICBC under the letter of credit. The bill of lading and the cargo have not been returned. Bayer accordingly commenced this action against ICBC.

8. The Writ of Summons was issued on 29 December 1998 and the Points of Defence were filed on 10 December 1999. The plaintiff's Order 14 Summons was taken out, subsequent to the filing of that Defence, on 23 December 1999.

9. This is the second piece of interlocutory litigation with which this court recently has been concerned. On 22 November 1999, judgment was delivered upon ICBC's application, by summons dated 25 January 1999, whereby the bank had sought to stay these proceedings upon the basis of forum non conveniens. That judgment speaks for itself. For present purposes suffice to say that ICBC's application for such a stay was dismissed. On that occasion, as today, Mr Brock represented the plaintiff and Mr Rimsky Yuen acted on behalf of the defendant.

THE ISSUE IN THE CASE

10. It became clear early in argument on this application that, at bottom, there is really but one issue : did the defendant, ICBC, receive the bill of lading in question? ICBC says that it did not. In support, two certificates have been exhibited which were issued by Wuxi Post Office Express Mail Services, the former delivery agent of the plaintiff's forwarder, Airborne Express. The first certificate dated 25 November 1999 reads :-

"Wuxi Post Office Express Mail Services (EMS) was the sole business agent of Airborne Co. Ltd in the Wuxi region, PRC in 1997. From our investigation, our company has not received and dispatched the courier 7098488482 from Thailand to The Industrial and Commercial Bank of China Wuxi Branch for the period 20 April 1997 to 10 May 1997."

Whilst the second certificate of the same date recites :-

"It is hereby certified that there were 1106 courier deliveries dispatched by our company on 7 May 1997 (for the details of the numbers of these deliveries please see the attachment). The courier to The Industrial and Commercial Bank of China Wuxi Branch, numbered 7098488482, was not dispatched on that day."

11. The attachment to which the latter certificate refers consists of a thick bundle of documents, untranslated, which are of minimal evidential assistance given that the numeration therein appears to be an internal one adopted by the Wuxi Post Office, thus making it impossible to correlate any of the references therein with the Airbill Reference No.7098488482.

THE ARGUMENT

12. Mr Brock for the plaintiff has referred me to a number of well known Order 14 authorities. I will not rehearse their contents. He asserts, correctly, that the burden is on the defendant to satisfy the court that, in the language of Order 14, rule 3 "there is an issue or question in dispute which ought to be tried". He says that ICBC has not discharged that onus in this case and that, indeed, that the defendant's case verges on the incredible. In this connection, Mr Brock stresses that the defence of non-receipt has not been raised before, or at least prior to 10 December 1999 when it appeared in pleaded form in the Defence as now filed. He further pointed out that during the recent attempt by ICBC to apply for a stay of this action to Wuxi, China, it was never mentioned that ICBC may have never actually received the bill of lading in question, noting that counsel on behalf of ICBC in that application, Mr Yuen, in fact acknowledged that ICBC's application to stay the proceedings was purely tactical. In this connection, he revisited a passage in the judgment upon that stay application, namely :-

"... Although there is no Order 14 application before me, Mr Yuen has not succeeded in identifying for the Court's consideration any particular case on the merits which his client [ICBC] wishes to put forward, and it seems to me that in such circumstances the Court should weigh firmly in the balance the apparent absence of merits on the part of the Defendant Bank. Indeed, if I have understood him correctly, Mr Yuen appeared to accept that this application for a stay was purely tactical on the Defendant's part."

13. The facts speak for themselves, submitted Mr Brock. Bayer's evidence demonstrated that the bill of lading was delivered to ICBC, and that ICBC took delivery thereof. He referred in this context to the Customer Report Card issued by Airborne Express confirming (in accordance with the Airborne Express Airbill) that at 9 a.m. on 7 May 1997, the bill of lading was duly delivered. Moreover, he said, Airborne Express had confirmed that its Customer Report Card is generated only upon receipt of confirmation from Wuxi Post that the bill of lading had indeed been delivered to ICBC. Accordingly, Mr Brock suggested, it was difficult to see how Wuxi Joyray could have obtained the bill of lading other than via ICBC, and in this regard, he prays in aid observations from Airborne Express to the effect that the goods could only have been cleared from customs subsequent to the endorsement of the relevant documents, including the bill of lading, by the bank. And the very fact that ICBC had waited until this late stage of the proceedings to suggest that it had never actually received the bill of lading represented no more than a tactical ploy to delay and/or avoid the legal consequences of having handed the bill over to Wuxi Joyray while at the same time having refused payment under the letter of credit.

14. As to the doctrine of recent invention, Mr Brock noted that ICBC now alleges that a representative from Bayer's Shanghai office, one Mr Yu, telephoned it on two occasions in or around August 1997 to query why payment had not been made under the letter of credit, and that they understand that Mr Yu was informed "in no uncertain terms" that ICBC had not received the bill of lading. However, said Mr Brock, whilst Mr Yu had indeed called ICBC on two occasions in order to enquire as to the circumstances surrounding the refusal to make payment, Mr Yu, for his part, had directly confirmed in the evidence filed by him that Mr Qian Ming of ICBC (from whom ICBC had not filed first hand evidence) had himself confirmed that ICBC could not find the bill of lading, the clear implication being that it had been received but could not now be located, and that at no time during the conversations had Mr Qian Ming given any indication that ICBC may not in fact have received the bill of lading.

15. For his part, Mr Rimsky Yuen, on behalf of the bank, stoutly defended the bank's position. He readily recognised the central importance of the EMS evidence, if I can thus term it, submitting that in the circumstances this was of considerably more weight than the evidence of Airborne Express. Airborne Express had not denied that Wuxi Post Office Express Mail Services was at the material time its local agent. So here, said Mr Yuen, were the people on the ground putting forward evidence, as exhibited to the affidavit of Mr Tse saying, in effect, that "whatever your agent says, we were in charge and we did not actually deliver this document". Contrast this, said Mr Yuen, with the generality of opposing evidence on this point, namely, paragraph 6 of the second affidavit of Mr Kin Hon Tham, which reads :-

"While it no longer appears possible to obtain a copy of the original delivery receipt, Airborne Express confirms that Customer Card Reports are issued in accordance with computer-generated confirmations obtained from the relevant local delivery agents, in this case, Wuxi Post Office Express Mail Services. That is, the Customer Report Card could only have been generated if Airborne Express had first received what is called a 'Proof of Delivery' notification in its system from Wuxi Post Office Express Mail Services confirming that the Bill of Lading had been delivered to ICBC."

16. And as for the disputed content of the relevant telephone conversations, Mr Yuen asserted (in my view correctly) that there was little the court presently could do to resolve the veracity of the respective accounts of what was or was not said, although naturally he did not accept Mr Brock's allegation of recent invention.

17. So much, therefore, for the matters forming the factual matrix of this case.

DECISION

18. Looked at in the round, I am bound to observe that the case put up by the bank appears to me to be 'thin', to say the least, and given the way the Defence has emerged, I am able to generate little enthusiasm for the defendant's position. However, notwithstanding a strong instinctive impression (and in this context I can understand why in this case it was thought appropriate to take out an application for summary judgment), after some reflection I have concluded that it would be wrong to accede to Mr Brock's persuasive address and immediately give judgment to the plaintiff, however tempting that might be. At the end of the day, I cannot simply ignore the Wuxi EMS evidence and dismiss the defence raised as of no significance whatever and as amounting to little more than a sham. In Manciple Ltd v. Char On Man [1995] 3 HKC 459 at 466, Mortimer JA remarked as follows :-

" Order 14 proceedings for summary judgment when there is no defence to a claim are an important feature of the legal process. It enables plaintiffs in cases where there is no defence to obtain expeditious summary judgment to avoid unnecessary delay. When applied for, it is for the defendant to show that there is a triable issue or an arguable defence if he is to be allowed his day in court. To deny him his day in court, if he shows a triable issue or an arguable defence, is indeed a fearful injustice. On the other hand, if he has no defence and he obtains leave to defend, equally, there is injustice to the plaintiff.

There is a difficulty because the court cannot resolve issues of fact on affidavits. However, there are some cases in which the defendant's own case, although apparently it raises issues which, if found in his favour, would provide him with a defence, are so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that his defence is a sham ..."

19. In the present circumstances, and in light of the evidence before the court, I do not think I can go that far and legitimately find that the defence raised is indeed "so contradicted by contemporaneous documents or circumstances" that it can be summarily dismissed as no more than a fraud, although I do not hide the fact that I have been less than impressed by the defendant's case.

20. At the end of the day, however, as Godfrey JA put it in Ng Shou Chun v. Hung Chun San [1994] 1 HKC 155 (at 158), the court must refrain from conducting a mini-trial on affidavit, however much it may wish to do so, and at this stage I decline to categorize the defence evidence in this case as 'incredible', notwithstanding the absence of an immediate explanation as to precisely how Wuxi Joyray obtained the bill of lading, and thus ultimately possession of the goods absent payment. However, as Mr Yuen remarked in this context, it is not for the bank to speculate and he did not seek to do so.

21. Having reached this conclusion, which as I have indicated I do not regard with enthusiasm, but which I think is constrained by the evidence placed before the court, I did further explore with counsel the possibility of making leave to defend conditional upon payment into court of the sum claimed. This provoked an interesting debate but on reflection, I do not think that this would be logically justified, and having declined judgment, in my view the bank is to be permitted to defend in normal course. I should, however, welcome any attempt, given the present circumstances, to obtain an early hearing date for this action, and indeed I can see no reason why in this case this cannot be achieved.

ORDER

22. It follows from the foregoing, therefore, that the application for summary judgment is refused, and that my Order on this application is that the defendant is to have unconditional leave to defend this action. Absent agreement between counsel, I will make the necessary consequential procedural directions.

23. As to costs, the usual order upon the grant of unconditional leave to defend is that costs be in the cause, and subject to the submissions of counsel, I can see no reason to depart from that approach.

24. I thank counsel for their assistance.