CHATRU'S (HK) LTD v. YANG KAM SHAN (DAVID) AND ANOTHER

1988, No. A7688

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The plaintiff's claim against the defendants is a very straight-forward one. It is founded on a contract for the sale of goods. The allegation is that in purported performance of the contract Luen Hing failed to supply goods to the plaintiff in accordance with as well the samples given as the descriptions specified. It is further charged that the goods taken delivery of in the purported performance of the contract were unmerchantable.

2. On this claim, the plaintiff applied to the Master under Order 14 for summary judgment. For reasons I need not go into, the application against the first-named defendant was abandoned. The application was proceeded with against the second-named female defendant. The Master granted her leave to defend but on condition - the condition being that she is required to pay into court virtually the whole of the plaintiff's claim. The female defendant feels aggrieved and she appeals against the Master's determination. I have been constantly reminded that the hearing today is a hearing de novo; so it is.

3. On behalf of the female defendant, it is submitted that the plaintiff has not even succeeded in establishing the root of contract, so counsel characterises the shortfall. What happened was that the written contract sought to be relied upon by the plaintiff was not signed by Luen Hing. Moreover, in the copy retained by the plaintiff, various alterations were made, in particular, the original 3,000 pieces of men's jackets having been amended to 2,400 pieces.

4. Counsel for the female defendant draws the Court's attention to the assertion made on her behalf that on the 28th April 1988 the five jackets handed over to the plaintiff were not by way of samples but for the purpose of illustrating the nature of the goods. The defendants admit that there was a sale by Luen Hing to the plaintiff of a quantity of the very jackets but they claim that it was a sale of stock goods. The jackets were allegedly obtained from Chinese manufacturers. They were low cost goods, not manufactured on the instructions of Luen Hing themselves. Thus the goods were expected to have variations in more ways than one. It was therefore Luen Hing's intention, so it is alleged, to sell the jackets as stock goods on "as is" basis. The defendants claim that the plaintiff was well aware of the situation and agreed to take these as stock goods off the defendants at a certain agreed unit price.

5. The defendants are themselves less than specific as to the formation of that contract of sale: after the meeting on the 28th April, at which five jackets were given to the plaintiff together with a quotation, the written contract sued upon was sent over by the plaintiff to the defendants on the 29th June. Luen Hing refused to sign this contract as it contained specifications and conditions which the stock goods were not expected to meet. These specifications and conditions were not agreed. It was at the request of the plaintiff that a Temporary Invoice was issued for its application of an export licence. Luen Hing noted down on the unsigned contract the number of the Temporary Invoice. It is explained on behalf of the defendants that the number of the Temporary Invoice could have been put down on just any piece of paper except for the fact that the unsigned contract happened to be then at hand. It was a matter of convenience and coincidence that the number of the invoice was so noted on the unsigned contract. The Temporary Invoice itself bore the unsigned contract number. Some time later on the 2nd of July, an inspection was carried out by the plaintiff of the stock goods to be sold. Inspection was allegedly thorough and goods were found to be suitable and taken by the plaintiff. That represents, in toto, the defence version. In consequence of all these events, so claim the defendants, a deal for the sale of stock goods was finally struck between Luen Hing and the plaintiff. Counsel is not able to pin the contract down on any specific date.

6. As for the plaintiff, the number of the Temporary Invoice on the unsigned contract and the unsigned contract number on the Temporary Invoice coupled with the five jackets and quotation are matters sought to be relied upon in support of its claim made on the force of the terms and conditions of the unsigned contract. The plaintiff sues on the unsigned document as a completed contract.

7. No explanation has been given for the alterations, but as far as quantity is concerned, the Temporary Invoice puts the matter beyond doubt that it was 2,400 jackets that were to be sold.

8. The plaintiff is adamant that the five jackets given on the 28th April 1988 were samples, and such contention is said to be fortified by the entries in the quotation which carried 5 separate categories.

9. These are all matters open to arguments. The female defendant invites the Court to have the plaintiff's 0.14 application dismissed altogether for its failure to set up its "root of contract". The plaintiff has sufficiently disclosed a good cause of action. Turning to the defence, the Master was prepared to grant leave to defend. I find myself in complete agreement with him that the female defendant should not be kept from defending this action. But the Master granted conditional leave and that is the core of her complaint.

10. This appeal can be resolved quite simply: the plaintiff, through its director, I am told Mr Chatru, complains that on affirmations the defendants excuse for refusing to sign the written contract was in protest of the allegedly unagreed specifications and conditions. The defendants further explain on affirmations that as the sale was to be a sale of stock goods of low cost, manufactured in China, they had no confidence in their quality and description. In the result, the written contract sent over by the plaintiff to the defendant on the 29th June was left unsigned. But in a letter of the defendants' solicitors dated the 22nd of October, it was then asserted that the written contract was not signed because the defendants could not understand its specifications and conditions. I should quote, perhaps the precise version then given by the defendants' solicitors :-

"They [the defendants] did not agree to and would not sign the document mentioned in your letter under reply, which document was purported to be a written contract containing specifications and conditions which our clients could not understand."

11. Mr Chatru takes the defendant's to task on this previous excuse in paragraphs 13 and 14 of his first affidavit. Mr Chatru's complaint is : that excuse for not signing the written contract, namely that they, the defendants, could not understand its specifications and conditions was wholly inconsistent with Luen Hing raising no objection to and signing on an earlier occasion another contract with like conditions and specifications. There was not then a word uttered that the defendant's were not able to understand them. That is a plain challenge to the defendants' bona fide. The defendants had taken a different stance at different times. The challenge so clearly made by Mr Chatru has not been met or otherwise satisfactorily explained. It is not an oblique criticism levelled at the defendants. The accusation is direct and it has been left unanswered.

12. In substance, what the plaintiff complains against the defendants is primarily twofold: first, a different reason was given in their solicitors' letter, different from that now given on affirmations filed on behalf of the defendants as to why the written contract was left unsigned. Further, a direct criticism of the defendants' shifting attitude in alleging lack of understanding of the conditions and specifications has been left unanswered.

13. Both these matters are weighty enough for the Court, entertaining an Order 14 application, to doubt the bona fide of Luen Hing and require a payment into court. In my view, the director of the plaintiff, Mr Chatru has succeeded by these matters in casting doubt on the bona fide of the defendants.

14. Mr Chatru relies on other matters as well, for instance, sale by sample, production of a quotation with five categories, the charging of the unit price and the reference made to article numbers for the jackets in question. All these sought to be further relied upon by the director of the plaintiff, Mr Chatru, have been met with explanations. Evidently, these matters cannot be resolved on affidavits before the hearing of this action.

15. The alleged conduct I have referred to has cast doubt on the good faith of Luen Hing in their attempt to resist the application of the plaintiff under Order 14 of the Rules of Supreme Court. It is my opinion that condition ought to be imposed and that the sum set by the Master a virtually to the full extent of the plaintiff's claim is a proper condition for the conditional leave so granted.

16. In the circumstances, the appeal against the Order made by the Master cannot succeed and the same must therefore be dismissed with costs to the plaintiff.