GILMAN & CO LTD v. HO SO WAH (a female) t/a FAI WAH PHOTO COPYING SERVICE CO

HEADNOTE

CONTRACT - documents mistakenly signed - misrepresentation - plea of non est factum - whether mistake serious or fundamental - negligence.

                In connexion with the purchase of two copying machines from the plaintiff, the defendant signed two copy-service agreements, which were printed entirely in English, after their contents had allegedly been misrepresented to her by the plaintiff's servants or agents. By the terms of the agreements, the plaintiff undertook to service the machines, for a term of years or until a specified number of copies had been produced on the machines, for which the defendant would be charged a monthly charge, calculated according to the volume of copies produced. The defendant contended that she was induced to sign the agreements after being assured that service would be provided free of charge until the specified number of copies had been produced on the machines. The plaintiff sued to recover copying charges in respect of copies produced during a period of four months after delivery of the machines. The defendant set up a plea of non est factum as a defence to the claim.

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT KOWLOON

CIVIL JURISDICTION

ACTION NO. 21277 OF 1984

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JUDGMENT

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1. In March 1984 the defendant acquired two copying machines from the plaintiff. One was a Ricoh DT1200, which was delivered to her on the 21st March 1984. It was a used machine. She purchased it for $4,500. The other machine was a Ricoh DT5700, which was delivered. to her on the 6th March pursuant to an "Installation Agreement" (Exhibit P3). This printed form was, in effect, a hiring for 12 months, but on the back there is a typed provision to the effect that ownership would be transferred to the defendant on payment of the final instalment. The defendant paid a deposit of $5,000 and agreed to make 12 monthly payments of $923, making a total of $16,076. This was apparently a "reconditioned" machine.

2. These machines were acquired by the defendant for the purposes of a business of providing facilities for photocopying, which she commenced on or about the 7th March 1984. She did so as a result of a meeting with Mr. Chui Hung Kam, a sales representative employed by the plaintiff. The defendant's younger sister, Doris Ho So Lim, was also present at this meeting. In the present proceedings, I am not concerned with any dispute regarding either of these machines or the provisions of the Installation Agreement. But, I am very much concerned with what transpired at this meeting, because the plaintiff's claim is based upon two copy-service agreements (Exhibits P4 and P5) allegedly signed by the defendant at this meeting. The defendant denies that she is bound by her signature to these agreements, because the contents thereof were misrepresented to her by Mr. Chui at this meeting. In other words, she seeks to defeat the plaintiff's claim by setting up the plea of non est factum.

3. Each of the copy-service agreements is a printed form, expressed entirely in the English language. That relating to the Ricoh DT 5700 machine (Exhibit P4) is dated the 6th March 1984. The material terms are as follows:-

"WHEREAS:

 

1.        In consideration of Gilman supplying such service and supplies and parts, the Consumer hereby agrees to pay to Gilman a monthly charge of $0.10* per unit for the first and subsequent months of installation as recorded on the said meter. Gilman shall have the option to vary the unit charge by giving thirty days notice and if rejected in writing within seven days of notification, such rejection will suspend Gilman's obligations under this agreement.

2.        The Consumer hereby undertakes to allow Gilman's representative regular access to the said machine in order to ascertain the number of units recorded by the meter.

3.        The number of units indicated by the meter shall be conclusive as to the number of copies made by the Consumer on the machine, and the Consumer undertakes to return to Gilman at the end of each month a completed meter card which will be supplied by Gilman.

4.        The Consumer shall make payment to Gilman monthly within 14 days of receipt of Gilman's invoice.

5.        This Agreement shall remain in force until whichever of the following events shall first occur:-

At the bottom and on the back of the form there is a typed "Special Arrangement for Meter Charge" in the form of a schedule of charges varying from 10 cents to 5 cents per copy, according to the monthly volume. The form relating to the Ricoh DT 1200 machine (Exhibit F5) is expressed in identical terms, except for recital C and clause 5. In recital C(1) and clause 5a.a typist has substituted "Three" for "Five". In recital C(2) and clause 5b the printed form specifies 300,000 units instead of the 600,000 units, specified in Exhibit P4. Both documents bear the defendant's signature at various places. The "chop" of the defendant's firm is also placed on these documents.

4. To any person who reads English their effect is fairly clear. The plaintiff's obligation to keep the machines in good and serviceable repair and condition was to continue for a specified period of years or until a specified number of copies had been produced on the machines. In the meantime, the defendant was to make monthly payments for every copy made on the machines at the rates specified in the schedule.

5. The defendant, however, contends that before any documents were produced for her to sign, Mr. Chui told her that she would receive partially free maintenance for each machine. In respect of the DT 5700 the first 600,000 copies would be free of charge. For the DT 1200, the first 300,000 copies would be free of charge. Thereafter, she would pay 5 cents for each copy produced on the machines. When Mr. Chui produced documents for her signature, she did not read them, because they were in English, which she did not understand, and relied on Mr. Chui's representations that their contents were the same as his previous oral assurances. After the machines had been delivered, a female employee of the plaintiff induced her to sign another set of documents by representing to her that their contents were the same as those signed at the meeting with Mr. Chui.

6. In support of the plaintiff's claim for $21,675.30, being meter-charges allegedly due under the copy-service agreements for the period from delivery of the machines in March 1984 until the 31st July 1984, I heard evidence from Mr. Chui. The defendant and her sister, Doris Ho, also gave evidence, in support of the defendant's case. Their evidence has been subjected to the usual forensic process of examination-in-chief, and cross-examination. But, I am still left with a few loose strands, which make it impossible for me to decide the clear conflicts of fact solely on the basis of the credibility of the various witnesses. Certain aspects of the evidence have not been fully probed or further explored, possibly for good reasons. Accordingly, I have approached my task of determining the material facts, within the limits of our adversary system of trial, by considering the actual evidence before me in its totality with a view to arriving at a conclusion as to which version is the more reliable, having regard to the undisputed or proved facts.

7. In essence, Mr. Chui testified that, far from misrepresenting the terms of the plaintiff's copy-service agreements, he explained them in considerable detail and "clause by clause", although the defendant told him that she understood them clearly.  He was not informed that the defendant could not read English or that she understood very little English.  He was quite emphatic that Exhibits P1, P2, P3, P4 and P5 were signed by the defendant and her sister at the initial meeting, and that there was only one set of these documents. He did not know when the defendant's "chop" had been placed on these documents, but agreed that it was not done at the meeting. He denied that he told the defendant that there was any period or degree of free maintenance, and asserted that it was the practice of the trade to charge for maintenance.

8. The defendant gave evidence to the effect that she had never previously owned or hired a copying machine. This occasion was the first time she had ever entered into a business contract. She told Mr. Chui that she had very little understanding of English. She could read dates and figures, but not complete sentences, as her knowledge of English was limited to what she had learned at primary school. She agreed to purchase the two machines, because Mr. Chui told her that she would receive free maintenance in the form of 600,000 free copies for the DT5700, which he described as a relatively new, but second-hand machine, and 300,000 free copies for the DT 1200, which he described as an old machine. She signed a number of documents at the meeting. She didn't read them because Mr. Chui merely said that they were the same as he had previously represented. He did not go through them in detail or explain their nature. Mr. Chui signed the documents first and then she and her sister signed. Subsequently, the day after the machines were delivered, a girl from the plaintiff asked her to sign some other documents, telling her that there was no need to read them as they were the same as she had signed at the meeting with Mr. Chui. On those occasions she put her "chop" on the documents. When she received the plaintiff's two bills in July 1984, she thought that they related to the purchase price of the two machines. She contacted the plaintiff to explain that she had "paid up", but was informed by an employee of the plaintiff that further enquiries would have to be made. Her younger sister basically confirmed the defendant's understanding regarding the "free" maintenance, but was not able to remember much of the details of what was said at the meeting with Mr. Chui.

9. Before I indicate the masters of fact which are not disputed, or which I am able to find without any difficulty, I should emphasise that I have not overlooked the fact that the witnesses who gave evidence before me may have strong reasons or motives for deceiving me or their legal advisers as to what took place at this meeting, or subsequently. The defendant, aided and abetted by her sister, may have given false evidence, in order to evade or defer a liability, freely entered into, simply because it turned out to be more onerous than she realised at the time she signed the various documents. Whilst it is, perhaps, unlikely that Mr. Chui would misrepresent the practice of the plaintiff with regard to maintenance of machines supplied by the plaintiff, as well as the contents of agreements which would eventually be sent to the defendant, such has been known to happen. Furthermore, in my respectful view, Mr. Chui had an equally powerful incentive or motive for not telling the truth, namely, a desire to protect his position with she plaintiff and his rights to commission, which forms the greater part of his earnings. For all I know, he may have felt that his word would be accepted, against that of the defendant, simply because, unlike the defendant, he would not have to face the additional practical hurdle of explaining away signatures on a supposedly legally binding agreement. But a motive for not telling the truth is not the same as proof of perjury. In the absence of reliable evidence or material for evaluating the relative strength of such motives, I am unable to say that any of the witnesses have told me clear and deliberate lies on any material issue. For reasons, which will shortly emerge, I am able to indicate the version of the material facts which I prefer. But, that result is based upon a careful consideration of the reliability of the evidence, tested by reference to the undisputed facts and surrounding circumstances.

10. Although the date of the meeting with Mr. Chui is disputed, I do not think that it is material. It clearly took place at a restaurant at some time before the defendant commenced business, because her business premises were then being decorated, she had not obtained her business registration certificate, and did not have her "chop" with her at this meeting. For what it is worth, I incline to the view that this meeting took place in February 1984, as the defendant and her sister asserted. In my view, their recollection of the date of the meeting is likely to be more accurate, because it was an almost unique event in their experience. Mr. Chui, on the other hand, must have had many similar dealings during the same period. His final answer in re-examination suggests that he was not slack, or short of potential customers, at the time when he met the defendant. In my view, he had no independent or special recollection of his meeting with the defendant. Indeed, I gained the distinct impression that his recollection of the material events was based entirely upon his firm belief or careless willingness to accept, that the various documents, presented to him as he gave his evidence (i.e. Exhibits P1 to P5 inclusive), were reliable contemporaneous records, from which he could "refresh his memory". In this respect, I think that Mr. Chui may be mistaken, or may have bean led into a state of self-deception.

11. It is, however, clear, in my view, that, at this meeting, the defendant did not place her "chop" on any of the documents which she signed at this meeting. Nor was she given copies of these documents by Mr. Chui. The defendant asserted that the documents she signed at the meeting were also signed by Mr. Chui, which Mr. Chui denied. In fact, none of the documents on which the plaintiff now relies is signed by Mr. Chui. Neither of the machines was new, which perhaps explains why no mention was made of any Guarantee or Warranty being given by the plaintiff or the manufacturer. The machines were delivered on the 6th and 21st March 1984. The first and only demand for payment of meter-charges was made by the plaintiff at the end of July 1984, approximately four months after the delivery of the machines.

12. Although I am satisfied that the defendant signed same documents at the meeting, I am not satisfied that those documents are exhibits P1 to P5, as Mr. Chui firmly asserted. In my view, examination of these exhibits (as well as Exhibits P6 and P7) clearly demonstrates that some of them must have been signed by the defendant at a later date, because her signatures on Exhibits P1, P2 and P3 are clearly written over the "chop", i.e. after the "chop" had been placed thereon. The same is true of the signatures of Rita Cheung on Exhibits P4 and P5, and the initials or abbreviated signature in the left-hand margin of Exhibit P5. Whilst it is possible that the defendant signed Exhibits P4 and P5 at the meeting, since her signatures are not placed over the "chop". I think that it is more likely that they were placed on these exhibits after the machines were delivered. The persons who executed these exhibits (and Exhibit P3) on behalf the plaintiff did not give evidence. Accordingly, I only have the evidence of Mr. Chui that all these exhibits were signed by the defendant at the meeting and in his presence. In this respect, he has, in my view, been shown to be clearly mistaken about Exhibits P1, P2 and P3. On the evidence before me, I also think that he was mistaken about Exhibits P4 and P5.

13. The defendant's account of signing two sets of documents - one set at the meeting and another set after delivery of the machines - was not really challenged. Athough this part of her case was earlier set out clearly in paragraphs 4 and 5 of her Defence, the plaintiff has not made any real effort to meat or answer these allegations. The person who might reasonably be expected to have custody, on behalf of the plaintiff, of all documents signed by its customers was not called. Apart from the unreliable evidence of Mr. Chui, there was no evidence to refute the defendant's evidence of being asked to sign two sets of documents. The absence of Mr. Chui's signature from any of the material exhibits may be explicable on the basis that he had no authority to sign contracts an behalf of the plaintiff. Such documentation was left to other employees of the plaintiff. As Mr. Chui testified, he took the documents, signed by the defendant at the meeting, back to his office for his superior's approval. At the same time, I think that it is extremely unlikely that the plaintiff would subsequently deliver two machines to the defendant simply on Mr. Chui's instructions, unless the defendant had already signified her commitment to purchase them by signing some documents in Mr. Chui's presence. But, whatever documents the defendant did sign at this meeting, I am quite satisfied that they are not the documents which have been produced before me at the trial of this action. On this aspect of the cane, I have no hesitation in preferring the account of the defendant, and her sister, to the evidence of Mr. Chui.

14. In my view, the plaintiff's failure to produce, or explain the absence or non-existence of the documents signed by the defendant at this meeting is not without some significance. Apart from tending to confirm the defendant's version of the circumstances in which she signed the documents on which the plaintiff now relies. it makes it virtually impossible for me to find that there was no difference between the terms of the plaintiff's service agreements, as evidenced by Exhibits P4 and P5, and what Mr. Chui actually told the defendant. It is tolerably clear that the plaintiff is relying upon standard printed forms which were prepared many years ago, and are, in my view, more appropriate to the supply of new machines. For instance, Exhibit P.3 is the same as the agreement which figured in Gilman & Co. Ltd. v. Yau Shun Printing Press [1978] DCLR 34. The typed provision on the back of the form is the only response which the plaintiff has made to the criticism expressed in that case. For my own part, I venture to suggest that the provisions, which are intended to operate in the event of unpunctual payment by the "lessee", are seriously defective, because the agreement does not even specify when the payments thereunder have to be made! Insofar as the duration of Exhibits P4 and P5 is governed by a term of years (see clauses C(1) and 5a), time begins to run from "the date of the Guarantee issued by Gilman", an expression which I consider can only apply to new machines.  In the context of the present case, involving old or reconditioned machines, these provisions are really meaningless, unless it is perhaps, the policy or practice of the plaintiff, or its sales representatives, to offer some form of ''guarantee" to users or purchasers of such machines.

15. It is, in my view, noticeable that Mr. Chui constantly referred to the terms on which the plaintiff would maintain the machines purchased by the defendant as a "service of guarantee''. To the average or unsophisticated consumer, this expression would, in my view, convey the impression that some form or period of service or maintenance was being offered by the plaintiff free of charge or at a nominal cost.

16. Mr. Chui's use of this expression, coupled with my impressions of him as a witness, and other aspects of the plaintiff's case, lead me to conclude that I cannot accept Mr. Chui's version of what was said at this crucial meeting. At times, he seemed confused or unsure of what had taken place. His account of the execution of documents by the defendant does not accord with observable features of the documents placed before me. I do not, for one moment, believe his assertion that he explained Exhibits P4 and P5 "clause by clause". Had he done so, I am sure that there would have been some mention of, or enquiry about, the guarantee issued by Gilman", and further discussion of the plaintiff's option to vary the unit charge and the consequences of such variation being rejected by the defendant. (Cf clause 1 of Exhibits P4 and P5). Assuming that Mr. Chui did explain to the defendant that she would be charged 5 cents per copy if the monthly volume produced by each machine was 30,000 copies (an assumption which I am not prepared to elevate into a finding of fact!), I am satisfied that Mr. Chui never brought home to the defendant, clearly or at all, that Exhibit P4 would come to an end after 20 months, in lieu of 5 years, or that Exhibit P5 would come to an end after 10 months, in lieu of 3 years (5 years?), had elapsed from the dates when the defendant acquired the machines.

17. On the basis of the totality of the evidence before me I have no hesitation in preferring the evidence of the defendant to that of Mr. Chui. There wore no material contradictions or inconsistencies in her account. It is, in my view, more consistent with the undisputed facts and surrounding circumstances. I accept her evidence that she has very little command of English, and that she made this clear to Mr. Chui, and that he merely repeated his previous oral assurances to her that she would not have to pay copying charges until each machine had produced the volume of copies she mentioned. I find that it was Mr. Chui who suggested that the "English" version of her name and her proposed business name and business address should be used on the documents. Unfortunately, I do not know the language used at their meeting, but from the fact that they gave evidence in Punti, I think that it is probable that they conversed in their mother tongue, on all other important matters. In her final submission, Miss Cheng contended that Mr. Chui would not dare to misrepresent the contents of documents, which would later be shown to the defendant. I have taken that into account when assessing the evidence before me, but it does not cause me to alter my finding that Mr. Chui did materially misrepresent the contents of Exhibits P4 and P5. Apart from the fact that copies thereof were not supplied by the plaintiff until some days after the machines had been installed, the plaintiff's first demands for copying charges, supposedly in accordance with the terms of Exhibits P4 and P5, were not made monthly, but after the machines had been used for some four months. This conduct of the plaintiff is not only inconsistant with its supposed rights under these agreements; it tended, in my view, to reinforce the defendant's belief that she would not be charged for service until the volume of copying exceeded certain specific quantities.  Furthermore, when she queried the amount of the plaintiff's invoice, on the basis that she had paid what was due for the purchase of the machines, she was never told that the amount had nothing to do with their purchase, but related to charges under the service agreements, at least until she was served with the writ in the present action.

18. As a general rule of principle and common-sense, I accept that a person who signs a document, knowing that it governs his or her legal relations with other persons, bears a heavy burden of proving all the circumstances which, as a matter of law, are necessary to justify his or her subsequent denial of liability. In the present case, I have borne in mind the various opinions expressed in the leading case of Gallie v. Lee [1971] AC 1004, some of which were cited to me. Although that case did not deal with documents in a foreign language, and the issues were not confined to the rights or expectations of the immediate contracting parties, but materially affected those of an innocent third party, I do not regard the decision as distinguishable. But, I do not think that there is anything in this highly persuasive authority which suggests that the "heavy burden" imposed upon the signer nor is higher than the normal burden of proof in civil disputes, i.e. proof on the basis of a preponderance of probability. On the basis of the evidence before me, I am satisfied that the defendant has proved, to the extent required by law, the initial foundation of material facts for her plea of non est factum to be considered. I believe her evidence, and find that she was led to believe, and did believe, that, by signing Exhibits P4 and P5, she would receive free service from the plaintiff in respect of both machines until the total volume of copies produced on DT 5700 reached 600,000 copies, and 300,000 copies in respect of DT 1200. I will now consider whether she has brought herself within the legal restrictions placed upon the plea of non est factum.

19. In the first place, Miss Cheng did not really contend that the defendant had failed to bring herself within the first restrictive rule, namely, that the plea only applies to specified categories of persons.  Having regard to the defendant's limited command of English, the fact that her education stopped at Primary 5, and this was the first time she had ever entered into an agreement with another person, coupled with my finding that she was induced to sign Exhibits P4 and P5 by misrepresentation on the part of Mr. Chui and the girl who brought them for her signature after the machines had been delivered, I consider that the defendant has amply established that she is within the category described by Lord Reid in Gallie v. Lee, supra (at p. 1016) as:

"......those who are permanently or temporarily unable through no fault of their own to have without explanation any real understanding of the purport of a particular document, whether that be from defective education, illness or innate incapacity."

Even if she supplied the "English" or romanised version of the name and address of her proposed business, and signed the documents in the romanised form of her name, without any suggestion or prompting on Mr. Chui's part (which I do net accept), this is, in my view, insufficient to bring her into the category of literate persons of full capacity.

20. Miss Cheng, however, contended that the defendant had failed to satisfy the second restrictive rule that her mistake was serious, because there was no fundamental difference between what she signed and what she believed she was signing. The nature of the agreement was the sane, namely, a service agreement.  Indeed, I must accept that such was the case. But, although the speeches in Gallie v. Lee, supra, use a variety of epithets to describe the difference which must exist between the document, as signed, and what the signer believed it to be, or to contain - 'radical,' 'substantial' or 'fundamental'- they are, in my respectful view, unanimous in rejecting the distinction, drawn in earlier cases, between the character of the document and its contents. In the present case, on the facts found by me, I am satisfied that the defendant's mistake was sufficiently serious to enable her to rely on this special plea, whichever epithet is selected.  In my view, it falls squarely within the practical example given by Lord Reid(supra, at p, 1017):

"If a man thinks he is signing a document which will cost him £10 and the actual document would cost him £ 1,000 it could not be right to deny him this remedy simply because the legal character of the two was the same."

In my respectful view, the seriousness of the mistake must be judged by the difference in practical result rather than by any difference in legal character.

21. In the present case, the defendant signed documents which she thought would involve her in no indebtedness to the plaintiff (apart from the cost of purchasing the two machines under separate contracts) until she had made 600,000 conies on DT 5700 and 300,000 copies on DT1200. Thereafter, she thought that the plaintiff would service the machines at a cost of 5 cents per copy. Instead, she signed documents which immediately committed her to monthly payments to the plaintiff, ranging from 10 cents per copy for the first 4000 copies to 5 cents per copy if the monthly volume exceeded 30,000 copies, and which would release the plaintiff from its obligation to service the machines after those limits had been reached. Assuming that the defendant regularly produced 30,000 copies per month on DT 5700, she would incur immediate liabilities to pay to the plaintiff, over a period of 20 months, a total sum of $30,000. Assuming the same degree of use of DT 1200, she would become immediately liable to a sum which would, over a 10 month period, grow to $15,000. In my view, it is sufficient to state those figures to support my conclusion that the defendant's mistake in this case was fundamental, or sufficiently serious to enable her to rely on the plea of non est factum.

22. Miss Cheng's final attempt to defeat the defendant's plea was based upon her alleged carelessness in signing the relevant agreements. In my view, this aspect of the legal restrictions upon the plea of non est factum, can only realistically apply in those situations where the signer seeks to deny his or her liability towards an innocent third party, who has relied upon the relevant document. As between the immediate contracting parties, I consider, that it can only apply, if the other party is totally ignorant of the signer's mistake or misunderstanding, or has not contributed to that state of affairs by his or her conduct. On my findings of fact in this case, I do not think that the defendant was careless in relying on what she had been told by Mr. Chui and the girl who brought the documents after delivery of the machines.  Although they were strangers to her, they were representatives of a prominent business concern, which she selected because it was a "well-cstablished" firm. Even if she had read the documents before signing them, she would not, in my view, have appreciated their true contents, having regard to her limited command of English. In this context, the proper test must surely be whether the defendant took such care as a person in the category, earlier described by Lord Reid, might be expected to take.  In my view, the defendant did so in the circumstances of the present case. The standard of care cannot, in my view, be that expected of the legendary reasonable man - that "noble creature" who always "contemplates his fellow - merchants, their agents, and their goods, with that degree of suspicion and distrust which the law deems admirable." (cf Fardell v Potts (1924), reported by Herbert (A.P.) in Uncommon Law and Wigs at Work.) And, if I may respectfully add, a person, who always reads documents before he signs them, and' never signs a document in a foreign language!

23. For the aforesaid reasons, the defendant has, in my view, made good her plea of non est factum. Although she does not seek any relief by way of rescission of any of the agreements she entered into with the plaintiff, that successful plea is a good defence to the present claim, which is, accordingly, dismissed.