XCHRX Tim Lee Frozen Food Co. v. Leung Sau-ling

DCCJ13126/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 13126 OF 2001

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R U L I N G

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1. This is a claim in the sum of $53,486.02 which the plaintiff brings against the defendant. The subject matter of the claim is a series of invoices, the first of which is dated 19 September 2000, and the last, 24 October 2000, in relation to the price of goods that are alleged to have been sold and delivered by the plaintiff to the defendant. The defendant is sued in her own name, formerly trading as Lo Yau Kee.

2. These are Order 14 proceedings which were issued on 5 September this year, the summons being returnable on 8 October. The plaintiff's affidavit in support is dated 21 September and the defendant's affidavit should have been in by 5 October.

3. When the parties appeared before Master Kwan on 8 October, the solicitor for the defendant asked for more time so that he may file his evidence in reply. The Master was not disposed to allow more time and he entered judgment based on the plaintiff's evidence alone. The defendant now appeals against that judgment and, of course, the defendant has now filed evidence in reply to that of the plaintiff. I have a number of affidavits before me filed on behalf of the parties.

4. The issue is straightforward. The defendant says that she did not at the material time operate the business of Lo Yau Kee, that she did not contract with the plaintiff in respect of these orders and that the plaintiff has therefore sued the wrong person.

5. A letter of demand was in fact sent to her in English on 23 June this year and that appears at page 119 of the bundle. She replied on 27 July (see page 122). Her position that she was not the party who contracted with the plaintiff is one that has been consistently adhered to by her, initially in her first letter of 27 July and now in her defence (page 24), and there is also a proposed amplified defence which it is proposed should be filed as an amended defence in the event that this appeal succeeds. That proposed amended pleading is to the same effect.

6. There is no doubt that the defendant had registered a business in the name of Lo Yau Kee. She did that on 11 September 1997 (see page 114). The address which is given for that business is in the same building but on a different floor to the defendant's alleged business address as pleaded in the statement of claim. According to the formal record at all events, the defendant's business in the name of Lo Yau Kee ceased on 30 August 1998 and as I have already indicated, the invoices that are now sued on post-date the cessation of that business.

7. Mr Shum, who appears on behalf of the defendant, has submitted that when one looks at the evidence as a whole, there is simply no solid proof that his client ordered the goods that are the subject matter of the invoices and that in those circumstances the appeal should be allowed and his client should be given unconditional leave to defend.

8. As against that, Ms Fan, who has presented the plaintiff's case, if I may say so, very persuasively, has taken a number of points in support of the judgment of the Master. Most of those points appear as part of paragraph 7 of a very helpful skeleton argument which she has prepared for this appeal. I think it is helpful for me to go through a number of those points. Firstly, she says that the defendant has traded under an identical name in the same building and, of course, what is particularly material, in the same line of business. She says, and she asks this by way of a rhetorical question, "Is this not too much of a coincidence?" Mr Lee, who has put in an affirmation, has affirmed that Lo Yau Kee in fact ceased business in or about 9 September 2000. So much appears from paragraph 5 of his affirmation (page 144). But the firm itself continued to order food during October 2000 and so much is clear from the plaintiff's invoices which are dated 3 October 2000 until 24 October 2000 (see pages 88 to 112 of the bundle).

9. Ms Fan then asks another rhetorical question, "Well, who was it then who was trading as Lo Yau Kee?" The plaintiff's last invoice to Lo Yau Kee is that dated 24 October 2001 and the defendant - and there is no doubt about this - started a new firm by the name of Po Sum on 28 October, just four days later (see page 137).

10. Ms Fan asks the next rhetorical question, "Is this yet another fortuitous coincidence?" As to the fact that the business was brought to an end in August 1998 is no evidence that the defendant either did not just continue the original business or started another business later. So far as - if I can put it this way - the live evidence, the defendant was seen at the place where the goods were delivered and were required to be delivered to, and she was seen on every occasion when Mr Tang of the plaintiffs visited to collect payment. So much is clear from paragraph 12 of Mr Tang's second affirmation (see page 151).

11. Further, the defendant issued her personal cheques to settle payment for the firm. Cheques were drawn in the amount of $89,701. These cheques were collected by Mr Tang personally. It was done at times when the defendant was present in the business premises although she did not hand those cheques over to him herself and this appears at paragraphs 12 and 13 of his second affirmation, page 151.

12. Of all the cheques that were given to the plaintiff for payment, six of them were drawn by the defendant herself and one by Madam Cheung. The defendant alleges that all of these cheques were in fact loans to Madam Cheung and Madam Cheung merely used those cheques in order to pay her trading debts. As against that, Ms Fan says, "Well, this is just a mere assertion. There's no substantial evidence backing that assertion up and it's an assertion made at the last moment. She also submits that it's somewhat strange that Madam Cheung has not filed an affirmation to confirm that. It is also right to say that the defendant has issued cheques under the new firm of Po Sum for repayment of the outstanding account of Lo Yau Kee. There is ample evidence as to that to be found at paragraphs 7 and 8 of Mr Tang's second affirmation, at page 149, and those cheques appear at pages 170 to 172.

13. As against that, of course, Mr Shum says that that cannot amount proof that the invoices that are the subject matter of the claim are invoices that should have been paid by the defendant. That fact of itself cannot be taken as proof that the defendant was the person who was ordering the goods, the subject matter of the invoices in the statement of claim.

14. When one looks at all of that evidence, there is no doubt in my view that the plaintiff's case is a compelling one as against the defendant. One has her all pervading presence; first, having initially set up this firm, then, at the material time - that is to say September and October 2000 - there she is, present at the premises of Lo Yau Kee, albeit different premises to the ones that are given in the original business registration. She is the person who is present when cheques which were issued by her and were being given to settle the trading debts of Lo Yau Kee.

15. What should I do? The test, of course, is well known in Order 14 cases. The defendant must satisfy the court that he has a fair or reasonable probability of showing a real or bona fide defence, that is that his evidence is reasonably capable of belief. The test is helpfully set out in Hong Kong Civil Procedure 2001, paragraph 14/4/9 which is at page 154.

16. At the end of the day, the court has three options. If it is satisfied that there is simply no defence to the claim on paper - and, of course, the evidence has not been tested by cross-examination - it will enter judgment for the plaintiff. If, in fact, the defendant's evidence taken as a whole appears reasonably credible or believable, then it is only right that the defendant should have unconditional leave to defend. Nevertheless, the court also has a middle ground which ought to be considered and that is to give conditional leave to defend. The situation is as follows:

"A condition of paying some or all of the money or damages claimed into court, or giving security, is imposed where there is a good ground in the evidence for believing that the defence set up is a sham defence or the Master is prepared very nearly to give judgment for the plaintiff (Wing v Thurlow (1893) 10 TLR 53). This statement was cited with approval by Lord Diplock in York Motors v Edwards [1982] 1 WLR 444 at page 450 and has been quoted with approval by Devlin LJ in Field Rank v Stien (1961) 1 WLR 1287 who restored the dictum of Bramwell B in Lloyds Banking Company v Ogle (1876) 1 Exchequer Division 262 that conditional leave may be granted where there is something suspicious in the defendant's mode of presenting his case or the court is left with a real doubt about the defendant's good faith."

17. It seems to me that those sentiments best describe the status of the defendant's case here. I do not think that Ms Fan has done quite enough for me to shut the defendant out completely but the burden of the evidence here so very heavily favours the plaintiff that I take the view that this is a defence which one could properly, in all the circumstances, describe as shadowy and so I have come to the conclusion that I ought to put the defendant on terms when giving her leave to defend. I am not going to go as far as to say that she should bring the entire amount of the claim into court but that she should bring the majority.

18. So I am going to allow this appeal. I shall set aside the Master's order. I will give the defendant conditional leave to defend upon condition that within 42 days she do bring into court $40,000; and that is the order that I make on the appeal.

(Discussion re costs)

19. I take the view that in an interlocutory matter of this sort, the appropriate order is costs in the cause. I think it is far too ambitious for Mr Shum to start asking for costs of the appeal where he has just got by by the skin of his teeth and been put on terms, and I think so far as the plaintiff is concerned, of course the judgment has been set aside. Costs in the cause leaves the matter alive and whoever ultimately succeeds will get these costs. So, I shall say, costs in the cause both here and below.

(Discussion re application to amend defence)

20. I shall say, order in terms of your summons. That is the summons at page 58 of the bundle.