BUN KEE (INTERNATIONAL) LTD v. LUEN YICK WATER & DRAINAGE WORKS LTD AND OTHERS

HCA 3072/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3072 OF 2001

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J U D G M E N T

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1. In this action, the Plaintiff is claiming against the 2nd and 4th Defendants pursuant to two guarantees. The guarantees were in respect of goods supplied by the Plaintiff to the 1st Defendant. At the trial before me, I am only concerned with the position of the 2nd and 4th Defendants because the 1st Defendant had been wound up and the 3rd Defendant made bankrupt.

2. The first guarantee was dated 30 March 1999 ["the First Guarantee"] and it was executed by the 2nd and the 3rd Defendants. It was a guarantee given to the Plaintiff. The terms are as follows,

"IN CONSIDERATION of your having at our request agreed to supply LUEN YICK WATER & DRAINAGE WORKS LTD whose registered office is situate at FLAT A, 12/F., PROSPEROUS COMM. BLDG. 54-58 JARDINE'S BAZAAR, CAUSEWAY BAY, H.K. (hereinafter called the Principal Debtor) with goods and/or services we now agree with you as follows:

1.	We will jointly and severally guarantee and be answerable and responsible to you for the due payment including but not limited to interest at the rate of 2 percent per month payable by the Principal Debtor for all such goods and/or services as you may from time to time at its request supply and deliver to it notwithstanding that we shall not have notice of any neglect or omission on its part to pay for such goods according to the terms agreed on between you and it but so that our liability under this guarantee shall not exceed in aggregate the sum of Hong Kong Dollars ONE MILLION ONLY. (HK$1,000,000.00) plus interests.
2.	the Principal Debtor with you in respect of goods and/or services or be supplied and delivered to it and for the avoidance of doubt shall be treated as security the whole debt and not for so much of it as equals the limits of our liability.This agreement shall be a continuing guarantee to you within the above limits for the whole debt that shall be contracted by
3.	All dividend composition and payment received by you from the Principal Debtor whether in liquidation or otherwise shall be taken and applied by you as payments without there being any deduction in respect of any claim arising under this guarantee and our right to be subrogated to you in respect of such dividends or payments shall not arise until you have received the full amount of all your claims against it.
4.	You may at any times at your absolute discretion and without giving any notice whether to us or at all refuse further credit or suppliers to the Principal debtor and grant to it or to any drawers acceptors or endorsers of bills of exchange promissory notes or other securities received by you from it or on which it may be liable to you any time or other indulgence and compound with it or them respectively without discharging or impairing our liability under this guarantee.
5.	This guarantee shall be enforceable against us notwithstanding that any negotiable or other securities or to which it shall extend or be applicable shall at the time of proceedings being taken against us on this guarantee be outstanding or in circulation."

3. The second guarantee was dated 5 December 2000 ["the Second Guarantee"] and the 2nd and 4th Defendants executed it together with the 3rd Defendant. The terms are identical to the First Guarantee except that the upper limit of the Second Guarantee was $1.5 million instead of $1 million.

4. A number of defences were raised on behalf of the Defendants and in view of the fact that the burden of proof of most of the issues rested upon the Defendants, I ruled at the beginning of the trial the 2nd and 4th Defendants should open the case.

5. After such ruling from the court, Mr Shum indicated on behalf of the 2nd and 4th Defendants that they would abandon all the defences except one point. The remaining point was that on proper construction of the guarantees, they only covered goods supplied pursuant to contracts made between the Plaintiff and the 1st Defendant after the respective date of the guarantees. This contention was pleaded in Paragraph 4 of the Defence. Mr Shum also informed the court that the defence chose not to call any evidence.

6. The Plaintiff called only one witness, Mr Ku Chun Ming. He adopted his witness statement of 5 July 2002 as his evidence in chief. Most of his evidence in that statement, understandably, dealt with the other defences which were abandoned at the trial. Counsel for the Plaintiff mainly focused on Paragraphs 9 to 10 of his witness statement and asked the court to bear in mind of those as part of the underlying factual matrix in the construction of the guarantees. Mr Ku explained that the Plaintiff had since 1995 required the directors or shareholders of their corporate customers to execute personal guarantees to secure the due payment of goods supplied to those customers. In the case of the 1st Defendant, a series of guarantees of different amounts had been executed by various directors of the 1st Defendant since December 1995. The First and Second Guarantees were the last two in the series.

7. As stated, in the present action, the Plaintiff only sued on the strength of the 1st and 2nd Guarantees and the earlier guarantees were not relied upon. Mr Ku's evidence was that the earlier guarantees were returned to the guarantors when they were replaced by subsequent ones. His evidence was that in May 1999, the 1st Guarantee was executed by the 2nd and 3rd Defendants to replace an earlier guarantee of 18 August 1998. However, the 2nd Guarantee was not a replacement of the 1st Guarantee and the originals of both documents were kept by the Plaintiff. Both of them were regarded as valid and enforceable. Mr Shum did not have any quarrel with that.

8. Mr Shum contended that the Plaintiff had not adduced evidence to prove that the present claim of the Plaintiff was in respect of goods supplied pursuant to contracts made after the dates of these guarantees. It is noteworthy that it had not been pleaded by the Defendants that the goods were supplied pursuant to contracts made before the date of the First Guarantee. To the contrary, the net effect of Paragraphs 24 and 25 of the Defence (reading together with the further particulars given by the Defendants under Requests 7 and 8) is that all the agreements in respect of the goods that form the subject matter of this action were made after the First Guarantee but before the Second Guarantee.

9. Mr Shum submitted that the Plaintiff should not be permitted to rely on the pleadings in the Defence to establish its claim. I shall need to discuss this at greater length later.

The Plaintiff's pleaded claims against the 2nd and 4th Defendants

10. Mr Shum also argued that the Plaintiff's claim as pleaded in the Amended Statement of Claim was in respect of the five cheques instead of goods sold and delivered to the 1st Defendant. After pleading the two guarantees, the Plaintiff pleaded in Paragraphs 4 and 5 of the Amended Statement of Claim as follows,

" ...
4.	Pursuant to the 1st and 2nd Guarantees and at the request of the 1st Defendant, the Plaintiff duly supplied and delivered goods and/or services to the 1st Defendant. The Plaintiff will rely on the full terms and effects of the said 1st and 2nd Guarantees.
5.	The Plaintiff claims against the 1st Defendant as the drawer of the following five (5) cheques drawn on Chekiang First Bank Limited and in favour of the Plaintiff, in purported payment of the outstanding price for goods sold and delivered to the 1st Defendant. Particulars of the said cheques are as follows:-

Date	Cheque No.	Amount HK$
31/12/2000	720869	459,857.76
31/01/2001	720871	93,546.50
28/02/2001	720873	123,557.87
31/03/2001	720891	342,495.78
30/04/2001	720925	157,156.74
		1,176,614.65
		=========

When the Plaintiff presented the said cheques for payment on their respective due dates, they were dishonoured and returned to the Plaintiff and marked "Refer to drawer". Notices of dishonour of the said cheques are dispensed with by virtue of S.50(2)(c)(iv) of the Bills of Exchange Ordinance, Chapter 19."

11. It is quite clear to me that as far as the claims against the 2nd and 4th Defendants are concerned, the Plaintiff's case is formulated as follows in the Amended Statement of Claim,

(a) the 2nd and 4th Defendants were guarantors;

(b) goods were supplied "pursuant to the [guarantees] and at the request of the 1st Defendant";

(c) the price of such goods were outstanding as the purported payment for the same by the five cheques were ineffective because they were dishonoured;

(d) the 2nd and 4th Defendants were therefore liable under the guarantees.

12. The Plaintiff did not tie itself down to any particular construction as to the scope of the guarantees in the Amended Statement of Claim. What was asserted is that the transactions fell within the scope of the guarantees. That is how a reasonable pleader would understand by the plea in Paragraph 4 that the goods were supplied pursuant to the guarantees.

13. I see no merit in the contention of Mr Shum set out in Paragraph 10 above. I do not believe the use of the words "purported payment" in Paragraph 5 of the Amended Statement of Claim could suggest to a reasonable pleader that the Plaintiff was asserting that the cheques were payment for something else or that the Plaintiff was suing purely on the cheques as far as the claims against the 2nd and 4th Defendants are concerned. As submitted by Mr Wong, the word "purported" was used because the payment was ineffective due to the cheques being dishonoured. The Plaintiff justifiably and understandably sued on the cheques in respect of the claims against the 1st Defendant (as the drawer of the cheques). But as far as the claims against the 2nd and 4th Defendants were concerned, the case of the Plaintiff was pleaded on the basis of unpaid price of goods supplied "pursuant to" the guarantees. There could not be any mistake as to that and that seems to be the understanding of the pleader who drafted the Defence.

Construction of the Guarantees

14. The construction of the guarantees was an issue raised in the Defence. Mr Wong agreed that guarantees should be construed strictly. This is well settled law (see Para. 13 of my judgment in 陳永 訴 周利華 [2004] 1 HKLRD 1051). Mr Wong however contended that the guarantees had to be construed in its context and the underlying factual matrix could be referred to in aid of construction. He relied on Paras.173 and 174 of Halsbury's Laws of England, 4th Edn. Reissue, Vol.20. He also submitted that the court could refer to the consideration clause of the guarantee in the construction process, citing O'Donovan & Phillips, The Modern Contract of Guarantee, English Edition (2003), Para.5-09 and Geelong Building Society v Encel [1996] 1 VR 594 in support.

15. The Plaintiff said the guarantees were wide enough to cover unpaid liabilities for goods supplied prior to the dates of the guarantees. Whilst there is no dispute that a guarantee could, if drafted with sufficient clarity, cover past transactions, the issue in the present case is whether the wordings of the 1st and 2nd Guarantees achieved that objective. Mr Wong relied on the consideration clauses in these guarantees. He submitted that the expression "having agreed to supply" in that clause suggests that the scope of the guarantee would cover goods contracted for prior to the dates of the guarantee.

16. Mr Wong also referred to the contractual arrangement between the parties. The goods in question were pipes and fittings for installation at construction sites. As shown by the Sales Notes in the trial bundles, contracts were entered into between the Plaintiff and the 1st Defendant well in advance for a particular site. Taking Sales Note No.BK98-116090 as an example, the contract was dated 25 November 1999. It was for the supply of ductile iron pipe and fittings for KCRC 5 HA Site. The shipment term was as follows,

"Partial quantity ex-stock, balance about 3-4 months after ordering, subject to manufacturer's final schedule. All the goods should be taken delivery before 30 October 2000. After that day, all the price and terms will be subject to our reconfirmation."

17. It was therefore contemplated by the parties that the actual delivery of the goods could be as late as almost one year after the contract date. Hence, it was very likely that a contract date was earlier than the guarantee date although the goods were not yet delivered by the time the parties executed the guarantee.

18. On the other hand, Mr Shum relied on the contra proferentem rule and submitted that the guarantees only covered goods sold pursuant to contracts made after the dates of the guarantees. Although he cited a number of cases, I do not find it necessary to refer to all of them. Construction of a document depends on the facts of the case and it would not be right to adopt the construction placed upon a clause by another court in another context, no matter how similarly worded they were, to the case before the court irrespective of the underlying factual matrix.

19. Both parties had addressed this court on the case of Morrell v Cowan (1877) 7 Ch D 151. The only principle of general application that I feel able to derive from that case is that if a principal creditor wished to have a guarantee covering past debts, the guarantee must be expressed in clear and unambiguous terms. I am unable to derive further assistance from that case as to the extent to which one could have regard to the consideration clause in the construction of the guarantee and what is the proper meaning and effect of a consideration clause stating "in consideration of you having agreed to supply goods at my request". With respect to counsel (both of them invited this court to adopt this case as an authority for favouring the construction advocated by them on a guarantee with a similarly worded construction clause), the ultimate construction must depend on the facts of each case. It should be noted that on the facts of that case, unlike the present case, there was no significance in the distinction between the dates of contract and dates of delivery. Also, there was no question of replacing one guarantee with another on the facts of Morrell v Cowan. To transpose what was said by the court in that case regarding construction of the guarantee in that case directly to the present case would be, in my view, a misuse of authority.

20. I have mentioned Mr Wong's argument based on the consideration clause to urge this court to adopt a wide construction of the scope of the guarantees. On the other hand, Mr Shum relied on Clause 2 of these guarantees to ask the court to adopt a narrow construction. He referred specifically to various expressions in Clause 2 suggesting that liabilities incurred in the future were the subject matters of the guarantees ("debt that shall be contracted by [the 1st Defendant]"; "goods ... be supplied and delivered ...").

21. In my judgment, whilst it is permissible to refer to other parts of the guarantees to assist in the construction of the main clause governing the scope of the guarantee, the ultimate duty of the court to give effect to the plain meaning of the main clause and if there is no ambiguity in the main clause, one should not twist its meaning by reference to the other parts of the guarantee that were not put into the guarantee for the purpose of defining the primary scope of the guarantee.

22. In the First and the Second Guarantees, the principal clause governing the liability of the guarantors is Clause 1. The consideration clause was there to set out the consideration provided by the creditor in support of the promise of the guarantors. Clause 2 was there to make it clear that the guarantee was a continuing guarantee instead of a guarantee for a specific transaction. It was therefore quite natural for Clause 2 to refer to liabilities to be incurred in the future. However, that should not normally be taken as cutting down the scope of the principal clause.

23. I do not think there is any ambiguity in Clause 1. It is a guarantee for payment of goods that the Plaintiff "may from time to time at [the 1st Defendant's] request supply and deliver to it". It does not refer to goods supplied before the date of the guarantee nor does it refer to the date when the contract of sale was made. It is important to bear in mind that it is not a guarantee for all liabilities under the contracts of sale. It is only a guarantee for the price of the goods sold and delivered. It is not a guarantee for liabilities for failure to take delivery or non-acceptance of goods. If the 1st Defendant repudiated the contracts before goods were delivered, the guarantors would not be liable under the guarantees. It is therefore not surprising that there was no reference to the date of the contract in Clause 1.

24. Mr Shum contended that the word "may" in Clause 1 suggested that the goods must be contracted after the date of the guarantee. I do not agree. I think it is plain that in the context, the word "may" means "shall". It is far fetched to suggest, as Mr Shum did, that by the use of "may", the obligations covered by the guarantee was circumscribed to goods supplied pursuant to contracts made after the dates of the guarantees. I see no reason why the goods contracted earlier than the respective date of guarantees but delivered to site later could not properly be described as goods that might be delivered by the Plaintiff at the request of the 1st Defendant from time to time. This is particularly so given the background as to the contractual arrangement between the Plaintiff and the 1st Defendant as mentioned above.

25. In the context of the First Guarantee, my construction of Clause 1 is reinforced by the fact that it was a replacement of the earlier guarantee of 18 August 1998. If Mr Shum's construction were correct, liabilities for payment of goods delivered under contracts made prior to the date of the 1st Guarantee would not be covered by any guarantee upon the execution of the 1st Guarantee in place of earlier one. I do not believe that was the parties' common intention. Even applying the contra proferentem rule, I see no justification for construing Clause 1 in that manner.

26. I acknowledge that the same argument of common intention could be advanced in the context of the First Guarantee in respect of goods delivered prior to the date of that guarantee. But the wordings of the guarantee, in my judgment, exclude goods delivered prior to the date of the guarantee from its scope.

27. Since the meaning of Clause 1 is clear by itself, there is no justification for referring to the consideration clause or Clause 2 to resolve any ambiguity in Clause 1. In any event, even if one were to take into account of those other clauses, bearing in mind the different functions of those clauses and the underlying factual matrix, I do not think one can validly point to those clauses to contend for another construction in respect of the meaning of Clause 1.

28. I therefore hold that on proper construction, the First Guarantee covers goods delivered to site after the date of the guarantee even though they were contracted for earlier. But it does not cover goods delivered to site prior to the date of the guarantee.

29. As regards the Second Guarantee, it was not executed to replace the First Guarantee. Hence, the argument in Paragraph 25 above does not apply.

30. Even so, for the reasons given in Paragraphs 21 to 24 above, I hold that the plain meaning of Clause 1 in that guarantee is the same as Clause 1 in the First Guarantee. Hence, the effect of the 2nd Guarantee is similar to that of the 1st Guarantee as stated in Paragraph 28 above.

Are the pleadings and evidence in the present case sufficient to establish liabilities of the 2nd and 4th Defendants?

31. Given my construction of the scope of the guarantees, the Plaintiff has to establish the following before it could succeed,

(a) the debts in question were in respect of goods delivered by the Plaintiff to the 1st Defendant at the latter's request;

(b) the goods were delivered after the date of the relevant guarantee;

(c) the price of those goods remained unpaid by the 1st Defendant.

32. I have explained earlier why I am of the view that element (a) has been pleaded in the Amended Statement of Claim. This element is admitted by the Defendants in Paragraphs 24 and 25 of the Defence (reading together with the particulars supplied under those paragraphs). It is therefore not necessary for the Plaintiff to adduce evidence to prove the same. In any event, Mr Ku has provided evidence for this in Paragraph 1 of his witness statement. Mr Shum did not challenge his evidence in this regard. That paragraph also dealt with element (c). The relevant pleas in the Amended Statement of Claim can be found in Paragraphs 5 to 7.

33. Element (b) has not been pleaded explicitly in the Amended Statement of Claim. It is however within the plea that the goods were supplied pursuant to the guarantees. The Defendants did not seek particulars from the Plaintiff to tie it down in respect of the general plea under Paragraph 4 of the Amended Statement of Claim.

34. The scope of the guarantee was only raised as an issue in the Defence. At the time when the Defendants pleaded their case under Paragraphs 24 and 25 of the Defence (which set out the relationship of the cheques and the goods and the allegation concerning the dates when the goods were agreed to be sold), the Defendants had not tied the Plaintiff down to a particular construction of the guarantees. The Defendants' construction was pleaded in Paragraph 4 of the Defence. Even assuming for a moment that such construction were correct (though I have held that it is not correct), that alone would not be a defence unless the goods were contracted before the date of the guarantee. In the same pleading, the Defendants chose to plead in Paragraph 24 the contract dates of the relevant transactions. A fortiori the goods must have been delivered after the dates of these contracts.

35. At least two points of significance arising from such a plea. First, the Defendants themselves chose to put the dates of the contracts in issue and plead a positive case on that issue in their own pleadings. They cannot therefore contend that it would be unfair to them if the court examines that issue at the trial. Second, according to the dates of contracts as pleaded (as subsequently particularized), the construction point could not afford any defence to the 2nd Defendant in respect of the 1st Guarantee for the reasons stated in Paragraph 8 above. Hence, reading as a whole, the construction point as pleaded (which is the only point relied upon by the 2nd and 4th Defendants) did not afford any defence to the 2nd Defendant.

36. Mr Shum submitted that Paragraphs 24 and 25 were part and partial of the alternative defence of defective goods and since that defence had been abandoned at the trial, the court should not have regard to those two paragraphs at the trial. I do not accept that submission. First, the alternative case of defective goods as pleaded is no less a positive case than the primary case pleaded by the Defendants. We are not dealing with a situation of inconsistent alternative versions of facts being put forward in the pleadings in respect of matters outside the knowledge of the Defendants. The Defendants pleaded categorically and asserted positively that the goods were contracted on such dates. Once a party sets up a positive case in his pleadings in these circumstances, he is bound by it and his opponent is entitled to assume that he could not resile from it without amending the pleadings.

37. Second, although Mr Shum indicated that the Defendants would not rely on the alternative defences when he made his opening submissions, he did not apply for leave to amend to delete these positive assertions in the Defendants' pleadings. Had he done so, the Plaintiff would be put on notice that the Defendants was no longer asserting that the goods were contracted on the dates as pleaded in the particulars and if the Plaintiff wished to rely on those dates to support its claim, it should plead the same in its own pleadings. It is precisely due to the retention of these paragraphs in the defence that Mr Wong contended it was strictly not necessary for the Plaintiff to amend its pleadings. I therefore ruled against Mr Wong's application for leave to amend made at a late stage on 17 June 2004.

38. Third, the decision of the Court of Final Appeal in Poon Hau Kei v Hsin Chong Construction Company Limited FACV No.18 of 2003, 30 April 2004, provides support for my rejection of Mr Shum's contention. The relevant principles are set out in Paragraphs 12 and 19 of the judgment of Bokhary PJ. Mr Shum submitted that Poon Hau Kei was dealing with a situation where the defendant not only pleaded a particular scenario but also advanced the same by adducing evidence and relying on the same at the trial. In contrast, the Defendants in the present case did not advance the alternative defence of defective goods at the trial. I agree there are distinctions between that case and the one before me. However, two points can be noted from the decision in Poon Hau Kei. First, Bokhary PJ referred to a dicta of Ma JA (as he then was) in Paragraph 12 and agreed with it subject to the rider concerning an omission. Whilst the present case may not fall within the four corners of the rider formulated by Bokhary PJ, the following dicta of Ma JA could be applicable.

"In circumstances where the version of events as pleaded or advanced by a party is found not to be accurate or true, and another version is held to represent the true position, a court must be careful when asked to make a finding of liability (or some other legal consequence) based on this other version. Before attempting to do so, the court must first be satisfied that the issue has been properly put before it and identified so that the other party becomes fully aware of the case he has to meet. This is usually done by the matter being made clear in the pleadings. Next, the court must also be satisfied that the 'new version' is one that the other party has been given a full opportunity to deal with. Both elements must exist before a court can then proceed to make a finding of liability or some other legal consequence based on the 'new version'. There may of course be other considerations as well, but these two are usually the most important."

39. I therefore asks whether the issue as to the delivery dates of the goods has been properly put and identified before this court and whether the Defendants had been given full opportunity to deal with it. As mentioned in Paragraph 33 above, the Plaintiff had not tied itself down to a specific construction of the guarantees in its pleadings. Although it denied the Defendants' construction in Paragraph 6 of its Reply, it had not pleaded positively what it contended to be the correct construction. Since construction of a document is a question of law, the Plaintiff was not obliged to plead the same. It cannot be suggested that the construction put upon those documents by the court was outside the scope of the pleaded case of the Plaintiff. By reason of such construction and Paragraph 4 of the Amended Statement of Claim, the delivery of the goods after the date of the relevant guarantee is also a matter within the scope of the Plaintiff's pleadings. Hence, the issue is properly put before this court.

40. In order to run a defence basing on the construction it advocated, the defendants could not have missed the significance of the dates of contracts and the dates of delivery. As explained above, it would not take the defence home by succeeding on its construction point if all the goods were contracted after the dates of the guarantees. I believe any reasonably competent lawyer would appreciate that. The Defendants had actually looked into the issue about the dates of the contract and pleaded a positive case with regard to these dates.

41. The contracts (insofar as they were written) and the delivery notes were included in the trial bundles. Mr Wong had, based on the documents in the trial bundle, produced a schedule of the delivery notes and submitted the same to the court on 16 June 2004 before Mr Shum was directed to open his case. Mr Wong also made the submission at that early stage of the trial that even if the court were to construe the guarantees as covering only goods delivered after the dates of the guarantees, these delivery notes showed that the 2nd and 4th Defendants are liable. The Defendants were therefore aware that the delivery dates of the goods were matters relied upon by the Plaintiff at the trial before they chose to abandon their other defences.

42. Given the stance of the Defendants as to the dates of the contracts as pleaded in their Further Particulars (which had not been retracted by the 2nd and 4th Defendants up to the end of the trial by any application for leave to amend) and the delivery notes in the trial bundle, it is difficult to see how the Defendants could contest the delivery dates of the goods as set out in the Schedule produced by Mr Wong. Mr Shum had not suggested to this court there was any inaccuracy in the delivery dates set out in that Schedule.

43. In these circumstances, I am of the view that the 2nd and 4th Defendants had been given full opportunity to deal with the issue.

44. The second point to note from Poon Hau Kei is that ultimately, it is a question of fairness, see Paragraphs 19 and 21 of the judgment of Bokhary PJ. I do not see any unfairness in referring to the pleaded case of the defence in the present circumstances. As I have held, the construction of the guarantees the court arrived at and the delivery dates of the goods are within the scope of the pleaded case of the Plaintiff in the Amended Statement of Claim. There is ample evidence in the trial bundles to establish these delivery dates by the delivery notes. Mr Ku confirmed in his oral testimony that the date shown on the delivery note was the delivery date. Mr Shum did not challenge these evidence. The reference to the pleadings of the defence only serves to reinforce my view that the 2nd Defendant did not have any defence.

45. I find on the pleadings and evidence before me that the claims of the Plaintiff against the 2nd and 4th Defendants were in respect of goods delivered to the 1st Defendant particularized in the Schedule produced by Mr Wong. A summary of that is as follows,

Month of delivery	Amount
9.2000	$57,774
10.2000	$111,438.50
11.2000	$123,557.87
12.2000	$342,495.78
1.2001	$157,156.74

46. Hence, subject to part payments already made, the 2nd Defendant is liable to the Plaintiff under the 1st Guarantee for the full sum as all these goods were delivered after the date of that guarantee. As regards the 4th Defendant, all the goods delivered in December 2000 were delivered after 5 December 2000, the date of the 2nd Guarantee. Hence, her liability is the aggregate of the unpaid goods delivered in December 2000 and January 2001, viz. $499,652.52.

Part payments

47. It is common ground that there had been part payments in the total sum of $430,000 by the 1st Defendant. Mr Shum submitted that credit should be given to the 2nd and 4th Defendants in respect of such part payments. That must be right. Mr Wong said credit had been given as that amount had been deducted from the sum due under the first cheque. That cheque was in the sum of $459,857.76 whereas the present claim of the Plaintiff for September 2000 was confined to $29,857.76.

48. Mr Shum said there is a discrepancy in the Schedule of Mr Wong. As mentioned, it showed delivery for September 2000 in the sum of $57,774 only. I agree that there is a defect in that schedule. However, there is evidence before the court that the goods delivered by the Plaintiff to the 1st Defendant in that month was actually $459,857.76. In the trial bundle, the Plaintiff included monthly statements of account with the 1st Defendant. By reference to the statements dated 30 September 2000, excluding the deliveries in August, the total price of goods delivered in September was $459,857.76. After credit being given for the part payments, the unpaid balance for goods delivered is therefore $29,857.76.

49. By reason of the Clayton's rule and the Plaintiff's right of appropriation of payments in settling the account between the Plaintiff and the 1st Defendant (see Lee Ying Wah v Tai Wah Copper Tube Warehouse Co HCA 976 of 2001, 31 May 2002), the Plaintiff was entitled to appropriate those part payments to settle sums due for some of the unpaid goods delivered in September 2000. I am therefore satisfied that due credit had been given to the Defendants in respect of these part payments of $430,000.

50. There is another discrepancy in the Schedule of Mr Wong. For October 2000, the unpaid goods delivered in that month were $111,438.50. The cheque amount was only $93,546.50. Mr Wong said there was a credit note R05302 in the sum of $17,892 in favour of the 1st Defendant. The credit note had not been produced in evidence.

51. In my judgment, this discrepancy do not cast doubt on the Plaintiff's claim. As shown above, there is ample evidence to show that the Plaintiff's claim were in respect of unpaid goods delivered after the dates of the guarantees and the cheques were in respect of these unpaid goods. I accept such evidence in making findings to such effect. Since the cheque amount is $93,546.50 and the Plaintiff is not claiming beyond that amount, the omission to produce the credit note is not a problem.

52. Hence, the Plaintiff's claim for goods delivered in September and October 2000 are confined to $29,857.76 and $93,546.50 respectively.

Conclusions

53. For these reasons, the 2nd Defendant is liable to the Plaintiff under the 1st Guarantee for the sum of $746,614.65 and the 4th Defendant is liable under the 2nd Guarantee for the sum of $499,652.52.

54. The Plaintiff asks for interest from date of writ to judgment at judgment rate. I see no reason why these Defendants should not be required to pay interest as sought.

55. I therefore order that judgment be entered in favour of the Plaintiff against the 2nd Defendant in the sum of $746,614.65 and against the 4th Defendant in the sum of $499,652.52. There shall also be judgment for interest on these sums as prayed for by the Plaintiff.

56. As regards costs, there is no reason why costs should not follow events. I have heard submissions from parties on costs. Mr Shum submitted that if the Plaintiff only succeeds in getting a judgment less than $600,000, costs should only be awarded on District Court Scale. As it turns out, the Plaintiff succeeds against the 2nd Defendant in respect of a claim larger than $600,000 although the judgment against the 4th Defendant is less than $600,000. Given the nature of claim, it would be a waste of costs and time to require the Plaintiff to proceed against the 4th Defendant separately in the District Court. I do not think there is any good reason why the Plaintiff should not get costs on High Court scale. I therefore order the 2nd and 4th Defendants to pay the Plaintiff's costs of the action, including the costs of the aborted trial before Deputy Judge Gill and Tang J.