CORE RESOURCES (FAR EAST) LTD. v. SKY FINDERS LTD

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is an appeal from a decision of Master Beeson dated 6th November 1991 whereby she gave summary judgment in favour the plaintiff in the sum of $486,544.97 in respect of a dishonoured cheque for that amount. Payment of the cheque was countermanded by the defendant.

2. The Master also dismissed a summons issued by the defendant that these proceedings be stayed in the light of a United State's jurisdiction clause.

3. When this appeal came before me Mr. Barlow for the plaintiff invited Mr. Smith for the defendant to apply for leave to adduce 2 affirmations of Mr. Samucha which had been filed after the hearing before the Master. I heard argument on this application after which I refused the defendant leave to adduce this evidence. After a short adjournment Mr. Smith conceded that in the light of my ruling he could not proceed with this appeal and I therefore dismissed it with costs. This was done on the basis that Mr. Smith reserved the right to challenge my ruling when I had given reasons, which I now proceed to do. Clearly if another court took a different view as to this application then Mr. Smith's client would be free to argue the matter afresh.

4. A chronology will I think be useful.

5. It will be seen from this Chronology that Mr. Samucha filed an affirmation a day before the hearing before the Master and one immediately before the appeal. Mr. Barlow tells me that he did not have sight of the latest affirmation until early on the morning of the 5th December. This form of litigation by ambush is to be deprecated.

6. The case for the defendants before the Master was hopeless. That is why judgment was entered and that is why Mr. Smith, a most realistic advocate, could not proceed with the appeal without this new evidence.

7. In order to understand what happened I must briefly refer to the facts.

8. The cheque was given in respect of a toy called "Catch Ball Playset". The defendants issued their Purchase Order dated 7th August, 1991. Clause 13 of this Purchase Order gives jurisdiction to the Courts of California over any dispute which may arise from the Purchase Order, or any of its "terms or conditions."

9. The goods in question were shipped to the U.S.A. The goods were not returned nor did the defendants repudiate the contract at any time prior to the hearing before the Master. It was difficult to see how there could be a total failure of consideration when the defendants had received and accepted the goods, and issued a cheque for those goods that had, in fact, been shipped.

10. The dispute which has arisen relates to whether the plaintiffs own the trade mark and trade name in the toy and whether the defendants are authorised to use it. It was when the Plaintiffs failed to respond to a request relating to the trade mark that the defendants countermanded payment of the cheque.

11. In paragraph 14 of Mr. Samucha's first affidavit he states this:

"The defendants' defence to the plaintiffs claim on the cheque is that there is a breach of a condition of the underlying transaction by the seller and the breach is a repudiation which we can accept and reject the goods resulting in a total failure of consideration. This is a good defence to the action on the cheque and in determining the issue the court will have to look at the underlying transaction."

12. So it is clear that as at the date the matter was heard by the Master the defendants had not in fact rejected the goods and was somewhat sitting on the fence. The claim on the cheque was unanswerable.

13. I now turn to the 2 affirmations which were sought to be placed before me. On 29th November 1991, Mr. Samucha affirmed his 3rd Affirmation. He states that the goods were the subject matter of the claim were resold by the defendants to Onspan Ltd. who onsold them to Tradewinds International Enterprises Inc. It is clear that the Samucha family control all three companies.

14. Mr. Samucha owns 50% of the shares in the defendant company with the other 50% being owned by his brother, Saul Samucha.

15. As to Onspan Ltd., Mr. Samucha owns 50% of the shares while the other 50% belong to Sidney Samucha (his former wife).

16. As to Tradewinds, Mr. Samuch owns 25% of the shares. His ex-wife owns 25% and his brother Saul owns the other 50%.

17. He deposes to the fact that since his divorce from Sidney he takes care of the business of Onspan and the defendants. His brother Saul looks after Tradewinds.

18. In paragraph 8 of the affirmation, he states that after the hearing before the Master he received a letter  dated 5th November (the day before the hearing) from his brother Saul rejecting the goods on the grounds of poor quality and further on the grounds that the goods were patented in the United States.

19. Having read the letter from brother Saul, Mr. Samucha then wrote on behalf of Onspan to the defendants a letter dated 12th November 1991 rejecting the goods on the same grounds. In the light of these events he states that there has been a total failure of consideration.

20. Judith Greenberg's affidavit takes issue with the factual basis of Mr. Samucha's 3rd Affirmation. She states that it is now too late for the defendants to reject the goods as they were accepted when delivered to the vessel on the 31st August, 1991. She points out that the purported rejection was made 10 weeks after delivery to the defendants and 7 weeks after inspection upon arrival in the United States.

21. Judith Greenberg also alleges that the defendants had been guilty of tactical delay. (P. 167). She points out that at a hearing before the Master on the 23rd October, 1991, Counsel for the defendants suggested a 2- week adjournment was required in order to adduce evidence of Californian law. At the hearing on 6th November, no such evidence was adduced and none was sought to be adduced before me.

22. In his 3rd Affirmation, Mr. Samucha takes issue with a number of statements made by Judith Greenberg and makes it clear that the defendants have been advised that they can bring proceedings in the United states within a 4-year period and that apparently the defendants will not be prejudiced by waiting for the outcome of this action.

23. I looked at Mr. Samucha's two post-hearing affirmations as well as the intervening one of Judith Greenberg on a de bene esse basis in order to be able to rule on Mr. Barlow's objection.

24. Having set out the history of this matter and the rival contentions, I now turn to consider the applicable principles on applications for leave to adduce fresh evidence on appeal from a Master to a Judge in Chambers.

25. I should begin by stating that it has been my experience that there are very few appeals from the Master where fresh evidence is not put in. It is usually done without objection. However, it must be emphasized that the leave of the court is required and that such leave is not given as a matter of course although in most cases it will be given. The general attitude of the court in permitting fresh evidence on appeal should not be taken as any encouragement for those concerned in Order 14 applications to prepare them sloppily on the basis that mistakes can always be put right later if necessary.

26. It is necessary also to mention that although the hearing before the judge is a de novo hearing, in other words he approaches the matter as if it were coming before him for the first time, nevertheless, it is by way of appeal and the reception of fresh evidence has to be considered in that light.

27. I think it is clear from the aurthorities in the practice notes in the White Book that it is far more difficult to persuade the Court of Appeal to let in fresh evidence on an interlocutory appeal than it is before the judge. That is not to say, however, that a judge merely rubber-stamps such application. He has a discretion to exercise and it will not inevitably, in every single case, be exercised in favour of the applicant. Each case must be looked at in its own factual situation.

28. At p. 160 in the White Book, one finds the following passage:

"The evidence on an appeal to the Judge in Chambers should ordinarily be the same as it was before the Master or District Registrar; but since such an appeal is dealt with by way of an actual rehearing of the application which led to the order under appeal, and the Judge treats the matter afresh as though it came before him for the first time, save that the party appealing has the right as well as the obligation to open the appeal, it would seem that the Judge in his discretion is free to admit fresh evidence, and he frequently does so in the absence of special reasons (see Evans v. Bartlam (1937) A.C. 480; Krakauer v. Katz (1954) 1 WLR 278)"

29. The notes then go on to deal with the approach of the Court of Appeal noting that the present practice is not as indulgent as it once was.

30. Krakauer v. Katz was an interlocutory appeal to the Court of Appeal where the court held that there was no right to adduce fresh evidence on appeal. As Denning L.J. (as he then was) put it.

"It is a matter of discretion in this court whether or not fresh evidence by affidavit should be admitted."

31. In refusing the application in that case, the court was much influenced by the fact that the defendant elected to take his stand before the judge on the evidence as it then stood and refused an offer of an adjournment. It is, of course, fair to point out that this was a case in the Court of Appeal and not before the Judge in Chambers.

32. One finds further notes on this subject at p.873 of the White Book under order 58. It is there stated that the matter is by way of re-hearing and the judge is in no way fettered by the exercise of discretion by the Master. On appeal to the Court of Appeal the discretion of the judge is the relevant discretion. One finds the following passage:

"It is common practice for the Judge in Chambers, subject of course to the question of costs, to admit further or additional evidence by affidavit to that which was before the Master or Registrar; but if a party has taken his stand on the evidence as it stood before the Master or Registrar, the Judge in Chambers may in his discretion by anology with the practice of the Court of Appeal refuse to allow him to adduce fresh evidence (see Krakauer v. Katz...)"

33. Mr. Smith relied on certain passages at page 944 of the White Book at 59/10/6 which deals with points being taken for the first time in the Court of Appeal. I am not dealing with a new point taken for the first time but a completely different case based upon that which occurred long after delivery of the goods, long after payment, in circumstances which, as will appear later, give me cause for some concern.

34. What usually happens in these cases is that the losing party before the Master finds some additional documents or another deponent to deal with the matters which should have been dealt with below. The court will usually allow this to happen. But what I am dealing with here is not the placing before the court of additional information which was available but not used, but placing before the court of a completely different defence which it  is said arose only after the hearing before the Master.

35. In my judgment, the court has to look at an application of this nature with particular care. It is common ground that the defence raised before the Master was hopeless hence Mr. Smith's abandonment of the appeal following my ruling. I am entitled to take into account the relevant dates in this case. The cheque was given in early September. The goods were shipped either at the end of August or beginning of September. According to Mr. Samucha, the goods were resold to Onspan who on sold them to Tradewinds and he produces Purchase Orders in August to establish this. On 10th September Mr. Samucha was raising the question of authorization of the name with Judith Greenberg. The hearing before the Master was on the 6th November. The alleged rejection by Tradewinds is said to be by letter dated 5th November received after the 6th November by Onspan. Onspan then allegedly sent a letter on 12th November to the defendants whose solicitors then purported to reject the goods as against the plaintiff on 15th November. Neither Tradewinds nor Onspan's letter of rejection has a received chop. Mr. Barlow pours scorn over the fact that this was allegedly done by post when it seems inconveivable that Saul Samucha would not have known of the impending hearing before the Master and its urgency. Why he asks, was this not done by fax so that it could be placed before the Master. Indeed he points out that there is a history of the use of faxes.

36. When I bear in mind these dates and the very close relationship between the buying companies I am left with a strong feeling of unease. As I have made clear the court is not there to rubber stamp applications of this nature. A great deal of latitude is shown to litigants in order 14 proceeding. However, I came to the very strong opinion that if I were to allow this application it would be difficult to conceive of an application which could not succeed.

37. It is clear that I have a discretion in this matter. I have considered all the points raised by both sides and have taken into account the observations in the White Book, some of which are derived from decided cases. In the exercise of the undoubted discretion which I have, I decided that it would not be fair or just to permit the defendants to adduce this new evidence in order to place before me a wholly different defence to that which, quite rightly, did not find favour with the Master.

38. I have to say that I have grave misgivings about the bona fides of the rejection letters in the light of their purported dates, the proximity to the hearing date and the distance in time from the giving of the cheque and the receipt of the goods.

39. It has to be said that this is, after all, a claim based upon a dishonoured cheque .The defendants, by reason of their stay application and affidavits, have made it clear that they wish to proceed on their cross-claims in the U.S.A. They are perfectly free to do so and can claim for all the heads of loss which their American lawyers have mentioned in correspondence.

40. These then were the reasons why I dismissed both appeals and awarded the plaintiff their costs of both appeals. I rejected an application by Mr. Barlow that costs should be on a more generous basis. The taxation will be on the ordinary basis.