KAROCHEM INTERNATIONAL LTD. v. RICHARD LIU & CO. LTD t/s KAYO PACIFIC INC.

CACV 206/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 206 OF 1998

(ON APPEAL FROM HCA No. 12537 of 1997)

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J U D G M E N T

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Hon Leong JA:

1. The appellant Richard Liu and Co. Ltd trading as Kayo Pacific Inc. through one German company Otto Brandes GmbH sold 100 metric tons of melamine to the respondent Karochem International Ltd. The value of the goods was approximately US$157,000. The goods were packed in 4,000 polypropylene bags and were shipped from Shanghai in five sealed containers. When the containers arrived at Suffolk, U. K. they were stored in a warehouse for about a month and when the containers were unsealed and opened and an inspection of the goods was made, the bags were found to contain a different substance. There was no evidence that the seals on the containers had been interfered or tampered with.

2. The respondent subsequently issued a writ against the appellant claiming damages for breach of contract.

3. The appellant in a self-made defence, put up a general denial of the claim and specifically denied that it had entered into a contract with the respondent and asserted that the contract was with the German company which resold the goods to the respondent. In his affidavits, the appellant's director asserted that the goods were inspected and certified to be melamine before they were shipped. He also asserted that the Bill of Lading had named the respondent as the owner of the goods and if there was any loss or damage to the goods in transit, according to international commercial law and trade practices, the appellant should not be made liable for the loss.

4. The respondent applied for summary judgment on the ground that the appellant had no defence on that basis. The master gave the appellant unconditional leave to defend. The respondent appealed to the Court of First Instance against the master's decision.

5. On 5 August 1998, Barnett J of the Court of First Instance, reversed the decision of the master and gave summary judgment against the appellant. In his judgment, the Judge rejected the appellant's suggestion that there had been a switch of the goods while they were in transit. He found that suggestion implausible. He also rejected the certificates from the Shanghai Authorities on the ground that they were wholly unsatisfactory. He considered that the problem, if any, arose at the port of embarkation. He also concluded there was clear evidence of exchange of faxes between the appellant and the respondent that there was a contract between them.

6. The appellant appealed against the judgment of Barnett J. The respondent applied for security for the costs of the appeal on the basis that the appellant was impecunious. Rogers JA considered that there was justification for that allegation because nothing was recovered from the appellant's bank account on the respondent executing a Garnishee Order; there was only US$600 in the balance and all the appellant's banking facilities had been withdrawn. Further, the appellant was allowed to be represented by a director in the proceedings because the appellant was unable to afford legal representation. The Judge found that on the whole of the evidence, the best the appellant could hope for in the case as a matter of defence would be conditional leave to defend with payment into court of the amount claimed.

7. On 16 October 1998, Rogers JA granted the application and ordered that the applicant provide security for costs in the sum of $130,000 on or before 16 November 1998 and the appeal proceedings be stayed in the meantime. He ordered that if it was certified that the appellant was in default in complying with the order, the appellant's appeal would be dismissed. The appellant defaulted in providing security within the time limit as ordered. The appeal was therefore dismissed on 18 November 1998.

8. The appellant now appeals out of time against Rogers JA's judgment. The grounds are merely that he had a defence on the line he stated in the earlier proceedings and that the respondent's execution of the summary judgment had frozen his bank account and all the banking facilities were as a result withdrawn, making it impossible for him to carry on trading and to comply with the order for security. He said that the order made by the Judge had deprived him of his opportunity to appeal. As to the delay, he said that he was ignorant of his right and the procedure to appeal as Rogers JA did not inform him of it when he gave judgment. He had to consult others before he knew he had the right to appeal. In addition, he said he was out of Hong Kong frequently and that was the reason for the delay.

9. In our view there was every justification for the conclusions reached by Rogers JA. There was evidence that the appellant made no profit since the year 1995/1996, and in all the circumstances the appellant would not be able to meet the costs of the appeal if the appeal is dismissed. On the merits of his appeal, the appellant's defence has little chance of success. Even if conditional leave to defend had been granted, this would not prevent an order for security from being made on the ground of the appellant's impecuniosity. The present notice of appeal was lodged in January 2000. It would appear that this was more than a year late. However, on a search of the court file, the appellant had earlier lodged with the court a notice of appeal in January 1999 and the present notice of appeal is the second one. It would appear that the 2nd notice of appeal was necessitated because there was a mix up as regards the first notice of appeal. The end result was that the first notice of appeal had not been dealt with in the sense that a date for hearing the appeal had not been fixed. Be that as it may, the first notice was also out of time. We do not think that the appellant's explanation before us today for the delay can be regarded as a reasonable excuse. We do not accept that explanation. As we said since there was evidence to conclude that he was impecunious and the chance of success in his appeal against Barnett J's judgment is slim, the question of delay is of little significance. Accordingly, we dismiss this appeal out of time with costs to the respondent.