SHANGHAI INTERNATIONAL AERO- TECHNOLOGY TRADING CORPORATION v. CASIL CLEARING LTD

CACV 390/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 390 OF 2002

(ON APPEAL FROM HCCL NO. 2 OF 2002)

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REASONS FOR JUDGMENT

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Hon Ma CJHC:

1. I agree with the reasons of Rogers VP for allowing the present appeal.

Hon Rogers VP:

2. This was an appeal from a judgment given by Stone J on 27 September 2002 on an application under Order 14. At the conclusion of the hearing of this appeal this court allowed the appeal with costs and set aside the judgment. The costs below were to be in the cause. It was further ordered that the monies paid into court pursuant to the order of the judge be paid to the defendant. At the hearing the date of that order was referred to as having been made on 27 September but the order for payment as a condition for stay of execution was made on 17 October 2002. The reasons were to be given in writing which we now do.

Plaintiff's claim

3. The plaintiff is a Mainland company carrying on business in Shanghai. Its claim in this action is based on a contract "CLN-98807" which is alleged to have been made between the plaintiff and the defendant. The contract relates to the purchase of various items of beauty equipment for US$921,740 and was dated 7 August 1998. The document, alleged to constitute the contract, provided that the goods were to be shipped from Hong Kong by the defendant. The plaintiff's name implies that it is engaged in the aero-technology business and it has been alleged in this case that it has no dealings in beauty equipment. The defendant is a Hong Kong company and acts as a financier. Its case is that it, too, has no involvement in beauty equipment.

4. The statement of claim avers that although there was a shipment on 15 August 1998, purportedly under the contract, the goods shipped were not the contractual goods but were other items of comparatively no value. It is alleged that the goods which were shipped were returned to Hong Kong because the plaintiff was sent a letter, dated 15 September 1998, purportedly signed by the defendant, requesting return of the goods because wrong goods had been shipped. There is no dispute that the sum of US$921,740 was transferred from the plaintiff to the defendant on 2 November 1998 by means of a letter of credit. In those circumstances, the plaintiff claims the amount which had been transferred on the basis that the consideration wholly failed since no replacement goods had ever been supplied. It has to be stated, however, that the writ in this action was not issued until 27 October 2001.

5. The defendant's case is that it never did enter into a contract with the plaintiff. Its case is that the letter of credit came into existence as a means of repaying the defendant a sum in excess of US$921,740 which was owed by a Hong Kong company, Collina International (Group) Co. Ltd ("HK Collina"). The defendant avers that all arrangements were arranged by HK Collina and in particular by a Miss Sung Lai Na of that company. It is said that Miss Sung requested the defendant to place its chop on the document bearing a number CLN-98807 alleged to be the contract which named the buyer as a different company from, albeit having a similar name to, the plaintiff. The defendant's case is that it knew nothing about the return of any goods to Hong Kong and it knew nothing of the letter of 15 September 1998.

The history of the proceedings

6. Prior to hearing the application for summary judgment in the present case on 27 September 2002, the judge had given judgment on 22 August 2002 in HCCL No. 140 of 1999, Shanghai Tongji Science & Technology Industrial Company Limited v Casil Clearing Limited ("the Tongji action"). The trial of that action had taken place some time earlier. The judge gave judgment for the plaintiff in that case. It appears to have been accepted on all sides that the only factual difference of any substance between that case and the present case was that in the present case there was a document which purported to be a contract between the plaintiff and the defendant, on which there was the defendant's chop.

7. The defence in this case, as in the Tongji action, was that there had been no intention to enter into contractual relations between the plaintiff. In the present case the defendant's position is that although it had placed its chop on the document that had only been for the purposes of satisfying the requirements under the letter of credit.

8. On appeal in the Tongji action, this court set aside the judgment in favour of the plaintiff, concluding that no contract existed between the parties there. The reasons, based on an extensive review of the evidence, are contained in the judgment handed down on 6 June 2003. More or less the same evidence is relied on by the defendant in the present action. In the circumstances, this court was of the view that leave to defend had to be given in this action. There are clearly a number of factors, including the true nature of the relationship between the plaintiff and Shanghai Collina International Medical Beauty Company Limited, an associated company of HK Collina and as between these companies and the defendant, which give rise to the conclusion that the defendant, at this stage at any rate, has an arguable case which cannot be resolved without trial. Since this matter will now go to trial it is preferable that this court should say as little as possible about the various issues and points which arise.

9. In view of the judge's conclusion as to the summary judgment application, the defendant's application before him for security of costs naturally fell away with a consequential order as to costs. However, by reason of the present appeal being allowed, that order for costs was set aside by this court, leaving it to the defendant to renew its application for security, should it see fit.