DAYS INTERNATIONAL LIMITED v. SHYAM NARAINDAS KIRPALANI alias N.K. SHYAM

Commercial List No. 27 of 1983

IN THE HIGH COURT OF JUSTICE

HONG KONG

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JUDGMENT

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1. In 1974 the plaintiff commenced business with a Nigerian company called Esenkay (Nigeria) Ltd. which I shall call "SNK". The business negotiations were carried out between Mr Nanik Dayaram (PW1), a director of the plaintiff, and the defendant, a director of SNK. SNK imported into Nigeria Goods from Hong Kong or elsewhere for which the plaintiff drew bills of exchange on SNK. The plaintiff discounted in whole or in part many of the bills with its hankers in Hong Kong. In due course, SNK paid the hills in Nigeria in local currency and, after foreign exchange cover had been obtained from the Central Rank of Nigeria, the proceeds were remitted to New York for the credit of the plaintiff.

2. In 1979 business between the plaintiff and SNK apparently ceased, PW1 having transferred the plaintiff's business to one of the defendant's brothers. Thereafter, all outstanding bills were paid by SNK and, in 1980, the defendant came to Hong Kong to settle outstanding accounts with the plaintiff. The gap between the parties was extremely wide. Each thought that something in excess of US$100,000 was owed by the other. A discussion between PW1 and the defendant broke down and was not resumed. In 1982 PW1 discovered that the defendant was in Hong Kong and had him arrested in accordance with the provisions of 0.44A. The plaintiff was claiming interest amounting to US$103,151.10 outstanding on twenty-six bills of exchange which had been drawn on and accepted by SNK. The plaintiff alleged that this sum was payable by the defendant by virtue of a guarantee which he had signed on 29th October, 1977 under which he agreed to be personally responsible to the plaintiff for the price and interest thereon of all goods to be supplied to SNK.

3. The defendant was brought before Kempster J. (as he then was). He admitted the guarantee and was released upon giving certain security. Eventually, after many amendments to the pleadings, the trial commenced before me on 14th September, 1987. I think it fair to say that, at that stage, the trial was essentially an assessment of the amount, if any, for which the defendant was liable under the guarantee. However, on the third day of the hearing , the defendant sought and obtained leave to re-re-amend his points of defence. The effect of the amendment was that, while the defendant admitted that his signature was on the guarantee, he denied that he had signed the guarantee or any guarantee. Later, the defendant with leave withdrew his counterclaim. The principal issue, therefore, became whether or not the defendant had given the  guarantee at all.

4. Before embarking upon an examination of the evidence, I have to determine where the burden of proof lies. It was Mr Poll's contention for the plaintiff that the burden of proof is on the defendant. In Phipson on Evidence, 13th edition, para. 4-26, the learned editor asserts that in civil cases the so-called presumption of innocence throws the burden of proof upon the party alleging an unlawful act. He continues "that the presumption omnia praesumuntur rite else acta will also generally suffice to throw the burden of proving fraud, etc. upon the party asserting it". One authority is cited in support of the latter assertion but Mr Poll was unable to trace it.

5. For the defendant, Mr Mitchell pointed out that he had not alleged fraud or an unlawful act in the pleading. He said he had been careful not to make such an allegation because it is trite that such an allegation should only be made if it can be proved. He said that the defendant had made a simple denial. He said that if fraud had been alleged, full particulars would no doubt had been sought.

6. At the time I described Mr Mitchell's submission as ingenious but specious. I adhere to that description. Having regard to the circumstances in which the amendment was sought, there could be no doubt but that the defendant was pointing an accusatory finger at PW1. Indeed, Mr Mitchell in reply to Mr Poll's objection to the proposed amendment, used the words "inference of fraud". That certainly is how I understood it and quite clearly so also did Mr Poll. Apart from the support given by Phipson, common sense dicates that, having regard to the background of this case, the defendant should prove that what appears to be a perfectly regular guarantee was not given by him. I am satisfied that the burden in this case lies on the defendant.

7. There is one other matter which I must also resolve. During the course of his final speech, Mr Poll sought leave to re-amend the reply so as to plead that the defendant is estopped from denying that he gave the guarantee. He maintained that the defendant had admitted the authenticity of the guarantee from the time of the 0.44A proceedings in November 1982 until 15th September, 1987 and in reliance on such an admission the plaintiff had failed to interview, or preserve the evidence of, Mr T. Dayaram, PW1's father (who is now dead) about the guarantee; had failed to locate promptly the person who typed the guarantee and had incurred the costs of a full trial rather than the determination of a preliminary issue on the validity of the guarantee.

8. Mr Mitchell had no formal objection to the amendment but suggested that it was too late to raise this point. He said that the matter of costs could be dealt with by the court in any event, but that the question of prejudice to the  plaintiff was or should have been canvassed upon his application to re-re-amend the defence. I formally allowed the amendment. However, I accept Mr Mitchell's argument. It is true that the question of PW1's father was not specifically raised on behalf of the plaintiff when Mr Mitchell made his application to re-re-amend.  Nevertheless, the plaintiff was granted an adjournment at that stage to consider its position. I heard submissions. I ruled in favour of the defendant. In my view, it is now too late in effect to reopen that matter by pleading estoppel. I reject the estoppel argument.

9. PW1 was the principal witness for the plaintiff. He explained how he and the defendant commenced business on behalf of their respective companies with one or two transactions in 1974. In 1975 the defendant came to Hong Kong and in circumstances which are in dispute but which, I think, are of no particular significance, the defendant found himself in the plaintiff's office where he sought and obtained D/A facilities from the plaintiff, i.e. bills of exchange, drawn by the plaintiff on SNK for goods supplied, would be on a documents against acceptance basis, thus giving a period of credit to the defendant during which he could receive and dispose of the goods in Nigeria. There was no particular discussion about the interest rate to be paid on the bills. PW1 said that in effect it was understood that SNK would pay whatever interest was charged by the plaintiff's bankers after discounting of the bills. There was, however, considerable discussion about overvaluing the goods to be supplied. This was at the defendant's suggestion and would enable him to remit more funds out of Nigeria to the plaintiff than the real price of the goods warranted. The effect of this would he two fold. First, there would be money available in Hong Kong for the defendant to spend on personal purchases. Secondly, the surplus money so remitted would cover any shortfalls on other transactions.

10. Trading thereafter commenced between the parties. PW1 found it necessary to remind the defendant on more than one occasion to pay his bills in time. Most bills were, however, paid after the due date. In 1976, the defendant did the plaintiff what PW1 agreed was a good turn. PW1 found on his hands some surplus textile material. At the defendant's suggestion he converted this material into shirts and pyjamas which he consigned to the defendant to sell on behalf of the plaintiff at the plaintiff's risk and account. The invoice values of these consignments were considerably inflated to represent what PW1 described as anticipated profit. Bills of exchange reflecting these values were drawn on SNK to enable the proceeds of sale to be remitted out of Nigeria.

11. In January 1977 PW1 went to Nigeria. There he found that the defendant, without authority, had apparently sold the shirts and pyjamas so far consigned at prices considerably less than anticipated. Indeed, PW1 discovered that he had made a considerable loss so that it was necessary for him to reimburse the defendant in order that the bills which had been drawn on SNK in respect of this transaction could be met. This was achieved by PW1 drawing a number of US$ cheques to various persons whom he did not know and from whom the defendant obtained Naira, the local currency, that could be paid into the defendant's bank to cover the bills.

12. PW1 said that he was not given proper accounts in respect of this transaction and has never been given proper accounts, so that he is unable to say precisely how much he owed SNK, although he conceded that he owed something. He only learned the true position by suborning a member of the defendant's staff to introduce him to one of the purchasers of the shirts in Nigeria from whom PW1 learned that the shirts had in fact been sold at a much high price. PW1 found that he had been cheated and estimated his loss at 70,000 Naira (say US$80,000). He did not, however, accuse the defendant. He regarded the defendant as having done him a good turn by opening his eyes to the kind of man the defendant was so that he could take care in future dealings.

13. The defendant was in and out of Hong Kong in August, September and October 1977. At the beginning of August, PW1 said that, in reaching agreement over the latest statement of account between the parties, he resolved one dispute between him and the defendant. They compromised certain matters whereby, in return for the defendant accepting payment of an excess baggage charge for personal effects taken to Nigeria by one of PW1's colleagues, PW1 agreed to credit SNK's account with interest on two D/P bills which the defendant maintained was wrongly debited.

14. PW1 then went away on holiday. While he was away, the defendant paid another visit to the plaintiff's office where he was apparently outraged to find that the plaintiff had not remitted in full to a certain Mr Kundan money which the defendant had borrowed from him in July in Nigeria to cover the shortfall on the sale of further consignments of the infamous shirts. PW1's father explained that the plaintiff had remitted as much as they thought SNK's running account with them could bear. The defendant, at this time happening to receive a telephone call from his office in Nigeria, instructed his office to withhold payment on all further bills and to tell the bank to withhold payment on any bills already with them. In a subsequent telephone call to PW1, the defendant was able to resolve the matter to his satisfaction. However, it was PW1's complaint that the defendant on this occasion treated PW1's father and other members of the plaintiff's staff in a bad manner.

15. In October 1977, PW1 was becoming concerned about the plaintiff's exposure to SNK; the late payment of bills by SNK; and the general manner in which the defendant dealt with members of the plaintiff apart from PW1. At the same time the situation was exacerbated by the defendant asking a trader in Singapore from whom he had arranged the purchase of goods to draw a 30 day D/A bill on the plaintiff without prior reference to PW1.

16. Accordingly, when the defendant came to the plaintiff's office on 28th October, PW1 began to break to the defendant the need for a guarantee if business between the parties was to continue. Eventually, the defendant agreed to give such a guarantee and the following day PW1 and the defendant discussed what was to be covered and the terms in which the guarantee was to be expressed. The guarantee was drafted between them, a revocation clause being inserted at the request of the defendant. The defendant did not wish solicitors to be consulted nor to make use of a specimen form of guarantee used by banks. After the guarantee had been drafted, it was typed by a member of the plaintiff's staff on SNK notepaper provided by the defendant. A copy of the guarantee is annexed to this judgment.

17. At the same time, it was thought that the defendant should pay some money into the running account between the parties to restore the balance, the defendant having made personal purchases of jewellery while in Hong Kong upon that account. According to PW1, the defendant agreed to write a letter to his bankers in London directing them to remit US$9,500 to the plaintiff. The necessary letter was again typed on SNK notepaper supplied by the defendant. The defendant signed the letter. Shortly thereafter the defendant apparently placed a second signature on the letter although not in the presence of PW1. PW1 was wholly unable to explain why the defendant did this except to suggest that he might be following PW1's own practice which is to place two signatures on a personal cheque as a precaution against theft or robber. A copy of this letter which I shall call "the BNP letter" is annexed.

18. Trading between the parties ceased in 1979. PW1 accepted that all bills on SNK were paid.

19. In March 1980, the defendant came to Hong Kong. The defendant produced a statement of account between the parties. This showed some US$117,000 due to SNK. A significant portion of this related to interest which the defendant alleged to have been overpaid or wrongly debited. In April 1980, PW1, with the defendant, spent a whole day in the plaintiff's office going through this account. The defendant was shown documents in support of the various entries, such as copies of bank debit and credit advices. The defendant made various amendments to his statement and at the same time made notes indicating that other entries were accepted. The defendant left at about 10 p.m. It was agreed to meet the following day in order to complete the settlement of the accounts. The following day the defendant failed to appear. PW1 went to the defendant's hotel room where he found the defendant who said he was suffering from a stomachache and would come the next day. At that moment, the defendant received a call from his office in Nigeria and told the office that he would be returning to Nigeria next morning. In answer to PW1's query as to how he could settle the accounts if he was leaving the following day, the defendant said that there were two flights and he was just telling his office. PW1 left. PW1 did not see the defendant again until the defendant was arrested on 4th November 1982.

20. The only other witness called on behalf of the plaintiff was Mr Chan Po-chuen who worked for the plaintiff between 1974 and 1982 as a merchandizer. He said that he used to sit in the general office. He remembered the defendant as a customer and he remembered on one occasion that a letter was retrieved from the posting counter and the defendant took it to sign. As the defendant was signing, Mr Chan noticed that there were two signatures on the letter, which surprised him.

21. The defendant gave evidence. He said that he came to Hong Kong in 1974 to meet PW1's brother-in-law but because he did not have the necessary telephone number, he called PW1 whose visiting card he still had. PW1 sent someone to collect the defendant and at the subsequent meeting PW1 and the defendant agreed to do business. The business was upon the basis of 90-days D/A, with 120 days interest free. The defendant said he specifically asked horn much interest he would have to pay if payment on the bills was delayed and was told that PW1 would charge prime rate plus 2%, prime rate at the time being 10%. The defendant explained that he needed to know so that he could properly calculate the costs of the goods and the subsequent sale price and profit. Two transactions went through. On the first, the defendant discovered that the plaintiff had charged interest at 15% from the day of shipment until the arrival of proceeds in New York. He wrote to the plaintiff pointing out that he had not been given 1.20 days interest free. The necessary credit was subsequently given. Although he did not write about it, the defendant said that he did telephone PW1 to ask why interest was charged at 15%. He was told that prime was then 13% which, with the additional 2%, made 15%. PW1 told the defendant that he would show the defendant evidence about the prime rate.

22. In April 1975, the defendant came to Hong Kong and negotiated the purchase of more goods from PW1. They discussed D/A terms. The defendant told PW1 he would not pay interest on bills at sight. PW1 then suggested that goods might be overvalued and the amount of overvalue would he credited to the defendant's account. This would enable the defendant to spend the money or take cash from the plaintiff, and would also cover any shortfall of interest. The defendant said he would not pay any interest on the overvalue. PWl told him that interest would he mentioned on the hill and the defendant would have to pay the whole amount but the overvalue and the interest on it would be credited to the defendant's account when the money reached Hong Kong.

23. During the course of trade between the parties, the defendant received from the plaintiff various statements of account and from the plaintiff's auditor's confirmation notes. As to these documents, the defendant said that he was presented with some statements while in Hong Kong. As he was unable to check these against his own records, and because he was told they were for audit purposes only, he sinned them. Statements which were sent to Nigeria, he signed because he was told they were for audit purposes. He signed the auditor's confirmations for a similar reason.

24. The defendant confirmed the shirts and pyjamas transaction which commenced in 1976. He said, however, that he sold the goods for the best prices he could obtain with the prior approval of PW1 to whom he had spoken on the telephone. When PW1 came to Nigeria in January 1977, it was PW1 who found persons who were prepared to trade currency on the black market and from whom he obtained Naira which he provided to the defendant. The defendant said he knew none of the persons from whom PW1 obtained currency.

25. In July 1977, because more shirts and pyjamas had been sold at prices less than hoped for, the plaintiff needed to supply the defendant with a substantial sum of money to cover their bills. At the time, PW1 or one of his fellow directors, the defendant could not be certain which, was in Nigeria and agreed that the defendant should borrow the necessary money from a Mr Kundan whom the plaintiff would reimburse.

26. When the defendant arrived in Hong Kong a month later, he was disappointed on two counts. First, in examining the plaintiff's statement of account, he discovered that the plaintiff had debited him with an excess baggage charge and wrongly debited interest on two D/P bills. He felt that the excess baggage charge was hard and did not recognise the friendship that existed between the defendant and PW1 who had often stayed in the defendant's house in Nigeria. The reversal of the two interest entries was not a compromise but no more than the defendant's right as he was not liable for interest on D/P bills.

27. His second disappointment was to discover in September that only part of the US$62,500 had been remitted to Mr Kundan. He agreed that he told his office in Nigeria not to pay any further bills drawn by the plaintiff. He explained that he was annoyed at being let down by the plaintiff. However, he then spoke to PW1 on the telephone and the matter was resolved and a cheque drawn and sent to Mr Kundan for US$34,002.

28. In October 1977, the defendant returned from Taiwan to Hong Kong where he had business discussions with PW1 and returned to his complaint about the interest rate charged by the plaintiff. He had explained that on many occasions he had spoken to PW1 on the telephone about the rate of interest being charged and he had been told that PW1 would look into it, would produce documentary evidence and adjust the account if necessary. On this occasion, the defendant told PW1 that the plaintiff's rate was higher than that of other suppliers who were charging 11%. PW1 explained that prune rate had come down and because SNK was delaying paying of bills, he would charge overdue interest of prime plus 1-3%. The defendant agreed but asked that this be endorsed on confirmation notes so that it would be in writing. The defendant conceded that he understood that this rate would apply to all future bills.

29. At this time, the defendant was asked to make some payment into his account with the plaintiff because his drawings had been too much. He agreed to send a draft from London. PW1's father, however, suggested that the defendant should write to his bank. The defendant said he had no SNK notepaper with him which was necessary because he always wrote to the bank on SNK notepaper. PW1's father told him they had some SNK notepaper and that the defendant should draft a letter for typing. When the typed letter was given to the defendant, he was surprised to see his signature already on it. He then remembered that he had given PW1 some SNK notepaper signed in blank for insurance claim purposes. He placed a second signature on the letter, therefore, in order to remind him of the circumstances in which it was written.

30. The defendant was adamant that he did not sign a guarantee at this or any other time.

31. In 1979, business in Nigeria was bad. The defendant had difficulty in paying his hills and explained to PW1 that he would pay as soon as the stock was sold. POI went to Nigeria in the latter part of the year. To enable the defendant to pay outstanding bills, he obtained an interest free loan from another of his clients. This loan was subsequently repaid. However, it was clear to the defendant that PW1 was going to do business in future with the defendant's brother. He told his accountant, therefore, to prepare an account between SNK and the plaintiff so that he could settle with the plaintiff. In April 1980, the defendant was in Bombay recovering from an appendix operation. He took the plaintiff's statements, his accountant's statement and any creditor debit notes which he had, and prepared a statement of account between the parties in a better way. He was disturbed that the plaintiff's accounts had many entries which did not relate to SNK transactions and entries where he felt that the interest being charged was very high. He completed his statement which showed some US$117,000 owing to SNK. The defendant conceded, however, that this was a somewhat speculative figure because he did not know what prime interest rates were at any particular time and because he did not have all the necessary documents. It was, as it were, something of a bargaining document.

32. The defendant came to Hong Kong in May 1980 when he pave his version of the account to PW1 for checking. Subsequently, on about the 8th or 10th June 1980, he and PW1, together with various other members of the plaintiff, sat down to check the accounts. In order to achieve an overall settlement, the defendant said he put remarks such as "accepted entry" by which he meant that he had checked the entry. Some figures were altered. The defendant made notes so that he would know how much was owing and could then return to Nigeria to seek confirmation from the directors and shareholders of SNK on the final settlement.

33. The defendant had two claims against the plaintiff amounting to US$40,000 for short-shipped or empty cartons. Although the plaintiff had recovered some US$10,000 from insurers with the assistance of the defendant, the defendant was still carrying a loss of US$30,000. PW1 however, refused to compensate the defendant saying that the plaintiff's responsibility ceased upon delivery of the goods to the shipping company. Because PW1 refused to budge on this matter, the defendant finally threw his papers on the table and told PW1 that whenever PW1 was ready to settle the accounts, he could call the defendant. The defendant then left the plaintiff's office with no firm agreement to meet again. As far as the defendant was concerned, it was up to PW1 to contact him when he was ready.

34. The following day, the defendant was feeling ill because of his earlier appendix operation. In fact, he left Hong Kong the day after that and went to Bombay and subsequently London. In London he met a friend and supplier Mr Mahtani. Mr Mahtani showed the defendant a file he had received from PW1 who had asked Mr Mahtani to arbitrate between them. There was a phone call to PW1 and his father in Hong Kong. After that call, Mr Mahtani said he would not arbitrate.

35. At this time, one bill, No. 1787, was still outstanding. The defendant did not want to pay this bill as he felt that the plaintiff owed him money. However, after persuasion by his brother he paid this bill in November 1980.

36. The defendant did not attempt to contact PW1 again, even upon two occasions when he was in Hong Kong. However, in November 1982 while in Hong Kong, he received a phone call from PW1. In response to PW1's request, he agreed to carry a letter to Taiwan where he was going that day and said he would sit to settle the accounts upon his return. This letter was subsequently brought to him at the hotel but later that afternoon, while about to board an aircraft at Kaitak, he was arrested by bailiffs who were accompanied by PW1. He was taken to the High Court.

37. At the Court, he was shown the guarantee. The defendant was very confused at the time but was able to say that he had not signed the. guarantee and also remembered having given certain sheets of SNK notepaper signed in blank to PW1 for insurance claim purposes. At this point, the defendant was with his uncle, Mr Lekh Raj, a friend and business acquaintance, Mr Nandkumar Lachman Das and a solicitor Mr Henry Fung Hoi-wing. The 0.44A hearing was adjourned and the following morning Mr Fung arranged a conference with counsel (not Mr Mitchell). The conference was somewhat confused, being conducted by the defendant partly in English and partly in his native tongue Sindhi. As he understood it, the advice which the defendant thought he received was that it was very unlikely anyone would believe that he had not signed the guarantee since he admitted his signature and, in any event, if he wished to be released to fight the case, he would have to admit the guarantee. In those circumstances, the defendant decided that he would admit signing the guarantee and did so when giving evidence before Kempster, J.

38. The defendant said that once or twice thereafter he casually mentioned that he had not signed the guarantee but was told to forget it. He also said that he had never given a personal guarantee and would never do so because of the danger of being removed from SNK by the other directors who were by law, Nigerians. The defendant said he only protested strongly again about the guarantee after hearing PW1 telling lies in Court. At a conference with counsel after the second day of the hearing, he raised the matter with counsel who, taken by surprise, rightly said that he could not continue to defend the defendant upon a false basis.

39. Mr Lachman gave evidence in support of the defendant. He confirmed that the defendant, upon seeing the guarantee for the first time, disclaimed knowledge of it and made mention of blank notepaper. He also confirmed that the defendant had subsequently raised the matter on one or two occasions, but that he, Mr Lachman, was not interested in that aspect of the matter. He did not wish to get involved.

40. Mr Fung also gave evidence. He remembered the defendant denying that he signed the guarantee. Indeed, Mr Fung's notes and a draft statement prepared by Mr Fung show clearly that the defendant had so denied but had changed his mind consequent upon the conference with counsel. Mr Fung did not remember any mention of blank notepaper but remembered that at a later meeting conducted with the help of Mr Lachman, the defendant mentioned not signing the guarantee and he, Mr Fung, had told the defendant to forget it because it had already been admitted.

41. Finally, Dr. A.J. Nutten gave expert evidence in respect of the guarantee. I shall deal with his evidence in more detail later.

42. The defendant and his case suffered from two disadvantages. First, it is no easy thing to explain away the 11th hour retraction of the admission in respect of the guarantee, an admission made some five years earlier. Secondly, the defendant was alert to mention the difficulties arising at his first conference with counsel because his grasp of English was not good. The defendant commenced giving, evidence before me in Sindhi. However, after answering several questions in English, it was agreed that he should give evidence in English, the interpreter being retained to help in case of difficulty. The only difficulties the defendant encountered thereafter were when he was asked long and convoluted questions which, on occasion, even I found difficulty in following. In my view, the defendant's English was more than adequate to cope both with the proceedings before me and, I have no doubt, the proceedings and consultation at the time of his arrest.

43. I find it difficult to accept, therefore, that the defendant so tamely agreed that the guarantee was his. The defendant, on his evidence, was being cheated of a substantial sum of money. Common sense dictates that, if it was the truth that he had signed no guarantee, the defendant would have maintained this both loud and long.

44. The defendant said that he frequently asked PW1 on the telephone about interest rates. He said he raised this matter on the telephone because it was delicate in as much as he was remitting more interest out of Nigeria than permitted by the Nigerian Authorities. He also said that he did much of his business on the telephone and could not put everything in writing. The plaintiff, however, supplied the defendant with detailed information in relation to their transactions by way of statements of account, debit and credit notes and various other documents. Several bundles of such documents were placed before me. For his part, the defendant was quick to challenge certain matters in writing. On the very first transaction between the parties, he challenged interest which had been debited on two bills when there had been agreed 120 days interest free. He did not, however, challenge the rate in that letter, although at that time in their relationship there was nothing, as I understand it, to which the Nigerian Authorities could have taken exception. The defendant, of course, said that he challenged the rate in a contemporaneous telephone conversation. I find that difficult to accept, as I do that, in all the correspondence between the parties which has been exhibited, there is not one reference to the rate of interest.

45. Apart from statements and other documents sent by the plaintiff to the defendant, the defendant also received the bills of exchange and supporting documents from his bankers. These latter documents indicated the interest which was to be charged. If he had had any query, it would not have been difficult for the defendant to delay accepting the bills until such query had been clarified with the plaintiff.

46. The defendant asserted that he needed to know the rate of interest so that he could calculate the sale price of the goods. As Mr Poll suggested, the variation in rates from time to time and the variation between banks themselves would have had a marginal effect upon the costs of the goods. More significant, however, is a document put in by the plaintiff, namely exhibit P6. This is a letter dated 11th June 1980 from a Hong Kong company, Jacksons Ficom Limited, to SNK confirming credit facilities discussed with the defendant and in which paragraph 4 reads:-

 

"Interest on bills - Interest will apply as charged by banks."

47. That appears to me to be no different from the understanding about interest which PW1 said that he had with the defendant and which he described as standard practice. Again I find it difficult to accept the defendant's evidence on this point.

48. In contrast to the plaintiff's meticulous accounts and other documentation, the defendant appears to have kept no accounts in respect of business with the plaintiff. Certainly, no accounts have been produced other than the final statement prepared by the defendant in 1980 and which, as he admits, is somewhat speculative. The defendant's repeated explanation for this state of affairs was that he was too busy, that there was no need to keep an account of small things, and that when the time came to settle accounts between the parties, he would work out everything then. Considering the litany of complaint that the defendant has now made against the plaintiff, I find it surprising that no detailed account was kept. The inference is that the defendant was generally happy with the way in which the plaintiff was doing business with him and that any disputes which did arise from time to time were, as PW1 stated, settled amicably.

49. The defendant repeatedly said that it was agreed that there would he no interests on D/P bills. In a letter dated 23rd June 1977 (Bundle 5, page 120), the defendant wrote "we cannot pay you any interest on sight D/P bills". There was no reference to the alleged agreement between the parties. The implication is that payment could not be made because of constraints imposed by the Nigerian Authorities. At page 159 of the same bundle, SNK, through the defendant's manager, wrote to the plaintiffs on 7th February 1978 in respect of two D/P bills saying "We shall pay the above bills in local currency, if you accept that, interest will cease on these bills from the date the hills are paid in local currency." The defendant said that he had not seen this letter before and did not know why his manager had written it. He suggested that the plaintiffs had agreed to change the tenor of the bills but had failed to do this. I observe, however, that this letter, unlike other letters in the same bundle, does not speak of changing the tenor of the bills from D/P to D/A. Notwithstanding the two credits which PW1 gave for D/P interest in August 1977, it is difficult to accept that there was such an agreement as stated by the defendant.

50. The defendant said that he signed the plaintiffs' statements of accounts either because they were in credit in his favour or because they were for audit purposes only. As Mr Poll pointed out, these accounts were prepared at various dates, not necessarily the end of each financial year. It seems tolerably clear to me that the statements were prepared, in several cases, to give to the defendant when he came to Hong Kong with the intention of obtaining his agreement to them. It is difficult to believe that a business man would sign statements, particularly when they show a debit against him or his company, unless he was satisfied as to their accuracy.

51. The defendant said he did not supply notepaper for the signing of the guarantee or any other purposes. He said that he did not carry notepaper with him on his overseas trips as business was carried out on trust and any necessary paperwork would be tidied up after his return to Nigeria. I find this a most unlikely explanation.

52. It was the defendant's evidence that any settlement which he reached with PW1 in June 1980 had to be referred back to and approved by the directors of SNK. PW1 in his evidence had said that the defendant made no such reference and in any event the directors were no more than figureheads to comply with Nigerian law. It is quite clear to me that the defendant ran SNK as his own personal fief. One has only to look, for example , at the plaintiffs' accounts which show SNK's money and money personal to the defendant intermingled. I do not believe the defendant when he said that it was necessary to refer back to his directors for approval of a settlement.

53. Equally, I do not believe the defendant when he said that he would not give a personal guarantee for SNK because of the possibility of the other directors removing him. The Jacksons' letter (exh. P6) to which I have already referred, contains the following clause:-

The letter is signed on behalf of SNK by the defendant. The defendant said that this does not constitute a guarantee on his part. In law, the defendant is undoubtedly right. However, it was either the defendant's intention to execute a separate personal guarantee in which case his evidence about and reasons for not giving a personal guarantee are wholly undermined. Alternatively, he had no intention of providing or honouring any guarantee in which case he can only have been misleading Jacksons and has shown himself to be thoroughly dishonest.

54. The defendant said that in January 1977 he had given PW1 five or six pieces of SNK note paper which he signed in blank. This was to facilitate PW1 in pursuing insurance claims. Apart from the guarantee, there is another document which the defendant does not recall signing. This is a receipt dated 15th January 1977 purporting to acknowledge the receipt of US$15,000 from the plaintiff for compensation for various late shipments. A copy of this document, which I shall call "the receipt", is annexed to this judgment. So there are at least two documents, apparently signed by the defendant, about which he purports to know nothing. Indeed, the defendant said he did not see the receipt before coming to Hong Kong in September last. I find it surprising that the defendant having remembered immediately when confronted with the guarantee that he had signed some sheets of notepaper in blank, did not then or at some later stage, take steps to enquire what had happened to those pieces of note paper.

55. For the purpose of the 0.44A proceedings, the defendant made an affirmation and also gave evidence before Kempster J. In his affirmation dated 5th November 1982, the defendant said in relation to the abortive meeting to settle the accounts in 1980:-

"Some items were agreed but other (sic) were still in dispute. He agreed to sit down on another day to discuss the remaining items. I stayed in Hong Kong for the next few days but was not able to meet him again because of his other business engagements."

56. That statement, of course, is in sharp contrast to the defendant's evidence that he marched out of the settlement meeting in annoyance because PW1 would not budge on the defendant's outstanding claims, and that there was no agreement to meet again.

57. In his evidence-in-chief before Kempster J., the defendant said:-

"I signed the plaintiffs' statements, for audit purposes only, if we found the figures correct. I signed as a guarantor of SNK."

58. Apart from indicating that he had difficulties with English, the defendant explained this by saying that he signed the statements for audit purposes only and would check if the figures were correct or not. Suffice it to say, I find that a lame explanation.

59. In cross-examination before Kempster J. the defendant said :-

"If a supplier asks for a personal guarantee from me I give it."

60. The defendant explained that he had to say that because he had admitted the guarantee. Coupled with the evidence of the Jacksons' letter to which I have already referred, I find that a less than satisfactory explanation.

61. Under cross-examination before me, the defendant said that when he came to Hong Kong in November 1982 he intended to meet PW1 to sort matters out with him, that he intended to telephone and fix a time. That was, as Mr Poll contended, a declaration that the defendant intended to contact PW1. However, that intention had not been mentioned before, least of all in evidence before Kempster J. Further, if the intention was a true one, what documents did the defendant have with him on which he would rely for settling the accounts with PW1. There was no evidence that the defendant had any documents with him. On the contrary, his attitude was that he needed to get hack to Nigeria in order to get hold of the necessary documents. The defendant's evidence as to his intention was, I accept, a deliberate falsehood designed to mislead the Court.

62. In relation to the guarantee itself, the defendant said that, because he did not have a good command of English, he did not understand the words "revoke" and "hereafter". I have already, as I have indicated, formed a view about the defendant's competence in English. However, I find it difficult to believe that a businessman dealing in substantial imports and who, on his own evidence, is not unfamiliar with letters of credit which are usually expressed to he irrevocable would be unable to understand the root word "revoke". I further note that in at least one letter, the defendant has used the word "herewith".

63. I formed a poor opinion of the defendant. I find much of his evidence to he unsatisfactory and inherently unbelievable. Certainly, in relation to interest rates and complaints about them, I reject his evidence entirely.

64. The thrust of the defendant's evidence was that he was a relatively inexperienced importer who had great friendship with PW1 in whom he reposed the utmost trust. This image does not, in my view, stand close scrutiny.

65. In contrast, PW1 gave generally convincing or satisfactory explanations of the various documents and accounts and entries therein. He gave an apparently straight forward and fair account of the dealings between himself and the defendant. There was, however, a number of matters which damaged his air of injured innocence.

66. First, it is necessary to look carefully at the wording of the guarantee. PW1's evidence on this was quite plain. The wording was arrived at as a result of discussion between PW1 and the defendant. The wording came from their own minds without the benefit of legal advice or precedent. The provision as to revocation was suggested by the defendant. PW1 was then confronted with a copy of Form 1.2 from the Green Forms, Vol. VI. A copy of this form "continuing guarantee for the supply of goods to a trader : short form" is annexed (the form). It is not difficult to see a marked similarity between the guarantee and the form. The only significant differences appear to be that the limit on liability is omitted in the first paragraph and the words "for myself or my personal representatives" are omitted in the second paragraph.

67. PW1's explanation was that he had taken personal guarantees before and may have had a form such as this at the back of his mind. In my view, it is wholly improbable that, if the wording of the guarantee was reached as PW1 described, it should so closely resemble the form. There appear to me to be only two possible explanations. First, the form was used as a precedent, but PW1 for reasons known only to himself chose to deny this. To do so on such a crucial matter effectively destroys his credibility. Secondly, no guarantee was signed.

68. Other matters also cast doubt on PW1's credibility. For example, whoever suggested that certain goods should be over-valued in order that extra funds could he remitted from Nigeria, there is no doubt that just as this would be of benefit to the defendant, so it would to the plaintiff whose account with SNK would be kept in balance in the event of a shortfall on other bills or because of overdrawing for personal purchases by the defendant. PW1 was most reluctant to concede such a benefit to the plaintiff.

69. I find difficulty in accepting, PW1's version of the shirts/pyjamas transaction in 1976 and 1977. It has an air of total unreality. If, as PW1 said, he discovered that them defendant had cheated him, I find it surprising both that he failed to challenge the defendant and that he continued to do business with him. I did not find convincing PW1's explanation that he could not afford to cease business with the defendant because of the plaintiff's explosure to SNK. PW1 certainly said that he would like to have reduced or ceased business with the defendant but in contrast to this, business continued as before. And business continued, at least after October 1977, on the basis of the personal guarantee given by the defendant. It is perhaps surprising that PW1 should have been prepared to accept such a guarantee from a person who earlier that year had cheated him.

70. It is also surprising that, once business between the parties had ceased and again when the defendant had failed to return and settle the accounts, no demand was made upon SNK, or upon the defendant by virtue of the guarantee, for the money which the plaintiff thought to be outstanding.

71. In fairness to PW1, I do not overlook that, at the time he said the guarantee was sinned, there was every reason for him to seek one. Over US$300,000 was outstanding on bills; bills were frequently being paid very late; and more than once the plaintiff had had to query why bills which the defendant said had been paid had not been remitted.

72. Much, therefore, depends upon the guarantee itself. For the defendant, Dr. A.J. Nutten, an expert who is well known to these courts, examined the guarantee, the BNP letter and the receipt. As far as the guarantee is concerned, Dr. Nutten felt very strongly that the signature was made before the typescript. He relied upon two factors in coming to this conclusion. First, by an examination of the control documents, i.e., other letters admittedly signed by the defendant, he found that the defendant, whose signature starts with a down stroke to the "N", generally commences that down stroke to the right of a perpendicular line decending from the first "Y" of "Yours faithfully". This feature does not occur, said Dr. Nutten, in what he called the form letters, i.e., preprinted standard letters, where the words "Yours faithfully" are placed too close to the right of the page to enable the defendant to get in his complete signature unless he starts it to the left of the perpendicular. In the guarantee, said Dr. Nutten, the "N" commences to the left of the perpendicular and it must therefore follow that the letter was typed after the signature by a typist who unwittingly placed the words "Yours faithfully" in the wrong position.

73. With respect, that argument begs the question. It is equally possible that the words "Yours faithfully" were typed before the signature and because they were placed closer to the right hand side of the paper, as in the form letters, the defendant was constrained to commence his signature farther to the left in order to be able to complete it in full.

74. Secondly, Dr. Nutten found that it is a characteristic of the defendant that, in all letters where there is a space left for him to sign, he centralises his signature. Further, the defendant tends not to miniaturise his signature as, for example, one does in the confined space in a credit card but signs in full "N.K. Shyam" without regard to the typing, so that words typed under the space for his signature are often encroached upon. In Dr. Nutten's view, therefore, the typist of the guarantee had avoided encroaching upon an existing ink line and tried to impart a balance to the signature but, in so doing, had created an imbalance in comparison with the defendant's normal practice.

75. I find this point more convincing. Mr Poll, of course, pointed out that the space left on the guarantee for the defendant's signature is larger than the spaces left in the various control letters in Dr. Nutten's report. That is true, but one has only to look at the letter on page 224, for example, to see how the defendant signs when a large space is left for him. It is quite clear, even to the layman's eye, that the signature on the guarantee appears unnatural. Mr Poll also pointed to various letters where the defendant's signature does not encroach upon the typing above or below. Again, that is true, but depends, as I see it, upon the way in which the typist has set out the typescript rather than any conscious attempt on the part of the defendant to avoid the typescript.

76. Mr Poll also suggested that Dr. Nutten had not properly dealt with the characteristic of centralisation because he had failed to note the unusual spacing between the letters "GPO" in the address; had failed to note that the title "Re: Esenkay (Nig) Ltd." was not centred exactly in the middle of the notepaper; and had not noticed that there was no fullstop at the end of the title. Dr. Nutten had, however, noticed that there was no comma after "Yours faithfully". There was also a great deal of cross-examination about typists and typing and the manner in which the guarantee is get out. Dr. Nutten would concede that he is not an expert on these matters. Suffice it to say, I think that nothing turns on these particular points.

77. The plaintiff put in a report by Mr R.W. Radley, a forensic handwriting and document examiner, whom Dr. Nutten described as the best in the field. Unfortunately, it is clear that Mr Radley, who disagreed with Dr. Nutten, mistakenly understood Dr. Nutten to be relying on the pre-printed letters. Mr Radley was not called to give evidence. His report is, therefore, of little value.

78. I am persuaded that Dr. Nutten's opinion, based upon the centralisation characteristic, is a strong one.

79. Dr. Nutten could say little about the BNP letter save that, upon his earlier yardsticks in respect of the guarantee, the notepaper was signed first. Applying those yardsticks, i.e., that the signature generally begins to the right of the perpendicular from the "Y" and centralisation, it would appear to a layman, at least, that there is little wrong with the signature.

80. What is wrong with the BNP letter is the second signature. There are two explanations. The defendant said that his signature already appeared on it and he signed again for record purposes. PW1 simply said that it was signed a second time but could advance no real explanation.

81. The upper signature is in blue. The lower signature is in black. This is at least consistent with both stories. If the defendant's version is correct, it is wholly understandable that he made his second signature with a different pen. If PW1's version is correct, it is certainly possible that the second signature was made with a different pen in the plaintiff's outer office.

82. A letter dated 14h January 1988 from BNP itself was put in evidence. This letter confirmed that the defendant had maintained a number of accounts operated by his sole signature signed "singly". Although the contents of this letter were not admitted, I see no reason to doubt the truth thereof.

83. In my view, the only reasonable explanation for the second signature on the BNP letter is that advanced by the defendant.

84. Dr. Nutten could say nothing about the receipt except that because the signature appears so far below the typescript it gives rise to suspicion. There can, I think, be no question about that. As far as the receipt is concerned, PW1 explained that when he was in Nigeria in 1977 dealing with the shirts/ pyjamas transaction, one of the cheques which he gave for the purpose of the purchase of Naira included this sum in settlement of outstanding claims by the defendant. Support for this is to be found in Bundle 7, page 108B, where the counterfoil for this particular cheque made out for US$35,000 includes the endorsement "claims pail to Esenkay - US$15,000". However, the receipt was, on PW1's evidence, prepared by the  defendant. It is noteworthy that the date is typed in numbers whereas in all other letters coming from the defendant the month is spelt out. Further, the typeface is similar to that in the guarantee and BNP letter, although not from the same typewriter. Yet nowhere in the correspondence from the defendant is there any other example of such typeface.

85. Finally, if the guarantee, the BNP letter and the receipt are placed one on top of the other and held up to the light, there is a remarkable coincidence between the placement of the three signatures. PW1 was asked to do this. He was reluctant to accept that which is clear to me.

86. As I have said, generally I formed a poor view of the defendant. However, having regard to Dr. Nutten's evidence concerning the centralization characteristic; having regard to the wording of the guarantee; and having regard to the peculiar characteristics of the three documents which are apparent even to a layman, I find on the balance of probabilities that the guarantee was not signed by the defendant. Accordingly, the plaintiff's claim is dismissed.

87. In case the matter goes further, I should deal with the question of quantum. First, for reasons which I have already given, I have no doubt and I so find that the agreement between the plaintiff and SNK was that SNK should pay on the plaintiff's bills such interest as was charged by the plaintiff's bankers. The interest charged on the various bills was clearly documented by the plaintiff in its debit notes, statements and other correspondence. Apart from the telephone conversations in which the defendant alleged he complained about the interest rates being changed, there is no documentary evidence of such complaints until the defendant's statement of account which he presented to PW1 in 1980. On the defendant's own evidence, that was a speculative document based more upon what he felt SNK should have been charged than upon any knowledge of proper interest rates.

88. PW1 was frank in his evidence. He did not attempt to assert that he could remember precise details of any discussions about interest with the defendant in 1974 or 1975. He simply said that the defendant must have understood the position and that the subsequent documents speak for themselves. He said, and I find this understandable, that if the defendant had attempted to discuss what rates of interest would be chargeable if the bills were not paid on their due date or if the defendant had complained about the interest being charged, he would either not have done business in the first place or attempted to discontinue the business relationship between them.

89. PW1 accepted that there was a discussion about interest rates in October 1977 before the guarantee was signed by the defendant. On that occasion, PW1 said that the defendant mentioned that other suppliers were charging a lower rate than the plaintiff. PW1 checked with bankers and confirmed the then prime rate. He agreed to endorse this on confirmation notes and bills from then on. This was done in some cases. Such an endorsement reads:-

"Bank interest is chargeable on current rate which is 11½% and is subject to fluctuation without notice. All interest rates are valid for 150 days from date of shipment and they will be quoted on the draft after which they are subject to overdue interest rate which varies between l% to 3% per annum and is payable over and above the rate quoted on the draft."

90. I regard that as being no more than a general indication to the defendant of the likely rate at which interest will be charged. What is clear is that once a bill became overdue, a higher rate of interest would be charged. It was the defendant's own evidence that he understood that this would apply to all future bills.

91. Mr Mitchell tried to argue that para.8 of the re-amended statement of claim read with further and better particulars thereof is at varience with PW1's evidence as to interest. I am satisfied that, taken together, they clearly indicate that SNK was to pay whatever interest the banks charged the plaintiff on its bill and that, by a combination of discussion and acceptance of documents by SNK, SNK was aware of and agreed to this.

92. On those hills for which the defendant is liable, therefore, he must pay the interest in accordance with debit notes submitted to SNK by the plaintiff, except where it is admitted by PW1 that there is a discrepancy in the number of days charged.

93. 14 bills related to goods which were ordered before the guarantee was signed. It was PW1's evidence that he delayed signing confirmation notes, shipping the goods and dating the bills of exchange until after the guarantee had been signed in order that these transactions should he covered by the guarantee.

94. It was Mr Mitchell's argument that the word "supply" in the guarantee comprehends an instantaneous transaction where goods are handed over and payment made, as you would find between two local traders. The word "supply" does not sit comfortably with international trading. Mr Mitchell argued that according to the plaintiff's interpretation, "supply" must mean "ship" which is the point at which the property passed to the defendant and the bill of exchange was dated. That would mean, however, that the guarantee should be taken to read "all such goods, property in which shall hereinafter pass to them", or "all such goods as you shall hereinafter ship to them". Mr Mitchell said that the defendant's interpretation does less offence to the language of the guarantee and is more likely to be in accordance with what the parties meant. He said that it is only necessary to insert the words "agree to" so that the guarantee would read "hereinafter agree to supply".

95. Mr Poll contended that until the plaintiff's bills . were accepted by SNK, the title to the goods remained with the plaintiff. The word "supply", therefore, could as easily encompass overseas trade as local trade.

96. Mr Mitchell no doubt right when he says that the property passed to the defendant when the goods were shipped. That would be when goods were appropriated to the contract. However, in my view, both arguments missed the point. PW1's evidence was that until he returned to Hong Kong in October 1977 and sat down to discuss the question of a guarantee with the defendant, the defendant's activities had been confined to placing orders with staff of the plaintiff. It was not until the guarantee had been sinned that PW1 confirmed these orders. It seems to me that it was only then that contracts were concluded between the parties. The defendant naturally did not give evidence on this aspect because it was his contention that there was no guarantee.

97. In my judgment, therefore, no contracts were concluded for the sale of such goods until after the guarantee had been signed. Accordingly, whatever interpretation is put upon the word "supply", there can be no question but that the goods were supplied after the guarantee vas signed. There is one exception, however, in respect of Rill No. 1268. This bill relates to the goods obtained by the defendant from the Singapore company which drew a bill upon the plaintiff which in turn drew a bill upon SNK. The goods were shipped and the plaintiff's bill was dated before the guarantee, although PW1 said that authorization for this transaction was given only after the guarantee was signed. In my view, however, the defendant is not liable for this bill.

98. Another group of bills relate to goods obtained from Japan. As I understand the evidence, the defendant ordered these goods from a Japanese company. After persuasion, PW1 agreed to open a Letter of Credit on behalf of SNK in respect of these goods. The plaintiff was to be reimbursed by way of bills drawn on SNK. Although Mr Poll argued that it was precisely this sort of transaction that PW1 had in mind when drawing the guarantee, I can see no justification for holding the defendant liable on these bills. The plaintiff supplied, if I may use that word, no more than finance. I do not find the plaintiff to have supplied the goods themselves.

99. Further bills relate to goods ordered by the defendant from the plaintiff's Taiwan office. Mr Mitchell conceded that there might be an argument that the plaintiff supplied these goods. He did not pursue the matter. One further bill related to goods ordered from United States Agencies of Hong Kong. PW1's evidence was that this company was an auxiliary trading name of the plaintiff. I think Mr Mitchell would have to make the same concession. In my view, the defendant is liable in respect of these bills.

100. Mr Mitchell further argued that the defendant should not be liable for interest on that part of any bill which represented the overvaluing of goods. However, it is clear from the evidence, particularly that of the defendant, that it was agreed that SNK should pay such interest although it would be credited in the plaintiff's running account with SNK. According to PW1, whose evidence on this I accent, the reason for overvaluing was two fold. First, the additional funds remitted could offset any shortfall in respect of other transactions or personal purchases by the defendant when in Hong Kong. Secondly, it constituted part of the arrangement at the request of the defendant for both over- and undervaluing. Goods upon which there was a high rate of duty in Nigeria, which would be borne by SNK, could be undervalued. The shortfall on the real price in respect of such goods could he compensated by overvaluing goods for which the rate of duty was lower and. therefore less of a burden on SNK. In principle, therefore, SNK and consequently the defendant are liable for all interest charged by the plaintiff.

101. It was also argued that the defendant should not be liable for interest on D/P bills. Mr Mitchell pointed out that the interest on two such bills was credited to SNK in August 1977. This was the occasion when, according to Pill, he agreed to a compromise with the defendant when settling the current state of account between the parties. The defendant's evidence, of course, was that he was entitled to have such interest credited as a matter of right. As PW1 pointed out, however, the defendant or any other recipient of a D/P bill could delay making payment and obtaining the documents until it suited him to do so. In the meantime, the bill having been discounted, the plaintiff was incurring interest thereon. It would make no commercial sense, therefore, to agree not to charge interest on such a bill. In all the circumstances, I am satisfied that the defendant is liable for such interest.

102. I do not propose to assess the precise sum which would be payable by the defendant; should it become necessary to do so, this can conveniently he done by the parties in accordance with the findings which I have made above.