BRIGHT-LINE ENTERPRISE COMPANY LIMITED v. MELODY PREMIER TECHNOLOGY LIMITED

No. 164 of 1997

(Civil)

IN THE COURT OF APPEAL

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J U D G M E N T

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Mortimer, V-P : Findlay J. will deliver the first judgment.

Findlay J. :

1. On 28 August last year, the plaintiff issued a writ of summons with a Statement of Claim against the defendant. In this, the plaintiff claimed the sum of US$32,785 from the defendant alleging that this was the outstanding balance of the purchase price of some audio equipment sold by the plaintiff to the defendant in October 1995. The purchase price agreed was US$62,785 but the defendant had paid US$30,000.

2. To this, the defendant filed a Defence on 7 October. In that Defence, the defendant alleged that the price agreed was only US$30,000, and this had been paid. I should mention that this Defence also originally alleged that the goods were not in order but this line of Defence has not been pursued.

3. On 29 November last year, the plaintiff applied for summary judgment on its claim and this was granted by Mr Registrar Betts. An appeal from his decision to Yam J. was dismissed. The defendant now appeals to this Court against the Order of Yam J.

4. In the first instance, the question before us is whether or not what the defendant now says in its Defence is credible. I should explain that the Defence which was filed on 7 October 1996 was radically amended on 17 February this year. In that Amended Defence, the defendant said that it agreed essentially that the price had been US$62,785 and that agreement had been reached on 6 October 1995, but says that the defendant was liable to pay only US$30,000 on delivery and the balance was deferred until about February 1996. The defendant says the plaintiff agreed to supply to the defendant before that time all outstanding spare parts due under another transaction. So essentially the defendant was saying that the balance was payable only once the date was reached and once the plaintiff had supplied the spare parts. As I say, it is for us to decide at this stage whether that Defence now alleged is a credible one.

5. Clearly in matter of this nature, the Court pays a lot of attention to the probabilities, and those probabilities in particular revealed by the contemporaneous documents. In the circumstances of this particular case, it is important to ascertain whether the defendant raised the Defence it now raises at the relevant time. If it is so that the defendant did not say that the plaintiff was not entitled to claim the US$32,785 because there was this alleged agreement; it did not say so that when it had many opportunities of doing so, this will tell strongly against the bona fides of that Defence. That is especially so if the defendant has advanced no or no acceptable explanation for failing to do this.

6. To determine whether the defendant did what one would have expected it to do in raising this Defence as now before the Court, it is necessary to look at the history of the matter.

7. The parties agreed that the agreement was entered into on 6 October 1995, and on that very day, the plaintiff wrote to the defendant and said - and I read of course from the translations of most of the documents, that - "The amount shall be payable by two instalments : one will be before shipment and the other in November." The defendant wrote to the plaintiff a day later and did not, in that letter, dissent from what the plaintiff had said; that the second instalment would be in November. If there had been such an agreement as the defendant alleges now, one would have expected the defendant to say that there and then.

8. Then the plaintiff wrote to the defendant on 9 October 1995 saying this :

"The balance amounts also to nearly US$30,000 and will be settled by Melody separately on 15 November."

There was no specific response to this, but the next event was a letter from the defendant dated 17 October 1995. This letter says :

"About this lot of goods, the L/C amount is US$30,000. Please fax one invoice briefly show the amount US$30,000 in order for our bank to prepare documents. The balance will be settled next time."

There were some additional words on the document before us but it is common course that they were written in subsequently.

9. There is no suggestion here in the words of the defendant that the balance was due to be settled only after the plaintiff had supplied spare parts the following year, and again there is no explanation from the defendant as to why it did not say that. And this course of behaviour continues. The plaintiff wrote to the defendant on 2 November 1995. In this letter the plaintiff asked :

"Moreover, how about the balance of US$32,785 for the previous shipment, when can you arrange payment, please inform."

The defendant replied to this letter on 4 November but did not mention the amount at all. Again, if its case was then that the money was not due, one would have expected it to say so. There is no explanation before us as to why it did not say so.

10. The plaintiff wrote to the defendant again on 6 November 1995, again asking about the payment of the balance. On the papers before us, the defendant did not answer this. Again, one would have expected there to be a firm reply if the defendant had in its mind at that time that the money was not due.

11. In January 1996, the defendant sent to the plaintiff a full list of the spare parts required. This letter is the only one, as far as I can remember, that is in English. In this letter, the plaintiff asked for the defendant's help in supplying the spare parts, and said :

"As agreed, we will settle our outstanding bills once you can help us to fix these damaged goods. I am sorry about our finance problem stop us pay on time, but if we can turn these damaged goods to saleable stocks, we can improve our financial position."

In regard to this letter, the defendant did make an explanation as to why it had not firmly said to the plaintiff "the money will be paid when you supply the spare parts". The defendant's explanation was that it was not hard-headed because it was being courteous.

12. But this does not, in my view, ring true because in reply to this letter of 9 January, the plaintiff obviously smelling some attempt to link payment with the spare parts, said in clear terms : "The pending payment of US$32,785 has nothing to do with those stocks and defectives."

13. The defendant wrote back to the plaintiff on 16 January and said not one word dissenting from that view. Then the plaintiff wrote the customary letters of demand to the defendant on 30 July and 8 August 1996 and there was apparently no reply to these setting forward Defence now raised. And of course we have the fact that the defendant's original Defence did not raise this defence. Here we have another attempted explanation by the defendant to say why this had not been done. And this explanation was that : "The director concerned was under severe time constraint as I had to do a lot of business travels." This of course makes no sense. Constraint of time could not possibly have led the defendant to tell its solicitors what was untrue as opposed to what was true. It takes no more time to say "the contract was US$30,000 and I have paid that" than "I have not paid the balance, but it was not due".

14. All in all then there are no contemporaneous documents at all by which the defendant ever said, at any time at all, that the payment of the balance claimed by the plaintiff was subject to any kind of condition or delay in payment.

15. It seems to me, therefore, that it is not credible that a person in the position of this defendant in these circumstances would not, when given all the opportunities that I have mentioned, have said even once that the plaintiff is wrong. To say something like :

"You are wrong to claim this money from me now. It is not due to you. You know perfectly well that we agreed that it would not be paid until February next year after you had supplied the spare parts."

16. On that basis, it is my belief that the plaintiff was entitled to summary judgment and that part of the Order below should stand.

17. But that is not the end of the matter, the defendant has advanced a counterclaim against the plaintiff. The substance of this claim is that the parties had agreed to appoint the defendant as the sole distributor of the audio products concerned in their course of business, and that the plaintiff breached this agreement, in one way or another, by allowing other persons to sell those products in the countries in regard to which the defendant had sole rights.

18. Now there may be some unsatisfactory aspects about this claim and one could criticise it one way or another. But the fact to the matter is that there was undoubtedly - the plaintiff agrees - a sole distributorship agreement in favour of the defendant. There was no doubt about that. So it cannot possibly be said that the counterclaim is based on a total sham. There is a dispute as to when that agreement was entered into and whether or not it was terminated by mutual consent. But the case of the defendant here is in no way similar to its case with respect to the Defence to the claim. There is no doubt that on the record the defendant complained to the plaintiff about breaches of the distributorship agreement. On that basis, it seems to me that it cannot be said that the defendant's counterclaim is untenable or implausible. It may, at the end of the day, fail but that is not something that we can decide now.

19. That leaves to the question of what then happens to the judgment in favour of the plaintiff and for the balance claimed. The counterclaim arises out of the same course of dealing as the plaintiff's claim against the defendant. One cannot suggest that they are totally separate; it is part of the same course of conduct, dealing in the same kind of audio equipment and in much the same period of time. It seems to me that it would be unfair to order the defendant to pay the money to the plaintiff now when it may be that, at the end of the day, the plaintiff owes money to the defendant. For those reasons, I would want to see the judgment in favour of the plaintiff be stayed and pending the outcome of the counterclaim.

Godfrey J.A. :

20. The plaintiff's claim in this action (for US$32,785 with interest) is one to which, in my judgment, the defendant has failed to show any credible defence. Accordingly, I agree that the judgment entered below should stand. The question remains whether there should be a stay of execution upon that judgment until after the trial of the defendant's counterclaim.

21. I think this is an appropriate case for the exercise of the power conferred on the court by O.14 r.3(2), under which the court may order, subject to such conditions, if any, as may be just, a stay of execution of any judgment given against the defendant under O.14 until after the trial of any counterclaim made or raised by the defendant in the action.

22. It was submitted to us that in exercising that power here we should impose a condition, that is to say, that the defendant should bring into court what is due under the judgment. But I do not think it would be right, in the circumstances of this case, where the counterclaim is so intimately bound up with the subject matter of the claim, so to order.

23. Accordingly, I agree that we should make the order proposed by Findlay, J.

Mortimer V.-P. :

24. I entirely agree and have nothing to add.

25. In consequence the appeal will be allowed in part. The judgment will stand. But there will be a stay of execution until after the determination of the counterclaim or further order.

26. There will be no order for costs of this appeal and the orders for costs below will stand.