TAISEI KOGYO KAISHA LTD. v. BILLIONGOLD CO. LTD.

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J U D G M E N T

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Penlington, J.A.:

1. This is the judgment of the Court.

2. These appeals were heard on the 16th October 1992. At the conclusion we said that the appeal against the order of Mayo, J. of 9th December 1991 would be allowed but the appeal against the order of 28th February 1992 would be dismissed. This would permit the amendment of the defence as sought. As the appeal against Mayo, J.'s order dated 6th March 1992 struck out part of the defence which would now be replaced, it now did not need to be decided. We said we would hand down our reasons for the decision, which we now do.

3. The plaintiff claims damages against the defendant in respect of 3,000 tonnes of steel plate supplied to it by the defendant in December 1990 and January 1991. The allegations in the statement of claim are that by a contract, which was partly oral and partly written, the defendant undertook to supply plate which was in accordance with "Chinese Standard GB700-79 and GB709-66" and in particular the plate was to be free of lamination, even if such lamination could only be detected by scientific tests. It is the defendant's case that it only agreed to supply plate which was free of lamination which was visible.

4. Paragraphs 5 and 6 of the claim read as follows:

"5. It was an implied and/or express term of the contract that lamination would not be present in the goods provided to the Plaintiff by the Defendant pursuant to the contract.

PARTICULARS

This term is implied from the fact that the contract expressly provided for compensation to be paid to the Plaintiff by the Defendant in the event that the Defendant provided the Plaintiff with goods in which there was lamination.

This express term was agreed to in conversations which took place between Mr. Iwata of the Plaintiff and Messrs. Chan and Edmond of the Defendant and Mr. Hirotani of F.T.L. and Messrs. Chan and Edmond in or about December 1989.

6. It was an express term of the contract that the Defendant would compensate the Plaintiff for the full loss amount occasioned by the provision of goods in which there was lamination as assessed by SGS or NKKK Surveyors.

PARTICULARS

This express term is contained in clause 14 of the Special Conditions in the document dated 2nd January 1990 headed "Revised Sales Contract No. HRSP-26/89 and signed on behalf of the Plaintiff and Defendant; the second paragraph of a telex from the Plaintiff to the Defendant dated 18th December 1989; the third paragraph of a telex from the Defendant to the Plaintiff dated 22nd December 1989; the second paragraph of a telex from the Plaintiff to the Defendant dated 22nd December 1989; the fourth paragraph of a telex from the Defendant to F.T.L. dated 26th December 1989; the third paragraph of a second telex from the Defendant to F.T.L. dated 26th December 1989.

This express term was also agreed to in conversations which took place between Mr. Iwata of the Plaintiff and Messrs. Chan and Edmond of the Defendant and Mr. Hirotani of F.T.L. and Messrs. Chan and Edmond of the Defendant in or about December 1989."

5. In its defence dated 10th October 1991 the defendant denied that the contract was partly oral and, inter alia, it said:

"4. Paragraphs 5 and 6 is admitted and the Defendant avers that there was an express term, that is, the particulars goods shall be produced in accordance with the Chinese Standards CB700-79 and with inspection certificate of quality issued by Mill. The Defendant further avers that it was at all material times, only Chinese Standards should apply for the contracted plates under the said revised sales contract.

5. Paragraphs 7 and 8 is denied and the Defendant says that the Defendant only accept the responsibility on lamination which can be detected by human eyes and not the visible lamination by the supersonic detected. The Defendant further says that there was no neither express term nor implied term of the contract, the particulars goods to be examined by supersonic and that the term was unilaterally imposed by the Plaintiff to be an X-ray, ultrasonic or supersonic check of the good."

On the 12th November 1991 the defendant issued a summons to amend the defence. The proposed amendment was a total re-draft and reads, in part, as follows:

"8. The Defendant avers that lamination in the context of the type of commodity agreed to be sold by the Defendant to the Plaintiff refers to visible lamination as was provided by the said Chinese Standard GB700-79. The Defendant further avers that the plates in this quality must comply only to chemical composition and mechanical properties and stay within the tolerances which these standards call for with regard to sizes, thickness and flatness and that hidden lamination is not falling under these conditions.

9. Paragraph 14 of the said Revised Sales Contract provided that in compensation for lamination plate, seller might pay the buyer full loss amount assessed by SGS or NKKK at buyer's option or seller reserves its right to free dispose of the plated declared to be with laminations somewhere else. The Defendant avers that lamination in the said paragraph 14 refers to visible lamination which was the commonly accepted standard relating to the particular type of commodity sold by the Defendant to the Plaintiff.

10. In the premises paragraph 3 to 7 [inclusive] of the Statement of Claim are denied

11. The Defendant denies that there was an implied and/or express term either written or orally of the agreement between the Defendant and the Plaintiff that the survey to be conducted by SGS or NKKK was to be an X-ray, ultrasonic or supersonic check of the goods. The Defendant repeats his case that he had not agreed to sell the goods to be free of internal lamination and had never agreed with the Plaintiff to have X-ray, ultrasonic or supersonic testing on the goods of the grade and quality agreed to be sold. In the premises paragraph 8 of the Statement of Claim is denied."

This application to amend was opposed by the plaintiff on the basis that it sought to withdraw admissions which had been made.

6. The application was heard by Mayo, J. on the 9th December 1991 and was refused on the basis that an admission can only be withdrawn if made in error (Annual Practice, para. 20/5-8/16): Hollis v. Burton [1892] 3 Ch 226. Mayo, J. considered that there was nothing before him to show that there had been any such error, even though the defendant was offered an adjournment to put forward some evidential basis for the application.

7. The claim came back before Mayo, J. on the 28th February 1992 when he heard a further application to amend the defence, this time supported by an affidavit by the defendant's solicitor, explaining that the admissions made were not expressed as they should have been and were, in effect, made in error. Mayo, J. refused the application on the basis that he considered it was simply a renewal of the first application, and for that reason was an abuse of process. He said however that the matter had given him considerable concern.

8. Finally on the 6th March 1992 Mayo, J. heard an application by the plaintiff seeking to strike out the defence and to enter judgment for the plaintiff on the basis that, in view of the admissions made, there was no defence to the action. Mayo, J. allowed the application but only to the extent of deleting paragraphs 3 and 5 of the defence. Paragraph 3 reads as follows:

"3. As regard to paragraph 3 of the Statement of Claim, the Defendant denies that the agreement is partly oral and partly written. The Defendant further avers that insofar as to the agreement there was only an written agreement and no oral agreement at all, it was merely an negotiation before enter into a formal agreement, however, all the term of the agreement were incoproated in the agreement."

We have already set out paragraph 5.

9. Mayo, J. held that these paragraphs were inconsistent and they could not be maintained in the light of the admissions made in paragraphs 5 and 6. He held that this caused embarrassment to the plaintiff, as envisaged in Order 18 rule 19.

10. Notices of appeal were filed within time by the defendant against the orders of Mayo, J. dated 28th February and 6th March 1992. There was then no appeal against the first decision of 9th December 1991. On the advice of counsel application was made to this Court out of time to appeal against the first decision and that was ordered by Kempster, J.A., before whom it came, to be renewed here. Having heard counsel we granted the application of the defendant to appeal out of time against the order of 9th December 1991.

11. Mr. Christopher Mumford, Q.C., leading counsel for the defendant, submitted that from the pleadings clearly there was only one real issue between the parties, i.e. did they agree that there should be no lamination or only that there should be no visible lamination. The defendant had never denied that there were laminations but had clearly suggested that, being not visible to the naked eye, they did not found an action. It was clear that the defendant never intended to admit anything else and the defence had been drafted in the way it was as a result of the defendant's solicitor's error, for which error the defendant should not be punished. The mistake made in the pleading was so obvious it did not require an explanation. The amendment should be allowed on the general principle that to do so will allow the real issue between the parties to be determined: G.L. Baker Ltd. v. Medway [1958] 1 WLR 1216.

12. For the plaintiff Mr. Roderick Murray relies. heavily on the decision of Hunter, J. in Tse Yuk Tin v. Chee Cheung Hing and_-Anr. [1984] HKLR 391. At 395 he said:

"In particular it (the court) expects the party to put before it a convincing credible explanation of the circumstances in which the admission was in fact made which is sought to be said to have been made under a mistake."

Here, Mr. Murray submitted, there were even now no such convincing reasons and there certainly was nothing at all before Mayo, J. on the first occasion. He was then quite right to refuse the second application as it was simply a repetition of the first.

13. In light of the view we have taken we do not think it necessary to go into the facts or authorities here in depth. While we have no doubt that Hunter. J. was right in what he said in Tse Yuk Tin v. Chee Cheung Hing the admission made in paragraph 4 of the defence was, in the light of what was contained in the rest of the defence, obviously made in error. It would have been much more satisfactory for the defendant's solicitor to have sworn an affidavit in support of the motion to amend saying exactly how the error arose, especially when specifically invited to do so but even without such an affidavit the admission was obviously made in error.

14. We agree with Mayo, J. that the second application was simply a repetition of the first one and should have been dismissed. We agree with Mr. Mumford that the issue between the parties is whether or not the contract between them called for the supply of plate without any lamination, visible or invisible, and that such dispute should be properly reflected in the' pleadings.

15. We make the following order nisi as to costs:-

The defendant to have its costs on first application;

on the defendant's second application and on the plaintiff's application to strike out, no order as to costs;

the costs of this appeal to be in the cause.