HWA HIM CO LTD v. KAY KAY CO (A FIRM)

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REASONS FOR JUDGMENT

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1. In this Action, the Plaintiff claimed against the Defendant for some $530,000 as price for goods sold and delivered but unpaid. The debt was admitted by the Defendant in the pleading and the only issue at the Trial is whether the above debt was discharged by reason of an alleged oral settlement agreement made between Mr. Wan ("Wan") of the Plaintiff and Mr. Hani Khemlani ("Hani"), a partner of the Defendant firm (hereinafter referred to as "Kay Kay"). Kay Kay contends that a binding agreement was made whereby the Plaintiff agreed to accept a number of agreed goods from Kay Kay in discharge of the debt whereas the Plaintiff submits that no such binding agreement was made. The final outcome of the Action depends largely on the Court's assessment of the credibility of the two key witnesses, Wan and Hani. At the conclusion of the Trial, I held against Kay Kay, entered judgment in favour of the Plaintiff and I said I will give my reasons for my judgment later. I now hand down my Reasons for the Judgment.

2. Both the Plaintiff and Kay Kay have been for many years traders in suiting material and it is clear from the evidence that the Plaintiff had been selling to Kay Kay for some ten odd years prior to 1994 without any problem. The relationship was friendly. In early 1994, Kay Kay began to experience cashflow difficulties and was unable to pay its many creditors sellers including the Plaintiff. To pay off its debts, Kay Kay approached its customers and proposed that the customers might wish to agree to take the goods of Kay Kay in exchange for the debts. Apparently many customers agreed to such proposals of Kay Kay but the important question at this Trial is whether the Plaintiff did so.

3. The evidence shows that Hani telephoned Wan in March 1994 and asked for a meeting at the office of Hani's uncle and that at that meeting ("Uncle Office Meeting") the question of goods of Kay Kay in exchange for the debt was discussed. There is no dispute that such a meeting was held attended by inter alia Wan, Hani, Hani's uncle and Hani's cousin, Mr. Raja Lakhani ("Raja") who gave evidence before me. Wan admitted that at that Uncle Office Meeting, he did not reject out of hand the idea of taking Kay Kay goods in exchange for the debt and that he demonstrated his willingness to give further consideration to the idea by attending, immediately after the Uncle Office Meeting, the office of Hani to see what goods might be offered by Hani. As Hani could not show any of his goods to Wan at the office of Hani's uncle, it was clear (and Kay Kay did not contend otherwise) that no binding agreement was reached at that Uncle Office Meeting. Both Hani and Raja gave evidence about the Uncle Office Meeting but in my judgment, the crucial evidence is that relating to the subsequent discussion at the office of Hani and not that relating to what took place at the Uncle Office Meeting. But in any event, if necessary I hold, for reasons which will appear below, that the evidence of Wan on this Uncle Office Meeting (as well as on all other aspects) is to be preferred to the evidence of Hani and Raja.

4. It is common ground between the parties that immediately after the Uncle Office Meeting, Wan and Hani went to the office of Kay Kay to discuss the question of what goods would be offered by Kay Kay to the Plaintiff in exchange for the debt. There is undisputed evidence that the meeting at the office of Kay Kay ("Hani Office Meeting") took something like one hour and half to two hours. What are hotly disputed, are:-

5. It is not in dispute that on the 11th March, Kay Kay caused delivery to be made to the warehouse of the Plaintiff, goods consisting of some 147 pieces of suiting material and 3 cartons of socks and underwear ("Delivered Goods"). Nor is it in dispute that prior to such delivery, staff of Kay Kay contacted staff of the Plaintiff to say that delivery would be made the afternoon of the 11th March. There is also agreement that when the Delivered Goods arrived at the warehouse of the Plaintiff, the warehouseman of the Plaintiff was asked to sign a receipt for such Delivered Goods ("Receipt") as appears at page 25 of the Bundle and that the Receipt was signed. The Receipt was in a restricted form of acknowledging receipt of 147 pieces of textile piece goods and socks and underwear. The Receipt did not refer to it being in extinction or discharge of the debt due by Kay Kay to the Plaintiff.

6. On the 12th of March, the day after the delivery to the Plaintiff, Kay Kay faxed to the Plaintiff a draft settlement agreement for the Plaintiff to sign. The draft settlement agreement is in very clear terms to the effect that the Plaintiff has agreed to waive the debt of $529,657.00 in exchange for the receipt of goods from Kay Kay. The draft settlement agreement in fact listed the 4 cheques which form the subject of the debt. The four cheques in question had been issued by Kay Kay but under which no payment had been made by Kay Kay. It is common ground that the Plaintiff did not sign the draft settlement agreement and that in fact Kay Kay did not chase the Plaintiff for the signing of the draft settlement agreement or the return of the 4 dishonoured cheques.

7. On the 25th March 1994, the Plaintiff sent a Fax to Kay Kay to say that the settlement proposal made by Kay Kay of goods for debt, could not be accepted by the management of the Plaintiff. This Fax was answered by the Fax of Kay Kay dated 11th April 1994 in which Kay Kay rejected that there was no settlement and insisted that there had been a settlement agreed and that Kay Kay was no longer in debt to the Plaintiff by reason of the alleged settlement. There then followed some further correspondence leading eventually to the Writ being issued on the 2nd of June 1994.

8. Having heard and seen the three witnesses, I have no doubt that I prefer the evidence of Wan to the evidence of Hani and of Raja. Hani gave extensive evidence before me and conducted the defence of Kay Kay's case with skill and ability. Although he is no more than probably forty, he is undoubtedly a very experienced businessman. I formed the impression that he is clever, quick, charming and skilful but at the end I am convinced that his evidence is not reliable. His cousin, Raja gave evidence which is confined to the Uncle Office Meeting but I also reject his evidence where it conflicts with that of Wan. Raja is a young man and he is also a very intelligent businessman but he is very much a man with close ties to Hani. I cannot but help feeling while he was giving evidence that he was someone who had rehearsed his evidence beforehand and much of what he said was intended to help the cause of his cousin, Hani.

9. I was initially not impressed by Wan or his evidence. But the longer I watched him giving evidence before me, the more I came to view favourably Wan and his evidence. There is no doubt in my mind that Wan is not as bright as Hani. Wan is not a quick person and I formed the clear impression that Wan is someone who needs a lot of time to make up his mind. He is liable to be confused sometimes but his honesty I do not doubt. Unlike Hani, Wan is not someone who is capable of lying on his feet and I suspect he is someone who will blush badly when he is telling something not one hundred percent truthful. I have concluded that Wan is someone who is honest and his evidence can be relied upon. Whenever there is a conflict of evidence between Wan on the one hand and Hani or his cousin Raja on the other hand, I have no hesitation in preferring the evidence of Wan.

10. In the light of the above fundamental findings of credibility of the witnesses, I will now proceed to analyze and make my findings of fact on the essential events.

11. On the first major issue of the date of the Hani Office Meeting I have little doubt that it took place on the 10th of March 1994 as said by Wan, and not on the 11th of March as told to me by Hani. The contemporaneous documents of the correspondence starting with the Fax of 25th March and ending with the solicitors exchange of correspondence all show clearly and unmistakably that 10th March was the date of the Uncle Office Meeting and of the Hani Office Meeting. Kay Kay's own pleadings and in particular its Further and Better Particulars showed up Hani's evidence of 11th March as a clear lie. Hani tried to explain in Court that his solicitors were mistaken time and again about the true date. I do not believe Hani and I have no doubt that Hani deliberately put forward the 11th March when he knew full well that the true date of the meetings was the 10th March. Why did Hani lie about the date. The explanation given by Mr. Lam for the Plaintiff is that Hani wanted to give the Court the impression that the oral settlement agreement was so firmly made that within a matter of an hour or two after the Hani Office Meeting, Kay Kay completed the oral agreement by delivering to the Plaintiff the goods agreed to be exchanged for the extinction of the debt. I accept that there is much in this explanation. But whatever might be the reason of Hani not telling the truth, what is important is that I reject his evidence of the 11th of March as being the date of the Hani Office Meeting.

12. The second major dispute between the parties is whether at the Hani Office Meeting, Wan was given a free run of the warehouse of Kay Kay and he looked at all the rolls and rolls of suiting materials or that Wan was restricted to looking at only the sample books which Hani chose to give and show to Wan. On this again, I am of the view that Wan's evidence is to be preferred. Wan described in considerable detail the process of selecting the various fabrics from the sample books and the recording of the article numbers and yardages on the documents which are found at pages 55 onwards of the Bundle ("Proposed Goods Particulars"). The whole process done under the guidance of Hani, took some one and half hour covering some 147 pieces. My judgment of the character of the two businessmen is that Hani is not the sort of person who would allow Wan to have the free run of the warehouse or to look at whatever fabrics Wan wanted to look at. If each roll is opened up and examined then firstly the whole process would take considerably longer than one hour and half or two hours but secondly the recording of the yardage could be done directly from the yardage written either on the fabrics or on the tags attached to the pieces rather than from the sample books as described by Wan. The clear discrepancy between the goods and their yardages set out in the Proposed Goods Particulars and the goods and yardages set out in the Plaintiff's Fax of 25th March lends strong support to the view that at the Hani Office Meeting, Wan was only given such sample books as Hani allowed Wan to see. Finally, on this aspect I find it difficult to believe that if Wan had been given access to all the goods in the warehouse, that socks and underwear which the Plaintiff had never dealt in, would even come into the picture or become the subject of goods offered to the Plaintiff. On the second issue therefore, I find as a fact that Wan was only looking at the sample books at the Hani Office Meeting and did not have the free run of the warehouse.

13. If Wan was only looking at samples and there were insufficient goods of suiting materials from the samples which were of interests to Wan, so that socks and underwear had to be offered to Wan, what then was the final conclusion at that Hani Office Meeting. Having regard to my above assessment of the character and credibility of Wan and Hani, I have no doubt that no final binding settlement agreement was reached. I have reached this conclusion for a variety of reasons, and amongst such significant reasons are the following:-

14. In the course of the Trial, much was made of the subsequent conduct of the parties but in my view instead of such acts supporting a case of binding agreement, the subsequent events are for me confirmation that there was no binding agreement.

15. The sending of the goods by Kay Kay to the Plaintiff might provide powerful inference that the goods were delivered pursuant to the alleged oral agreement. But examining this more closely and one can see in fact all the signs against such a finding. Firstly if there was such an oral agreement. I would expect some agreement reached as to when the goods so agreed would be delivered to the Plaintiff and when the dishonoured cheques would be returned by the Plaintiff to Kay Kay but even according to the best case of Hani, there was no such agreement at the Hani Office Meeting. What happened instead was someone from Kay Kay telephoning the Plaintiff either on the 10th or morning of 11th to say some goods of Kay Kay would be delivered. That is hardly the behaviour of someone who is delivering goods pursuant to an agreement whereby a large debt was discharged in exchange for the goods. Secondly, the Receipt presented by Kay Kay for signature was certainly not a document which evidenced the oral agreement of goods delivered in exchange for debt. The Receipt did not particularise the goods delivered and did not incorporate or annex the Proposed Goods Particulars into the Receipt. The Receipt did not make any reference to the alleged oral settlement agreement and having regard to my view of the shrewdness of Hani as a businessman, I just cannot conceive that if there had been such oral agreement, Hani would allow Kay Kay to present a Receipt in the simple form which I have before me. The faxing of the Receipt by the warehouseman of the Plaintiff to Wan before Wan authorised the signing of the Receipt indicates to me there was great caution by Wan in the signing of the Receipt, pointing again firmly to a situation of no binding agreement. In my view, Hani knew full well that the Plaintiff would not sign a receipt, if such is expressed to be in discharge of the debt and that in such a case the Plaintiff probably would not even accept the goods so delivered. This is borne out later by the Plaintiff refusing to sign the draft settlement agreement faxed to the Plaintiff on the 12th March.

16. The lack of any action by Kay Kay to chase the Plaintiff to sign the draft settlement agreement or to return the four cheques are further factors which point to the non existence of any binding oral settlement agreement. The final significant action is by the Plaintiff rejecting the settlement proposal of Kay Kay and asking Kay Kay to take away the Delivered Goods. This is an act of someone who would rather sue than hold on to some goods of doubtful value belonging to Kay Kay. The Plaintiff in fact then proceeded to do exactly that, namely to commence this Action. The subsequent attempts by Kay Kay to rely on the oral settlement agreement suggest to me that Kay Kay took the view that the Delivered Goods were worth far less than the debt of some $530,000 owing to the Plaintiff. But that of course is strictly speaking irrelevant. What is important in this case is whether at the Hani Office Meeting, there was a firm and binding oral agreement whereby the Plaintiff agreed to accept the goods set out in the Proposed Goods Particulars in exchange for forgiving the $530,000 debt. In the light of all the evidence, the only conclusion I can come to is to that there was no binding agreement made. Accordingly, the Plaintiff is entitled to judgment in the amounts claimed. The Counterclaim must be dismissed.