LANDMARK CHEMICAL S.A. v. NAM KWONG (GROUP) CO. LTD.

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J U D G M E N T

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Kempster, JA:

1. On 29 May 1991 on the plaintiff's application for summary judgment on the issue of liability Master Jones made an order giving the defendants unconditional leave to defend. An appeal by the plaintiffs met with success in that on 20 December, in a reserved judgment of some length, Hooper J made the leave conditional upon the payment into court by the defendants within 21 days of US$100,000. Against the imposition of that condition, which has been stayed, the defendants appeal to this court.

2. The plaintiffs are a Swiss corporation and acted throughout through the agency of Hong Kong Management Services (Chemicals) Ltd ("HMS"). The defendants are a Macau corporation controlled by the Ministry of Foreign Economic Relations and Trade of the People's Republic of China. In this action the plaintiffs claim damages for non-delivery of 4,000 metric tons of benzene pursuant to an agreement said to have been concluded by telephone on 19 August 1990 between Mr Wu for HMS and Mr Lok for the defendants. In an affidavit purporting to derive from direct personal knowledge and without giving the source of his information or grounds for belief Mr Feiner, for the plaintiffs and HMS, swears to the conclusion of such an agreement. Mr Lok affirms to the contrary. No evidence is forthcoming from Mr Wu.

3. Telexes from HMS to the defendants dated 19, 21, 23 and 26 April and 8 May 1990 are consistent with the conclusion of an agreement as alleged the existence of which has never expressly been denied in writing by the defendants. On the other hand the telex of 19 April concludes with the words "Please send your contract immediately to HMS for signature and Letter of Credit opening". No Letter of Credit for 7,000 metric tons has ever been opened. Coupled with the fact that the plaintiffs, by HMS, signed a "Sales Contract" dated April 30 for a shipment of 3,000 metric tons - part of the 7,000 metric tons they contend in para 3 of the Defence - the words "Please send your contract" allow of the argument that any oral agreement for the whole 7,000 metric tons was made subject to the signature of a similar document.

4. Mr Lok deposes to the fact that there had been previous transactions between the parties by reason of which the plaintiffs were well aware that the defendants would not accept any binding obligation in the absence of a document formally signed on their behalf. He refers to the telex from HMS dated 20 April which begins "Still waiting for your contract".

5. In the interests of completeness I should add that a dispute arising out of the agreement in relation to the 3,000 metric tons of benzene was submitted to arbitration by both parties. Again it could be argued that the plaintiffs' conduct in so doing was inconsistent with their claim that this delivery was made pursuant to an overall agreement, not including an arbitration clause, covering 7,000 metric tons.

6. In the light of all the foregoing considerations, whether or not formally pleaded to date, the defendants have satisfied me that there are issues and questions in dispute which "ought to be tried" within the meaning of RSC 014 r 3(1) and that the potential defences cannot properly be described as "shadowy". Since we are considering an exercise of discretion I record my opinion that the judge failed to appreciate the significance of the separate agreement concluded in relation to the 3,000 metric tons.

7. I would allow this appeal, discharge the condition imposed by Hooper J and give the defendants unconditional leave to defend.

Sir Derek Cons, Acting CJ:

8. There is in my own mind no doubt whatsoever that this is an appropriate case for giving leave to defend. Indeed, the need for Miss Kwan to make such a detailed attack upon the affirmation of Mr Lok is perhaps in itself sufficient to show that the judge was right as far as that went. He thought nevertheless that the affirmation was very suspicious and the defence shadowy. He gives no reason for so doing and I must confess I am unable to find in the matters that were before him anything which could in my view, reasonably support such a conclusion. Therefore I would, like my Lord, allow the appeal to the extent of setting aside the condition imposed.

9. I would only like to add one thing. Solicitors who set down this appeal for hearing estimated the time necessary to be two days. In fact, it has taken less than a morning. I appreciate that to a large extent this is due to the skill and ability of counsel who appear on both sides and to the industry that they put into preparing for this appeal. But these are matters which would be well known to those who instructed them. I appreciate also the difficulties that are always present in estimating how long any litigation will last but, with every respect, the estimate that this would last two days was wholly unrealistic and has led to the loss of time that could usefully have been used for the resolution of other party's appeals. I trust that, perhaps, in future more care will be taken in the assessment.

Bokhary, J:

10. So fully do I agree with everything which has fallen from my Lords that I do not propose to add anything of my own even though we are disagreeing with the learned judge.