SOLAR EXPORTS LTD v. YICK LEE TRADING (CHINA) LTD

DCCJ3031/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3031 OF 2002

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JUDGMENT

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Introduction

1. This is an action for money had and received in which the Plaintiffs are seeking the return of $600,000 from the Defendants, they having abandoned the excess of $45,735 over the monetary jurisdiction of this Court. Ultimately, this matter falls to be determined on the view that I form of the evidence of Mr. Tan Kin-cheung who is the principal of the Defendants. The background, which is uncomplicated, can be shortly stated.

2. Both the Plaintiffs and the Defendants are general trading companies of the type which used to be more commonly known as 'confirming houses'. They source and purchase a wide variety of products on behalf of their clients who are mostly from overseas. In this matter the Plaintiff had placed orders with the Defendants for items as varied as boot polish and disposal plastic cigarette lighters which the Defendant would source and order from mainland Chinese manufacturers. The documentary evidence supporting these transactions is not in dispute. It can be expressed in table form in the following way:-

	Date of Purchase Order	Date of Delivery	Purported Shipment Date	Invoice Date	Payment Date
1st Transaction	03.12.01 [C1]	03.12.01 [C1]	02.12.01 [C2]	04.12.01 [C2]	04.12.01 [C3]
2nd Transaction	12.12.01 [C5]	19.12.01 [C5]	14.12.01 [C6]	17.12.01 [C6]	18.12.01 [C7]
3rd Transaction	07.02.02 [C12]	08.02.02 [C12]	07.02.02 [C13]	07.02.02 [C13]	08.02.02 [C14]
4th Transaction	12.03.02 [C17]	16.03.02 [C17]	13.03.02 [C18]	15.03.02 [C18]	15.03.02 [C19]

The arithmetic of the claim is also not disputed. The Plaintiffs having acknowledged receipt of the repayment of $98,000 by the Defendants on 22 March 2002 have paid the Defendants $645,735 in respect of the four transactions for which none of the items ordered by them has been delivered. In such circumstances it is submitted on the Plaintiff's behalf that the consideration under the Defendant's invoices has wholly failed and the Plaintiff's are now entitled to the return of the outstanding monies paid by them.

3. The Defendants' case, upon which the outcome of this action will be decided, is that the Plaintiff through a Mr. Daswani, one of its merchandisers, who had negotiated these orders with the Defendants had cancelled them and the monies paid by the Plaintiffs and now claimed by them have been returned by the Defendants to him.

4. This perfectly simple factual basis has given rise to two issues, one entirely evidential and the other giving rise to a matter of both fact and law. As to the first the Plaintiff suggests that on the evidence I cannot be satisfied that these repayments were in fact made to Mr. Daswani. If the Defence fails to show this, the evidential burden being on them to establish these repayments, then the Plaintiffs must succeed and judgment should be entered in their favour. In the event that I am satisfied, on the civil burden of course, that the repayments were made to Mr. Daswani it is then submitted on the Plaintiff's behalf that such payments cannot 'qualify' as repayments to the Plaintiff because Mr. Daswani cannot be said, as a matter of law, to be the Plaintiff's agent for the purpose of receiving these repayments. The point here being that Mr. Daswani, at about the time that these repayments were allegedly being made, disappeared having stolen substantial amounts of the Plaintiff's money. He has now been found and arrested by the police who have charged him with offences of dishonesty committed against the Plaintiffs.

The Evidence

5. This has been a two witness case. Mr. Tolani who is the Managing Director of the Plaintiff has given evidence for them. His evidence has not been subjected to any meaningful challenge. As I have already indicated the placing of the orders by the Plaintiff and the payment for them, against the Defendant's invoices, is not in dispute. Neither is the amount of the Plaintiff's claim. Mr. Tolani says that the Plaintiff company is a well-established one in Hong Kong having been set up by him in 1977. The business which comprises two separate but related companies employs 30 people, 8 of whom are directly employed by the Plaintiff. Of Mr. Daswani, who is also known as Nicky, he says that he was employed as a merchandiser and as such had no authority to sign cheques nor to receive payment on behalf of the Plaintiff. As will become apparent in the moment the repayments to Mr. Daswani were said to have been made in the form of cash cheques and in some instances in cash. There are no receipts in respect of any of these repayments, these arrangements having been made between Mr. Daswani and Mr. Tan of the Defendants.

6. The essential elements of Mr. Tan's evidence are that he and Mr. Daswani had negotiated a number of these orders in the past all of which had gone through without mishap. In respect of these matters and the alleged repayments he says that Mr. Daswani telephoned him shortly after each order was placed and payment made telling him that the Plaintiff wished to cancel the particular order and be repaid. This pattern of events can also be conveniently illustrated in table form as follows:-

	Payment Date	Cancellation/ Repayment Date	Repayment Amount/Mode
1st Transaction	04.12.01	5.12.01	HK$200,700 cash
2nd Transaction	18.12.01	20.12.01	HK$181,367 (HK$80,000 cash HK$110,000 post-dated bearer cheque)
3rd Transaction	08.02.02	11.02.02	HK$93,600 cash
4th Transaction	15.03.02 *Defendant deposited the cheque only on 19.03.02 [C23]	20.03.02	HK$268,068 (HK$170,000 cash cheque HK$98,000 post-dated bearer cheque)

7. In respect of the first three transactions Mr. Tan has told me that the reason given by Mr. Daswani was that the Plaintiffs were having cash flow difficulties and needed the money back. As to the matter on 20 March 2002 he told me that the Plaintiff's client had changed its mind and did not wish to proceed with that particular order. As appears in the table of repayments which mirrors the evidence given by Mr. Tan these repayments were either by cash or bearer cheques or in cash with no acknowledgment made for the payments on the Plaintiff's behalf.

8. Not surprisingly this, on the face of it, commercially irregular method for making such repayments has come under sharp criticism from Mr. Yee who appears for the Plaintiffs. It is right to say that on any objective basis, with two, on the face of it, professional companies who on this occasion and in the past had transacted their business together on the basis of proper documentation, these cancellations and repayments were done in a most unbusinesslike and informal way. At the very least one would have expected to see credit notes or correspondence on the Plaintiff's letterhead confirming these arrangements. This is compounded by the method of repayment that has allegedly been employed by Mr. Tan and Mr. Daswani. On any objective, neutral, basis the expectation would be that the repayments would have come by cheque from the Defendant made out in favour of the Plaintiff and not by combination of cash, cash cheques or post-dated bearer cheque. These observations of course do not mean that what Mr. Tan says is not true but he does undoubtedly start on the 'back-foot' in the sense that his explanation as to why these arrangements were made would need to be cogent and compelling.

9. In the final analysis all that he is able to say is that he knew and trusted Mr. Daswani and that he did not imagine that anything was amiss. He was prepared to do it in this way because he wished to preserve a valuable business relationship with the Plaintiffs.

10. Apart from the unusual methods that were allegedly employed, Mr. Yee has also referred to a number of inconsistencies in Mr. Tan's evidence which he has drawn attention to in his written closing submissions and which I am bound to say have the effect of 'hurting' Mr. Tan's credibility beyond that which I have already referred to, having regard to what on any objective basis one might have expected to see if these 'cancellations' had been dealt with in an orthodox manner.

Conclusion on the factual dispute

11. I am bound to say that I have found Mr. Tan's account most unconvincing. He has simply failed to persuade me on the required balance of probabilities that these repayment transactions took place at all.

12. In such circumstances the Plaintiff's claim must succeed on the basis of the evidence of Mr. Tolani which has proved the placing of the orders and the payments for the orders by the Plaintiff. As I have already indicated his evidence is not disputed on these matters.

The Agency Point

13. These findings on the evidence are sufficient to dispose of the action in favour of the Plaintiff but for the sake of completeness I have been asked to indicate my view, as best I can, on the basis that even if these payments were made whether such payments could avail the Defendant because it is said by Mr. Yee that Mr. Daswani did not have authority to accept such repayments on behalf of the Plaintiff. Given my findings on the facts the argument becomes a theoretical one which can only have any relevance in the event of an appeal where I might be held to have been wrong to find that these payments had not been made. I had thought that perhaps I might have been able to express a view, as a matter of law, but now that I have had the opportunity to reflect further on the matter and come to the findings that I have it seems to me that it is unnecessary to express such a view which, in any event, would be wholly artificial. Usually a court of first instance might find it desirable to express an alternative view where such a course might avoid the need for a re-trial. It seems to me that in this case in the event of an appeal the Court of Appeal would not require any view from me - it would be in a position, if it thought it necessary, to express its own view without the requirement of having my entirely obiter views on this theoretical position. I am content to decide the case on the findings of fact that I have made and to go no further. Accordingly, there will be judgment to the Plaintiff in the sum of $600,000 together with interest thereon at half of the judgment rate from the date of the writ until today and thereafter at the judgment rate until payment. There will also be an order nisi that the Defendant pays the Plaintiffs costs of the action on a party and party basis to be taxed if not agreed.