MAXWELL HONOUR HOLDING LTD. v. WONG SHU KAU AND ANOTHER

DCCJ22703/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 22703 OF 2001

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J U D G M E N T

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1. The Plaintiff's claim is for price of goods sold and delivered. The Defendants' defence is basically that it has paid the outstanding amount to the Plaintiff's agent, one Mr Tang Sing-yung ("Mr Tang"), and so the Defendants have discharged the liability. Since this is the only remaining issue between the parties, the Defendants were the first to prove their case at the trial.

2. The first-named Defendant testified on behalf of the Defendants. According to him, the outstanding amount owed to the Plaintiff was $218,316.40 by the end of 1998. In January or February 1999, the Plaintiff sent a debt-collecting agent, one Mr Poon Keung-ming ("Mr Poon"), to collect the debt with a letter of authorisation. After confirming the authority with the owner of the Plaintiff, one Mr Miu Man-leung ("Mr Miu"), the Defendants paid a total of $50,000 to Mr Poon. Apparently, this Mr Poon had not handed the money over to the Plaintiff.

3. On or about 20 May 1999, the Plaintiff's two owners, Mr Miu and one Mr Kwan Kam-wah ("Mr Kwan"), brought along six to seven persons, including Mr Tang, to the Defendants' shop and demanded the outstanding debt. The parties agreed on a provisional repayment schedule and Mr Kwan expressly authorised Mr Tang to collect the debt from the Defendants. Although the Defendants could not comply with the repayment schedule, they nevertheless repaid all the outstanding debt on various occasions to Mr Tang by cash, and each time Mr Tang issued a receipt to confirm the payment. As agreed by Mr Tang, part of the debt in the sum of $13,250 was discharged by a supply of fish fillet by the Defendants to the Plaintiff. In the trial, the Defendants produced all the written receipts signed by Mr Tang, the invoice for the supply of the fish fillet, and a written authorisation signed by Mr Kwan to substantiate their case. However, only the provisional repayment schedule was put down in the said written authorisation. The name of the agent, Mr Tang, was not stated therein. According to the first-named Defendant, he did not know Mr Tang prior to the incident on 20 May 1999, and he had actually been assaulted on a number of occasions by Mr Tang.

4. Mr Tang, who is a former employee of Mr Kwan, also testified in the trial. He basically confirmed the evidence given by the first-named Defendant. According to him, he followed the instructions given by Mr Kwan and collected debt from the Defendants. Part of the debt recovered was handed to Mr Kwan, and the balance was handed to a person known as "Elder Brother Fuk"(福哥) upon the instruction of Mr Kwan. Mr Tang had a dispute over certain monetary matters with Mr Kwan, and he ceased to work for Mr Kwan in the end of 1999. Nevertheless, he continued to help Mr Kwan to collect some of the debts up to the year 2001. He did not know the first-named Defendant prior to the incident on 20 May 1999.

5. Mr Kwan testified on behalf of the Plaintiff. According to him, in January 1999, he had engaged Elder Brother Fuk to collect a debt owed by the Defendants to the Plaintiff, and he also signed a letter of authorisation authorising the holder of that document to collect the debt. By that time, the name of the authorisee was not put in the document. Shortly after that, he could not locate or contact Elder Brother Fuk. In February 1999, he issued another blank letter of authorisation to his former partner Mr Miu to collect the debt, and he also spread the news about the Defendants' indebtedness in the trade. Later, on 20 May 1999, the Defendants issued four cheques to the Plaintiff to settle the payment. However, those cheques were dishonoured and Mr Kwan subsequently made numerous attempts to press the Defendants to make payments, but without any success. According to him, Mr Tang was his employee up to March 1999 and he had not authorised Mr Tang to collect the debt from the Defendants on the Plaintiff's behalf.

6. In my judgment, the evidence of the Defendants makes much more sense and should therefore be accepted by the court. It is common ground that the Plaintiff would, from time to time, issue a document known as Table of Outstanding Balance (對數表) to the Defendants, listing out the outstanding amount owed by the Defendants to the Plaintiff at a particular point in time (see Exhibit P1). The interesting thing to note here is that the Plaintiff cannot produce such kind of tables after April 1999. It is the Defendants' case that they had started to make repayments to the Plaintiff in June 1999. Such kind of tables should have been issued to the Defendants periodically, and it would be too much of a coincidence that the Plaintiff cannot produce the tables after April 1999. In such circumstances, the Defendants' evidence seems to be the truth.

7. Further, the Defendants are able to produce a fax copy of the table after April 1999 (see Exhibit D1 and the photocopy D1A). Although most of the words in the table have faded, I can still see that certain deductions were made in the table out of the outstanding sum of $218,316.40. This is a document apparently issued by the Plaintiff. According to the Plaintiff's case, there should not be any deductions, and so the presence of these deductions in the document certainly supports the Defendants' case that part-payments were indeed made at various times after May 1999.

8. Miss Cheung for the Plaintiff tries to attack the genuineness of the document, as the same was only first disclosed in the middle of the trial. However, according to my observation, the first-named Defendant does not appear to me to be the kind of person who has the ability or the sophistication to fabricate such kind of evidence. Indeed, as most of the words in the documents had faded, the first-named Defendant did not appreciate the importance of this document. It was only upon questioning that the first-named Defendant brought the document to the attention of the court. Hence, I do not doubt the genuineness of this piece of evidence.

9. The conduct of the Plaintiff after May 1999 also supports the Defendants' case. Obviously, the Plaintiff was very concerned about the debt owed by the Defendants. After he had engaged Elder Brother Fuk to collect the debt, Mr Kwan also went with Mr Miu to the Defendants' shop on a number of occasions to collect the debt. According to Mr Kwan, he also spread the news about the outstanding debt in order to hurt the reputation of the Defendants. However, after May 1999, the Plaintiff had not made any serious attempts to collect the debt. Although there is a dispute between the parties as to whether Mr Kwan did actually go to the Defendants' shop to demand payment, and the Plaintiff and Mr Kwan might have approached a solicitors' firm to draft a demand letter, there are also other undisputed facts. Firstly, the Plaintiff had not made any written demand for the repayment of the debt. Secondly, the Plaintiff waited for a period of more than two years before commencing the present action. Obviously, the Plaintiff was eager to get the payment as soon as possible. After the goods were supplied in January to March 1998, the Defendants actually made various part-payments to the Plaintiff up to the amount of $614,528.80, representing about 75% of the total value of the goods. Yet, Mr Kwan regarded the Defendants as bad customers and sought the assistance of Elder Brother Fuk a few months after. In such circumstances, it is very difficult to understand why the Plaintiff has waited for a period of two years before commencing the present action. In my judgment, the absence of any serious attempt to demand for the outstanding payment after May 1999 also supports the Defendants' case that part-payments were indeed made by the Defendants during this period of time.

10. I also accept the first-named Defendant to be an honest and truthful witness. According to my observation, he is a simple-minded person. He could always answer the questions without much thought, and he frankly admitted that he was in great financial difficulty at the relevant time. Hence, I believe that he was telling the truth.

11. I also find Mr Tang to be an honest witness. Although he has personal grudges against Mr Kwan, he has nothing to gain, at least in monetary terms, by coming forward to court to testify on behalf of the Defendants. On the contrary, he has much to lose. As he has made an express admission about the receipt of money from the Defendants, he will probably have to face a claim by the Plaintiff to account for the money received.

12. Further, what impresses me is that he is able to say, in no uncertain terms, that a cheque of $40,000 had been returned by him to the Defendants. In a meeting on 20 May 1999, the first-named Defendant handed over four cheques to Mr Kwan with various payment dates. The cheque of $40,000 was the second one in terms of the date of payment. As the Defendants had made various part-payments, this cheque was handed back to the Defendants. This is a very bold statement. If the Plaintiff can produce the original of such cheque, it would seriously undermine the credibility of his evidence. Yet he was able to confirm such statement without hesitation. Interestingly, the Plaintiff does not have the original of such cheque. Mr Kwan explained that he had given the first two cheques to Mr Miu to demand payment, while he kept the third and the fourth cheques. However, did he have to do so? Was that too much of a coincidence? Obviously, Mr Tang would not have been able to know that the Plaintiff did not have the original of the $40,000 cheque, and yet he was able to confirm it without hesitation. In my judgment, this certainly adds considerable weight to the credibility of his evidence.

13. On the other hand, I do not accept Mr Kwan's evidence as reliable. According to my observation, Mr Kwan always believes what he did was correct, and the Defendants could only discharge the liability by making a direct payment to the Plaintiff's bank account. Under the law of agency, this may not be correct. Indeed, Mr Kwan has all along adopted a very casual method of collecting debt. During the whole process, he issued two letters of authorisation with the name of the authorisee left in blank, and so the holders of these documents would have the right to collect the debt on the Plaintiff's behalf. He even gave the Plaintiff's receipts to Elder Brother Fuk. In such case, he has to take the consequence if the debt-collecting agent does not account to him for the money received from the debtor.

14. Further, if what Mr Kwan said was the truth, the alleged "fraud" committed on him could only be possible if there was a conspiracy between Mr Tang and the first-named Defendant. The fraud could not be committed by Mr Tang alone, as the Defendants would not have been so foolish in handing substantial amounts of money to a stranger without prior verification. However, the first-named Defendant did not know Mr Tang and they only met for a few times in February or March 1999. In such circumstances, it was unlikely that they conspired with a view to defeat the Plaintiff's claim. Further, if that was their intention, they could have fabricated a much simpler story. There was no need for them to mention things like: (i) the agreement to pay part of the debt by set-off of sale of fish fillet; (ii) parts of the debt were repaid by very small payments made to Mr Tang's personal account; and (iii) Mr Tang repaid part of the money recovered to Elder Brother Fuk and not to Mr Kwan. This would add further complication to their story, and the Plaintiff may be able to call Elder Brother Fuk or other evidence to rebut their evidence. In my judgment, the possibility of the first-named Defendant and Mr Tang in participating in a conspiracy and then fabricating a story against the Plaintiff is too remote.

15. After the first cheque in the sum of $228,316.40 handed over to the Plaintiff in a meeting on 20 May 1999 was dishonoured, the Defendants gave another cheque to the Plaintiff through Mr Tang. It is the Defendants' case that such cheque was honoured. However, the bank statements of the Plaintiff show that it has not received such amount of money. Despite that, I do not find that such piece of evidence in any way affects the credibility of the defence case. Mr Tang only handed the cheque to the Plaintiff. He assumed that the cheque had been cleared because he heard nothing to the contrary from Mr Kwan, and so what the Plaintiff had done with the cheque was none of his concern. In such circumstances, there was a valid tender of payment and Mr Tang accepted such payment as the Plaintiff's agent. Further, Mr Tang acknowledged on behalf of the Plaintiff that all the outstanding debt owed by the Defendants had been repaid. In such circumstances, it is not open to the Plaintiff to argue otherwise.

16. Further, Miss Cheung for the Plaintiff argues that the circumstances relating to the repayment of the debt were so unusual, and so the Defendants should have been put on inquiry as to the propriety of the form of payment. The facts relied upon by the Plaintiff are: (i) part-payments were made by cash; (ii) the receipts issued by Mr Tang did not bear the title of the Plaintiff; and (iii) part of the repayments were made to the bank account of Mr Tang. However, as I accept the Defendants' case to be the truth, Mr Kwan has given express authority to Mr Tang to collect the debt from the Defendants. After the previous episode relating to the debt collection by one Mr Poon, it would only have been reasonable for the first-named Defendant to rely on the words of Mr Kwan. Obviously, the Plaintiff, in particular Mr Kwan, had put considerable pressure on the Defendants to make payments. In such circumstances, it would only have been reasonable for the first-named Defendant to do what was being told. Further, the Plaintiff had all along entrusted the debt-collecting task, first, to one Mr Poon, and then to Mr Miu. In such circumstances, it was reasonable for the Defendants to believe that the agent would have had full authority to deal with him relating to the repayment of the outstanding debt.

17. In addition, as I accept the evidence of Mr Tang, the Plaintiff had given express authority to Mr Tang to collect the debt by whatever means. Indeed, Mr Kwan had all along sanctioned the acts of Mr Tang. In such circumstances, even if the Defendants had made inquiry with Mr Kwan, the outcome would have been the same.

18. Based on the aforesaid, I accept the Defendants' case as the truth and find that the outstanding debt had been fully discharged. I therefore dismiss the Plaintiff's claim.

19. Lastly, I am deeply disappointed as to how the present case was being conducted by the parties' legal advisers. Firstly, the Defendants' legal advisers had all along indicated to the court that the trial would be conducted in Punti, and so I ordered the trial to be conducted in Punti in the listing hearing. However, the Defendants' solicitors briefed an English-speaking counsel to conduct the trial. Consequentially, the length of the trial grossly exceeded the estimated time. On the other hand, the Plaintiff's counsel obtained the bank accounts of the Plaintiff prior to the trial. These documents might help the Plaintiff's case, but the Plaintiff's counsel did not seek to disclose such documents until the first-named Defendant had finished his evidence-in-chief. This was a typical case of ambush and such kind of conduct is unacceptable. Further, both parties have not disclosed some important documents prior to the trial. I accept that this might not be intentional, however, this indicates that the parties' legal advisers have not seriously prepared the case and, as a result, they missed some important documents which should have been disclosed. Although cases in the District Court involve relatively small amounts, the legal representatives for the parties should devote more effort in the preparation of the case and always bear in mind their duty of disclosure. The present case is actually a simple one. The lack of preparation and the non-fulfilment of the legal advisers' duty of disclosure have actually contributed to the prolongation of the trial.

20. I now listen to the parties' submissions on the issue of costs.

(Discussion re costs)

21. As I have dismissed the Plaintiff's claim, costs should follow the event, and I therefore order that the Plaintiff should pay for the costs of the Defendants. Since both sides have engaged counsel, certificate for counsel is appropriate in the present case.

22. Although I make various criticisms against the conduct of the parties' legal advisers in respect of the conduct of the case, I do not find that this would justify the making of an indemnity costs order against the Plaintiff. It is not the case where the proceedings have been conducted in an unreasonable manner. It is only that certain conduct in respect of the Plaintiff is not acceptable. In such case, I see no reason to depart from the general principle that the costs should be taxed on a party-and-party basis.

23. Concerning the length of the trial, the parties have the right to use either official language. The Plaintiff would have a right to use Punti but, on the other hand, the Defendants would have the right to conduct the trial in English. Undoubtedly, the engagement of an English-speaking counsel on the part of the Defendants has caused the trial to exceed the time estimate, but if they have indicated to the court earlier of their intention to use English at the trial, which they had every right to do so, the trial would nevertheless take that long. Hence, in such case, the Defendants should not be penalised for electing to conduct the trial in English.

24. In such case, I will just make an order that the Plaintiff's claim be dismissed with costs and certificate for counsel.