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Great Sincere Trading Co Ltd v Swee Hong & Co (A Firm)

Judgment Cited authorities 1 Cited in Precedent Map Related
Vincent
Judgment Date01 May 1969
Subject MatterCivil Appeal
Judgement NumberCACV34/1968
CourtCourt of Appeal (Hong Kong)
CACV000034/1968 GREAT SINCERE TRADING CO LTD v. SWEE HONG & CO (A FIRM)

CACV000034/1968

IN THE SUPREME COURT OF HONG KONG

(APPELLATE JURISDICTION)

CIVIL APPEAL NO. 33 OF 1968

(On Appeal from O.J. Action No. 528 of 1968)

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BETWEEN:
Great Sincere Trading Co. Ltd. Plaintiffs

AND
Swee Hong & Co. (a firm) Defendants

IN THE SUPREME COURT OF HONG KONG

(APPELLATE JURISDICTION)

CIVIL APPEAL NO. 34 OF 1968

(On Appeal from O.J. Action No. 724 of 1968)

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BETWEEN:
Great Sincere Trading Co. Ltd. Plaintiffs

AND
Swee Hong & Co. (a firm) Defendants

Coram: Rigby, Acting C.J. and Huggins, J.

Date of Judgment: 1 May 1969

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JUDGMENT

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Rigby, C.J.:

1. These are two appeals, taken together, from the decisions of Mills-Owens, J. giving leave to the respondents (the plaintiffs in both actions) to enter final judgment against the appellants in respect of both actions. As a matter of convenience, I propose hereafter to re...(illegible) to the respondents as the "plaintiffs" and the appellants as the "defendants".

2. The facts in both cases are simple and straightforward. The plaintiffs are a merchant firm carrying on business in Hong Kong. The defendants are an import and export firm, but the two partners of the firm are both normally resident in Singapore. In the past, the defendant firm has acted as purchasing agents for an Indonesian firm to whom I will refer as Messrs. N.V. Lampong. In fact, it would appear that a Mr. Kho Siu Bin, the managing partner of Messrs. N.V. Lampong, is the son of one of the two directors of the defendant firm. In July 1966, Mr. Kho Siu Bin came to Hong Kong from Indonesia and, together with other representatives of the defendant firm, called on the plaintiff firm with the object of doing business with that firm in the way of purchasing textiles for export and delivery to Indonesia. Apparently, there were various commercial difficulties in the way of trading with Indonesia and by reason of these difficulties and, still more so, because the plaintiff company was, not unnaturally, reluctant to trust to the credit of a foreign company, it was arranged that the defendants should enter into the contracts with the plaintiffs as principals in each contract.

3. The particular contract sued upon in this case was for the sale of goods (textiles) at the price of $276,000 for delivery to Djakarta "Around Feb. 1967 from Japan". Payment was expressed to be "By Irrevocable 4c". It is not disputed that the goods were duly delivered in Indonesia. As principal signatories to the contract the plaintiffs looked to the defendants for payment.

4. The argument put forward by the defendants was that they took no part in the negotiations of the terms of sale and purchase of the goods; that none of the arrangements for shipment were made by them and that none of the shipping documents passed through their hands. They contended that when the plaintiff company authorized shipment from Japan without a letter of credit having been opened as provided for by the contract, the plaintiff company did so on its own responsibility and cannot now look to the defendants for payment. Their argument, in effect, was that they had simply lent their name to the contract which was, in truth, one between the plaintiffs and Messrs. N.V. Lampong, and that it was generally understood between all parties that Messrs. N.V. Lampong would provide the irrevocable letter of credit. There were also produced in evidence seven other contracts entered into between the parties for the supply of goods to Messrs. N.V. Lampong dated between July and December 1966. They showed a variety of methods of payment. In order of date, they provide for payment (1) by full prepayment to the plaintiff; (2) by letter of credit in favour of the plaintiff, or in favour of the defendants and to be transferred by them to the plaintiff; (3) by letter of credit in favour of the plaintiff; (4) by cash; (5) by cash; (6) by letter of credit; (7) by letter of credit or cash cheque. Also put in evidence were various letters and cables sent by the plaintiff company to Messrs. N.V. Lampong pressing for a letter of credit to be opened in respect of the contract now sued upon. On the one hand, the defendants contended that these letters and cables clearly enforced their contention that the true nature of the contract was one between the plaintiffs and Messrs. N.V. Lampong and that the plaintiffs looked to Messrs. N.V. Lampong for payment; on the other hand, the plaintiffs said that those letters were sent at the defendant's request, and they point out that it is evident that those letters were sent contemporaneously to the defendants.

5. Upon first consideration, it seemed to me that there might be some substance in the defendants' argument and that leave should have been given, whether conditional or unconditional, to the defendants to defend the action so that they might be given an opportunity to explain the true nature of the agreement between the parties. If, indeed, the contention upon which the defendants relied was the true agreement between the parties, namely that the goods should not be shipped until Messrs. N.V. Lampong had produced an irrevocable letter of credit, then it might have been open to an unscrupulous plaintiff, with goods warehoused in Japan which he expected to depreciate in value, to ignore the true nature of the contract and, anxious to dispose of those goods in the face of a falling market to deliver the goods to Messrs. N.V. Lampong and to demand payment of the purchase price from the defendants as principal parties expressed on the face of the contract, in breach of the true position between the parties.

6. On further consideration, I think this would be a wrong view to take. It must be manifest that if in fact an irrevocable letter of credit had been produced by Messrs. N.V. Lampong before delivering the goods, that would have been the end of the matter and these proceedings would never have been brought. It is beyond dispute that on the face of the contract itself the defendants were principal parties to it. The reason for that was, quite clearly that the plaintiffs were not prepared to extend credit to a foreign firm and looked to the defendants for payment. It was a contract of sale and purchase as between the plaintiffs and the defendants as the sole parties to the contract. In the absence of any expressed stipulation as to who was to provide the letter of credit, it was clearly for the defendants to do so. Mills-Owens, J. took the view, and I think rightly, that the method of payment by way of irrevocable letter of credit was a provision inserted solely for the benefit of the plaintiffs as vendors; a condition which they were entitled unilaterally to waive. Whatever may have been the arrangements as...

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