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CACV000093/2000
CACV 93/2000
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 93 OF 2000
(ON APPEAL FROM HCA NO. 9059 OF 1999)
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| BETWEEN |
| SHENZHEN BAOMING CERAMICS COMPANY LIMITED |
Plaintiff |
| AND |
| COMPANION-CHINA LIMITED |
Defendant |
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Coram: Godfrey V-P and Keith JA in Court
Date of Hearing: 3 May 2000
Date of Judgment: 17 May 2000
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J U D G M E N T
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Keith JA (giving the judgment of the Court):
Introduction
1. In May 1997, the Plaintiff, Shenzhen Baoming Ceramics Co. Ltd, concluded an agreement ("the original agreement") with the Defendant, Companion-China Ltd, for the manufacture by the Plaintiff and the sale to the Defendant of quantities of ceramic tiles. By a subsequent agreement concluded in September 1997 ("the settlement agreement"), the parties agreed that they should be discharged from performing their obligations under the original agreement. One of the terms of the settlement agreement was that certain payments would be made by the Defendant to the Plaintiff, and the settlement agreement included a timetable setting out the deadlines for those payments.
2. In due course, the Plaintiff commenced proceedings against the Defendant. One of its claims was that sums of $2,349,394.86 and RMB7,447.86 (which were part of the sums owed by the Defendant under the settlement agreement) had not been paid. The Plaintiff applied for summary judgment for these amounts plus interest under Ord. 14. The Defendant admitted that sums totalling $1,859,755.88 due under the settlement agreement had not been paid. Master Lau gave the Plaintiff summary judgment for that amount plus interest, and gave the Defendant unconditional leave to defend the balance of the Plaintiff's claim.
3. The Defendant appealed against the award of summary judgment. The appeal was heard by Cheung J. He allowed the appeal, and gave the Defendant unconditional leave to defend the whole of the Plaintiff's claim. The Plaintiff now appeals. It seeks to have Master Lau's orders restored.
The defence of agency
4. The defence which caused the judge to grant the Defendant unconditional leave to defend the whole of the Plaintiff's claim related to the status of the Defendant. The Defendant's case was that when it entered the original and subsequent agreements it was not acting as principal. It was acting as an agent, and entered the agreements as agent for and on behalf of Saint Galarie Tiles Ltd ("SGT"). Both the fact of this agency, and the identity of the principal, were said to have been disclosed to the Plaintiff. Accordingly, it was said that the Plaintiff's claim for the amounts unpaid under the settlement agreement could not succeed against the Defendant, and that the Plaintiff's cause of action was against SGT. The judge allowed the appeal because he thought that this defence raised a triable issue.
5. The basis on which the Defendant claims that it was acting as the agent of SGT appears from the affirmation of Leung Kwok Wa, one of its directors. In essence, Mr Leung's evidence was that the Defendant is a member of the Companion Group of Companies. It is principally engaged in investment holding. It is not one of the operating companies in the Group, and owns no factory or machinery. SGT is its wholly-owned subsidiary. It is SGT which carries on the business of supplying ceramic tiles to local and overseas customers. That was known to the Plaintiff's representative with whom Mr Leung negotiated the original agreement. Since
(a) the Plaintiff was owned by a County Government on the mainland,
(b) the Companion Group of Companies was well known on the mainland for its trade in ceramic tiles, and
(c) this was the first time that the Group had dealt with the County Government,
Mr Leung thought that "it would be better to use the Defendant's name to enter" the original agreement with the Plaintiff. Accordingly, he told the Plaintiff's representative that the agreement "would be signed in the name of the Defendant but the buyer was SGT". He mentioned that both during the visit of the Plaintiff's representative to SGT's retail outlets in Hong Kong and when the terms of the original agreement were finalised on the mainland. He claims that on neither occasion did the Plaintiff's representative raise any objection.
6. Mr Leung's evidence on the topic concluded with the following statement:
"Other than lending its name to the [original] agreement, the Defendant took no part in the deal. There was no contract of sale and purchase between the Defendant and SGT. Raw tiles would bear SGT's logo and be sent to SGT direct. [The] [c]oating process would be carried out by SGT. SGT paid the Plaintiff for raw tiles supplied to SGT. SGT was solely responsible for the sale of the ceramic tiles. The profit and loss from the [original] agreement would be attributed to SGT."
It was on the basis of this extrinsic evidence from Mr Leung that the judge held that there was a triable issue as to whether the Defendant was liable to the Plaintiff for the sums due under the settlement agreement.
The admissibility of the extrinsic evidence
7. The admissibility of extrinsic evidence is the subject of Art. 102 in Bowstead and Reynolds on Agency, 16th ed. At para. 9-037, the authors write:
"Where it is clear from the terms of a written contract made by an agent that he contracted personally, extrinsic evidence is not admissible to show that, notwithstanding the terms of the contract, it was the intention of the parties that he should not be personally liable on it, because such evidence would be contradictory to the written contract."
A similar statement of principle appears in Halsbury's Laws of England, 4th ed., vol. 1(2), para. 137:
"If .... the agent contracts in such terms as to imply that he is the real and only principal, evidence to contradict the terms of the contract will not be admitted."
That is to be contrasted with the case of an agent who "contracts in his own name but not in terms which are consistent only with his having done so as principal". In such a case, "oral evidence may be admitted to prove the identity of the principal". These are also quotations from Halsbury, op. cit., para. 137, as is the statement that "[w]hether he has contracted in such terms or not depends upon the construction of the particular contract".
8. Against this background, we turn to the agreements themselves. Both of them were in Chinese, but they have been translated into perfect English. Although the translation has not been certified, there is no dispute that the translation is correct. The Defendant is named...
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