Swee Bee Trading Co Pte Ltd

- vs -

Lanho Corp (Pte) Ltd

Judgment

KC Lai J

1. High Court, the respondents were sued as hirers of 18 air compressors for $161,500 and interest thereon from 1 July 1977 in respect of 19 instalments payable under a hire-purchase agreement dated 1 July 1976 (‘the agreement’). The agreement was entered into with Credit Corp (Singapore) Ltd a Singapore finance company (‘the financiers’).

2. The financiers were not parties to these proceedings because on receipt of full indemnity they had assigned their rights, title and interests under the agreement to the appellants who as assignees had commenced these proceedings against the respondents.

3. The learned trial judge dismissed the claims of the appellants on the ground that since the 18 air compressors were never delivered to the respondents there was a total failure of consideration: see Karflex Ltd v Poole [1933] 2 KB 251 and Warman v Southern Counties Car Finance Corp Ltd [1949] 2 KB 576. In this appeal, no criticism was nor could be made against this part of the judgment.

4. In rejecting the appellants’ claims, the learned trial judge however found that ‘the plaintiffs (the appellants) themselves were negligent’ and also held that ‘the facts of this case did not warrant the application of the estoppel doctrine to prevent the respondents from pleading the non-existence of the air compressors.’

5. The sole question before us is whether the respondents were estopped from asserting the non-existence of the air compressors as against in effect the financiers.

6. The facts giving rise to these proceedings are as follows. In the following narrative, it should be noted that the appellants had played the role of a party commonly known as ‘the dealer’ in hire purchase transactions. This role is quite different from their present capacity as assignees and plaintiffs in the proceedings below. Dealers in this trade normally buy from suppliers goods which are required for hire-purchase by hirers and also arrange the hire-purchase transactions between the hirers and finance companies. It is a part of such transactions that dealers, as had happened in this case, sell the goods to finance companies who, in turn, hire out the goods to hirers under written hire purchase agreements. Such dealers are often required simultaneously to enter into re-purchase agreements with finance companies under which they agree to indemnify the finance companies any losses suffered in the hire purchase transaction in consideration for which the finance companies would assign to them their rights, title and interest under the hire-purchase agreements. In the result, dealers are left with the carriage of prosecuting any claims against any delinquent hirer.

7. In late February 1976 the appellants acted as such a dealer for the respondents in the hire-purchase of some four or five air compressors, dealing with one Daniel Lim. The appellants’ manager, Tay Boon Koon, first met him. The transaction proceeded without any hitches.

8. On or about 21 March 1976 the appellants again dealt with Daniel Lim who turned out to be the villain he was. He was the son of the owner of a sole-proprietorship known as Chop Siong Lee. Chop Siong Lee were the intended suppliers of the 18 air compressors which they were importing from Japan by a letter of credit opened by the Bank of America.

9. At the same time, Daniel Lim wore another hat. He was managing director of the respondents. The respondents were in the business of hiring out heavy equipment, including air compressors. Daniel Lim made a favourable impression on Tay who thought that the respondents’ business was substantial. Favourable reports were received from the respondents’ bankers. The respondents wanted to hire purchase more air compressors. Daniel Lim negotiated with Tay.

10. Following the negotiations, the appellants wrote a letter dated 22 March 1976 to Chop Siong Lee offering to act as a dealer in the sales and hire purchase of the 18 air compressors. The purchase price payable to the suppliers was fixed at $261,000 of which the respondents were to make a down payment of $91,000. The appellants offered to arrange the hire purchase finance of $170,000 repayable over a period of 24 months with interest at 10% pa flat. The terms of the offer called for ‘sight’ by the appellants of copies of the relevant letter of credit established by the suppliers, the bill of lading and other shipping documents. Chop Siong Lee was to cause the respondents to make the down payment and sign the hire-purchase agreement.

11. Daniel Lim signed the acceptance of the offer on behalf of Chop Siong Lee and his father’s written authority to him to bind Chop Siong Lee was sent to the appellants.

12. In June Daniel Lim phoned Tay to say that the air compressors had arrived. Tay went to the PSA Godowns and was shown the air compressors by Daniel Lim. They were also accompanied by one Han Choon Poo, another director of the respondents. At the trial he was the only witness for the respondents. After the inspection, the sighting of the documents called for in the offer took place. It was then agreed that the hire-purchase agreement would be entered into between the financiers and the respondents.

13. It was also agreed that the appellants as the dealer would not make any payment to Chop Siong Lee against the latter’s invoice until the respondents had signed a delivery receipt indicating that they had taken delivery of the air compressors from Chop Siong Lee, as was contemplated under sub-cl 3(o) of the agreement.

14. On 1 July 1976 the agreement was signed, Daniel Lim and Han Choon Poo signed on behalf of the respondents. Sub-cl 3(o) provided that it was the obligation of the respondents as the hirers to obtain delivery of the goods.

15. Before the agreement was signed Daniel Lim handed to Tay the crucial document also dated 1 July 1976 and which bore the heading ‘Delivery Receipt’. It was signed by both Daniel Lim and Han Choon Poo. It was addressed to the appellants as a dealer and although it was not addressed to the financiers, its representations were plainly intended for the financiers. It made the unequivocal representation that the respondents had ‘taken delivery’ of the 18 air compressors. Daniel Lim had also verbally told Tay that the respondents had taken delivery of the air compressors.

16. On 2 July 1976 the appellants as a dealer paid Chop Siong Lee $170,000 and were reimbursed by the financiers the same day. Before the payment and reimbursement, the agreement and the delivery receipt were sent by the appellants to the financiers.

17. At this time, however, the 18 air compressors were still in the possession of Bank of America as pledgees. The intended suppliers were not the legal owners of the goods, not having paid for them. Both Chop Siong Lee and the respondents through the knowledge of its managing director knew this and also knew that the representation by the respondents that they had taken delivery of the air compressors were false. On the other hand, the appellants as the dealer and the financiers were completely in the dark.

18. After the agreement was signed, the respondents paid four instalments under the agreement. After the fourth instalment, one Jeffrey Cheah, yet another director of the respondents, informed Tay that the respondents wanted to transfer the 18 air compressors to a company known as Siong Lee Heavy Equipment Pte Ltd which belonged to Daniel Lim and his brother. The financiers had no objection to the assignment and it was documented on 9 December 1976. Both Daniel Lim and Han Choon Poo signed this assignment on behalf of the respondents. It cannot be too strongly emphasised that some five months after the agreement the respondents continued to represent to the financiers that they had in their possession the 18 air compressors in respect of which they were purporting to assign their rights under the agreement to Siong Lee Heavy Equipment Pte Ltd.

19. Under the assignment, Siong Lee Heavy Equipment Pte Ltd agreed to pay the outstanding instalments. However, under cl 3 of the assignment the respondents remained liable under the agreement to the financiers.

20. Only one further instalment was paid by Siong Lee Heavy Equipment Pte Ltd. After this, the appellants’ efforts to obtain payments drew a blank until shortly before the proceedings. They did not receive any reply to their letters. No one from the respondents complained that they had not received the goods until this fact was first asserted by the respondents’ solicitors in December 1977.

21. After failing to obtain recourse from the respondents, the financiers duly exercised their rights under their re-purchase agreement with the appellants. Pursuant to it, the appellants paid the financiers $161,500 being the balance due under the agreement and the rights, title and interest of the financiers were accordingly made over in writing to the appellants. The appellants therefore in the proceedings below claimed against the respondents the sum of $161,500 plus interest thereon at 10% pa from 1 January 1977 under the agreement.

22. At the trial, it emerged that Daniel Lim had disappeared, his father was adjudicated a bankrupt and Siong Lee Heavy Equipment Pte Ltd was compulsorily wound up.

23. In all the circumstances, we have come to the conclusion that the respondents were indeed estopped from asserting the non-existence of the 18 air compressors as against the financiers and the appellants who derive title from the latter. The respondents had made express representations both in writing and orally on 1 July 1976 and again in writing in the course of the purported assignment in December 1976 that they had taken delivery of the compressors. The financiers had acted on the representations of 1 July 1976 which were plainly intended for them to act upon and paid out the sum of $170,000 to their detriment: see 16 Halsbury’s Laws of England (4th Ed) paras 1591–1593.

24. In addition, the respondents paid four instalments and caused Siong Lee Heavy Equipment Pte Ltd to pay the five instalment under the agreement. It would lie ill in the mouth of the respondents to assert now that the air compressors were nonexistent or that the financiers were not the owners. Daniel Lim was the managing director of the respondents and it was within his ostensible authority to sign the delivery receipt and make the representations: see 16 Halsbury’s Laws of England (4th Ed) para 1603. This document and the subsequent conduct of the respondents, including the purported assignment in late 1976 led the financiers to believe and they must have believed that the 18 air compressors were safely in the possession of the respondents free from any adverse claims.

25. We find the following quotations cited to us by counsel for the appellants from Goode on Hire Purchase Law and Practice (2nd Ed) at pp 218 and 223 rather apposite:

    It remains only to note that if the hirer enters into the agreement with full knowledge of an adverse claim he cannot afterwards set up the existence of such claim as a ground for terminating the agreement, unless the claim is one which the owner undertook to settle as part of his agreement with the hirer. at p.218 It is uncertain whether a hirer who signs a receipt for goods although they have not been delivered and do not in fact exist is estopped from pleading their non-existence in an action brought against him for breach of contract by an owner acting in good faith who was induced by the hirer’s receipt to believe that the goods had in fact been delivered and to pay the dealer as a result of that belief. It is submitted that he would be so estopped since — unlike the case of a hirer who carelessly signs an agreement in blank — he is making a statement which to his knowledge is untrue and by which the owner is induced to act to his detriment. at p.223

26. We now turn to the finding that the appellants were negligent. The learned trial judge found that the appellants as the dealer were not at all concerned about title to the air compressors. In our view, they and the financiers did not owe any duty of care to the respondents who had assumed the obligation to take delivery of the air compressors under sub-cl 3(o) of the agreement. If the respondents had fulfilled their contractual duty and taken delivery, the pledge of the Bank of America would have been extinguished. Accordingly, the question of negligence ought not to have arisen at all.

27. For these reasons, we would allow the appeal with costs here and below. The judgment below is set aside and we give judgment for the appellants in the sum of $161,500 together with interest thereon at 10% pa calculated from 1 January 1977 up to date hereof.

Cases

Karflex v Poole [1933] 2 KB 251; Warman v Southern Counties Car Finance Corp [1949] 2 KB 576

Authors and other references

Halsbury’s Laws of England (4th Ed), vol 16

Goode on Hire Purchase Law and Practice (2nd Ed)

Representation

M Karthigesu and Michael BB Ong (Michael BB Ong & Co) for the appellants.

Cheong Yuen Hee (Chan, Goh & Co) for the respondents.