LIM NYUK FOH v. HO KAM CHOY

HCA 1203/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1203 OF 2016

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D E C I S I O N

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Introduction

1.  This is the defendant’s appeal against the master’s order dated 19 January 2017 whereby the master entered summary judgment against the defendant.

Background

2.  A large part of the background leading to this appeal is undisputed, and can be summarized as follows.

3.  The debt giving rise of this action arose out of an earlier agreement to sell and purchase company shares.  The defendant was the vendor of the said shares; the plaintiff was the purchaser.  A subsequent dispute arising out of the said sale and purchase led to an earlier civil litigation (HCA 651/2012 (“the 2012 action”)).

4.  The 2012 action ended in a settlement agreement dated 4 February 2013 (“the 2013 agreement”).  To put the matter shortly, pursuant to the 2013 agreement, the defendant was under a contractual obligation to pay certain sum (US$961,000) to the plaintiff (initial payment of US$150,000; monthly payments of US$20,000).

5.  The sum claimed in this action (US$506,075) was alleged by the plaintiff to be the outstanding amount, due and owing and payable by the defendant at the commencement of this action (in May 2016).

6.  There is evidence consistent with the defendant’s financial difficulties having a relationship with the slack shipping market.

This appeal

7.  What essentially is in dispute for the purpose of the summary judgment application (and hence this appeal) is this.

8.  The defendant asserts that:

(a) the parties reached a verbal agreement in April 2016 whereby he would pay the plaintiff US$3,000 to US$5,000 per month (and would do his best to pay US$5,000);

(b) the parties entered into discussion again in June 2016.  This resulted in an exchange of messages via Whatsapp.

Particular emphasis has been placed by the defence on the Whatsapp messages as constituting a triable issue.

9.  As the Whatsapp messages are important to this appeal (and are relatively short), they are set out below.

Plaintiff	Message	Defendant	Message
12:48 pm	Ron. Call me pls
		1:11 pm	As per our telcon mom ago. I will arrange to settle the legal fees of hkd80k by Sept
2:29 pm	Have you sent 13000 for this month
2:29 pm	Today is 7th
		2:29 pm	13k commence from July as agreed
2:30 pm	Have you sent 13000 for this month
		2:30 pm	100k before end June 13k from July onwards
		2:30 pm	Will send by tomorrow
2:30 pm	Ok

(the presence of the word “Tuesday” (at the bottom of the mobile phone screen capture) suggests that they were posted on 7 June 2016 (Tuesday))

10.  Based on the Whatsapp messages, the defendant submits that an agreement has been reached shortly earlier (“the June 2016 agreement”) the terms of which were:

(1) the defendant agreed to pay the plaintiff’s legal costs (quantified at HK$80,000);

(2) the outstanding sum was rescheduled as follows:

(a) US$100,000 was to be paid before the end of June 2016,

(b) US$13,000 was to be paid monthly from July 2016 onwards.

The defendant further submits that the June 2016 agreement has at least the effect of “suspending” all previous agreements (especially the 2013 agreement).

11.  On a factual level, it is quite arguable that the Whatsapp messages point to the parties having reached some kind of arrangement before the Whatsapp messages.  Further:

(a) on 23 June 2016, the defendant has paid the plaintiff US$30,000;

(b) on 30 June 2016, the defendant has paid the plaintiff US$70,000;

(c) since July 2016, the defendant has paid the plaintiff US$13,000 per month.

(HK$80,000 was paid to the plaintiff shortly before the appeal hearing)

12.  In answer, the plaintiff argues that:

(1) the Whatsapp messages were consistent with a “without prejudice” discussion which has no legally binding effect;

(2) in any event, the Whatsapp messages have no legal effect on the 2013 agreement, because of the lack of consideration in support;

(3) the Whatsapp messages did not create any estoppel.

13.  As regards para 12(1) above, whether the Whatsapp messages evidence an agreement (as the defendant contends: para 10 above) or merely a “without prejudice” discussion (as the plaintiff contends: para 12(1) above) is a fact-sensitive issue where, for example, the surrounding circumstances would need to be examined before it can be properly resolved.

14.  As regards para 12(2) above, a number of authorities have been relied upon by the defendant.  They include:

(a) Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1.  A main contractor was held liable to pay an additional sum to its own contractor where the additional sum was offered to prevent work cessation due to the contractor’s financial difficulties;

(b) UBC (Construction) Ltd v Sung Foo Kee Ltd [1993] 2 HKLR 207.  A plastering sub-contractor successfully claimed sums for disputed variation work orders against the main contractor.  The argument that the agreed sums were void for want of consideration was rejected by the court, relying on the Roffey Bros decision and the proposition that the courts would now more readily find the existence of consideration (such as obtaining a practical benefit, or a commercial advantage);

(c) MWB Business Exchange Ltd v Rock Advertising Ltd (CA) [2016] 3 WLR 1519.  The English court of appeal allowed a licensee’s appeal against a holding that the licensor’s promise not to exclude the licensee (upon a licence fee reschedule agreement) did not ground a valid claim.  The appeal court opined that there was a variation of the original licence agreement (which excluded oral renegotiation) and that the payment of a lump sum together with a revised payment schedule conferred a practical benefit.

15.  In view of the said authorities, and assuming a finding of fact (see para 10 to 11 above) is made in the defendant’s favour after trial, whether or not the arrangement shown by the Whatsapp messages should constitute sufficient consideration for there to be a variation of the 2013 agreement, is something unsuitable for final determination in this appeal.

16.  By reason of the conclusions reached in relation to para 12(1) and 12(2) above, it is unnecessary to consider para 12(3) above.

17.  The plaintiff also argues that he has accepted the defendant’s breach of the 2013 agreement by latest May 2016.  The 2013 agreement was in the nature of an agreement to “suspend” the repayment obligation of an existing debt.  As to whether there has been an outright “acceptance” of the failure to pay as agreed, and, if there has been such “acceptance”, what legal consequence(s) should flow from it, seem to be issues involving mixed law and fact.  As such, the issues are also suitable for trial.

18.  The plaintiff’s submission that the defendant’s case based on the Whatsapp messages is unbelievable cannot be substantiated in view that the Whatsapp messages themselves (see para 9 above) are factually undisputed (see also para 12 above).

Conclusion

19.  To conclude:

(1) the appeal is allowed and the master’s order is set aside;

(2) the defendant should have unconditional leave to defend this action;

(3) the defendant be at liberty to file the draft amended defence within 7 days from today (re-service of the amended defence is dispensed with);

(4) liberty to apply for further directions as regards the conduct of this action.

Other matters

20.  The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the decision and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

Costs order nisi

21.  There is no apparent reason to depart from the usual rule.  There will accordingly be a costs order nisi pursuant to Ord 42 r 5B(6) that the costs of this appeal (and those of the application (including the master’s hearing)) be the defendant’s costs in the cause.