ARTHUR TAY TENG GUAN v. JIM KENNETH WONG

1989, No. A2546

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. In November 1987, the Plaintiff paid the sum of US$100,000 to one Peter Ta Yao Kuo ("Peter Kuo"). The Plaintiff claims that this was done at the request and on behalf of the Defendant. The Plaintiff brings this action to recover the sum of US$75,000 being the balance owing to him by the Defendant in respect of the said sum paid to Peter Kuo.

2. By a document called an Acknowledgement of Debt made on 9th June 1988, the Defendant acknowledged that the Plaintiff did advance, on 17th November 1987, to Peter Kuo a sum of US$100,000 on his behalf and at his request. It went on to provide that in consideration of the Plaintiff refraining from commencing suit against the Defendant for recovery of the said sum and allowing him to repay the same by 30th June 1988, the Defendant agreed that in default of payment by 30th June 1988, he would be further liable to pay interest.

3. By a further document called an Agreement for Repayment of Debt dated 30th November 1988, the Defendant acknowledged that the Plaintiff did at his request pay the sum of US$100,000 to Peter Kuo on 17th November 1987. The Defendant also agreed to repay the said sum with interest to the Plaintiff in stated instalment payments and that if he should default in any one of the instalments, the whole balance would become payable.

4. In his amended Defence, the Defendant raises three Defences :

5. The Plaintiff himself gave evidence and called Bruce Cheung and Max Tong. The Defendant also gave evidence.

6. It is common  ground that T.A.I., formerly known as Global Thai Limited, commenced business in 1985 in Hong Kong. It was mainly financed by the Plaintiff's father, Mr C.H. Tay, who held 70% of the shares, with 15% each held by Max Tong and the Defendant. In fact, the whole of the capital of T.A.I. was initially provided by the Plaintiff's father. Max Tony, the Defendant and Bruce Cheung were directors as well. The plaintiff was appointed by his father to look after his interest in T.A.I. but he was neither a shareholder nor a director of T.A.I. The Plaintiff, his father and Max Tong were all resident in Singapore. Bruce Cheung was resident in the United States of America ("U.S.A.") and dropped out of the picture in so far as T.A.I. was concerned soon after business commenced in 1985. The Defendant was the only one left in Hong Kong and he ran the day to day business of T.A.I. The Plaintiff's family had business interests in Singapore as, inter alia, distributors of cigarettes to South East Asia. T.A.I. was an investment of the Plaintiff's father in Hong Kong and the Plaintiff's family business in Singapore was the major customer of  T.A.I. in Hong Kong, although T.A.I. had other customers. The Plaintiff's family interests in Singapore were in Singapore United Tobacco Ltd. and Hye Tai Trading Pte Ltd. The investment in T.A.I. by the Plaintiff's father proved to be a bad one as T.A.I. operated at a loss almost from the time it commenced business.

7. Max Tong gave evidence, which I accept, that a few months before September 1987,  he had an enquiry from the Defendant about whether there was a buyer for a consignment of Marlboro cigarettes from China. As it concerned goods from China, Max Tong told him to be careful and not to do this business unless he was sure about it. The Defendant was warned not to offer the goods to anyone before a personal inspection of the same by the Defendant.

8. As it turned out, the Defendant sold this consignment of Marlboro cigarettes to Peter Kuo of Chuen Her Industries. Co. Ltd.,  of  Taiwan. The source of supply was from China but the Defendant's supplier in Song Kong was Christopher Wu of Fast N Nice General Supply Services. Peter Kuo paid the equivalent of US$200,000 for the goods and the same was ultimately paid to Christopher Wu's source of supply. When the goods were inspected after payment had been made, it was found that the cigarettes were packaged in hard packs and not soft packs and they were rejected by Peter Kuo for that reason. The Defendant accepted this rejection. Peter Kuo was repaid about half the purchase price and that left the equivalent of US$100,000 owing to Peter Kuo. Although the Plaintiff believed that the Defendant entered into the transaction as a private deal, I am satisfied that the Defendant entered into the transaction on behalf of T.A.I. to sell the Marlboro cigarettes to Peter Kuo. Peter Kuo believed he was dealing with T.A.I. in respect of that transaction according to his affirmation filed on 13th November, 1989 which was put in evidence before me. Christopher Wu also thought that he was dealing with T.A.I. as regards this transaction, according to the Plaintiff's evidence. I accept this part of the Defendant's evidence and find that he entered into the transaction with Peter Kuo on behalf of T.A.I. and not in a personal capacity.

9. Peter Kuo having been repaid the equivalent of US$100,000 by the Defendant, he was still owed US$100,000. I heard the Plaintiff, Max Tong and the Defendant give evidence about the circumstances giving rise to the payment of US$100,000 to Peter Kuo by the Plaintiff. I have no hesitation in accepting the Plaintiff's and Max Tong's version and in rejecting the Defendant's.  I .find that Peter Kuo went to Singapore in November 1987 when the transaction concerning the Marlboro cigarettes was brought to the Plaintiff's attention. Peter Kuo went to Singapore to try and get his money back as he knew who the financier of T.A.I. was. The Plaintiff contacted the Defendant about this outstanding amount to Peter Kuo. The Defendant blamed his supplier, Christopher Wu, for the transaction which fell through. Max Tong had warned the Defendant not to offer the goods to anyone without personally inspecting the same but he nevertheless sold the goods to Peter Kuo before an inspection was made. Not surprisingly, he was blamed for entering into the transaction. The Defendant himself admitted that he felt he was responsible for the transaction.   I find that the Defendant requested the Plaintiff to pay Peter Kuo the US$100,000 on his behalf and not on T.A.I.'s behalf, and a discussion arose as to how the Plaintiff would be paid back. At the time, the Defendant's family business in the U.S.A. held a promissory note in the sum of US$100,000 issued by the Plaintiff's family business in the U.S.A. against a property there known as Howe 69 which constituted a lien on the property. The Plaintiff asked the Defendant if he could secure the release of this promissory note in exchange for the US$100,000 to be paid to Peter Kuo by the Plaintiff and he agreed to that course. He also said that if he could not secure the release of the promissory note, he would personally pay the Plaintiff back the US$100,000. It was under these circumstances, I find, that the Plaintiff paid US$100,000 to Peter Kuo by two cheques, each for S$50,000 which were given together with the note by the Plaintiff dated 23rd November 1987 to Peter Kuo. One of the cheques was dated 15th November 1987 and the other was post-dated to 30th November 1987. These two cheques were later exchanged for a cheque dated 17th November 1987 for US$100,000. Peter Kuo was thus paid the US$100,000 and he went back to Taipei. The cheques had a reference on them to the promissory note held by the Defendant's family business in the U.S.A. for the Howe 69 property and this was written in by the Plaintiff to reflect the fact that the cheques were in exchange for the promissory note on the Howe 69 property. This tends to support the Plaintiff's version of the events. The Defendant denied that he agreed to secure the release of the promissory note. He said that he learnt of the payment of the US$100,000 to Peter Kuo when he was in Taipei and he did not request the Plaintiff to pay it to Peter Kuo.  As I have said, I reject his version of the events.

10. I was referred to the case of Licenses Insurance Corporation and Guarantee Fund (Limited) v. Lawson (12T.L.R. 501). In that case, the Defendant, who was a director of the Plaintiff company made a statement at a board meeting of the Plaintiff company that he would pay for any loss resulting from the retention of certain shares. It was held, on the facts, that there was no contract which made the Defendant . liable to make good the loss to the Plaintiff  company which it subsequently sustained in respect of the shares. This case does not assist the Defendant here. I have found that the request made by the Defendant to the Plaintiff to pay the US$100,000 was made on his behalf, not on behalf of T.A.I. and there was a contract here whereby the Plaintiff paid the sum of US$100,000 to Peter Kuo on the Defendant's agreement to either secure the release of the promissory note held by his family's business in the U.S.A. to the Plaintiff or to personally repay the said sum to the Plaintiff.

11. After November 1987, the Plaintiff pressed the Defendant for the release of the promissory note but to no avail. The promissory note was never released. He also pressed the Defendant for repayment of the US$100,000. In an effort to accommodate the Defendant, the Plaintiff and Max Tong met the supplier Christopher Wu in Singapore in December 1987 and the document dated 19th December 1987 was signed whereby Christopher Wu was to deliver certain goods to T.A.I. as security for the outstanding amounts to T.A.I. Nothing further happened under that document as Christopher Wu did not perform his obligations thereunder.

12. Having pressed for repayment and received nothing, the Plaintiff eventually asked the Defendant to sign the Acknowledgement of Debt dated 9th June 1988 which was signed by the Defendant and witnessed by  Max Tong.  By this document, the Defendant acknowledged that the Plaintiff did advance US$100,000 on his behalf and at his request. It went on to provide that in consideration of the Plaintiff refraining from commencing suit against him for recovery of the said sum and allowing him to repay the said sum by 30th June 1988, the Defendant agreed that in default of payment as aforesaid, he would pay interest as well at 128 per annum calculated from 9th June 1988.

13. I accept what both the Plaintiff and Max Tong said about the signing of the Acknowledgement of Debt by the Defendant and reject the Defendant's evidence on this as well. The Defendant says that he signed this document so that the Plaintiff could show it to his father. He said the Plaintiff, told him it was just for his father's eyes so that his father could see that they could solve T.A.I.'s problems and that, in effect, it would not be used against him legally. I reject the Defendant's evidence and find that the Plaintiff did not say anything to the effect that the Acknowledgement of Debt would not be used against him legally. The Defendant, I find, knew perfectly well that he was personally responsible to repay the US$100,000 to the Plaintiff and having defaulted in the repayment of the same, he was required to acknowledge it in writing. The Plaintiff said that he wanted the Defendant to sign this document so that he could discipline himself  to pay up. The date when the, interest payment was to commence was changed in manuscript from 17th November 1987 to 9th June 1988. There was no evidence before me as to when this change occurred or who made it. It is clear, however, that the change was made for the Defendant's benefit as the time when interest was payable was to commence from a later date, namely, 9th June 988 instead of 17th November 1987. There was no need for anyone to make this change if indeed the document was never intended to create legal relations.  I am satisfied that there was clearly an intention to enter into legal relations when this document was signed by the Defendant.

14. I turn now to the Agreement for the Repayment of Debt dated 30th November 1988. The Defendant did not meet the payment deadline of 30th June 1988. By 30th November 1988 he had still not paid the Plaintiff and he was asked to sign the document of that date. By the said document, the Defendant confirmed in writing once again that the Plaintiff did, at his request, repay the sum of US$100,000 to Peter Kuo on 17th November 1987. In consideration of the Plaintiff giving further time to the Defendant to repay the said sum, he agreed with the Plaintiff to repay the sum by instalment payments as set out therein, the first instalment being US$25,000 to be paid within 60 days of the date of the agreement. Interest from 17th November 1987 at the rate of 11% per annum was also agreed to be paid. It was also provided that if the Defendant "should default in repayment of any one of the instalments, the whole balance then outstanding together with interest would become immediately payable to the Plaintiff.

15. I accept the Plaintiff's and Bruce Cheung's version of the events surrounding the Agreement for Repayment of Debt and reject the Defendant's. Bruce Cheung was visiting Hong Kong at the time from the U.S.A. and the document was prepared by a lawyer friend of his. I accept that Bruce Cheung spent a substantial period of time between the Plaintiff and the Defendant to work out the details and I am satisfied that Bruce Cheung obtained from the Defendant a payment schedule that fitted in with what the Defendant could meet. Bruce Cheung could not remember if the Defendant signed the document in front of him but he did say, and I accept, that the Defendant told him that the basic contents were alright. It was also provided in the agreement that as security for the repayment of the said sum and interest, the Defendant charged his interest to the Plaintiff of all his interests in his one sixth share of W.S.T. Investment Co. of Buckeye Range, which was a company of the Defendant's family in the U.S.A. The Defendant says this was inserted on Bruce Cheung's suggestion even though he says he had mentioned to Bruce Cheung that he no longer held any beneficial interest in W.S.T. Investment Co. I reject the Defendant's evidence and prefer the evidence of Bruce Cheung who says his understanding at the time was that the Defendant still held his interest in W.S.T. Investment Co.

16. The Defendant also said that about a month after June 1988, he started receiving menacing calls from the Plaintiff. He had also received a letter from him dated 7th September 1988 asking for repayment of, inter alia, the US$100,000 plus interest to the Plaintiff. The second paragraph of the letter states as follows :-

"Please be advised, I will take serious, drastic action, if you do not repay or solved the above matter immediately. We will give you until end of this week, i.e. 10th September, 1988 to reply. If not, I will take legal and drastic action. Please try to understand."

17. The Defendant did not reply to that letter but he said that he told the Plaintiff that he would talk to the Plaintiff's father about it. The Defendant understood this letter to mean that the Plaintiff would carry out the threats he had made over the telephone, namely, threats of violence to him and to his family, being his 2 children and his brother. I do not believe this. The letter does not give that impression. The Defendant knew full well that the Plaintiff was getting increasingly frustrated at being kept out of his money and his patience was running out. He was getting ready to take legal action for his money. The Plaintiff and the Defendant are both educated men and I do not accept that the Plaintiff ever threatened the Defendant with violence. I find that  there were no such threats ever made by the Plaintiff to the Defendant. The Defendant said that he signed the Agreement for Repayment of Debt whilst under apprehension of danger to himself and his family. I do not believe him and I reject his evidence. He himself inserted the last paragraph in the document which states :

"In addition to the above condition it is hereby agreed by all parties concerned that the original liability referred to at the beginning of this agreement was incurred by Christopher Wu to T.A.I. Enterprises Ltd. (a signed note of admission of which has been recorded) and that upon completion of the above agreement this liability will automatically be owed to Jim Wong by Christopher Wu".

I find that the above was inserted by the Defendant to protect himself in the event, unlikely as it was at the time, that should Christopher Wu come up at some future time with the money he owed, then the money would be owed by Christopher Wu to the Defendant personally after the Defendant had performed his obligations to the Plaintiff under the agreement. I do not think that he would have sought to protect himself in this way if indeed he acted under duress when signing the document.

18. In my judgment, the Defendant was willing to sign the Agreement for Repayment of Debt which he did and I am satisfied that the Defendant was not under duress when he entered into this agreement.

19. The Plaintiff received the sum of US$25,000 under the said agreement but no further payments. On his evidence this was paid on or about 2nd February 1989; the 1st instalment of US$25,000 was payable at the end of January, 1989. It is not disputed that US$25,000 was paid although the Defendant said that it was slightly later than 2nd February 1989. The Defendant  tried to explain this payment by saying that it was not for the first instalment payment of US$25,000 but mainly for his share of the capital contribution in T.A.I. that he owed the Plaintiff's father. In his evidence in chief he said that the sum included US$17,000 for his 15% captial contribution in' T.A.I. As for the US$100,000 paid to Peter Kuo, he said that it had been agreed between the Plaintiff, Max Tong and the Defendant that 50% of it would be absorbed by T.A.I. and since he was responsible for 50% of the losses of T.A.I., his share of US$50,000 came to US$7,500. He says he rounded it off to US$8,000, paying an extra $500, because the remaining balance of  50% of   US$100,000 was still in dispute and he therefore had some further potential liability. This US$8,000 together with the sum of US$17,000 mentioned above made up the US$25,000 paid to the Plaintiff. This was his explanation for the payment of US$25,000. He was cross-examined about different figures he had given in his supplemental affirmation filed on 13th November, 1989 which made up the US$25,000. I was not impressed with his explanation as to why he paid US$25,000 to the Plaintiff and I reject his evidence. On 17th April 1989, the Plaintiff's solicitors wrote to the Defendant pointing out that the second instalment of US$25,000 had fallen due on 30th March 1989 and demanding the balance of US$75,000 with interest in accordance with the Agreement for Repayment of Debt. The solicitors threatened to sue within 7 days if the payment was not made. That is clear from the letter. This made it plain that legal proceedings were imminent. There was no reply to that letter, although the Defendant said that he approached the Plaintiff's father to intervene. The Defendant is an educated person and experienced in business matters. If the Defendant felt at the time that the allegations made by the solicitors in their letter dated the 17th April, 1989 were not true, I think that he would have replied in writing to that effect in no uncertain manner. I find that the payment of US$25,000 by the Defendant to the Plaintiff was made in pursuance of the Agreement for Repayment of Debt and for no other reason.

20. It follows that I find that each of the defences pleaded by the Defendant fail. I am satisfied that the Plaintiff has proved his case. Accordingly, I give judgment to the Plaintiff in the sum of US$75,000 with interest at 11% per annum from 17th November, 1987 to judgment.