XCHRX TOMEN (ASIA) v. DRAGONWOOD LTD. and Others

1995, No. HCA8551

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. A summons to stay and an O.14 application was taken before Master Betts. Master Betts refused the application for stay and entered summary judgment against the 2nd and 4th defendants, the appellants in this action.

2. The history of this matter is that in 1987, the plaintiff and the 1st defendant in the action entered into a timber sale agreement. Subsequent to that agreement and consequent upon it, a loan agreement was entered into between the 1st defendant and the plaintiff, and supplemental letters of guarantee were provided by the 2nd, 3rd and 4th defendants to the plaintiff. A sum of US$3 million was drawn on by the 1st defendant and the supplemental loan agreement was entered into in November 1987 between the plaintiff and all of the defendants.

3. Repayment was not made within the period required by the agreements and on 23rd August 1995, a statement of claim was issued. Thereafter in November 1995, certain meetings took place between the plaintiff and the 4th defendant in Malaysia, and attempts were made to reach a compromise for the payment of the outstanding sum. On 13th December 1995, it is alleged by the appellants to this action, that a compromise agreement was reached. A letter was sent by the plaintiff to the 2nd, 3rd and 4th defendants on 19th December 1995, purporting to set out the terms of the compromise. This letter was not signed and returned by the 2nd and 4th defendants.

4. On 20th December 1995, a first payment in the sum of US$100,000 or there about was paid by the 3rd defendant, who did acknowledge that a compromise existed, to the plaintiff. This payment was confirmed by the plaintiff on 22nd December 1995.

5. On 2nd February 1995, the 2nd and 4th defendants still not having signed any document acknowledging that they were bound by any compromise, filed a defence to the Statement of Claim issued by the plaintiff. On 8th February 1996, a reply was filed and on 20th February 1996, the 3rd defendant paid a second payment of US$100,000 or there about to the plaintiff who, on 27th February 1996, confirmed that payment. At this point, no confirmation had been received from the 2nd or 4th defendants of any compromise and they were proceeding, as far as the plaintiff was aware, with their defence of this action. On 19th March 1996, a summons was taken out by the plaintiff for summary judgment pursuant to O.14 of the Rules of the Supreme Court.

6. On 10th May 1996, a summons to stay the whole proceedings on the basis that a compromise had been entered into by the parties was filed by the appellants, supported by an affirmation of Andrew Gum. Subsequently, the orders made refusing the stay and entering summary judgment against the 2nd and 4th defendants, the appellants in this action, were entered by Mr Registrar Betts.

7. The first matter for me to decide is whether this being a hearing de novo, I am satisfied that a compromise existed between the appellants and the plaintiff so as to warrant a general stay of these proceedings. It is self-evident from the papers that the only person who undertook, by any action or by any writing, to be bound by any compromise was the 3rd defendant to the action. The 2nd and 4th defendants have, on the face of the documents, made no payment in settlement of a compromise, and have not signed or acknowledged in any way to the plaintiff that a compromise existed.

8. It is argued by Mr Wong that the payment made by the 3rd defendant was a payment for and on behalf of each of the three defendants and that this is evidence of their acceptance of the compromise and their undertaking to be bound by it. I am further pointed to the affirmation of Mr Koji Ishizuka who, in the affirmation, affirmed that in discussion with the 3rd defendant, he indicated that he only considered himself bound to pay a sum equal to one-third of the outstanding US$1 million payable by the three defendants. That conversation, taken with the absence of any written acknowledgement by the 2nd and 4th defendants and by the absence of any direct payment from them, leaves me in a position of being unable to conclude otherwise than they did not consider themselves bound by the compromise and were not a party to it. The appeal against the Registrar's decision in respect of the summons to stay is dismissed.

9. The second matter which I have to consider is that of the summary judgment entered into pursuant to O.14. Mr Wong raises two matters. The first is that since a compromise exists between the 2nd and 4th defendants and the plaintiff, this is an arguable issue and that judgment should not be entered. I have dealt with that matter in my ruling in respect of the stay. I am not satisfied that there is credible evidence that a compromise existed between the 2nd and 4th defendants and the plaintiff. I am satisfied that a compromise existed between the 3rd defendant and the plaintiff. But that is not sufficient in respect of the 2nd and 4th defendants, and this argument in respect of the O.14 summary judgment must fail.

10. The second matter is the question of whether a breach of the Money Lenders Ordinance is a sufficiently credible defence to be argued by the defendants and that I should therefore refuse to allow the entry of summary judgment. I am referred to the case of Ng Shou Chun v. Hung Chun San, Civil Appeal No.182 of 1993. There, Godfrey, J.A. said :

"As to the defendant's third and last ground of defence, the money lending defence, we have had cited to us the case of Nash v. Layton [1911] 2 Ch.71. It appears there was nothing in the nature of the loan in question in that case or elsewhere in the pleadings to suggest the plaintiff was a money lender; yet the majority of the court allowed the defendant to interrogate the plaintiff on just that matter. That authority has stood for a long time; and the present case, where as I think there is something in the nature of the loan in question to suggest that the plaintiff might be a money lender, seems to me to be an a fortiori case for giving leave to the defendant to advance the money lending defence at the trial of the action (by which time the appropriate interrogatories will have been administered)."

11. I would distinguish the case before me from that of Ng Shou Chun v. Hung Chun San. It is obvious from the documents produced and the affirmations before me that the plaintiff and the 1st defendant entered into a timber sale agreement. It was to fund that particular agreement that accommodation was made by way of the permitting of drawing down of the sum of US$3 million, and that it was not, on the face of that agreement nor on the face of the normal business of the plaintiff, a defence which comes in within the terms of the provisions of the Money Lenders Ordinance.

12. I would be bound, in my view, by Ng Shou Chun v. Hung Chun San if less information were available to me. If there were little more than the bald assertion of the loan of monies, the defence might be open. The nature and manner of the loan is sufficiently explained within the documents filed with the court to indicate that it is not, in my view, a credible defence. The appeal in respect of the summary judgment pursuant to O.14 is dismissed.

(T.M. Gall)

Judge of the High Court