EASY MOUNT GROUP LTD v. LAM KA YUK, JAMES

CACV 267/2018

[2019] HKCA 890

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 267 OF 2018

(ON APPEAL FROM HCB 5246 OF 2016)

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J U D G M E N T

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Hon Au JA (giving the judgment of the court):

A.   INTRODUCTION

1.  This is the appeal of the petitioner creditor, Easy Mount Group Limited (“Easy Mount”), against the judgment (“the Judgment”) of Deputy High Court Judge Kent Yee (“the Judge”) dated 29 May 2018.

2.  By way of the Judgment, the Judge dismissed Easy Mount’s bankruptcy petition against Lam Ka Yuk, James (“Mr Lam”).  The petition was based on a statutory demand for a sum of RMB 60,000,000 (“the Sum”) said to be owed by Mr Lam to Easy Mount as guarantor for Well Spread Group Limited (“Well Spread”), in which he is the sole shareholder and director.

B.   THE BACKGROUND

3.  The dispute arose from a proposed acquisition (“the Proposed Acquisition”) of the shares or assets of China LNG Corporation Limited (“China LNG”) (中國清潔能源有限公司) by PetroAsian Energy Holdings Limited (“PEHL”) (中亞能源控股有限公司).

4.  PEHL is a company incorporated in Cayman Islands and is listed on the Hong Kong Stock Exchange.  China LNG is a private company incorporated in Hong Kong and Mr Lam is its sole director.

5.  With a view to the Proposed Acquisition, Easy Mount, by a sale and purchase agreement dated 29 May 2014 and a supplemental agreement dated 29 September 2014, acquired 10% shares in China LNG (“the Shares”) from Well Spread for RMB 30 million[1].  After the sale, Well Spread continued to hold 40% shares in China LNG.  It is noted that Easy Mount’s payment to Well Spread was delayed, and was made in full only in late April 2015[2] (“the Payment Delay”).

6.  The Proposed Acquisition was to be done with the involvement of a BVI company called Perfect Reward Limited (“Perfect Reward”).  All the shareholders of China LNG, including Easy Mount and Well Spread, were to transfer their respective shareholdings to Perfect Reward.  PEHL would thereafter acquire Perfect Reward and thus indirectly acquiring the entire shareholdings of China LNG.

7.  To guarantee certain performances in relation to the Proposed Acquisition, Easy Mount as Party A and Well Spread and Mr Lam as Party B entered into a share transfer and guarantee memorandum (“the Memo”) dated 7 January 2015.  The Memo was written in simplified characters of the Chinese language.  Clauses 1 and 2 provide as follows:

“1. 若中潔能 [China LNG] 全體股權或資產未成功注入中亞能源 [PEHL] 而終結，或 截止2015年7月31日中潔能未能整體成功注入中亞能源。乙方 [Well Spread and Mr Lam] 將收購甲方 [Easy Mount] 所持有中潔能公司10%股權，股權轉讓對價金額不低於¥60,000,000.00（大寫：人民幣陸仟萬元整）。乙方保證甲方轉讓中潔能10%股權之權利不受中潔能內部程式限制，包括但不限於：股東會決議批准、董事會決議批准及股東間的其他約定情形。

2. 如本諒解備忘錄第１條中約定條件成就，甲乙雙方應另行依照上述約定簽訂《股權轉讓協議》。乙方應在第1條所約定強制轉讓條件成就之日起3個工作之日內向甲方支付全部股權受讓對款項。” (emphasis added)

8.  Hence:

(1)   Under clause 1, Well Spread agreed to purchase the Shares from Easy Mount for a consideration (“the Consideration”) of not less than RMB 60 million in the event (“the Triggering Event”) that the Proposed Acquisition (a) was terminated, or (b) was not completed by 31 July 2015 (“the Deadline”).

(2)   Under clause 2, if the Triggering Event occurred, Well Spread shall pay the Consideration to Easy Mount within three days from the date of the occurrence of the Triggering Event.

9.  Easy Mount and Mr Lam also entered into a Deed of Share Charge and Guarantee (“the Guarantee”) dated 22 January 2015.  Clauses 23.1 and 23.2 provide as follows:

“23.1 [Mr Lam], as primary obligor, hereby unconditionally and irrevocably guarantees to [Easy Mount], the due and punctual payment and discharge by [Well Spread] of all of the Indebtedness.

23.2 If [Well Spread] defaults in payment or satisfaction of any Indebtedness when due, or when a default has occurred, [Mr. Lam] shall pay to [Easy Mount] on demand, without set off or other deduction, an amount equal to the amount so unpaid. A certificate by [Easy Mount] or any person duly authorized by [Easy Mount] of the amount so payable shall be conclusive unless manifestly incorrect. [Easy Mount] may make demand on [Mr Lam] without prior demand on [Well Spread].” (emphasis added)

10.  “Indebtedness” is defined in clause 1.1(g) as all present and future obligations and liabilities owed from Well Spread to Easy Mount whether actual or contingent, present or future, joint or several (including, but not limited to, any liabilities incurred as a guarantor or surety) and all interest thereon.

11.  It is common ground that the Proposed Acquisition was not completed by the Deadline and indeed eventually fell through.  However, Well Spread has not proceeded to purchase the Shares or paid Easy Mount the Consideration pursuant to the Memo.

12.  Easy Mount through its solicitors issued two demand letters to Well Spread and Mr Lam, respectively on 21 September 2015 and 14 March 2016 (collectively “the Demand Letters”).  The Demand Letters in substance stated that Well Spread failed to pay Easy Mount RMB 60 million (ie, the Sum) as the Consideration on 31 July 2015 in accordance with the Memo, and despite repeated demands, Easy Mount and Mr Lam (under the Guarantee) had still failed to make the payment.  Easy Mount therefore demanded Well Spread and Mr Lam to pay the Sum within 7 days of the first demand letter and 14 days of the second demand letter.

13.  On 15 June 2016, Easy Mount further served on Mr Lam a statutory demand, demanding him to pay the Sum as guarantor under the Guarantee.

14.  Mr Lam did not satisfy the statutory demand.  Easy Mount thereafter presented the bankruptcy petition against him on 21 July 2016[3].

C.    THE JUDGMENT

15.  Section 6(2)(b) the Bankruptcy Ordinance, Cap 6 (“the BO”) provides that a creditor may present a bankruptcy petition against a debtor if and only if, among others, the debt owed is a liquidated sum.

16.  By way of the Judgment, the Judge dismissed the petition on the ground that the Sum did not constitute a “debt” under the BO as it was not a liquidated sum said to be owed by Mr Lam to Easy Mount.  In coming to that conclusion, the Judge held:

(1)   First, pursuant to clauses 1 and 2 of the Memo, the Sum only represented the agreed minimum amount but not a final amount of the Consideration.  In the premises, until the parties had reached a “consensus” as to the final amount of the Consideration, Well Spread and Mr Lam were not obliged to pay Easy Mount the Sum.  Since there was no “consensus” of the parties as to the final amount of the Consideration, the Sum did not constitute a liquidated sum and therefore was not a debt.  See paragraphs 22 ‑ 26 of the Judgment.

(2)   Second, the Demand Letters could not be treated as a certificate conclusive of the amount due and payable by Mr Lam as provided under clause 23.2 of the Guarantee.  This was so since the Demand Letters were manifestly incorrect in stating that the Sum was due for payment as there was no consensus as to the amount of the Consideration.  In the premises, the Sum was open to challenge.  Further, the Demand Letters were also manifestly incorrect in stating 31 July 2015 as the due date for payment of the Sum.  See paragraphs 28 ‑ 30 of the Judgment.

D.    THIS APPEAL

D1.   The grounds of appeal and the respondent’s notice

17.  In summary, Mr Ambrose Ho SC (together with Mr Ken To) for Easy Mount raise the following grounds of appeal[4]:

(1)   First, the Judge erred in finding that the Sum did not represent a liquidated sum.  Upon proper construction of clauses 23.1 and 23.2 of the Guarantee and having regard to the nature of its claim, Mr Lam’s liability to Easy Mount should properly be characterized as a debt (as opposed to damages).  The indebtedness of RMB 60 million on the part of Mr Lam represents a liquidated sum (collectively, “Appeal Grounds 3 and 4”).

(2)   Second, the Judge erred to have found that the Letters contained manifestly incorrect information.  The Letters do not contain any error as the Indebtedness owed by Well Spread to Easy Mount stated as RMB 60 million was correct; and Well Spread’s obligation to pay pursuant to the Memo stated to be on 31 July 2015 was also correct (collectively, “Appeal Grounds 1 and 2”).

18.  By a respondent’s notice dated 17 July 2018, Mr Lam sought to support the Judge’s dismissal of the bankruptcy petition on four additional grounds.  However, at the hearing of the appeal, Mr Cooney SC (together with Mr David Cheung) for Mr Lam confirmed that Mr Lam would not pursue Grounds 1 and 2 therein.

19.  That leaves only Grounds 3 and 4 stated in the respondent’s notice.  They are as follows:

(1)   The Judge erred in holding that there was no “causal link” between the Payment Delay on the part of Easy Mount and the non-completion of the Proposed Acquisition, and therefore no bona fides dispute (“Respondent’s Ground 3”)

(2)   There is no liquidated debt under the Memo.  If Easy Mount has any cause of action, on a proper analysis, it is one for specific performance or damages (“Respondent’s Ground 4”).

20.  The above appeal grounds and the Respondent’s Grounds 3 and 4 therefore raise the following issues in this appeal:

(1)   Under Appeal Grounds 3 and 4 and Respondent’s Ground 4: Whether the Judge was wrong in holding that the Sum was not a liquidated sum and therefore not a debt, and hence Easy Mount was not entitled to present a bankruptcy petition against Mr Lam under the BO (“the Liquidated Sum Issue”).

(2)   Under Appeal Grounds 1 and 2: Whether the Judge was wrong in holding that the information contained in the Demand Letters was “manifestly incorrect” (“the Manifestly Incorrect Issue”).

(3)   Under Respondent’s Ground 3: Whether the Judge erred in holding there was no “causal link” between the Payment Delay on the part of Easy Mount and the non-completion of the Proposed Acquisition (“the Payment Delay Issue”).

21.  We now turn to look at each of these issues.

D2.    The Liquidated Sum Issue

D2.1  The nature of Mr Lam’s liability under the Guarantee

22.  Mr Ho SC submits that, on a proper construction, the Guarantee creates a liability in debt against Mr Lam to pay as guarantor. In the premises, Easy Mount is entitled to bring the petition against him for his failure to pay the Sum.  Mr Ho says the Judge erred in failing to consider the construction of the Guarantee at all.

23.  On the other hand, Mr Cooney’s principal contention is that Mr Lam’s failure to pay under the Guarantee is in nature a breach of contract.  It therefore only sounds in specific performance or damages.  As a result, Easy Mount’s proper cause of action against Mr Lam is by way of a breach of contract action seeking specific performance or damages.  Whatever amount Mr Lam is said to be liable to pay under the Guarantee is not a debt but damages, and does not ground a bankruptcy petition.

24.  These competing contentions boil down to identifying the nature of Mr Lam’s liability created under the Guarantee.  That is a question of construction of the Guarantee to determine what is the type or types of liability that are imposed on the guarantor.  See: McGuinness v Norwich & Peterborough Building Society [2012] 2 All ER (Comm) 265 at [7]; Hampton v Minns [2002] 1 All ER (Comm) 481 at [91].

25.  In this respect, it is trite that a guarantee of the “see to it” type, that is, an undertaking by the guarantor that the principal debtor will perform his own contract with the creditor, creates a liability in damages.  On the other hand, a conditional payment obligation under a guarantee is a promise by the guarantor to pay the instalments of principal and interest which fall due if the principal debtor fails to make those payments.  That obligation creates a liability in debt: McGuinness at [7] ‑ [8] and [60].

26.  In the present case, the relevant clauses in the Guarantee are clauses 23.1 and 23.2 as quoted above. In our view, when these two clauses are read together, it is clear that the obligation imposed on Mr Lam is a conditional payment obligation:

(1)   Although clause 23.1 of the Guarantee is framed in terms of a promise by Mr Lam that all Indebtedness due to Easy Mount will be discharged by Well Spread, it is further expressly provided under clause 23.2 that, any amount so unpaid by Well Spread to Easy Mount when due shall be paid by Mr Lam on demand.

(2)   In the premises, properly construed together, it is clear that Mr Lam also promises to pay by himself the Indebtedness of Well Spread when Well Spread failed to pay it.

27.  Consequently, subject to the question of whether the Sum can be regarded as a sum due and payable under the Memo as submitted by Easy Mount, on proper construction, Mr Lam’s liability under the clause 23.2 of the Guarantee sounds in debt.

28.  This conveniently takes us to the question of whether the Sum is due and payable under the Memo as contended by Easy Mount.

D2.2  Is the Sum a liquidated one, which is due and payable under the Memo

29.  As mentioned above, the Judge concluded that the Sum was not a liquidated sum on the basis that, on a proper construction of clauses 1 and 2 of the Memo, Well Spread’s liability to pay the Consideration only arose when the parties had reached a consensus as to its amount, although that could not be less than RMB 60 million.  The Judge explained this at paragraphs 23 and 24 of the Judgment as follows:

“23. It should be noted that under clause 2 of the Memo, what Well Spread was required to pay is the Consideration and not the minimum amount of the Consideration. If there is not any definite amount of the Consideration having been fixed by agreement, the minimum amount of RMB 60 million cannot be deemed to be the agreed amount.

24.  I can accept that it is not necessary for the parties had to first enter into a share transfer agreement before the obligation of the Payment could arise. There is no temporal requirement as to when they have to sign a share transfer agreement. So long as the condition of the compulsory sale occurs, within three business days thereafter, Well Spread has to pay the Consideration with or without a written agreement. Still, before Well Spread can do so in such an event, there must be a consensus about the quantum of the Consideration.”

30.  With respect, we are unable to agree with the Judge’s construction.

31.  It is trite that contractual provisions have to be construed in its proper context, which includes the other relevant provisions of the contract and related documents.

32.  In our view, the Judge has fallen into error in his construction by looking only at clauses 1 and 2 of the Memo without taking into account the following proper context.

33.  First, clause 5 of the Memo also provides that:

“5. 中亞能源 [PEHL] 受讓甲方 [Easy Mount] 持有中潔能 [China LNG] 10%股權 [the Shares] 之對價對應現金價值低於¥60,000,000.00（大寫：人民幣陸仟萬元整）部分，乙方 [Well Spread and Mr Lam]承諾以現金方式補足至¥60,000,000.00（大寫：人民幣陸仟萬元整），乙方應於2015年12月31日前向甲方支付以上全部補足款。”

34.  Thus, under this clause, if PEHL acquires the Shares at a consideration which is less than RMB 60 million, Well Spread and Mr Lam shall pay to Easy Mount the difference by 31 December 2015. This effectively provides that Easy Mount would receive at the minimum RMB 60 million for the sale of the Shares.

35.  Second, Easy Mount (as Party A) and Well Spread (Party B) and Mr Lam (as Party C) also entered into a Share Pledge Agreement dated 7 January 2015.  In its preamble, it is specifically stated that this is a supplemental agreement to the Memo, which further sets out the parties’ agreement as to the rights and obligations provided in the Memo.  It also provides expressly that both the Memo and the Share Pledge Agreement have equal legal effect and force[5].  The Share Pledge Agreement is therefore clearly relevant to construing the parties’ rights and obligations under the Memo.

36.  In this respect, clause 5 of the Share Pledge Agreement provides:

“5. 如中亞能源 [PEHL] 或其他指定第三方未成功收購甲方 [Easy Mount] 所持有10%中潔能 [China LNG]股權 [the Shares]，或收購對價現金價值總額低於¥60,000,000.00（人民幣：陸仟萬元整）；乙方 [Well Spread] 與丙方 [Mr Lam] 連帶對甲方以現金方式承擔補足責任。補足責任以甲方整體現金收益達到¥60,000,000.00（人民幣：陸仟萬元整）為限。”

37.  In other words, under the Share Pledge Agreement, the parties agree that if the Shares are eventually not acquired by PEHL or another third party, or if the acquisition value is less than RMB 60 million, Well Spread and Mr Lam shall pay to Easy Mount the difference to realise Easy Mount’s profit to be not less than RMB 60 million.  This again shows that, for the purpose of the Memo, the parties have agreed that the minimum amount that Easy Mount would obtain at the end of the day in relation to the Shares was RMB 60 million.

38.  In the premises, clause 5 of the Memo and clause 5 of the Share Pledge Agreement together provide that in whatever event, Well Spread and Mr Lam agree to pay to Easy Mount such sum to ensure that it would receive at least RMB 60 million for the Shares.

39.  In our view, once clauses 1 and 2 of the Memo are read and construed together with its clause 5 and clause 5 of the Share Pledge Agreement, what they mean is that upon the occurrence of the Triggering Event, Well Spread and Mr Lam shall purchase the Shares from Easy Mount with an agreed minimum sum of RMB 60 million, although the parties could agree for a higher price.  In other words, the sum that Well Spread and Mr Lam would have to pay to Easy Mount can only be either RMB 60 million (which is the minimum) or any higher sum that the parties may agree.

40.  In this respect, Mr Cooney has fairly accepted that clause 1 of the Memo (which provides that the parties could agree for a sum not less than RMB 60 million) is clearly for the benefit of Easy Mount as it gives Easy Mount the right to negotiate for a price higher than RMB 60 million but not for Well Spread and Mr Lam to negotiate for a lower sum.

41.  That being the case, it is open to Easy Mount to waive its right to demand a higher sum for the Consideration.  If Easy Mount chooses to do so and asks for RMB 60 million only, Well Spread cannot object and is obliged to pay as agreed.

42.  The question then is whether on the evidence, Easy Mount has waived its right to demand a price higher than RMB 60 million for the Shares.

43.  Mr Ho submits that it has. We agree.

44.  By the Demand Letters, Easy Mount referred to the Memo and the Guarantee, and demanded payment from Well Spread.  The Demand Letters both provide, among others, that:

“根據本所客戶的指示，貴司未有按《股權轉讓及擔保諒解備忘錄》 [ie, the Memo] 約定在2015年7月31日支付人民幣6,000萬元，雖經多次催告，貴司至今仍拖欠本所客戶款項人民幣6,000萬元，一直沒有/拒絕償還有關欠款。”

45.  The Demand Letters stated the exact amount of RMB 60 million as what Well Spread had failed to pay to Easy Mount under the Memo.  There is nothing in the Demand Letters which suggests that Easy Mount would demand or reserve its right to demand for any further sum in addition to the RMB 60 million under the Memo.  Reading the Demand Letters objectively, it is clear that Easy Mount has in substance waived its right to demand a higher amount as the Consideration.  In other words, Easy Mount has only demanded the payment of the agreed minimum sum of RMB 60 million as the Consideration.  The Consideration is thus ascertained.

46.  In the premises, the Sum is a liquidated debt owed to Easy Mount by Mr Lam as guarantor under the Guarantee.

47.  However, Mr Cooney further contends under the Respondent’s Ground 4 that pursuant to clauses 1 and 2 of the Memo, the Sum is in any event not due and payable on 31 July 2015 as alleged by Easy Mount.  The contentions run in summary as follows:

(1)   Under clause 2, Well Spread and Mr Lam are only required to pay Easy Mount the Consideration to acquire the Shares when the Triggering Event provided under clause 1 occurs.  These provisions are in gist and in substance a contract for the sale and purchase of the Shares, conditional on the occurrence of the Triggering Event.  Clause 2 indeed further provides that the parties are to enter into a separate shares transfer agreement for that purpose.

(2)   As such, although contracts for sale and purchase of shares do not come under the Sale of Goods Ordinance, Cap 26 (“the SOGO”), the principles relating to the sale of goods should apply by analogy to such contracts.  Specifically, under those principles, a seller can only sustain an action to recover the price when the property in the goods has passed[6], except if the parties have agreed that payment be made on “a day certain”, whereby the seller can still sue for the price even if the property in the goods has not passed[7]. However, if the date of payment cannot be ascertained without reference to some contingent event or the action of some person, the exception does not apply.

(3)   In the present case, the property in the Shares has not passed.  Easy Mount therefore cannot yet sue for the price of the Shares by way of the bankruptcy petition even if the Consideration is the Sum. Further, the time set for payment of the Consideration under clause 2 does not satisfy the requirement of being “a day certain” as it is contingent on the Proposed Acquisition failing to happen, which is not a day certain.  The exception therefore does not apply.

(4)   In the premises, Easy Mount can only bring an action against Well Spread for specific performance or damages for breach of contract.  There is therefore no liquidated debt upon which Easy Mount can demand Mr Lam to pay and to ground the bankruptcy petition.

48.  With respect, there is nothing in these submissions.

49.  First, the purported general principles in the SOGO simply do not apply in the present case by way of analogy or otherwise when the parties have entered into an express agreement specifically providing for the payment obligations.  Such obligations are then governed by the terms of the Memo, which are a matter of construction.  For the reasons we have explained above, when properly construed, Well Spread is obliged under clauses 1 and 2 of the Memo to purchase the Shares and make payment of the Consideration when the Triggering Event occurs.

50.  Second, and in any event, in contending that clauses 1 and 2 do not provide a certain date for payment of the Consideration, Mr Cooney has misread those clauses. There are two Triggering Events provided in clause 1, which are separate and independent events (given the word “或”).  The occurrence of either of those two events would trigger Well Spread’s obligation to purchase the Shares for the Consideration: one is when the Proposed Acquisition is terminated; the other is when the Proposed Acquisition was not completed by 31 July 2015.  The latter one in substance provides an agreed and certain date when Well Spread had to purchase the Shares from Easy Mount for the Consideration, which shall be paid within three days of 31 July 2015.  Easy Mount is entitled to rely on the latter event, and Well Spread is bound to make payment of the Consideration at the time as provided under clause 2.

51.  We therefore reject the Respondent’s Ground 4.

52.  For all the above reasons, the Judge erred in law in holding that the Sum is not a liquidated sum and thus not a debt within the meaning of section 6(2)(b) of the BO.

53.  Easy Mount therefore succeeds under Appeal Grounds 3 and 4.

D3.   The Manifestly Incorrect Issue

54.  As mentioned above, clause 23.2 of the Guarantee provides that “…A certificate by Easy Mount or any person duly authorized by Easy Mount of the amount so payable shall be conclusive unless manifestly incorrect.” (emphasis added)

55.  In relation to this, the Judge held at paragraph 29 of the Judgment as follows:

“29. It can be seen that the same factual mistake was made in the Letters. The Consideration not having been fixed by agreement, Well Spread was not liable to pay Easy Mount for the transfer of the Shares at all. In any event, the obligation to pay on the part of Well Spread did not arise on 31 July 2015 under the Memo. The time now contended by Mr To [counsel for Easy Mount] that Well Spread had to pay is 3 days from the Deadline and not 31 July 2015.”

56.  Thus, the Judge concluded that the Demand Letters could not be regarded as the conclusive certificate because (a) the Sum stated to be owed by Well Spread was incorrect for the reason that the parties had not reached a “consensus” as to the final amount of the Consideration, and (b) it was also incorrect to state that the Sum was payable on 31 July 2015.

57.  Under Appeal Ground 2, Mr Ho contends that Judge’s above conclusion is clearly wrong[8].

58.  In this respect, we have now concluded in the above that the Sum is indeed a liquidated sum constituting a debt which Mr Lam as guarantor is obliged to pay under the Guarantee.  In the premises, whether or not the Demand Letters could be regarded as a conclusive certificate for the purpose of clause 23.2 is irrelevant.  Strictly speaking it is unnecessary to deal with this issue. However, for completeness sake, we would dispose of it briefly as follows.

59.  In our view, for the following reasons, the Judge also erred in holding that the Demand Letters were manifestly incorrect.

60.  First, as we have said above, the Sum is in fact correct as to the amount of the debt liable to be paid by Mr Lam to Easy Mount as guarantor.  There is therefore no error contained in the Demand Letters when they referred to the Sum as the amount Mr Lam had to pay under the Guarantee.  The Judge’s conclusion that the Demand Letters were manifestly incorrect in this respect must therefore be wrong.

61.  Second, in relation to the Judge’s conclusion that the Demand Letters were manifestly incorrect in referring to 31 July 2015 as the payment date, that is in our view also wrong.

62.  In State Bank of NSW v Chia (2000) 50 NSWLR 587, the Supreme Court of New South Wales discussed the meaning of “manifest error” in the context of a conclusive evidence clause at [249]:

“249. … [T]he phrase ‘manifest error’ draws an implicit distinction between a ‘manifest error’ and an error of a lesser kind. A ‘manifest error’ must be an error which is easily demonstrable without extensive investigation, although some argument may be necessary. It does not include errors which are abstruse, obscure or inconsequential.” (emphasis added)

63.  The Demand Letters were issued on 21 September 2015 and 14 March 2016.  Whether the due date should be 31 July 2015 (as contended by Mr Ho) or three days after 31 July 2015, by the time of these two dates, there is no doubt that Well Spread (and hence Mr Lam as guarantor) had the obligation to pay the Sum as the Consideration.  The error (even if it is indeed an error) is inconsequential and therefore not manifestly incorrect.

64.  For the above reasons, the judge also erred to hold that the Demand Letters were manifestly incorrect.  Easy Mount therefore also succeeds under Appeal Ground 2.

D4.   The Payment Delay Issue – Respondent’s Ground 3

65.  Before the Judge, Mr Lam also contended that it was the Payment Delay on the part of Easy Mount that had materially contributed to the subsequent non-completion of the Proposed Acquisition.  In the premises, given the so-called non-prevention principle, it was at least triable as to whether Easy Mount was entitled to rely on and enforce clauses 1 and 2 of the Memo to demand Well Spread to purchase the Shares and pay the Sum.

66.  The Judge rejected this contention at [33] ‑ [43] of the Judgment as follows:

“The prevention principle objection

33. In making this objection, Mr Lam relies on a document written in the Chinese language entitled ‘Letter of Promise’. The document bore his signature and was dated 22 January 2015. It was addressed to Easy Mount and by this document, Mr Lam gave an undertaking to Easy Mount to complete four matters in three days’ time. In simple terms, the four matters related to the four transfers by the four shareholders of China LNG including Well Spread and Easy Mount all of their respective shares to Perfect Reward. It was further provided that in the event that any loss has been caused by breach of any of his undertaking given, Mr Lam should fully compensate Easy Mount. On the other hand, if Easy Mount causes any delay to the Acquisition, Easy Mount should bear all the resultant loss.

34. The crux of this objection is that Easy Mount had been late in its payment for the Shares and this delay badly affected the progress of the Acquisition and eventually led to its failure/non‑completion.

35. Mr Lam also blames Ms Kwok, chairman of Easy Mount, for causing the failure.

36. Mr Cheung [counsel for Mr Lam] submits that, due to the prevention principle, Easy Mount should not be allowed to hold Well Spread or Mr Lam liable for the obligations under the Memo or the Deed by reason of its own contribution to the failure of the Acquisition.

37. I can see no merit in this ground. Ms Kwok was cross‑examined and I do not think that there is anything in her oral evidence of assistance to the case of Mr Lam.

38. Mr To argues that the document is not binding on Easy Mount. The undertaking was given by Mr Lam to Easy Mount and not the other way round. This is so despite the assertion contained in the document that Easy Mount should bear all the loss if it causes any delay in the Acquisition.

39. I agree with Mr To. The undertaking was given by Mr Lam only without any conditions even if its content was drafted by the representative of Easy Mount. However, with or without the undertaking of Easy Mount in this document, if the non-completion of the Acquisition was indeed caused by the delay in payment by Easy Mount, I fail to see why Easy Mount should not be held liable for any loss suffered by Well Spread under the SP Agreement and/or the Supplemental Agreement.

40. More fundamentally, I can see no causal link between the alleged delay in payments and the non-completion of the Acquisition at all. Even on his own evidence, Easy Mount fully paid for the Shares in late April 2015. The agreement relating to the Acquisition (‘the Acquisition Agreement’) was entered into on 24 April 2015. The Acquisition was expected to take place on 30 September 2015. Well Spread and Mr Lam did not find it necessary to amend the Memo and the Deed so as to extend the Deadline. I accept Mr To’s submission that any delay in payment should be water under the bridge and cannot possibly be the cause of the non-completion of the Acquisition on the Deadline.

41. Furthermore, as pointed out by Mr To, Mr Lam actually sent an email dated 1 March 2016 to Ms Kwok and said that the Acquisition was cancelled because an IPO would be in the best interest of the shareholders of China LNG. Mr Lam made no complaint about the alleged delay and no accusation that East Mount caused the non-completion of the Acquisition on the Deadline.

42. In his affirmation, Mr Lam explained the circumstances under which parties agreed to terminate the Acquisition Agreement at the end of 2015 and early 2016. He said that the prevailing economic conditions have changed drastically and it would be advisable to terminate the Acquisition Agreement.

43. In the premises, on the evidence, I am not satisfied that it is arguable that the non-completion of the Acquisition on the Deadline was due to the lateness of payment of East Mount for the Shares. I reject the prevention principle objection without hesitation.” (emphasis added)

67.  Under Respondent’s Ground 3, Mr Cooney seeks to attack the Judge’s above conclusion on the following bases:

(1)   The Judge failed to take adequate consideration of the context from which the facts and evidence are drawn.  When the Judge said that the parties did not find it necessary to amend the Memo after they had entered into the Acquisition Agreement, he did not take into account that the delayed payment by Easy Mount and the Acquisition Agreement itself could raise issues of variation of the terms under the Memo.  As for the 1 March 2016 email, it is submitted that Mr Lam did not make an issue out of Easy Mount’s prior delay because he is a businessman who was, at the time, trying to maintain a working relationship with the appellant.

(2)   Furthermore, Mr Lam’s case was that Easy Mount’s delayed payment had caused the initial delay in the acquisition, and continued to have a knock-on effect.  It was not the sole reason for the non-completion, but it was material because it brought about or affected later obstacles which ultimately led to the termination of the acquisition.  Easy Mount was itself a party to the decision to terminate.  The fact that “economic conditions” was stated as the reason for the decision to terminate does not preclude Easy Mount’s prior delayed payments from being a materially contributing factor.  But for the original delay caused by Easy Mount, the Proposed Acquisition might have indeed been completed before 31 July 2015, obviating the reconsideration by the parties into whether the Proposed Acquisition was still in their best interests in 2016.

(3)   It is therefore submitted that the court should consider the matters raised above and find that there are genuine triable issues in the dispute between Mr Lam and Easy Mount, and the matter should not be dealt with by way of bankruptcy proceedings, which are summary in nature.

68.  We are not persuaded by these submissions.  It is clear from the Judgment that the Judge made a finding of fact based on his evaluation of the evidence before him that the non-completion of the Proposed Acquisition was not caused by the Payment Delay (see in particular [40] ‑ [43]).

69.  Mr Cooney’s above contentions are seeking to challenge the finding of facts by the Judge on appeal.  It is well-established that this court will not interfere with finding of facts by a trial judge unless the finding is plainly wrong in light of the evidence of the case.

70.  In holding there was no “causal link” between the Payment Delay on the part of Easy Mount and the non‑completion of the Proposed Acquisition, the Judge took into account that (a) despite the Payment Delay, neither Mr Lam nor Well Spread had found it necessary to amend the Memo and the Guarantee to extend the Deadline; (b) Mr Lam clearly stated in his email dated 1 March 2016 that the Proposed Acquisition was cancelled because an IPO would be in the best interest of the shareholders of China LNG; and (c) Mr Lam had made no complaint about the alleged delay and no accusation that Easy Mount caused the non-completion of the Proposed Acquisition on the Deadline.

71.  In our view, in light of this evidence, it was entirely open to the Judge to find as a matter of fact that there was no causal link between the Delay Payment and the non-completion of the Proposed Acquisition.  In any view, it certainly cannot be said that the Judge is plainly wrong in this finding.

72.  In the premises, we also reject Respondent’s Ground 3.

E.    CONCLUSION

73.  Accordingly, we would allow the appeal and set aside the Judgment.  We further order that a bankruptcy order be made against Mr Lam.

74.  There are no reasons why costs should not follow the event.  We make an order nisi that costs of this appeal (with certificate for two counsel) and costs below be to Easy Mount, to be taxed if not agreed.