GINORICH GROUP LIMITED v. CHUNG KEUNG

HCA 152/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 152 OF 2012

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J U D G M E N T

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1.  This is the defendant’s appeal from the order of Master K Lo granting the plaintiff summary judgment for the sum of US$100,000.00 together with interest and costs. The judgment was filed on 28^th September 2012 in respect of the order made on 13^th September 2012.

2.  The plaintiff’s claim against the defendant is for breach of a contract of guarantee.

3.  The background facts are that the defendant was at all material times the Chairman of a company in the Philippines namely, T3 Global Wealth Access Corporation (“T3”). T3 supplies copper ores. The plaintiff is a company incorporated in Hong Kong which trades in, inter alia, copper ores.

4.  By a written agreement made between T3 as seller and the plaintiff as buyer dated 1^st February 2010 (“the 1^st contract”), T3 sold and the plaintiff bought 100MT of copper ores at the price and upon the terms and conditions contained in the 1^st contract. Pursuant to the 1^st contract the plaintiff paid US$20,000.00 as a deposit to T3. T3 shipped 108 MT of copper ores to the plaintiff’s designated port in or about April 2010. The plaintiff paid the balance of the purchase price to T3. The total sum paid by the plaintiff to T3 was US$83,258.29.

5.  By another written agreement made between T3 as seller and the plaintiff as buyer on 18^th April 2010 (the 2^nd contract), T3 sold and the plaintiff bought a minimum quantity of 100MT of copper ores for each month as set out in the 2^nd contract for the price and upon the terms and conditions contained therein.

6.  There is no dispute that T3 was in breach of the 1^st contract and the 2^nd contract. That led to T3 and the plaintiff entering into a compensation agreement on 14^th June 2010 (“the Compensation Agreement”) whereby T3 agreed to reimburse the plaintiff the total payment of US$83,258.29 which the plaintiff had paid under the 1^st contract, and to perform its obligations under the 2^nd contract.

7.  In breach of the Compensation Agreement T3 failed to comply with its obligations and failed to ship any copper ores to the plaintiff.

8.  The plaintiff’s pleaded case is that the plaintiff and the defendant on 26^th May 2011 entered into an agreement “partly in writing and partly orally” for the defendant to personally repay the deposit before 30^th December 2011 “the Guarantee Agreement” (paragraph 18 of the statement of claim).

9.  Paragraph 19 of the statement of claim pleads the express terms of the Guarantee Agreement as follows:

“(a) the Defendant shall indemnify the Plaintiff by a single payment of US$100,000.00 before 31^st December 2011;

(b) after payment of the US$100,000.00 to the Plaintiff, the Defendant would no longer be held personally responsible for any other business matters between T3 and the Plaintiff;

(c) should the Defendant failed to repay the Plaintiff US$100,000.00 before 31^st December 2011, the Defendant would be held personally liable for all the lost and damages suffered by the Plaintiff under the 1^st and 2^nd Agreements, Compensation Agreement and Guarantee Agreement; and

(d) the Plaintiff would withhold suing T3”

10.  The plaintiff further avers that in breach of the Guarantee Agreement the defendant failed to repay the plaintiff the US$100,000.00 or at all on or before 31^st December 2011 or at any other time.

11.  Paragraph 23 of the statement of claim pleads that as a result of the defendant’s breaches of the Guarantee Agreement

“the Plaintiff suffered the following loss and damages:

(a) the Sum of US$83,258.25;

(b) the Deposit of US$100,000.00;

(c) Ocean Freight paid for the shipment of 108 MT of copper ores total US$7,200.00;

(d) China customs import tax, customs broker handling costs, and transportation costs paid for the delivery of 108MT of copper ores from yard to storage in the sum of US$15,265.00;

(e) Fees paid for the issuance of Letter of Credit for sum of US$107.70;

(f) China shipping company agent fees paid in the sum of US$2,569.20;

(g) SGS inspection fees in the sum of US$2,257.80; and/or

(h) Loss of profits pursuant to the 1st Agreement in the sum of approximately US$13,292.30 or to be accessed”.

12.  The claim is for the sums set out in (a) to (h) of paragraph 23 of the statement of claim.

13.  I would observe that the plaintiff applied by its summons for summary judgment which was filed on 27 March 2012 for “part of the claim in this action against the defendant for US$100,000.00 being amount claimed in the Statement of Claim herein with interests and costs”. The plaintiff does not seek summary judgment for the rest of its claim against the defendant.

14.  The plaintiff relies on the written letter of personal guarantee and indemnity dated 26^th May 2011 signed by the defendant and witnessed by Lai Ying Fun (“Lai”), the general manager of the plaintiff, and by a solicitor (“the written Letter of Guarantee”).

15.  On the plaintiff’s case, the written Letter of Guarantee is the written part of the Guarantee Agreement which was said by the plaintiff to be partly oral and partly in writing.

16.  It is denied that the Guarantee Agreement was partly oral and partly written as alleged by the plaintiff.

17.  By the written Letter of Guarantee, the defendant agreed to indemnify the plaintiff the sum of US$100,000.00 being the refund of deposit received by T3. The defendant agreed to indemnify the plaintiff the said sum by a single payment of US$100,000.00 before 31^st December 2011 “as settlement for the above said amount”. It was also agreed that after the defendant indemnified the plaintiff in the said sum of US$100,000.00, the defendant would not be responsible for any other business matters between T3 and the plaintiff.

18.  In Order 14 proceedings the obligation is on the defendant to show a triable issue. The defendant relies on 3 defences :

(1) lack of consideration;

(2) duress;

(3) misrepresentation.

19.  It is not clear to me what is said to be the misrepresentation of fact relied on. And Mr Wong, for the defendant, did not press this line of defence.

20.  I shall first consider the defence of duress raised.

21.  The defendant’s case is that before he signed the written Letter of Guarantee, he had been subjected to unlawful demands and threats made by Lai, of the plaintiff. It is the defendant’s case that the written Letter of Guarantee is liable to be set aside on the ground of duress.

22.  The defendant’s case is that Lai kept on threatening and harassing him and his family members for the return of the US$100,000.00. The defendant was threatened that if he did not refund the US$100,000.00 to the plaintiff, the matter would be reported to the police and debt collectors would be sent to his home to collect the said sum of US$100,000.00 from him.

23.  His assertions are supported by the documentary evidence of the letters of threat that the defendant received from Lai from December 2010 to February 2011. The evidence also shows that the defendant was indeed arrested by the Hong Kong Police at the airport and he was detained by the police in respect of a criminal complaint made by the plaintiff against him. It is not clear when he was arrested but it would appear to be sometime between February and May 2011.

24.  On the defendant’s case, it was in those circumstances that he had agreed to sign the written Letter of Guarantee on 26 May 2011. Later on and after he had signed the written Letter of Guarantee, he was informed by the Hong Kong Police that after a proper investigation had been made of the complaint, the police concluded that there was no prima facie case against him.

25.  I was referred by Mr Wong, for the defendant, to Chitty on Contracts (31^st ed), Vol 1,  para 7-049 where it is stated:

“…a threat to prosecute even when perfectly proper in itself in the sense that a prosecution would be justified may amount to an improper threat for the purposes of the law if it is coupled with a demand for restitution of or a promise of restitution or other contractual undertaking.”

26.  The Court cannot embark on a mini trial on the affidavit evidence in Order 14 proceedings. The facts relied on by the defendant as amounting to duress are, in my judgment, not incredible. Whether or not the defendant will be believed is a matter to be investigated at trial.

27.  As I have said, the plaintiff’s case is that the Guarantee Agreement was partly oral and partly written, the written part being the written Letter of Guarantee. The oral parts, on the plaintiff’s case, are what is pleaded in paragraph 19 (c) and (d) of the statement of claim as set out above.

28.  I would view the plaintiff’s case that the Guarantee Agreement was partly oral and partly written with some suspicion. Lai said that he was the one who drafted the written Letter of Guarantee. If the terms of the Guarantee Agreement were as pleaded in paragraph 19 (a) to (d) of the statement of claim, it seems to me that it is inconceivable that Lai would have omitted to put all the express terms that he says were agreed with the defendant into the written Letter of Guarantee. At the very least, it seems to me that this is a matter which should be investigated at trial.

29.  The defendant has satisfied me that there is at least a triable issue.

30.  The appeal is allowed. I would set aside the master’s order and grant unconditional leave to the defendant to defend.