CWT BEHEERMAATSCHAPPIJ BV v. LINCOLN SEREJO VENANCIO

CACV 111 of 2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 111 OF 2003

(ON APPEAL FROM HCA 4320 OF 2000)

----------------------------------------------

----------------

JUDGMENT

----------------

Hon Yuen JA:

1.  This is an appeal from a judgment of Deputy High Court Judge McMahon (now McMahon J) in which he gave judgment to the Plaintiff against the Defendant in the sum of US$300,000 together with interest at 1% above prime from 4 November 1998 and costs.

Background

2.  The Plaintiff’s cause of action against the Defendant was on a    guarantee.  The Defendant was a director and shareholder of a          company by the name of Spectrum International Marketing Ltd  (“Spectrum”) which was in the business of organizing international     sports events.  One of the events it promoted was the Women’s      Volleyball Grand Prix for the year 1996. 

3.  Spectrum had to arrange for participants from various countries to travel to the event venues.  For the few years prior to 1996, air tickets had been arranged for Spectrum by the Plaintiff, a Swiss company then known as Carlson Wagonlit Travel.  It was found by the judge (and it is not disputed) that for previous years, Spectrum had “prepaid” (i.e. paid before issue) at least 80% of the cost of the air tickets.

4.  The events were due to commence on 30 August 1996.  Spectrum provided the Plaintiff with routings and passenger numbers in March 1996.  Arrangements were originally handled at Spectrum’s end by David Weinraub.  However Mr Weinraub left Spectrum in June 1996.

5.  On 7 August 1996, Michael Luevano, who had taken over the arrangements as General Manager for the event at Spectrum, wrote to Marco Dall’Aglio, the Plaintiff’s manager in Lausanne, asking amongst other things about payment terms.

6.  On 12 August 1996, the Plaintiff replied asking for payment of CHF612,000 (about US$510,000).

7.  Spectrum was unable to provide this, apparently because of a cash flow problem caused by the withdrawal of a large corporate sponsor for the event.  The Plaintiff on the other hand had to pay the airlines within 15 days of issue of tickets.

8.  There then followed a series of correspondence between the Plaintiff and Spectrum regarding what sum the Plaintiff would be prepared to accept for the tickets to be issued.

9.  The Plaintiff’s case was that eventually a contract with Spectrum was reached on 19-20 August 1996, a term of which was the provision of a personal guarantee from the Defendant. 

10.  The guarantee was given in a letter dated 22 August 1996 which was in the following terms:

“Dear Mr Varesano [the Plaintiff’s finance director]

This acknowledges receipt of your telefax dated 19 August 1996 in regards to the WVGP payment terms.

This is to confirm my personal guarantee for the maximum payment of USD300,000 to Carlson Wagonlit Travel in the event of default of payment by Spectrum of such sum”.

11. The Defendant’s case at the start of the trial was that a contract had been agreed on 14 August 1996 which the Plaintiff threatened to breach by refusing to proceed with it, and that it was only as a result of economic duress that the Defendant provided the guarantee.  The Defendant’s pleaded defence had not however specifically asserted that a contract had been made on 14 August 1996.

12. In the event, the Plaintiff provided the tickets but Spectrum failed to pay the balance of the sum owed.  The Plaintiff obtained judgment against Spectrum but was unable to obtain payment, hence the action against the Defendant on the guarantee.

Trial

13. It was conceded by counsel for the Defendant at trial that the burden of proving that the guarantee had been provided under economic duress was on the Defendant.  As part of that burden, it was for the Defendant to prove that a contract between the Plaintiff and Spectrum had been reached on 14 August 1996. 

14. The Defendant’s case that a contract had been concluded on 14 August 1996 was only asserted in the Defendant’s supplemental witness statement, produced on the 1^st day of trial.  This was supported by a fax from Spectrum to the Plaintiff of 14 August 1996, referring to an agreement reached between Andy Jay, Spectrum’s Chief Operating Officer, and the Plaintiff.  (A fax denying the agreement was apparently sent the same day by Kate Wyss of the Plaintiff.  This fax will be discussed later in this judgment).

15. At trial, the Plaintiff’s case was proved by way of witness statements from Mr Dall’Aglio and Mr Varesano  and documentary evidence, in particular the contemporaneous correspondence.  The Defendant also gave oral evidence.

16. The judge reviewed the contemporaneous correspondence in detail in paras. 27-37 of his judgment, which I shall not repeat here.  He also considered the witness statements and the Defendant’s oral evidence.  Having seen the Defendant give evidence, he found that he was, in the judge’s own words, “a witness who inspired caution as to his credibility”.  He found that on the totality of the evidence, the Defendant had failed to make out his case that a contract had already been reached before the Plaintiff’s threats to cease dealing with the travel arrangements led to the Defendant’s agreement to provide the guarantee.

Appeal

17. On appeal, Mr Bleach SC for the Defendant accepted that an appellant seeking to overturn a trial judge’s finding of fact has a difficult task.  He sought to emphasize the fact that the Defendant was the only “live” witness.  He did not suggest that the witness statements produced by the Plaintiff were not admissible as evidence, simply that they were not sworn and had not been tested in cross-examination.  He also submitted that the judge had been wrong to say that both faxes of 14 August 1996 were only disclosed in discovery close to the start of trial.  In fact the fax from Spectrum had been included in the Defendant’s list of documents for some time, whereas Ms Wyss’ fax was only annexed to Mr Dall’Aglio’s supplemental witness statement at trial, and its authenticity was “not admitted”.

18. Although the judge was mistaken in respect of the disclosure of these faxes, I am not persuaded given the totality of the evidence that he was wrong in finding that the Defendant had failed to prove that a contract had been reached on 14 August 1996.

19. As Lord Hoffmann said in Biogen Inc v Medeva plc [1997] RPC 1 and repeated in Piglowska v Piglowski [1999] 1 WLR 1360:

“The need for appellate caution in reversing the trial judge’s evaluation of the facts is based upon much more solid grounds than professional courtesy.  It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impressions which was made upon him by the primary evidence.  His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance .... of which time and language do not permit exact expression, but which may play an important part in the judge’s overall evaluation”.

“Where the judgment turns on an issue of fact, the Court of Appeal must have regard to the nature of that issue of fact.  And it must have regard to the advantages enjoyed by a trial judge who received the evidence on such an issue at first-hand, in other words, in whose presence the whole of the evidence unfolded in its living state.  Such advantages can be, as Lord Shaw of Dunfermline put it in Clarke v Edinburgh Tramways at p.36, ‘sometimes broad and sometimes subtle’.  The question for the Court of Appeal is whether, even though it does not enjoy the advantages enjoyed by the trial judge who received the evidence at first-hand, it is nevertheless satisfied that his conclusion on the facts is plainly wrong.  The Court of Appeal should intervene if so satisfied.  But if not so satisfied, the Court of Appeal should defer to the trial judge’s conclusion even if in some doubt as to its correctness”.

20. When considering the veracity of the Defendant’s oral evidence, the judge rightly took into account the fact that in his 1^st witness statement, the Defendant made no reference at all to Spectrum’s fax of 14 August 1996.  This was not because the Defendant had no knowledge of the fax at the time.  On the contrary, he said in his supplemental witness statement that he had been provided with a copy at the time.  Nor was this because the Defendant did not have access to a copy of this fax for this action - he clearly did.  One would therefore have thought that this fax would have been at the forefront of the Defendant’s mind if it really evidenced that a contract had been concluded on 14 August 1996 which the Plaintiff later threatened to renege on.  Given the Defendant’s late reliance on this fax, the judge was entitled to consider it with caution. 

21. When evaluating the Defendant’s credibility, the judge was also entitled to take into account the fact that it was only in the latter part of cross-examination that the Defendant referred for the first time to a conversation he allegedly had with Mr Varesano in which the latter allegedly expressly acknowledged that a contract had been made (on 14 August 1996).  Again one would have thought that this would have been asserted right at the start.

22. The judge was also entitled to take into account the fact that there was no statement from Mr Jay himself (whether contemporaneously or for the purposes of this action), or from Mr Luevano, the writer of the 14 August 1996 fax from Spectrum.  

23. The judge rightly focussed on the totality of the contemporaneous correspondence, which did not bear out the Defendant’s case that a contract had been reached on 14 August 1996.  On appeal, Mr Bleach SC focussed on the Spectrum fax of 14 August 1996 alleging an oral agreement made by Mr Jay and submitted that the judge should not have taken into account the fax from Ms Wyss denying the agreement.  Mr Bleach SC submitted that Ms Wyss’ fax had never been disclosed in discovery and its authenticity had been challenged. 

24. In my view, even if Ms Wyss’ fax were to be disregarded, the judge would still have been entitled to find that the Defendant had failed to discharge the burden of proving that an agreement had been concluded on 14 August 1996.  The conclusion of such a contract on 14 August 1996 went completely against the grain of the contemporaneous correspondence.  The alleged terms would have been extraordinary in their generosity to Spectrum in the light of the Plaintiff’s position immediately prior to the date when the alleged agreement was made.  Moreover, the tone of Spectrum’s correspondence immediately after that date would have been inexplicable for a wronged party re-negotiating after its opposite number had reneged on a deal.  In its fax of 15 August 1996, Spectrum writes to the Plaintiff: “please understand that Spectrum is not trying to negotiate” and “we are not trying to make any non-payment”.  Five days later on 20 August 1996, a clearly grateful Mr Luevano expressly thanked the Plaintiff for its “flexibility” in payment terms. 

25. Even subsequently, when the Plaintiff started to press Spectrum for payment, Spectrum never sought to counter the Plaintiff with any allegation that it was the Plaintiff who was the first to breach an agreement. 

26. Thus, it is clear on the contemporaneous documentary evidence that even if Ms Wyss’ fax denying the agreement had been disregarded, the Defendant would still have failed to prove the existence of an agreement on 14 August 1996 and the judge’s view on the credibility of the Defendant would not have been affected.

27. In the circumstances, it is not necessary to consider the Respondent’s Notice. 

28. It follows that this appeal should be dismissed and I would make an order nisi that the appellant (Defendant) bear the respondent’s (Plaintiff’s) costs.

Hon Sakhrani J:

29. I agree.

Hon Barma J:

30. I also agree.