HIGH HOPE ZHONGDING CORPORATION v. 廈門墩峰進出口有限公司 AND OTHERS

HCA 2485/2015

[2021] HKCFI 32

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2485 OF 2015

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J U D G M E N T

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1.  The trial of this action was conducted by way of a virtual hearing, except for the hearing on the final day when counsel for the parties actually appeared before me to make their final submissions.  One of the reasons was that the 2 witnesses for the Plaintiff and the 2 witnesses for the defence were all on the Mainland from where they gave their oral evidence by video link.

2.  There were originally 5 defendants in total. Subsequently, the 1^st – 3^rd Defendants dropped out of the picture, leaving only the 4^th and 5^th Defendants to defend the action.  I shall say more about this below.

THE PARTIES

3.  The Plaintiff is a company incorporated on the Mainland and based in Nanjing.  It carries on the business of, inter alia, an importer of minerals for sale.

4.  The 1^st Defendant (“D1”) is a company incorporated on the Mainland and based in Xiamen.  It carries on the business of importing, exporting and trading in various commodities and minerals, including nickel.

5.  The 2^nd Defendant (“D2”) is a company incorporated on the Mainland.  It also carries on the business of importing and exporting various commodities.

6.  The 3^rd Defendant (“D3”) is a company incorporated in the British Virgin Islands (“BVI”).

7.  The 4^th Defendant (“D4”) is a company incorporated in Hong Kong.  It is a wholly-owned subsidiary of another BVI company by the name of “Dunfeng Holdings Inc.” (“Dunfeng Holdings BVI”).

8.  The 5^th Defendant (“D5”) is a Mainlander who has become a Hong Kong resident holding a Hong Kong Identity Card.

9.  D5 was the legal representative of D1 until 17 September 2015. He is (or was at all material times) the sole director of D3 and of D4.

10.  D5 through Dunfeng Holdings BVI is also the 100% beneficial owner of D4 and, through D4, the 100% beneficial owner of D1.

11.  It is to be noted that D1, D3, D4 and Dunfeng Holdings BVI all share the name of “Dunfeng” in common.

12.  At this juncture, it is to be noted that it is the Plaintiff’s case that all the said companies bearing the name “Dunfeng” have at all material times been owned and controlled by D5 and also that D2 was at all material times a company closely connected with D5 and/or his companies.

13.  It is D5’s case that, although he was at all material times the owner and controller of D1, he had left the management of D1 to a lady by the name Ding Wan Li (“Ding”) and that he never got involved in the ordering of shipments of nickel by D1 from the Plaintiff to which I shall refer below.

THE RELEVANT BACKGROUND FACTS

14.  For the purpose of the trial, the parties were able to produce a set of “Agreed and Undisputed Facts”.  For a bird’s eye view of the relevant background facts, it will be helpful for me to set out below the relevant parts thereof: -

“Date Event

06.06.2014 P and D1 entered into a contract (“003 Contract”) in Nanjing whereby D1 engaged P to import 52,000 wet metric tonnes (±10%) of nickel for a consideration of US$5,356,000.

17.06.2014 P and D1 entered into another contract (“006 Contract”) in Nanjing for the import of another 50,000 wet metric tonnes of nickel for a consideration of US$4,250,000.

20.06.2014 The 003 Contract was varied by a supplemental contract with the price of the import nickel revised to US$4,420,000 (“003 Sup-Contract”).

Up to late The nickel contracted for under the 003 Contract and the

June 2014 006 Contract was imported at the ports of Zhoushan in Ningbo and Lianyungang in Jiangsu respectively.

10.09.2014 D1 paid for and collected 10,000 wet metric tonnes of

& nickel under the 006 Contract.

19.9.2014

30.09.2014 The 006 Contract was varied by a supplemental contract (“006 Sup-Contract”).

29.10.2014 D2 and D3 each signed a letter of guarantee to P guaranteeing D1’s performance of its obligations under the 003 Contract and the 006 Contract for a period of 2 years.

05.11.2014 P and D1 entered into a further supplemental agreement to further supplement the 003 Contract and the 006 Contract (“05 Nov 14 Agreement”).

30.03.2015 A total of RMB3,600,000.00 was paid by D1 to P.

09.04.2015 P sent a letter to D1 demanding payment of RMB20,814,489.38 within 3 working days as additional security deposit proportional to the drop in market price of nickel as agreed under the 003 Contract and the 006 Contract.

16.04.2015 P commenced proceedings against D1 and D2 in the Nanjing Municipal Intermediate People’s Court (“Nanjing Court”), case no. (2015) 宁商初字号第129号, seeking inter alia:

(a) as against D1, compensatory damages in the sum of RMB35,497,023.23, and

(b) as against D2, honouring of its guarantee

(“1^st Nanjing Proceedings”)

16.04.2015    P applied to the Nanjing Court for an order preserving the assets of D1 and D2 to the value of RMB36,000,000.00.

21.04.2015    The Nanjing Court issued a preservation order as per P’s application.

27.04.2015    The Nanjing Court issued a notification to the effect that it only managed to freeze a total sum of RMB29,322.14 and US$0.07 in the 5 bank accounts of D1 for a period of 12 months.

07.05.2015    P and all Defendants executed a document entitled “还款协议” (“Repayment Agreement”) (signed by D5 on behalf of D3, D4 and himself).

(D4&D5 claim that D5 so signed the Repayment Agreement under duress.  P disputes)

08.05.2015    P and all Defendants executed a document entitled “补充协议” (signed by D5 on behalf of D3, D4 and himself).

(D4&D5 claim that D5 so signed this supplemental agreement under duress.  P disputes)

08.05.2015    D1 paid to P a sum of RMB3,000,000.00.

13.05.2015    Upon receipt from D1 RMB313,055 as settlement of legal fees, P applied to the Nanjing Court for withdrawal of the 1^st Nanjing Proceedings against D1 and D2.

14.05.2015    The Nanjing Court approved P’s application for withdrawal of the proceedings.

29.05.2015 & 04.06.2015

D1 paid a total of RMB2,922,000 to P and collected 10,000 wet metric tonnes of nickel under MV DUNFENG MANILA V.1404 

03.07.2015    P demanded D1 to settle under the Repayment Agreement interest payments due by the end of May 2015 and the end of June 2015, and to take delivery of and pay for the nickel scheduled for collection by the end of June 2015.

24.07.2015    P issued to D1 a reminder of its demand letter of 3.7.2015.

04.08.2015    P commenced fresh proceedings against all the Defendants in the Nanjing Court, case no. (2015) 宁商外初字号第00061号, seeking inter alia:

(a)  D1’s continued fulfilment of its obligations under the Repayment Agreement,

(b)  D1’s payment to P of RMB17,081,804.62 together with overdue interest of RMB3,435,623.92;

(c)  D2 to D5’s honouring of their obligations as guarantors.

(“2^nd Nanjing Proceedings”)”

15.  I shall hereinafter elaborate on the relevant provisions in some of the contracts referred to above where necessary.

16.  Referring first to the 003-Contract (an import agency agreement) as supplemented by the 003-Sup-Contract, the salient terms included: -

(i)  D1 should pay to the Plaintiff within 3 days 10% of the contract price as security deposit;

(ii)  in the event of a drop in the market price of nickel, D1 should increase the security deposit proportional to the decrease in market price of nickel as might be demanded by the Plaintiff;

(iii)  D1 failed to meet its obligations under (ii), the Plaintiff had the right to discharge the contract and to dispose of the goods on its own; and

(iv)  D1 should bear the loss, if any, suffered by the Plaintiff under (iii).

17.  Regarding the 006-Contract (another import agency agreement) as supplemented by the 006-Sup-Contract, its terms were very similar to those in the 003-Contract, except for the price which was lower and the provision for the payment of the security deposit within 3 days which was raised to 20% of the contract price.

18.  Upon D1’s failure to take full delivery of the nickel and pay all outstanding sums under the said contracts, D1 procured D2 and D3 each to sign a guarantee on 29 October 2014 in favour of the Plaintiff guaranteeing D1’s performance of its obligations under the said contracts for a period of 2 years.

19.  As can be gathered from the Agreed and Undisputed Facts, even by April 2015, D1 had still not fulfilled its obligations under the said contracts as further supplemented by the 05 Nov 14 Agreement.

20.  On 9 April 2015, the Plaintiff sent to D1 a letter of demand for over RMB20 million as additional security deposit.

21.  D1 having still failed to perform its obligations under the said contracts and agreement, the Plaintiff instituted proceedings against D1 in the Nanjing Court and obtained, inter alia, a preservation order against the assets of D1.

22.  Such effort was however of not much use because D1 only had very little money in its bank accounts to be frozen.

23.  There then began a process of negotiation between the Plaintiff and D1 in April 2015.  The negotiations were carried out between one Gu Chiang (“Gu”), an employee of the Plaintiff, who worked under the supervision of his superior, one Sang Lin (“Sang”), on behalf of the Plaintiff and Ding on behalf of D1. They, being in two different cities, communicated with each other by phone and by email correspondence.

24.  By 27 April 2015, the parties had actually got down to producing a draft settlement agreement.  By an email dated 27 April 2015, Gu sent to Ding a draft settlement agreement for her perusal.  It was entitled “还款协议” and the parties thereto were the Plaintiff, D1, D2 and D3.  D4 and D5 had not been mentioned in that document.

25.  By another email sent later on the same day, 27 April 2015, Gu sent a slightly revised draft of the earlier document.  It was entitled “协议”.  The effect of this document was broadly the same as the previous one referred to in paragraph 24 above, although it was in a slightly different format.

26.  By an email dated 28 April 2015, Ding replied to Gu’s last email and sent to him the document referred to in paragraph 25 above with her amendments thereto.  It is to be noted that this email was expressly copied to D5 at his own email address.

27.  By an email dated 30 April 2015, Gu sent to Ding a revised draft settlement agreement entitled “还款协议” which reverted back to the format of the document referred to in paragraph 24 above.  It is to be noted that, in this document, besides the Plaintiff, D1, D2 and D3 who were named as parties in the document referred to in paragraph 24 above, D4 and D5 were added as parties thereto.  This draft also contained a new clause 8 which provided that D4 and D5 were to be guarantors for the performance by D1 of its duties thereunder. It read as follows: -

“8. 墩峰国际(香港)有限公司，黄艺自愿为乙方上述进口代理协议项下的付款义务承担连带保证责任，保证期间为两年。＂

28.  There was no more email correspondence between the parties until 5 May 2015.  By an email dated 5 May 2015 from a Mr Xu (“Xu”), another employee of the Plaintiff, to Ding, the former enclosed a revised draft of the “还款协议” which was sent to Ding on 30 April 2015.  As far as I can see, this document contains some amendments to some figures and dates in the draft of 30 April 2015.  Clause 8 about the guarantee by D4 and D5 had remained unchanged.

29.  On the next day, 6 May 2017, Ding sent an email back to Xu with a copy to Gu.  As far as I can see, the previous draft referred to in paragraph 28 above had been amended in two respects: -

(i)  A figure of “人民币300万” had been inserted into clause 2.

(ii)  A new clause 9 had been added which read as follows:

“9. 甲方未按第4條約定及時申請撤訴或撤回財產保全，丙，丁，戍，已方免除保証責任。＂

30.  Three points are to be noted about the email referred to in paragraph 29 above: -

(i)  In the caption in the email, it was indicated that the draft had been amended by the sender’s side, i e, Ding’s side.

(ii)  There was no objection or protest by Ding against the addition of D4 and D5 as parties or guarantors.  Indeed, in the draft enclosed therewith, D4 and D5 were retained as parties and the provision in clause 8 that they would act as guarantors had also been retained.

(iii)      The new clause 9 which was added was clearly for the protection of D1, D2, D3, D4 and D5 and not the Plaintiff.

31.  On 7 May 2015, in the morning, Xu sent another email to Ding with a copy to Gu enclosing the draft returned by Ding on 6 May 2015 but with some further amendments made by the Plaintiff (“the Final Draft RA”).  Clauses 8 and 9 in the said draft returned by Ding remained intact.

32.  That was the state of play between the parties before the crucial meeting in Xiamen on the same day, 7 May 2015.

33.  Before I proceed to deal with the crucial meeting in Xiamen on 7 May 2015 and the signing of the Repayment Agreement dated 7 May 2015 referred to under the “Agreed and Undisputed Facts” as referred to in paragraph 14 above, it would be convenient for me to divert a little to give an account of the relevant procedural history and set out the remaining issues between the parties.

THE RELEVANT PROCEDURAL HISTORY

34.  As I have mentioned above, originally there were 5 defendants in the case.

35.  Although the action was started against all 5 defendants, D1, D2 and D3 being parties on the Mainland had never been served.  Notwithstanding the above, D1 in fact filed a voluntary Acknowledgment of Service through Messrs Henry Wan & Yeung, Solicitors, on 26 July 2018.  That firm of solicitors was in fact acting for D1 as well as D4 and D5 at that time.  Soon after that, the Plaintiff and D1 – D3 came to an agreement that the Plaintiff would discontinue the action against D1, D2 and D3 and that D1 would withdraw his said Acknowledgment of Service.

36.  As a result, by an Order of Master Ho dated 1 August 2018, leave was granted to the Plaintiff to withdraw the action against D1, D2 and D3 and to D1 to withdraw his Acknowledgment of Service.

37.  Hence, only D4 and D5 remain as defendants in the case, despite the fact that the title of the action has not been amended by deleting D1, D2 and D3 as defendants.

38.  On the third day of the trial, Mr Tam, counsel for D4 and D5 applied to further amend the Re-re-Amended Defence and Counterclaim in order to enable his clients to counterclaim for a set-off in the event that the Court decides in favour of the Plaintiff and award damages against D4 and D5.  I gave my Ruling against D4 and D5 on the same day.  My said Ruling has been reduced into writing and will be handed down together with this Judgment.

39.  In short, I ruled that since the principal debtor, D1, was no longer a party in the action, the guarantors, namely, D4 and D5, would not be able to raise the defence and/or counterclaim for a set-off against the Plaintiff for breaches of contract allegedly committed by the Plaintiff against D1.

THE REMAINING ISSUES               

40.  The parties had originally agreed upon an “Agreed List of Issues”.  As a result of my said Ruling, the agreed issues have been reduced to the following: -

“1.  Whether the defence of duress as pleaded in §§4 and 10(1) of the Re-Re-Amended Defence and Counterclaim of the 4^th and 5^th Defendants (“RRAD&CC”) is made out?

2.    If the answer to Issue 1 above is negative, what is the amount of damages payable by the 4^th and 5^th Defendants to the Plaintiff pursuant to the Repayment Agreement dated 7 May 2015 referred to in §5 of the Re-Amended Statement of Claim?

3.    In consideration of Issue 2, whether the 4^th and 5^th Defendants are entitled to rely on the defence of: -

(i)  ……………………………………………………….

(ii)  the Plaintiff allegedly having conducted unreasonably in selling the Remaining Nickels as pleaded in §§10(4)(b) of RRAD&CC,

and if so, whether such defence(s) is or are made out and to what extent?”

The issue of defence and/or counterclaim of set-off under paragraph 3(i) has been deleted as a result of my said Ruling.

41.  Issue 1 arises out of the defence put forward by D4 and D5 that they had been made to sign the Repayment Agreement and the Supplemental Agreement thereto dated 8 May 2015 (“the Supplemental Agreement”) by duress exercised by the Plaintiff’s representatives.

THE MEETING IN XIAMEN AND THE SIGNING OF THE REPAYMENT AGREEMENT AND THE SUPPLEMENTAL AGREEMENT

The Plaintiff’s Case

42.  The Plaintiff called two witnesses to give evidence on its behalf.  They were Sang and one Fan Zhong Feng (“Fan”).  Gu was not called to give evidence.

43.  Regarding what happened at the meeting in Xiamen and the signing of the Repayment Agreement and the Supplemental Agreement, only Sang’s evidence is relevant.

44.  According to Sang, what happened was as follows: -

(i)  He has already left the employment of the Plaintiff which took place in June 2016. Hence, he is no longer an employee of the Plaintiff now.

(ii)  When he was with the Plaintiff, he was a manager in one of its trading departments. He worked under Fan to whom he reported.  Both Gu and Xu were his subordinates.  Gu would report to him directly whilst Xu would merely carry out secretarial work, such as sending out emails, as directed by Gu.

(iii)  He and Gu were responsible for negotiating with the Dunfeng companies for a settlement of the dispute in April and May 2015.

(iv)  It was he himself who came up with the idea that, in addition to D2 and D3, D4 and D5 should also be asked to act as guarantors for the liability of D1.  Such idea was approved by his superiors in the Plaintiff.  This resulted in the production of the draft settlement agreement referred to in paragraph 27 above.

(v)  There was no objection by Ding or D4 and D5 that D4 and D5 should act as guarantors for D1’s obligations.

(vi)  Either before or after the Final Draft RA had been forwarded to Ding in the morning of 7 May 2015, he decided that the matter was important enough for him to go personally to witness the signature of D5 as a guarantor.  He therefore instructed Gu to make an appointment with Ding to meet in the Dunfeng office in Xiamen on 7 May 2015.  Gu did in fact make the appointment with Ding.

(vii)  Although there had not been any express agreement on the exact wording of the Final Draft RA, he was prepared to make the trip to Xiamen because, in view of the previous agreement by Ding to the draft returned by her to the Plaintiff by her email dated 6 May 2015 referred to in paragraph 29 above, he would not anticipate any disagreement on the Final Draft RA.

(viii)  In the afternoon of 7 May 2015, Sang and Gu took a plane from Nanjing to Xiamen. They arrived at the Dunfeng office at about 5:00pm.  On arrival at the reception, Gu notified Ding of their arrival.  Ding came out and met them and they were led past a locked door into the general office area and then into a conference room.  There were staff members working in the general office area.

(ix)  After Ding had led them into the conference room, the three of them were subsequently joined by D5 after about half an hour.  All the time, they talked to each other calmly and cordially.  D5 showed willingness and readiness to sign the document which became the Repayment Agreement.

(x)  Ding arranged for someone in the office to put the company chops of D1, D2, D3 and D4 respectively onto the signature page of the document.  D5 then put his signature over the company chops of D3 and D4 and also under his own name as the last party.

(xi)  Sang thought that, in order to be more cautious, he should request D5 to produce his Hong Kong Identity Card for copying onto the signature page.  Again, Ding arranged for someone to put the image of the Hong Kong Identity Card of D5 onto the signature page underneath D5’s own signature.

(xii)  Throughout the entire process, there was no protest or objection expressed by D5 or Ding in relation to the signing of the Repayment Agreement by D5.

(xiii)  As regards the signing of the document on behalf of the Plaintiff, Sang put his signature against the name of the Plaintiff on the signature page on a copy of that document to show that the agreement would be binding on the Plaintiff. The company chop of the Plaintiff had not been applied on any copy at that stage.

(xiv)  Sang and Gu then departed from D5 and Ding in the conference room with the document signed by D5 and then flew back to Nanjing.

(xv)  After Sang and Gu had gone back to Nanjing, it was discovered that there was a slight clerical error in clause 1 of the Repayment Agreement relating to the contract numbers of the 003 Contract and the 006 Contract as correlated to the two shipments respectively.

(xvi)  Gu therefore notified Ding about the clerical error.

(xvii)  On 8 May 2015, at 10:36am, Xu sent an email to Ding with a copy to Gu enclosing a draft of the Supplemental Agreement for the purpose of correcting the clerical error in clause 1 of the Repayment Agreement.

(xviii)  By an email dated the same date, 8 May 2015, at 11:29am, from Ding to Xu with a copy to Gu, Ding sent back a copy of the draft Supplemental Agreement bearing on the signature page the company chops of D1, D2, D3 and D4 and with the signatures of D5 over the company chops of D3 and D4 and against his own name as the last party.

(xix)  Furthermore, the said email from Ding bore the following message: -

“请打印扫瞄件盖章给我司，另请直接另外打印六套贵司盖章的补充协议，一起让我同事带回，我们收到后补完整的盖章回寄。”

(xx)  Thereafter the parties sent to each other the originals of the Repayment Agreement and the Supplemental Agreement with the company chop of the Plaintiff against its name and the company chops of D1, D2, D3 and D4 against their names respectively and the signatures of D5 against the names of D3, D4 and D5.  In addition, the image of the Hong Kong Identity Card of D5 was also imprinted underneath his last signature on the Repayment Agreement.

45.  In summary, the Repayment Agreement as amended by the Supplemental Agreement provided as follows: -

(i)  The recital referred to the 003 Contract and the 006 Contract.

(ii)  By clause 1, the Plaintiff and D1 agreed that D1 was owing to the Plaintiff under the 003 Contract and the 006 Contract the total sum of RMB42,552,443.84 (excluding the overdue interest for late payment as set out in the calculations shown in Annexures 1 and 2 thereto).

(iii)  Under clause 2, D1 agreed to pay to the Plaintiff on 8 May 2015 the sum of RMB3 million as additional security deposit under the said 2 contracts.

(iv)  By clause 3, D1 agreed to provide the “小提單” for the 5 tonnes of goods on MV DUNFENG MANILA V. 1404 to the Plaintiff as security before 15 May 2015.  In the event that that was not done, D1 should provide to the Plaintiff the sum of RMB3 million as security instead.

(v)  By clause 4, the Plaintiff and D1, would within 2 days after the performance under clauses 2 and 3 apply to court to withdraw or discontinue all legal proceedings and preservation orders.  D1 should also pay to the Plaintiff legal fees in the sum of RMB313,055.

(vi)  By clause 5, after D1 had performed its obligations under clauses 2 and 3, the payment dates under the said contracts would be extended to 30 August 2015.  It further provided for the calculation of monthly interest and other operational matters.

(vii)  Clause 6 provided for D1’s ability to take delivery of the goods on MV DUNFENG MANILA V. 1404.

(viii)  Under clause 7, the guarantees by D2 and D3 would be for a period of 2 years.

(ix)  Under clause 8, the guarantees by D4 and D5 would also be for a period of 2 years.

(x)  Clause 9 provided that if the Plaintiff should fail to withdraw or discontinue the legal proceedings and preservation orders as provided under clause 4, the guarantees by D2, D3, D4 and D5 would terminate.

(xi)  By clause 10, clauses 4 and 5 under the 05 Nov 14 Agreement between the Plaintiff and D1, became nullified.

(xii)  By clause 11, the Repayment Agreement and the Supplemental Agreement were to be executed by way of 6 sets of originals with each of the 6 parties holding 1 set of the originals.

46.  As can be seen from the Agreed and Undisputed Facts: -

(i)  On 8 May 2015, D1 paid to the Plaintiff the sum of RMB3 million.  (This must be compliance by D1 of its obligation under clause 2 of the Repayment Agreement.)

(ii)  On 13 May 2015, D1 paid to the Plaintiff legal fees in the sum of RMB313,055 and the Plaintiff applied to the Nanjing Court for the withdrawal of the legal proceedings against D1 and D2.  (This must be performance by the parties under clause 4 of the Repayment Agreement.)

(iii)  On 14 May 2015, the Nanjing Court approved the Plaintiff’s application for withdrawal of the legal proceedings.  (This must be as a result of the Plaintiff’s performance of its obligation under clause 4 of the Repayment Agreement.)

(iv)  On 29 May and 4 June 2015, D1 paid a total of RMB2,922,000 to the Plaintiff and collected 10,000 wet tonnes of nickel under MV DUNFENG MANILA V. 1404.  (This must be performance by the parties under clause 6 of the Repayment Agreement.)

The Defendants’ Case

47.  Ding and D5 were called as witnesses for the defence.  In summary, their evidence is to the effect as follows: -

(i)  Ding was the only person who dealt with the affairs and management of D1.  D5 never got involved with the day-to-day management which he left entirely to Ding.

(ii)  D5 was never involved in the negotiation between the Plaintiff and D1 for a settlement.  He never agreed and would never agree to put forward himself and his company, D4, as guarantors for the liabilities of D1, because he had nothing to gain by doing so.  Ding had no authority to commit him or D4 to providing any guarantee.

(iii)  According to Ding, the email issued by Ding to Gu on 28 April 2015 as referred to in paragraph 26 above was copied by Ding’s assistant to D5 by mistake.  It was never meant to be copied to D5.

(iv)  Regarding the meeting in Xiamen on 7 May 2015, the parties did not make any appointment. Gu and Sang simply turned up at the Dunfeng office uninvited.

(v)  There was no locked door in the Dunfeng office between the reception area and the general office area and Gu and Sang simply barged in to look for Ding and D5. They talked very loudly and in a very unfriendly manner.  In order to calm them down, Ding led them into a conference room alone.  She did not notify D5 to join them.

(vi)  Gu and Sang told Ding that they must get the settlement agreement signed, otherwise they would not leave.  Coincidentally, Ding suddenly had to leave in a hurry to fetch her child from school.

(vii)  As a result of the threatening manner on the part of Gu and Sang, she reluctantly caused the company chops of D1, D2, D3 and D4 to be put onto the settlement agreement and handed the document back to Gu with a view to letting them take it back to the Plaintiff as accomplishment of their mission.  Gu and Sang then appeared to have calmed down and agreed to leave with her.

(viii)  As they were leaving, Gu suddenly said he had to use the washroom.  Since she was in a hurry to pick up her child, she therefore left first.

(ix)  It then transpired that Gu and Sang found their way into the private office of D5.  Sang kept watch at the door and Gu banged on D5’s desk and forced him to sign the settlement agreement saying that, if he refused to sign, he would not be allowed to leave.  Gu further threatened him by saying that the Plaintiff was a state enterprise and would be able to prevent him from leaving the Mainland and to freeze the Dunfeng bank accounts.

(x)  As a result of the threats by Gu who was a very big and strong man, D5 had no alternative but to sign on the document which was the Repayment Agreement.  He was worried that if the Plaintiff were to be able to stop him from leaving the Mainland, he would not be able to see his family in Hong Kong.

(xi)  When asked in court as to how the image of his Hong Kong Identity Card got onto the Repayment Agreement, D5’s answer was that, in the course of past dealings, the Plaintiff would have got a copy of his Hong Kong Identity Card and that the Plaintiff must have added that image onto the Repayment Agreement afterwards.

(xii)  Regarding the signing by him of the Supplemental Agreement on the next day, 8 May 2015, D5 said that he had no alternative but to sign it because he was still laboring under the threats uttered by Gu on 7 May 2015.

My Findings

48.  I find Sang to be an honest witness who gave his evidence spontaneously and in a straight forward manner.  Moreover, he is no longer an employee of the Plaintiff and should have less motive to give untrue evidence.

49.  I find Ding and D5 to be evasive and untruthful witnesses.

50.  I further find their story to be untruthful and incredible for the following reasons: -

(i)  First, the amounts involved in the 003 Contact and the 006 Contact are very substantial.  The Plaintiff actually sued D1 in the Nanjing Proceedings.  D5 with his position and beneficial interest in D1, I simply cannot believe that he was not concerned with or involved in the placing of the original orders and the subsequent attempts to settle the Plaintiff’s claim.                                            

(ii)  It follows that I do not believe that Ding’s email to the Plaintiff sent on 28 April 2015 was copied to D5 only as a result of the mistake on the part of Ding’s assistant.  It must have been copied to him by Ding so as to keep him informed about the progress of the negotiation for a settlement.

(iii)  I also do not believe that Gu and Sang would have flown all the way from Nanjing to Xiamen without an appointment.  If they had just wanted to catch D5 and force him to sign the Repayment Agreement, they could well have found on arrival that D5 was not in the office or even not on the Mainland.  Their trip would have been totally futile.

(iv)  I also find the allegation that Gu and Sang simply barged into the Dunfeng office and D5’s private office and threatened him to sign the Repayment Agreement to be incredible.  It is the head office of the Dunfeng companies.  There would be staff members of those companies there.  It would have taken a lot of courage for Gu and Sang to have behaved in the manner as alleged in the territory not of their own but of the opposite party.

(v)  Then there is the description by Ding as to how the company chops of D1 – D4 were applied onto the Repayment Agreement.  It is simply unconvincing.

(vi)  What is more, I find the allegation by D5 about the imprinting of his Hong Kong Identity Card onto the Repayment Agreement by the Plaintiff to be totally unbelievable. Such allegation had never been made in any pleading or witness statement.  It was made for the first time by D5 in the witness box.

(vii)  I further find Ding’s allegation about her having to leave in a hurry and leaving Gu and Sang behind to be unbelievable.

(viii)  Likewise, the reason put forward by D5 for his signing the Supplemental Agreement on the next day without the presence of Gu and Sang is totally unconvincing.

(ix)  Indeed, the conduct of D5 and his companies from 8 May 2015 onwards as described in paragraph 46 above can only be consistent with the fact that the defendants, especially D1 and D5, were complying with the terms of and performing their obligations under the Repayment Agreement without objection or protest.

51.  In the circumstances, I find as a fact that the Repayment Agreement and the Supplemental Agreement were entered into by the defendants, in particular, D1, D4 and D5, totally voluntarily and freely without any duress exercised by the Plaintiff.

52.  D4 and D5 having failed to perform all their obligations under the Repayment Agreement and the Supplemental Agreement, I find that they are liable for the breach of the same and liable to the Plaintiff in damages.                                                        

DAMAGES

53.  At the stage of closing submissions by counsel for the parties, I was informed that it had been agreed between the Plaintiff and D4 and D5 that, subject to the court’s finding on liability, the amount of damages which the Plaintiff should be entitled to recover was in the sum of RMB42,267,856.52, being damages as at 31 August 2017, together with interest accruing thereafter at the daily rate of RMB15,074.29 until full payment.  It has also been agreed between the parties that such damages and interest are subject to any finding by the court that the Plaintiff has failed in its duty to mitigate damages.

MITIGATION OF DAMAGES

54.  The Plaintiff eventually sold in the market the shipments of nickel uncollected by D1 under the 003 Contract, the 006 Contract and on board of MV Dunfeng Manila.

55.  In the closing submission of Mr Tam, he has stated that D4 and D5 only challenge the respective sale prices of those shipments of nickel as not being the best prices reasonably obtainable in the market on the respective days of their sale.

56.  In her evidence, Ding gave an account of what the market completion price ranges were for nickel of different Ni, Fe and H20 compositions on the respective sale dates for the said 3 shipments of nickel by reference to the figures listed on the website “鉄合金在綫” www.cnfeol.com.

57.  No expert evidence on this aspect had been called by the defence.

58.  On the side of the Plaintiff, Fan gave evidence about the sale prices of the said 3 shipments of nickel.  He said that he always followed the market prices of nickel and he said that all the said shipments were sold at the respective open market prices.

59.  In his closing submission, Mr Chan submitted as follows: -

 (i)  Regarding the shipment under the 003 Contract, even on Ding’s own case, the price at which the Plaintiff sold the nickel, namely, RMB170 per metric tonne, on 23 December 2015, was precisely the same as the lower end of transaction price range quoted by Ding, namely, RMB170-210 per metric tonne.

 (ii)  Regarding the shipment under the 006 Contract, although the price at which the Plaintiff sold the nickel, namely, RMB210 per metric tonne, on 7 July 2016, appeared to be slightly less than the lower end of the transaction price range quoted by Ding, that is, RMB240-290 per metric tonne, Ding accepted under cross-examination that the price would edge closer to RMB240 per metric tonne if the shipment consisted only of 1.5% as in the present case.

 (iii)  Finally, regarding the shipment on MV Dunfeng Manila, although the price at which the Plaintiff sold the nickel, namely, RMB150 per metric tonne, on 17 November 2015, was slightly less than the lower end of the transaction price range quoted by Ding, that is, RMB190-250 per metric tonne, Ding accepted under cross-examination that the percentage of both nickel (1.35% Ni) and iron (16.68 Fe) of the shipment in question was much lower than the composition of the nickel in the example quoted by her (1.4-1.5% Ni; 30-35% Fe).

60.  Having received the evidence, I agree that there is substance in the submission of Mr Chan.

61.  The burden is on the defence to prove that the Plaintiff has failed to mitigate damages.

62.  I find on the balance of probabilities that D4 and D5 have failed to discharge their burden of proving that the Plaintiff has failed in its duty to mitigate damages.

CONCLUSION

63.  My finding on the Agreed List of Issues is as follows: -

 (1)  D4 and D5 have not made out their defence of duress as pleaded in paragraphs 4 and 10(1) of the Re-re-Amended Defence and Counterclaim.

 (2)  D4 and D5 are liable to the Plaintiff in damages in the sum of RMB42,267,856.52 being damages as at 31 August 2017 together with interest accruing thereafter at the daily rate of RMB15,074.29 until full payment.

 (3)  D4 and D5 are not entitled to rely on the defence that the Plaintiff conducted itself unreasonably in selling the remaining nickel as pleaded in paragraphs 10(4)(b) of the Re-re-Amended Defence and Counterclaim.

63.I accordingly give judgment in favour of the Plaintiff in the sum of RMB42,267,856.52, being damages as at 31 August 2017, together with interest accruing thereafter at the daily rate of RMB15,074.29 until full payment.

64.  I also dismiss the counterclaim by D4 and D5.

65.  I make an order nisi that D4 and D5 should pay to the Plaintiff the costs of the action and the counterclaim.

66.  Lastly, I wish to thank counsel on both sides for their able assistance.