GAM KIMURA COMMODITY TRADE FINANCE FUND LTD (formerly known as Kimura Master Fund Limited) v. SHENZHEN FEIMA INTERNATIONAL SUPPLY CHAIN CO, LTD

HCA 2609/2018

[2019] HKCFI 2780

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2609 OF 2018

________________________

BETWEEN

_________________________________

_________________________________

DECISION

_________________________________

Introduction

1.  By a summons filed on 15 July 2019 (“the O.14 Summons”), the Plaintiff (“P”) applied for summary judgment.  By a summons filed on 4 November 2019 (“the Amendment Summons”), the Defendant (“D”) applied for leave to amend its Defence. 

2.  I heard both summonses substantively today.  My decision is to (1) grant summary judgment in terms of the prayers in the Statement of Claim against D, with interests up to the date hereof being the contractual interests pleaded, and interests thereafter at the judgment rate; (2) dismiss the Amendment Summons; and (3) order D to pay the costs of the whole action, including the costs of both summonses and all costs previously reserved, all of which to be taxed on the indemnity basis with Certificate for Counsel if not agreed, to P (“the Decision”).

3.  My reasons for the Decision are as follows.

Background Facts

4.  P was a Cayman Islands corporation and a money lender.  P’s case was that in 2018, P as lender, D’s subsidiaries as borrowers, and D as guarantor entered into an agreement by which P agreed to lend, and the borrowers agreed to borrow, USD 7.5 million (“the Loan”). 

5.  The Loan was only for 7 days but could be rolled over at P’s discretion.

6.  P’s case was that D properly executed a guarantee for the Loan (“the Guarantee”), and the Guarantee was valid and enforceable.

7.  Relying on the Guarantee, P commenced this action against D, claiming USD 7.5 million plus contractual and/or statutory interests.

8.  D was a Mainland Chinese corporation listed on the Shenzhen Stock Exchange (Stock Code: 002210).

9.  According to the Draft Amended Defence, D’s case was that the Guarantee was invalid, ineffective or unenforceable against D because (1) the person who signed the Guarantee, namely, Mr Huang, had no actual or apparent authority to do so on behalf of D (“the Authority Argument”); and (2) the Guarantee was not executed as a deed and was unsupported by consideration in that it was not signed until on or about 29 June 2018 and the alleged consideration was past consideration (“the Past Consideration Argument”).

P’s Submissions

10.  Ms Elizabeth Cheung, Counsel for P, submits, inter alia, that neither the Past Consideration Argument nor the Authority Argument was believable or otherwise a good defence, so I should grant an order in terms of the O.14 Summons, and dismiss the Amendment Summons.

D’s Submissions

11.  Mr Victor Lui, Counsel for D, submits, inter alia, that the Past Consideration Argument and the Authority Argument were good and real defences, so I should dismiss the O.14 Summons, and order in terms of the Amendment Summons. 

My View

12.  On the Past Consideration Argument, I agree with Ms Cheung, Counsel for P, that it is plainly unbelievable and unarguable. 

13.  In Classic Maritime Inc v Lion Diversified Holdings [2009] EWHC 1142 (Comm); [2010] 1 CLC 445, the English Commercial Court (Cooke J) stated, in my view entirely correctly, that in considering whether consideration was past, the courts were not bound to apply a chronological test. If the consideration was plainly part of a larger, single, transaction, the fact that some documents were not signed in proper chronological order did not matter.  Ruling otherwise would take the law so far removed from commercial reality, and indeed from the reality of normal human activities, that we would be bringing the law itself into disrepute.  Editors of Chitty on Contracts (33^rd Edition, 2018, paragraph 4-027) took the same view. 

14.  In our present case, for all of the reasons set out by Ms Cheung (for P) in her most helpful written and oral submissions, I am satisfied the Guarantee must have been signed contemporaneously, and that suggestions to the contrary were so wholly incredible they were moonshine.  More importantly, even if the Guarantee was signed on a subsequent date (which I do not accept to be possible), that would not, in my view, amount to an arguable defence as the Guarantee was plainly just part of a single transaction, and the precise time it was signed did not matter at all. 

15.  On the Authority Argument, it is significant that D was a listed corporation with regulatory duties to make public announcements, and D’s own public announcement in April 2017, as well as D’s own annual report dated April 2019, referred to D’s obligations under the Guarantee.  The original Defence in this action, filed on 8 May 2019, did not allege absence of authority, whether as a purported defence or in any other context.  In fact, D never alleged absence of authority at any point prior to the date of the O.14 Summons. 

16.  Considering the above, and all of the other matters mentioned by Ms Cheung, I am satisfied the Authority Argument is also incapable of being believed, and that as such I should reject it summarily. 

17.  The above being my view, I must (1) enter summary judgment against D; and (2) dismiss the Amendment Summons. 

Costs

18.  Costs should follow the event.  P was the overall winner for both summonses.  The costs of the summonses should be paid by D to P. 

19.  On the question of Certificate for Counsel, in my judgment it was reasonable, necessary and proper for both sides to engage Counsel to argue the summonses, given the potential consequences and the amount of money at stake.  Both Counsel had been extremely helpful to this Court. 

20.  On the quantum of costs sought, I have read P’s Statement of Costs and I have some reservations as to whether some of the costs claimed should be recoverable.  It would be unfair for me to rule on the same, one way or the other, without reading the relevant privileged communication. For this reason, this is one of those rare cases where a full taxation hearing would in fact be more appropriate. 

21.  On the basis of taxation, Ribeiro PJ said this in Bank of China (Hong Kong) Ltd v Twin Profit Ltd (2012) 15 HKCFAR 560: -

“As with all questions of costs, the Court has a discretion which it exercises judicially… The parties’ agreement as to how costs should be dealt with provides the starting point...”

22.  I am satisfied, on a proper interpretation of the Guarantee, the parties had agreed that all costs incurred for the purposes of enforcing the Guarantee should be paid by D to P on a full indemnity basis. Whilst this agreement between the parties is just the starting point and does not in any way fetter my judicial discretion, on the evidence of this case I can see no reason why I should depart from it. 

23.  By reason of the above, all costs payable by D to P should be taxed on the indemnity basis.

Final Remarks

24.  I do thank both Counsel for their most able assistance.