TSUEN WAY DEVELOPMENT LTD v. KONWIN INTERNATIONAL LTD

HCA10173/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.10173 OF 2000

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J U D G M E N T

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Introduction

1. This is an action on an agreement in writing dated 10 July 1999 entered into between the plaintiff, the defendant and another company with the rather long name of Guangzhou Hongchang Electronic Appliances & Hardware Products Company Limited which fortunately is referred to in the agreement itself as "party C", which description I gratefully adopt in this judgment.

2. Although the parties in the action are Hong Kong companies and some of their business is transacted here, the vast majority is done on the Mainland where they have offices, business premises and employees. The Agreement itself, as will become readily apparent in a moment, has some curious features which perhaps one would not commonly find in Hong Kong, whereby the defendant undertook to repay debts that it owed to the plaintiff by payment in kind rather than in cash, entailing the transfer of motorcars, steel products and cheques drawn by a third party in favour of party C which the defendant had seized under an order of a Mainland court.

Background

3. In order to understand how this dispute comes about, it is essential to briefly set out the connections between the three companies that I am concerned with and the background leading up to the signing of the Agreement by them.

4. There is before me a "family tree" showing the connection between the three companies. Suffice it to observe that, although separate legal entities, they are either directly or indirectly inter-connected. So much emerges from the "family tree".

5. It is not disputed, and indeed this is part of the very background to the Agreement in this action, that the plaintiff actively traded with the defendant, selling to it steel products largely imported from Europe and parts of Asia. Between July 1997 and March 1998, the plaintiff had sold to the defendant steel products valued at $13,633,203.21. The defendant was slow in making payment so that by July 1999 a sum of $4,858,488.52 remained outstanding. Further time had been asked for and given by the plaintiff, but by July 1999 it had become clear that this outstanding debt needed resolution.

6. The fact that the parties were able, at that stage, to deal with these matters amicably is largely explicable by the fact that they were part of the same group of companies, as the "family tree" demonstrates, and that the plaintiff's General Manager Mr Zheng Chang and the defendant's General Manager Mr Huang Jin Chao had been friends and work colleagues together, the latter having been general manager of the plaintiff from 1988 to 1993 when he was replaced there by Mr Zheng. According to Mr Huang the debt between the plaintiff and the defendant built up because party C to whom the defendant sold on the steel products that it had purchased from the plaintiff became badly managed, suffered from cash flow difficulties and became unable to pay the defendant for what it had purchased. This in turn impacted upon the defendant's capacity to settle its invoices with the plaintiff resulting in the outstanding balance of $4,858,488.52.

7. The defendant then took legal proceedings against party C in the Baiyuen District Court in Guangzhou. The action was brought on 22 January 1999 for the price of the goods sold by it to party C which was then unpaid. On 28 January 1999 the court froze C's assets up to RMB6,619,029.29 and then these two parties settled the action under the court's supervision whereby C was to pay a little over RMB5,200,000.00 to the defendant in two stages within 54 days, together with interest. This it failed to do and so in May 1999 the defendant together with the officers of the Mainland court entered C's premises to enforce the settlement. Its assets were seized, including plant and machinery, steel products and inter alia eight cheques totalling $1,132,342.10 drawn by a company called Newtone in favour of C. The steel products that were seized amounted to 200 tonnes of sheet steel originally sold by the plaintiff to the defendant that it had in turn sold onto C.

8. The defendant through Mr Huang then approached the plaintiff's Mr Zheng to see if its own indebtedness could be settled by using some of the assets belonging to C which it had acquired under the Mainland court's order. Mr Zheng expressed some interest in accepting, in part payment, the eight cheques and the sheets of steel. This was in June 1999. Mr Zheng said that he was to leave the plaintiff's employment and wished to settle this matter before he left. Mr Huang explained that the defendant was in no position to settle its indebtedness to the plaintiff in full in cash simply because what it had seized from C under the court order was insufficient to discharge all of C's debt to it. Mr Huang says that Mr Zheng then proposed that the plaintiff would accept the steel and the eight cheques in part satisfaction and that the defendant could pay the balance by transferring to it certain motor vehicles that it owned as well as real property, the valuation of which would be agreed between them. The two of them agreed but Mr Zheng said that he required approval from his superiors and he also had to take advice from the plaintiff's Mainland lawyer Mr Chen Xue Mou as to the legality of such an agreement under Mainland law.

9. Legal advice was sought and the parties set about selecting assets belonging to the defendant which might be used to defray part of its indebtedness. A number of assets were viewed, some were dismissed as not suitable but eventually agreement was reached. Mr Zheng said that he would accept eight motor vehicles selected by him which belonged to the defendant. The parties agreed on their individual values which totalled RMB2,000,000.00 the equivalent of $1,853,703.70. Mr Huang says that Mr Zheng told him that he would also accept the eight Newtone cheques at their face value of $1,132,342.10, to which I have already referred, and pointed out to him that he would make arrangements with Newtone for it to issue eight fresh cheques payable to the plaintiff to replace the original ones made out to C. There is a substantial dispute on this aspect to which I will need to make further reference in due course. Mr Zheng also agreed to take the steel sheets (200 tonnes of them) on which an agreed value of $980,000.00 was placed. There still remained a shortfall and so Mr Huang proposed that he would transfer a residential property, a flat at Guang Yuan Lu which was in his wife's name. This was acceptable to Mr Zheng who said that he would be able to sell on the property to a customer of his. They agreed a value of $400,000.00 on this property. This then left over a balance of $492,402.70 which Mr Huang agreed to pay in cash no later than 31 December 1999.

10. The basic terms having been agreed on Mr Zheng instructed his lawyer Mr Chen to draft an agreement, which he did. Having regard to the connection of C in this matter, given that its assets, now seized under the court order, were being used in part satisfaction of the defendant's indebtedness to the plaintiff, the agreement was drafted to include C as a party with concurrent liability, with the defendant, to the plaintiff. C was then, and remains a worthless company, so its inclusion in the agreement would have been of no practical value to the plaintiff. The Agreement was signed at the plaintiff's lawyer's offices on 10 July 1999. Given its central position in this matter I should set out the terms of the Agreement here :

"Party A : Tsuen Way Development Limited

Party B : Konwin International Limited

Party C : Guangzhou Hongchang Electronic Applicances & Hardware Products Company Limited

From 22nd July, 1997 to 30th March, 1998, Party A sold seven batches of imported silicon steel plate of various types to Party B one after the other. The total value was HK$13,633,203.21. After Party B had received the goods, Party B had already repaid respectively to Party A HK$8,774,754.69 in total, still owing HK$4,858,448.52 not yet paid. Party B provides some of their cars, house as measures for repayment and provides repayment guarantee in order to negotiate with Party A for the resolution of repayment. Now Party A, Party B & Party C unanimously agree to set down the terms of repayment as follows :-

(1) Party B immediately delivers eight post-dated cheques, the drawer of which is Li Tong Electornics Factory Limited, total amount one million one hundred and thirty-two thousand three hundred and forty two Hong Kong dollars and ten cents, as part payment of purchase price of goods repaid by Party B to Party A. The time limits to honour the posted-dated cheques and the amounts are respectively listed hereinbelow :-

Date	Number	Amount (HK dollars)	Remarks
99/5/5	130704	189,730.00	Hong Kong Bank
99/5/12	149849	150,000.00	Shanghai Commercial Bank
99/7/24	157666	140,971.10	Shanghai Commercial Bank
99/8/21	157665	150,000.00	Shanghai Commercial Bank
99/8/31	398454	150,000.00	Bank of Communication
99/9/18	398456	100,000.00	Bank of Communication
99/9/30	398455	122,542.60	Bank of Communication
99/11/16	357339	129,098.40	Bank of Communication

(2) Party B shall use the following eight cars the total price of which was two million and two thousand renminbi, equivalent to one million eight hundred and fifty-three thousand seven hundred and three Hong Kong dollars and seventy-cents as part repayment of the purchase price of goods by Party B to Party A. Party B is responsible for providing the following documents of ownership, and assist Party A to go through the formalities of transfer of ownership. Payment of expenses on transfer of ownership and other relevant expenses shall be borne by Party B. The model numbers and price for the vehicles are as follows :-

(3) Party B immediately use the house in area, room 902, No.4 Yunyuan Yi Jie, Guangyuan Lu, Guangzhou 92 square meters (refurbished but not yet occupied), amounting to four hundred thousand Hong Kong dollars as part repayment of the purchase price of goods; payment to ownership transfer handling charges and tax expense are all Party B's responsibilities. The name of owner to whom ownership is transferred is appointed by Party A.

(4) Party B uses 200 tonnes of German imported silicon steel plates which amount to nine hundred and eighty thousand Hong Kong dollars to pay for part of the money. That batch of silicon steel plates will be picked up completely by Party A within ten days after both parties sign the agreement.

(5) Party B uses the aforesaid self-owned vehicles and real properties to pay for Party A's prices of goods which vehicles and real properties must be transferred to Party A or entity of persons appointed by Party A as actual repayment. Otherwise, such part of the money owed is still responsible for repayment in full by Party B and Party C undertake irrevocable joint repayment liability until the day Party B finished total repayment.

(6) Party B's repayment from items (1) - (4) amounts to HK$4,366,045.80. Party B still owes HK$492,402.70. Party B promises to repayment in full to Party A by instalments before 31st December, 1999 in respect of which Party C undertakes irrevocable joint repayment liability until Party B finished all repayment.

(7) If Party B does not follow this agreement to implement repayment before 31st December, 1999 or cannot make repayment in full the above money owing, Party A has the right to instigate proceeding at Guangzhou Middle People's Court against Party B and Party C for total repayment of the total money owing with principal and interest included.

(8) There are six copies to this agreement. Party A, Party B, Party C each holds two copies."

This therefore sets the scene for what now follows, in which there are a number of sharp disputes of fact which will require resolution by me.

The witnesses

11. The plaintiff has called a Mr Wu, whom it employs as a driver, and he has given evidence which is really limited to the issue of the motor vehicles. He speaks to the number of vehicles collected by him and the documentation which came with them. Surprisingly, its main witness is not Mr Zheng as one might have been expected - he has not been called but Mr Yang An Yong, its deputy general manager who worked under Mr Zheng's direction and who has given evidence about the implementation of the Agreement. Because Mr Zheng has not been called, a lot of what Mr Yang has said has been hearsay and I will therefore have to take care as to the way in which I assess that evidence in terms of its reliability and weight. I was not specifically told why Mr Zheng has not come to give evidence and I have not speculated about that, although it is right to say that Mr Huang has mentioned that Mr Zheng was due to leave the plaintiff's shortly after the Agreement was signed. Nevertheless, the fact remains that the person who had conducted the negotiations with Mr Huang leading to the Agreement has not given evidence. Mr Huang, his counterpart in those negotiations, has of course given evidence for the defendant and he has been their only witness so they too are a little short on testimony when it comes to specific transactions and occurrences about which he has unable to give direct evidence.

Matters in dispute

12. On the claim, I am concerned with alleged breaches of clause 1 of the Agreement the eight cheques; and clause 2 which relates to the motor vehicles. The remaining matters concerning the flat, the steel and the final cash payment are not in issue. As to the cheques the plaintiff has been unable to obtain payment on these, either by having them endorsed over in its favour by C the payee or by persuading Newtone the drawer, through the defendant's or C's intervention, to issue fresh cheques made out to the plaintiff. In respect of the motor vehicles, the vehicles appearing as 1, 3, 5 and 6 of the list in clause 2 have been delivered to it. The remainder have not and the plaintiff whilst claiming the value of those vehicles has at the start of the trial come to an agreement with the defendant whereby if the defendant is found liable on this aspect of claim, the defendant will do what is required of it by delivering the documentation in respect of the vehicles which will have the effect of transferring ownership of them to the plaintiff. More of this aspect of the matter in due course.

13. In opening his case, Mr Wong for the plaintiff, had to re-do the arithmetic on the claim and this now appears in the Re-re-amended Statement of Claim. As a result, the claim is now reduced from $2,974,199.02 down to $1,525,850.02. This has been achieved by reason of the plaintiff accepting that a number of further credits had to be given to the defendant principally in relation to the delivery of the sheets of steel under clause 4 of the Agreement and an overpayment of cash of $157,597.30 by the defendant in respect of clause 6. This also takes into account the potential monetary liability of the defendant to the plaintiff in respect of the eight vehicles which is in excess of $1,200,000.00 to which, as I have already indicated, I must return to presently. Subject to liability therefore on the alleged breaches of clauses 1 and 2, quantum is now agreed between the parties which has the effect of causing the counterclaim, which is in the form of a set-off and for which full credit has now been given, to fall away. That being so, I do not propose to further consider quantum because its calculation is no longer in issue.

14. In view of the separateness of these two elements of the claim, that is to say the cheques and the motor vehicles I will consider the evidence in respect of them separately, whilst remembering that on matters of credibility, where the evidence of Mr Yang for the plaintiff and Mr Huang for the defendant takes in both issues, any adverse finding as to credibility on one issue must inevitably be taken into account in assessing credibility on the other matter. This consideration does not apply to Mr Wu who only gives evidence on the issue of the motor vehicles and so his credibility can only impacts on that matter.

The eight cheques

15. This issue raises a fundamental and stark difference in the parties' positions. The plaintiff submits that there was an express term or at worst one to be implied from all the circumstances of a case that the defendant would take steps to have these cheques indorsed by C in favour of the plaintiff or that C and the defendant either individually or collectively would approach Newtone the drawer to issue fresh cheques made out to the plaintiff. If that were not so, the cheques would be worthless pieces of paper. The defendant, through Mr Huang, says that Mr Zheng was quite prepared to accept the cheques at face value because he said, and no doubt felt, that he had it in his power to see to it that C would make arrangements for these cheques to be made payable to the plaintiff. Accordingly, it is submitted by Mr Tam on behalf of the defendant that all that the Agreement required the defendant to do was to ensure that the plaintiff had physical procession of the cheques. Once this was done the defendant must be taken to have complied with his obligation under the Agreement.

16. That is how the issue lies. I now need to consider some of the evidence in respect of this and to attend to counsel's submissions as to how this is to be viewed on the evidence and as a matter of law.

17. The undisputed evidence is that the cheques were delivered to the plaintiff on 28 July 1999 and there is a receipt to this effect (see page 164). When the Agreement was entered into the first two cheques were due for payment and the remaining six were still post-dated. By the time that the writ was issued, none of the cheques was valid, more than six months having elapsed from their respective due dates. On 13 October 1999 six cheques were delivered to Mr Xu Chao of C (pages 134-135) so that they might be put into a state whereby they could be cashed by the plaintiff, either by endorsement or by the issue of new cheques in the plaintiff's name. The remaining two cheques were delivered to Mr Huang DePing of C for the same purpose on 10 November 1999 (pages 137-138). Since then none of the cheques has re-surfaced and they have not been produced in evidence. The physical delivery of these cheques to these two gentlemen was done by Mr Yang.

18. Fundamental to the resolution of this issue is how I determine the basis upon which these cheques were to be delivered to the plaintiff. If the mere delivery of the cheques was sufficient to discharge its obligation by the defendant then this part of the plaintiff's claim must fail but, if delivery was conditional upon the cheques being honoured or that fresh cheques were to be issued by Newtone and then honoured, the result must be that the plaintiff would be entitled to look to the defendant for the value of the cheques.

The defendant's case on the cheques

19. It is instructive to consider how the evidence of Mr Huang has developed in respect of the cheques. His written statement, which has largely formed the basis of his evidence-in-chief, only has a brief reference to the cheques at paragraph 17 (pages 73/74) which recites the handing over of the cheques by him to Mr Zheng and Mr Yang in Guangzhou. Prior to this at paragraph 10 (page 72) there is the bare statement that Mr Zheng had told him that he would accept the cheques at face value and that he would arrange for Newtone to issue fresh cheques in the plaintiff's name. In his oral evidence he sought to provide more substance to what he had said in paragraph 10. In his evidence-in-chief he said that Mr Zheng had told him that he would arrange with C to have the payee amended to the plaintiff. In cross-examination he went on to amplify this account by saying that he had told Mr Zheng that C would issue a letter to Newtone to ask it to alter the payee to the plaintiff. He explained that he had told Mr Zheng that, and that was why Mr Zheng had been disposed to accept the cheques. I am bound to say that this differs from the impression given in paragraph 10 which was that Mr Zheng himself had no qualms about accepting the cheques because he felt confident that he could do what was necessary to have the cheques amended in such a way that they became payable to the plaintiff. The express implication being that Mr Zheng required no help in achieving this. Now in cross-examination the account differs with the introduction of the element that he had told Mr Zheng that C would write a letter to Newtone to get them to alter the payee which was crucial in persuading Mr Zheng to accept the cheques. When questioned about the delivery of the cheques to Mr Xu and Mr Huang DePing he said that he was not aware that this had happened until after the action had been brought by the plaintiff. He did not ask Mr Xu about this because he did not consider it necessary - notwithstanding the fact that Mr Xu was his brother-in-law?

20. Mr Tam, in addressing me on this issue, has sought to consider the inherent likelihood of there being a term that the defendant would be required to see to it that the cheques were altered so as to become payable to the plaintiff. He has drawn attention to the fact that Mr Zheng must have felt completely confident in his ability to have the cheques altered because in practical terms the plaintiff was in control of C. C's general manager had been appointed by a company that was related to the plaintiff. C was indebted to one of the plaintiff's subsidiaries, Silver Country. Mr Tam suggests that in such circumstances Mr Zheng's capacity to influence the actions of C's managers was such that he must have felt that he had no need to rely on Mr Huang's assistance and that this must support the case that there was no term of the sort contended for by the plaintiff.

21. As to the legal position, Mr Tam submits that in deciding whether the law would imply a term or a duty of this type, the court will look not so much at the intention of the parties but to public policy considerations. He submits that the term ought not to be implied unless on considering the whole of the matter in a reasonable manner it is clear that the parties must have intended that there should be the suggested term. He draws attention to various passages from Halsbury's Laws of Hong Kong, Vol. 7, paras. 115, 152-154.

22. Another matter that Mr Tam has urged upon me which he says militates against the suggested term is that by having delivered the cheques to the plaintiff the defendant was then deprived of the right to enforce payment of the cheques itself. The cheques have now gone they were returned to C and have not re-appeared. How could it be that in such circumstances the defendant was signing up to a term which required it to have the cheques altered in the plaintiff's favour delivery up of the cheques to the plaintiff in their original form would indicate that this was all that was required of it.

The plaintiff's case on the cheques

23. Although deprived of the evidence of Mr Zheng who could have given a direct account of the negotiations with Mr Huang, Mr Wong for the plaintiff, is able to say that when one views this matter overall it is inconceivable that the plaintiff would have accepted the cheques with a face value of over $1,100,000.00 made out to a third party without any sort of term that the cheques would be turned into something more than just the paper that they were written on. The fact that they were handed over to Messrs Xu and Huang De Ping for alteration is said to support the proposition that such a term existed.

24. Mr Wong has submitted that on the face of the Agreement, it must follow that the defendant remains liable until the cheques have been honoured in the plaintiff's favour. He relies on the proposition in Benjamin's Sale of Goods, 6th edn, para. 9-030 that the presentation of a cheque as a means of payment is prima facie conditional on the cheque being honoured on maturity see In Re Romer & Haslam [1893] 2 QB 287 per Lord Esher MR at 298 and Fielding & Platt Limited v. Selim Najjar [1969] 1 WLR 357 at 361B where Lord Denning MR said :

"We have repeatedly said in this court that a bill of exchange or a promissory note is to be treated as cash. It is to honoured unless there is good reason to the contrary."

25. Further he has drawn attention to section 40(1)(b) of the Sale of Goods Ordinance, Cap.26 which is to the effect that;

"(1) The seller of goods is deemed to be an unpaid seller within the meaning of this Ordinance ....

(b) when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise."

26. These propositions of law are clear and not in dispute, but what really counts in this case is whether these cheques had been accepted as conditional or absolute payment. See Gunn v. Bolckow Vaughan & Co. [1987] LR 10 Ch. App. 491 per Mellish LJ at 501. The essence of this matter falls to be decided by the following authorities which show that the intention to take an instrument in absolute payment must be clearly shown and not deduced from ambiguous expressions such as that the instrument was taken "in payment" for the goods or "in discharge" or "in settlement" of the price. See Benjamin supra at para. 9-031, Maillard v. Duke of Argyle [1848] 6 M&G 44 (page 803 in ER reports, Kemp v. Watt [1846] 15 M&W 672 (pages 1020-1024 of ER version) and Romer & Haslam supra at 296-7. Further, what is also to be got from Romer & Haslam, see Lord Esher 296-7 and Bowen LJ 300-1, is that the burden to show the intention of the parties to take the cheque as absolute and not conditional is on the party alleging that it was taken as absolute.

27. From these principles, Mr Wong has referred me to the evidence starting with the Agreement itself. Clause 1 of the Agreement refers to the cheques being delivered as "part payment" of the outstanding debt. The clause refers to the total value of the cheques and the dates when they were to mature. The preamble to the Agreement refers to "measures for payment" of the debt. What Mr Wong gets from the Agreement as a whole is that all these elements amount to money or monies worth and the notion that the plaintiff accepted third party cheques without more is entirely inconsistent with the whole object of the Agreement.

28. In addressing the question of why Mr Zheng would have been content to have the cheques absolutely, which was his alleged control over C, Mr Wong submits that on the contrary, it was the defendant who had the control. It had the court order and it had the control of C's assets given to it by the court.

The result

29. I am in no doubt that the plaintiff must succeed on this issue. The whole object of what Mr Zheng and Mr Huang were agreeing to were the means by which the defendant's debt would be repaid. These cheques were an important element. They were worthless in the plaintiff's hands unless and until they were endorsed or re-issued by Newtone. The defendant had control of the situation. It could control how C dealt with this matter. Mr Zheng was persuaded to accept them because he was aware of that. Mr Huang's evidence in cross-examination has suggested at the very least that a written instruction from the defendant to this effect would be forthcoming. As a matter of law the cheques would be a conditional payment until honoured. There is nothing on the face of the Agreement that displaces that and as the authorities show the intention to accept a negotiable instrument absolutely must be clearly shown. The defendant bears that burden. It has come nowhere close to demonstrating that. I am not able to accept Mr Huang's evidence on this aspect of the case. He is clearly a highly intelligent and capable person but one who has shown himself very capable of shifting his ground to serve the exigencies of the moment as he gave his evidence. He added to his case and indeed was inconsistent in what he said in chief and under cross-examination as I have identified when I summarized what he has said on the main question which is the basis upon which Mr Zheng is said to have accepted these cheques. Notwithstanding the absence of Mr Zheng to contradict him, it is clear that the whole ethos of the Agreement on the cheques was that the plaintiff expected payment under them and if the defendant could not deliver on that then it remained liable for the amounts of the unpaid cheques. Accordingly, where nothing has been received in respect of these cheques the defendant must now account to the plaintiff in the sum of $1,132,342.10.

The motor vehicles

30. This matter is less complicated. The plaintiff accepts that the defendant has complied with its obligations in respect of the vehicles 1, 3, 5 and 6 on the list. Under clause 2 of the Agreement (page 157) which governs this aspect to the dispute the defendant is required to deliver the vehicles and "documents of ownership" as well as assisting the plaintiff to go through the formalities of ownership. The defendant is also required to bear the costs of transferring ownership.

31. The plaintiff's evidence is that provided by Mr Wu, one of its drivers. He has gone through the trial bundle and related the circumstances in which he took delivery of three of the vehicles together with their documentation and the receipts that he gave for them to the defendant's representative. The vehicles that he received and the order that he received them in was vehicle 5 on 14 September 1999 (page 170); vehicle 3 on 26 May 2000 (page 178) and vehicle 1 also on 26 May 2000 (page 180). As to vehicle 6, the plaintiff also accepts that it had taken delivery of it although no document had been provided. Nevertheless, it is prepared to accept the position about this particular vehicle and so no claim is made in respect of it.

32. Mr Huang's evidence is that he gave instructions, really at Mr Zheng's request, that all eight vehicles were to be delivered to a car park that was owned by a related company of the defendant. Mr Zheng told him that the plaintiff had rented spaces there and that this would be a convenient place to leave them. In such circumstances, once the vehicles were taken there that would be sufficient delivery to the plaintiff. Mr Huang does not have direct knowledge that this is what actually occurred but that does not matter because Mr Wu has admitted in the course of his evidence that when he took delivery of the first vehicle on 14 September 1999 the eight vehicles were all present at the parking lot and that at the end of 2000 after he had taken delivery of four of them, the remainder were still there. Mr Wong submits that physical delivery without the appropriate documentation is insufficient performance of the Agreement by the defendant. Particular reliance is placed on the evidence of Mr Wu who had made separate arrangements each time in respect of the three vehicles that he provided receipts for when collecting the vehicle referred to in each of those receipts. Mr Wong then asks rhetorically, why would there be a need for such receipts and separate collections unless each vehicle was to come with its appropriate documentation. Mr Tam has sought to play down the significance of the receipts by suggesting that they were no more than elaborate versions of a parking ticket which would need to be given to the parking attendant before a vehicle could be released.

33. The evidence has persuaded me, on a balance of probabilities, that the arrangement between Mr Zheng and Mr Huang was indeed that these vehicles should be delivered to this particular car park, which they were, but plainly there was an equally important requirement which of course appears in clause 2 that the vehicles would come with the documentary evidence as its ownership. Such documents are vital and indeed Mr Huang has noted that, in the course of their negotiations, Mr Zheng who selected these particular vehicles had indicated to him that he would wish to sell some of them to interested buyers. I have also seen faxed requests dated 31 August 2000 (Car 3 page 141) and the request in a Power of Attoney dated 15 September 2000 (Car 5 page 145) sent by the plaintiff to the defendant asking for assistance to transfer ownership of these vehicles to it. These documents served to demonstrate the importance of this obligation so far as the plaintiff was concerned. Mr Yang's evidence was to the effect that the ownership of none of the vehicles was transferred to the plaintiff, although this is now acknowledged to be wrong, in respect of the vehicles to which I referred where ownership is admitted to have been transferred. Where Mr Huang has not really been able to gainsay any the plaintiff's evidence as to the remaining four vehicles the suggestion is now advanced that because there had been a delay in making a request for assistance that the right to demand that assistance and the documents relating to ownership has somehow lapsed. In my judgment this is a most unattractive line to adopt where clearly the plaintiff was looking to have the documents of all the nominated vehicles and that these have not been forthcoming in respect of numbers 2, 4, 7 and 8. This being so, the defendant must be held to be in breach of clause 2 and prima facie the plaintiff must be entitled to the agreed value amounting to $1,233,343.00 but in view of the fact the defendant appears to accept that in the event of liability being made out against it, it will assist the plaintiff in getting ownership of these four remaining vehicles transferred to it Mr Wong is content that I should not enter judgment for the value of the vehicles and is willing to proceed on the basis of that indication by the defendant through Mr Tam its counsel. I will therefore merely recite here that the defendant is in breach of clause 2 as to the remaining four vehicles by virtue its failure to assist in the transfer of the remaining vehicles and the provision of ownership documents and leave it to the parties to draw up this part of the order to reflect my judgment on this issue.

34. I am somewhat concerned that the defendant has now been held to be in breach of two crucial aspects of this rather unusual agreement. The cheques have presented no difficulty, because I have been able to enter a monetary judgment, but I am concerned about possible difficulties that may result from the defendant failing to do as has been promised which is to now deliver the ownership documents to the plaintiff. Out of an abundance of caution, I think I should give the plaintiff liberty to apply for an alternative monetary judgment in the agreed value of these outstanding vehicles. I would have thought that the defendant should have 42 days from the date of this judgment to carry out its undertaking to provide the required documents.

35. As matters presently stand, the judgment will be as follows :

Upon the defendant undertaking within 42 days to provide the plaintiff with the ownership and registration documents and to assist it in the transfer of ownership in respect of the vehicles numbered 2, 4, 7 and 8 in the list to Clause 2 of the agreement dated 10 July 1999 there must be judgment to the plaintiff in the sum of $1,525,850.02 in accordance with the schedule hereto :

	Schedule
(i)	The outstanding amount of the debt	$4,858,488.52
	LESS
(ii)	Clause 2	$1,233,333.00
(iii)	Clause 3	$400,000.00
(iv)	Clause 4	$1,049,265.50
(v)	Clause 6	$492,402.70
(vi)	Additional payment	$157,597.30
	Total :	$3,332,598.50
	Amount of judgment :	$1,525,850.02

36. There must also be interest on that amount at half the judgment rate from the date of the Writ until judgment and thereafter at the judgment rate until payment.

Counterclaim

37. This then leaves over the counterclaim which is based on an overpayment. This has now fallen away having regard to the late adjustment of the amount of the claim and so for this reason the counterclaim must now stand dismissed.

Costs

38. I would have thought where the plaintiff has succeeded overall and notwithstanding that the counterclaim, which amounts to a set-off, has been admitted and on that basis has fallen away, that the plaintiff should have its costs on both the claim and the counterclaim. The counterclaim was always based on a mathematical error on the part of the plaintiff but, overwhelmingly, the contest between these parties has centered on whether there have been substantial breaches of Clauses 1 and 2 in which the plaintiff has succeeded. Because this judgment is being handed down, the order for costs will be an order nisi in the usual way.

39. I will give both parties liberty to apply as to the drawing up and implementation of the order itself consequent upon this judgment in the event of any misunderstanding or difficulty. Lastly, I wish to express my gratitude to both counsel who have conducted their respective cases most helpfully, particularly in relation to the documentation some of which, would not have been easily understood without their assistance.