WELLCHERRY LTD v. WELLCHERRY LTD

CACV 36/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 36 OF 2000

(ON APPEAL FROM HCA 16429/1998)

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J U D G M E N T

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Hon Godfrey VP :

Introduction

1. This is an appeal from Cheung J who, on 20 December 1999, gave a defendant unconditional leave to defend the action against it on an application made by the plaintiff for summary judgment under Order 14 of the Rules of the High Court. The matter came before the judge on an appeal by the defendant from the master, who had given summary judgment with damages to be assessed in favour of the plaintiff.

Background

2. The defendant's managing director, a Mr Shum Sui-yin, on 6 August 1998 signed an agreement for the letting of certain premises to the defendant for the purpose of a restaurant to be operated there by the defendant. The document is headed "Provisional Tenancy Agreement", which might perhaps be said to suggest that it was not intended to constitute a final and concluded agreement. But that is not a matter for us to consider at this stage of these proceedings.

3. The circumstances under which the document came to be signed are the subject of some dispute. Mr Shum is, or at least has held himself out to be, the managing director of the defendant; but we have not seen the Articles of Association of the defendant and we do not know the circumstances under which Mr Shum came to describe himself as its managing director. Nevertheless, I consider it safe to assume for present purposes that Mr Shum was duly appointed managing director of the defendant, and as such would have had authority, not only to negotiate the terms of the tenancy with the plaintiff, but also to contract with the plaintiff so as to bind the defendant. However, Mr Shum says that in fact he did not have such authority. He signed the document because he was pressed to do so by the plaintiff's representatives. He says he made it clear, as he did so, that he had no authority to conclude the agreement as distinct from negotiating it. He says he told the plaintiff's representatives that the agreement would require the approval of the other directors of the defendant. Mr Shum did not, in writing, qualify his signature to the document in any such way, and it has been forcefully submitted by Mr Chan, on behalf of the plaintiff, that, as the experienced businessman he was, Mr Shum would have so qualified his signature had there been any truth in his story. Mr Chan has also taken us to a number of subsequent documents, which, says Mr Chan, suggest that the story told by Mr Shum is incapable of belief, and that Mr Shum must, on the material before us, be taken to have had and not to have disclaimed authority to sign the document on behalf of the defendant.

The judgment below

4. In his judgment below, the judge rejected the suggestion made to him that the circumstances under which Mr Shum signed the document demonstrated a case of duress or undue influence. It has not been sought to renew that suggestion in this court. But, in his judgment, the judge indicated that, in his view, the defendant's case that Mr Shum had disclaimed authority to enter into the agreement, and had made that clear to the plaintiff's representatives when he signed it, was not to be considered unbelievable. In this connection, the judge had evidence from Mr Shum that throughout the negotiation, he had informed the plaintiff's representatives that he was only one of three directors of the defendant and that, while he had the authority to negotiate with the plaintiff, everything was subject to the final approval of the board of directors of the defendant. The judge had evidence from Mr Shum that he was surprised by the request of the representatives of the plaintiff to sign the agreement, since he had told them that he had authority to negotiate but had no authority to conclude the agreement without the approval of the board of directors of the defendant.

Conclusion

5. In my opinion, the material before us comes no way near demonstrating that the case for the defendant is unbelievable. What Mr Shum says may, or may not, prove at the trial to be worthy of belief. But that is another matter altogether. The purpose of Order 14, as has frequently been said, is merely to enable a quick judgment to be obtained in plain and obvious cases where no defence can be shown which is capable of belief. Whether that defence is to be believed or not is a matter for the trial judge. In the present case, like the judge, I conclude that the defence that the defendant had in fact no authority from the other directors of the defendant to sign the document and had told the plaintiff's representatives so, is believable. I say no more about its merits. Mr Chan has demonstrated that there is material here which could be used in cross-examination on behalf of the plaintiff to cast doubt upon the defendant's case. But that does not justify refusing the defendant a trial. He also urged on us a point which he described as a ratification point; but there is no substance in this point. The case for the defendant is that Mr Shum made clear to the plaintiff's representatives that he had no authority to sign. If a subsequent ratification negating the effect of this is to be established, it must be pleaded and proved by the plaintiff. That has not happened. Mr Chan is able to point only to the fact that the other directors of the company have not so far adduced evidence in support of Mr Shum. But that comes nowhere near proving that the other directors of the defendant have, by acquiescence in it, ratified Mr Shum's act in signing the document on behalf of the defendant if in fact he had no authority to do so.

Result

6. In the result, I am of the opinion that the judge was right to give the defendant unconditional leave to defend here and that we have no alternative but to dismiss this appeal with costs.

Hon Rogers JA :

7. I agree.

8. I only wish to say this, that Mr Chan, on behalf of the plaintiff, described the defendant's case as "practically moonshine". For my part, I would say that each point he made demonstrated clearer and clearer that the judge below was correct.

9. In my view, this appeal should never have been brought.

Hon Godfrey VP :

10. As to costs, we will order pursuant to the new Order 62 rule 9A of the Rules of the High Court that the plaintiff do pay to the defendant forthwith $125,000 as the approximate figure which would be allowed on taxation.