TEXON MEDIA LTD. v. TYPHOON 8 RESEARCH LTD.

HCSA 15/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

SMALL CLAMIS TRIBUNAL APPEAL NO. 15 OF 2002

(ON APPEAL FROM SMALL CLAIMS TRIBUNAL CLAIM NO. SCTC 36679 OF 2001)

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J U D G M E N T

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1. This is an application for leave to appeal against an award made by the Small Claims Tribunal on 8 March 2002 in favour of the Claimant against the Defendant for outstanding indebtedness in the sum of $50,000.00. The Defendant now wants to appeal against the award and seeks leave from me to do so at today's hearing.

2. At the hearing below, the Tribunal concluded that the Defendant was indebted to the Claimant for a total sum of $50,250.00. For the purpose of making its claim in the Small Claims Tribunal, the Claimant only claimed for a sum of $50,000.00. The Tribunal also concluded that subsequent to the incurring of the indebtedness in question, the Claimant, the Defendant and a 3rd company known as Company One Limited entered into a "payment settlement agreement" in which Company One Limited agreed to assume the Defendant's outstanding liability towards the Claimant up to a maximum of $75,000.00. (It was agreed at the Tribunal, and no issue is taken before me today, that this did not amount to a novation of contract, and the Defendant remained liable to pay the Claimant if Company One Limited did not pay.) In the same agreement, it was expressly provided that:

" Company Payment will be settled as soon as we can negotiate a complete package with [the Claimant] for our advertising needs for first quarter 2000.

For our immediate order of 20 end boxes of which two will be Dotnet Terminals, we shall settle by 14 December for advertising to commence on 22 December."

3. Pursuant to what had been expressly provided for in the agreement, the Claimant issued an invoice to Company One Limited on 22 December 2000 in respect of the 20 end boxes for a sum of $52,900.00. On 15 January 2001, Company One Limited made payment in favour of the Claimant in the sum of $52,900.00.

4. The issue between the parties in the Tribunal was whether the payment by Company One Limited of $52,900.00 was in respect of the Defendant's outstanding indebtedness to the Claimant or in respect of its own outstanding indebtedness to the Claimant relating to the end boxes.

5. At the hearing below, a director of the Defendant gave evidence before the Tribunal on the negotiations amongst the three parties leading up to the signing of the agreement in question, and based on the negotiations, the Defendant's director claimed that the intended effect or meaning of the agreement was that whatever payment was to be made by Company One Limited to the Claimant, it would be in respect of the outstanding indebtedness of the Defendant towards the Claimant first. In the circumstances, the Defendant argued before the Tribunal that the $52,900.00 paid by Company One Limited was in respect of the Defendant's indebtedness towards the Claimant.

6. The Tribunal rejected this argument. It is plain from the reasons for award that the Tribunal did not accept the evidence of the director about the negotiations. The adjudicator concluded that:

"The only reliable evidence is the settlement agreement itself and I am satisfied that I should give the words used their ordinary and natural meaning."

7. Regardless of whether in a court of law extraneous material could be admitted for the purpose of construing the written agreement in question, the finding of the Tribunal relating to the director's evidence is quite fatal to this first line of argument of the Defendant. Given the nature of the proceedings in question, it is not open to the Defendant in the intended appeal to challenge the finding of the adjudicator below. In those circumstances, this first line of argument of the Defendant must fail and cannot provide any arguable ground of appeal.

8. Turning to the proper construction of the agreement itself and ignoring the rejected evidence of the director of the Defendant relating to what the parties had allegedly intended to achieve by the signing of this payment settlement agreement, I am of the clear view that the payment settlement agreement did not, as a matter of proper construction, provide for Company One Limited to make payment in respect of the outstanding indebtedness of the Defendant first or that it could not make any payment to the Claimant in respect of its own indebtedness, at least in relation to the immediate order of 20 end boxes, first, before discharging the outstanding indebtedness of the Defendant to the Claimant. In other words, it is quite plain to me that under the payment settlement agreement, there was no obligation on the part of Company One Limited to make repayment in respect of the indebtedness of the Defendant towards the Claimant first before it could discharge its own indebtedness towards the Claimant.

9. The only remaining issue is the true nature of the payment made by Company One Limited on 15 January 2001. Was it made in respect of the outstanding indebtedness of the Defendant towards the Claimant or was it made in respect of Company One Limited's own indebtedness relating to the 20 end boxes towards the Claimant? It is plain from the reasons of award that the Tribunal came to a factual conclusion that the payment was in respect of Company One Limited's own indebtedness towards the Claimant. The Tribunal cannot be faulted for this finding - the payment made matched exactly the invoice issued by the Claimant to Company One Limited in respect of the 20 end boxes.

10. As I have already concluded that under the payment settlement agreement, there was nothing to stop Company One Limited from making payment in respect of its own indebtedness first and there was nothing to stop the Claimant from accepting payment in respect of Company One Limited's indebtedness first before the discharge of the indebtedness of the Defendant towards the Claimant, the finding of the Tribunal in this regard must be fatal to the Defendant's case. As I mentioned above, the finding of the Tribunal cannot be challenged in the intended appeal. In other words, I find no arguable ground of appeal in the present case.

11. For all these reasons, I refuse the application for leave to appeal. I make no order as to costs.