HCA003696/1984
IN THE HIGH COURT OF JUSTICE
NO. 3696 OF 1984
BETWEEN:-
MERIDIEN BRECKWOLDT HONG KONG LIMITED
Plaintiff
and
EMILIE SHI
LAM SIU YIN
CHAN KWOK
1st Defendant
2nd Defendant
3rd Defendant
_________________________
Coram: The Honourable Mr. Justice Penlington in Chambers
Date of hearing: 8th February 1985
Date of delivery of judgment: 8th February 1985
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JUDGMENT
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Background
By a specially endorsed writ the plaintiff claimed against three defendants in respect of the amount of $154,440.12 owing by a partnership called Peace Trading Company to the plaintiff, payment of which had been guaranteed by the defendants. The plaintiff says that there is no dispute that the money is owing to it and, payment being guaranteed, there is no defence available and it seeks summary judgment. There are two guarantees pleaded, one dated 18/12/1981 and a second one dated 16/2/1982, at the hearing of this matter the solicitor for the plaintiff told me that they were relying, at this stage, only on the second guarantee.
Possible Defences
(1) Res judicata
A defence to this action was in fact filed on the 4th July 1984, before these proceedings for summary judgment were commenced. In it the 1st defendant raises the defence in relation to the guarantee of 18/12/1981 that it was not a personal guarantee but was signed on behalf of Cliff-Renee Bros. Co. Ltd. of which he was managing director. There clearly would seem to be a defence on that ground. The plaintiff however, now relies solely on the second guarantee of 16/2/1982 which clearly was personal. The defence to that, as filed, is that a claim has already been brought in High Court' Action No. 3186 of 1983 by Meridien Credit Corporation Pte. Ltd. a Singapore company but one of the Meridien Group, against the 1st defendant relying on the same guarantee of 16/2/1982. That claim could have included the present one and, relying on Yat Tung Co. Ltd. v. Dao Heng Bank Ltd. 1975 A. C. 581 the matter is res judicata and the plaintiff is estopped from bringing this action. The 1st defendant claims he should therefore be allowed to defend it.
The circumstances here are very different to those in Yat Tung Co. Ltd. v. Dao Heng Bank Ltd. There the Privy Council held that the issues in two actions were the same, both concerned the same property, both parties in the second action were also in the first one. The second action could have been included in the first one and it was res judicata.
The question is (1) could the present issue have been decided in action 3186 of 1983 and, if so, (2) what is the consequence of its failure to do so. I am satisfied that the answer to the first question is "no". There is no way that I can' think of, and no way been suggested to me, as to how the two actions could have been successfully joined. The grounds relied on are that the defendant in both actions is the same, the plaintiffs are members of the same group and rely in both actions on the same guarantee. The Privy Council in Yat Tung adopted the dicta of Somervell L.J. in Greenhalgh v. Mallard (1947) 2 A. E. R. 255,257:-
"res judicata ..... covers issues on facts which are so clearly part of the subject matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them.".
That is simply not the case here. This claim is by a different plaintiff, albeit a member of the same group, but not even registered in Hong Kong. It is based on failure to honour a letter of credit dated 5/1/1982 (amended on 27/2/1982) for US $74,400. The earlier claim was on two bills of exchange dated 19/9/1982 and 17/10/1982 for H K $189,209.29 and H K $73,940.70. There is nothing in the lst defendant's affidavit alleging that there is any connection whatever as to the subject matter or issues of the two actions being the same other than that the claims are both brought under the same guarantee and the present one ante-dates the other. Ther eis no allegation that the guarantee of 16/2/1982 is not personal or is in any way defective. There is no defence on this ground.
(2) No allegation of delivery of goods
At the first hearing of this matter Mr. Ribeiro argued that liabilities under the letter of credit only arose 90 days after delivery of the goods. There was no allegation of such delivery.
After setting out the background to the contract from which the letter of credit was issued the claim states (Paras. 7 and 8) that Cliff-Renee Bros Co. Ltd. the beneficiary, obtained payment. The plaintiff however has received only part payment from the ultimate buyer - between 22/10/1982 and 22/12/1982 and the balance of US $25,956.33 is now owing.
I consider that allegation is sufficient to put the defendants on notice that the claim is that the goods were delivered. That claim which not specifically admitted in the defence, is not denied.
I am satisfied there is nothing in that defence.
(3) Does the guarantee include the plaintiff
When this matter first came on for hearing it was argued that the plaintiff could not avail itself of the guarantee because it was not named therein as part of the ITM Group of companies. It is to that Group of companies that the guarantee is addressed. Clause 12 of the guarantee says that "the Group" shall mean all or any of a list of companies, of which the plaintiff is not one, but it goes on to include:-
"and subsidiary or Associate Company of any of them and every reference to the Group shall be construed as a reference to each of them severally so that all covenants and undertakings given by me/us herein in favour of the Group shall be construed as covenants and undertakings in favour of each of them respectively.".
At the first hearing of this appeal, the only evidence that the plaintiff was a subsidiary or associate, as defined in Section 12 of the guarantee, was a statement in the affidavit of the General Manager of the plaintiff, Mr. Philip Ng who said:-
"I confirm that the Plaintiff is a Company as defined in clause 12 of the guarantee.".
There was a blank where presumably the word "subsidiary" or "associate" could have been filled in but was not.
I adjourned the matter, awarded the costs of the adjournment to the defendant, and gave leave for the plaintiff to file a further affidavit within 7 days. In fact, the plaintiff was unable to comply with that time limit because information had to be obtained from Germany. It was not in fact until the 2nd January 1985 that this further affidavit was filed. It is by Mr. Horst Schwarze, the Managing Director of the plaintiff company. He has exhibited to his affidavit a search made of the Companies Registry in Hong Kong which shows that the plaintiff was registered on 31/12/1954 and is owned, as to 599 shares out of 600, by a West German company called Ubersee Investitions GmbH Hamburg (*"Ubersee").* There is also exhibited an affidavit of Isa Drobnig, a lawyer from Hamburg, West Germany, which in turn exhibits copies of the company registry in Hamburg showing that Ubersee was, as at the 4th February 1982, entirely owned by Meridien Breckwoldt GmbH of Spaldingstrasse 70 D-2000 Hamburg. This is a company which is listed in paragraph 12 of the guarantee.
*
Its name was apparently changed from Breckwoldt and Co. (Hong Kong) Ltd. to its present one in May 1981.
Section 2(4) of the Companies Ordinance reads as follows:-
"For the purposes of this Ordinance a company shall, subject to the provisions of subsection (6), be deemed to be a subsidiary of another company, if -
(a)
that other company -
(i) controls the composition of the board of directors of the firstmentioned company; or
(ii) controls more than half of the voting power of the firstmentioned company; or
(iii) holds more than half of the issued share capital of the firstmentioned company (excluding any part of it. which carries no right to participate beyond a specified amount in a distribution of either profits or capital); or
(b)
the first-mentioned company is a subsidiary of any company which is that other company's subsidiary.".
Here there is evidence that, as at 4/2/1982, shortly before the guarantee was signed, Ubersee was a subsidiary of Meridien Breckwoldt GmbH of Spaldingstrasse, Hamburg, one of the named company in Clause 12. Mr. Ribeiro however argues that firstly the guarantee must be taken at the date of execution and the liability of the 1st defendant is fixed at that date and secondly the evidence is not clear that at that date Ubersee owned its 599 shares of the plaintiff. All the search shows it that it did on 31/12/1983 and therefore a vital link in the claim of evidence is missing.
It is clear from the wording of the guarantee that it is to cover payments made by any member of the Group at any future time. It refers to "all sums of money which are now or shall at anytime hereafter be owing" and when I first considered this matter I was of the view that this would cover the position when a company became a subsidiary within the Group even if after the signing of the guarantee. I therefore was of the view that that defence also must fail and accordingly gave judgment for the plaintiff with costs. I am now satisfied that that is not so and Mr. Ribeiro is correct when he says that under the terms of the guarantee the companies which fall within the Group must only be those so constituted at the date it was signed. There is evidence that the plaintiff was within the Group on 31/12/1983. There is nothing on the search report to show that the shareholding had altered before that date but as the plaintiff conceded, it is a possibility.
This is a purely technical defence but on further consideration of the matter since giving summary judgment to the plaintiff I am now satisfied I was wrong in doing so and the defendant should be given unconditional leave to defend.
(R. G. Penlington)
Judge of the High Court
Representation:
A. J. Murtagh of Johnson, Stokes & Master for Applicant/Plaintiff.
Robert Ribeiro (Liau & Co.) for Respondent/lst Defendant.