COMBINED RICH CO LTD v. SIM KOK KENG AND OTHERS

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

-----------------

JUDGMENT

-----------------

The Background

1. The plaintiff is a company incorporated in Hong Kong. The first and second defendants are resident in Singapore. The third defendant is a company incorporated in Singapore.

2. On the face of the relevant documents, the plaintiff, the third defendant and another party became involved in two joint ventures in Fuzhou. The plaintiff alleges, however, that "the 1^st and 2^nd Defendants (or alternatively the 3^rd Defendant)" were parties to the relevant agreements. The joint ventures were conducted under companies called Fuzhou Fuxin Leathers Limited and Fuzhou Fuxin Power-Tech Limited. A third joint venture was contemplated using a company to be called Fuzhou Fuxin Plastic Company Limited, but this company was never incorporated. Nevertheless, the plaintiff financed the provision of three letters of credit for importing machinery to be used in the third joint venture. These letters issued in August and October 1992 were in the total sum of US$2.054 million, although the second defendant says that, by an agreement dated 5 June 1993 between the plaintiff and the non-existent Fuzhou Fuxin Plastic Company Limited - which I have not seen, the plaintiff agreed "to apply for three documentary credits on its behalf totally US$2.050,000". In its statement of claim, the plaintiff speaks of "3 sets of letter of credit in the total sum of around US$2.050,000". It is this sum of US$2.050 million, amongst other things, that the plaintiff claims in the main action.

3. The plaintiff issued a summons under Order 14 seeking final judgment against the first and second defendants for this sum of US$2.050 million. In this application, the plaintiff relies on an agreement between the plaintiff and the first defendants dated 29 October 1994 under which the defendants promised to repay the sum of US$2.050 million on or before 30 December 1995.

4. The plaintiff succeeded in this application before the Master. The first and second defendants now appeal against this order.

The Agreement

5. The agreement dated 29 October 1994 is clear. There is no need to recite the precise wording; Mr Aiken makes nothing of this. He does not suggest - he could not suggest - that there is anything in the language that would indicate that it is intended to be otherwise than an ordinary legally binding agreement. The agreement recites that the first and second defendants asked the plaintiff to supply and pay for documentary credits on their behalf, and that the first and second defendants promise to pay the sum of US$2.050 million to the plaintiff, in any event, not later than 30 December 1995. The second defendant signed the agreement on 29 October 1994, and the first defendant signed it on 20 December 1994. The signatures and the agreement itself make it clear that they agreed in their personal capacities.

6. There was another document signed by the first and second defendants on 29 October 1994. This relates to the first and second joint ventures. It acknowledges that the balance due to the plaintiff was US$525,250.29. This balance was amended to read US$425,250.29 on 20 December 1994. The amendment is signed by the first and second defendants. The plaintiff does not claim summary judgment on this document, but it has important evidentiary value in relation to one of the defences raised. It is also instructive that a draft of this agreement dated 23 October 1994 was in the name of the third defendant, but the second defendant amended it so that the names of the first and second defendants appeared in place of that of the third defendant.

The Defences

7. The first and second defendants advance the following defences to the claim based on this document -

The Lack of Consideration

8. It is the first and second defendants' own case that the plaintiff was due repayment of the money advanced to pay for the letters of credit much earlier than 30 December 1995. In consideration for the first and second defendants signing the document agreeing to repay the money, the plaintiff agreed to wait until 30 December 1995 for payment. That is sufficient consideration to support the agreement.

The Binding Nature of the Agreement

9. Apart from the facts I have recited above from the defendants' defence, in an affirmation made by the second defendant on 11 March 1996, the second defendant says, in relation to this allegation, that "the Plaintiff agreed to apply for three documentary credits ... totally US$2,050,000" and the plaintiff was to be repaid from loans from banks, but these loans did not materialise so Mr Wang of the plaintiff "approached the 1^st Defendant and me to help settle the problem by furnishing a comfort letter to the effect that the companies would take steps to repay the amount of the documentary credits. Basically, he needed to give an assurance to his superiors that the amounts would be repaid. As a gesture of goodwill, the 1^st Defendant and I agreed to sign the undertakings as directors of the joint venture companies to repay the sum as contained in the two agreements. We did so only on the understanding that they were not intended to be legally binding but as a temporary measure to assist Mr Wang Rui to account to his superiors.".

10. In an another affirmation made on 27 June 1997, the second defendant repeats much the same thing; saying that Mr Wang was under pressure from his superior, that he persuaded the second defendant to sign, that he signed after consulting the first defendant "for the sole purpose of helping Mr Wang Rui to pacify his superiors", and that the agreement was signed "merely as a gesture of goodwill and on the understanding that it was not intended to be legally binding.".

11. This evidence is most unsatisfactory.

12. There is no acceptance by the first and second defendants that they signed the agreement in their personal capacities, as it undoubtedly did. It is clear from other documents, particularly the history of the other agreement dated 29 October 1994, that the first and second defendants well knew the difference between signing on behalf of a company and signing in their personal capacities. The second defendant speaks of "the companies" taking steps to repay, and of the and the first defendant giving undertakings "as directors of the joint venture companies to repay". By taking this approach, the first and second defendants have disabled themselves from explaining why they signed in their personal capacities. Indeed, they make no attempt to do so.

13. The second defendant avoids being specific regarding the principal on whose behalf he alleges he signed; he speaks only of "the joint venture companies", but he could not possibly have been signing on behalf of the joint venture company concerned here because, everyone agrees, that company was never incorporated. He does not suggest he signed on behalf of the third defendant. The first and second defendants could not of course, have been directors of the third joint venture company because it was never incorporated.

14. The second defendant fails to particularise his suggestion that there was an "understanding" that the agreement was not binding. An understanding by whom? The second defendant? The first and second defendants? Or an understanding between them and Mr Wang? If Mr Wang had agreed that the agreement would not be enforceable against them, I would have expected the second defendant to say so directly in simple terms. It seems that the second defendant goes out of his way to avoid saying this. A court should pay no attention to a defence put forward in such deliberately vague terms. The first and second defendants have had ample opportunity, both before and after the Master's order, to clarify this aspect of their defence. They have failed to do so.

15. Another difficulty is that, if Mr Wang had agreed that the agreement was not to be legally binding, the second defendant fails to give any explanation at all of how it could be that Mr Wang's superiors would be in the slightest bit comforted or assured by an agreement that was not legally binding.

16. This evidence is simply too vague and incredible to set up a defence fit for trial.

The Agreement of 20 December 1994

17. This agreement is contained in a summary of a meeting on that date. The document, in translation, records the indebtedness to the plaintiff in the sum of US$2,050,000, and says that it is intended that certain equipment be "subcontracted" and "the moneys so obtained will be applied to repay the said indebtedness to [the plaintiff] in priority to other indebtedness.".

18. The suggestion by the first and second defendants is that this agreement, in some way, cancelled the agreement of 20 October 1994. I do not understand how this could be so. There is no suggestion that the agreement of 20 October 1994 was expressly cancelled, and there is no reason why one should suppose that it was cancelled by implication. The two agreements are not inconsistent. The agreement of 20 October 1994 provided for payment to the plaintiff by 30 December 1995. If, under the agreement of 20 December 1994, the plaintiff received payment earlier than 30 December 1995, that was all to the good of all concerned, but there is no reason to suppose that the plaintiff agreed that it would accept the arrangements under the agreement of 20 December 1994 in substitution for its rights under the earlier agreement. It also not without some significance that the first defendant signed the agreement of 20 October 1994 on 20 December 1994. This indicates that the agreement of 20 October 1994 was in the minds of the parties on 20 December 1994, and that, to the plaintiff anyway, it was fully alive.

The Alleged Repavments

19. The first and second defendants say that the payment of US$399,953.54 was made on 9 December 1992, that the payment of US$149,981.54 was made on 30 December 1992, and that, in effect, the payment of US$400.000 was made on 20 May 1993. These alleged payments totalled US$949,935.08, leaving only a balance of US$1,100,064.92.

20. It is strange that these allegations of repayments arose only in an affirmation made by the second defendant on 27 June 1997. There is no allegation of repayment in the defence; in fact, the debt of US$2,050,000, although said to be due by the unincorporated joint venture company, is confirmed in that defence. I have already recited the terms of the agreement of 20 October 1994, which confirms the amount in the sum of US$2,050,000. I have also mentioned what the second defendant says about signing the agreement of 20 October 1994. He further says "This explained why the 1^st and I agreed to sign [ the agreement] undertaking to pay the Plaintiff the full amount of US$2,050,000 notwithstanding the previous payments reducing the total indebtedness ..." It explains, of course, nothing of the kind, as Mr Aiken agreed when I put this to him during argument. If, indeed, the plaintiff had been paid the sums claimed, there is no explanation by the first and second defendants why the agreement did not reflect this. There is also no explanation whatsoever why the same amount of US$2,050,000 is repeated as the indebtedness due to the plaintiff in the summary of meeting of 20 December 1994.

21. In his affirmation made on 17 May 1996, that is, well before the second defendant raised allegations that the sum of US$2,050,000 should be reduced by repayments, Mr Wang Rui, of the plaintiff, explained that the sum of US$399,953.54 had been credited to the first joint venture account, and the sums of US$149,981.54 and US$400,000 had been credited to the second joint venture account. The plaintiff says these credits were discussed and agreed with the first and second defendants. After taking these payments into account, the balance due under the first and second joint venture accounts was US$425,250.29, which is the sum that the first and second defendants acknowledged was due when they signed an amendment on 20 December 1994 to the other agreement dated 29 October 1994. There is evidence that earlier there were discussions and possibly even an agreement that the payments would be credited to the third joint venture account, but these were replaced by the agreement to credit the first and second joint venture accounts. This must be the case because clearly the first and second defendants accepted the balances, as calculated by the plaintiff, due under, in the first place, the first and second joint venture accounts, by their signatures on 20 December 1994, and, in the second place, under the third joint venture account, by their signatures on 29 October and 20 December 1994. The fact that they accepted this position is also supported by the fact that they let the quantum of the claim of US$2,050,000 go unchallenged until very late in the day.

The Duplicate Proceedings

22. There is no merit in this point at all. It is perfectly clear that the proceedings being taken by the plaintiff in another part of the People's Republic of China do not in any way overlap with the proceedings before me.

General

23. As a general point, Mr Aiken submits that this matter is complex, and, for that reason is not suitable for summary proceedings. I do not agree. The plaintiff's claim for summary judgment is not complex. It is based on a simple, straightforward agreement like many others that are dealt with in these courts in a summary manner every day. Any complexity is introduced by the first and second defendants' attempts to avoid the inevitable. Clearly, in my view, there was no defence to the plaintiff's simple claim, and the first and second defendants are not entitled to avoid summary judgment by seeking to raise all manner of complexities; complexities that evaporate quickly under examination.

Result

24. In the result, I find that the first and second defendants have raised no raised defences, and the plaintiff is entitled to summary judgment. The appeal is dismissed.

Costs

25. On the face of it, there seems no reason why costs should not follow the event. I make an order nisi that the first and second defendants pay the plaintiff's costs.