GLYNHILL INTERNATIONAL LTD v. BELFORD PACIFIC LTD AND ANOTHER

CACV 82/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 82 OF 2009

(ON APPEAL FROM HCA NO. 2937 OF 2002)

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BETWEEN

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REASONS FOR JUDGMENT

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Hon Rogers VP:

1.  This was an appeal from a judgment of Burrell J given on 12 January 2009 whereby, after granting an extension of time to the third party to file an application to set aside a judgment that had been entered on 1 August 2007 in favour of the second defendant against the third party, the third party’s application to set aside that judgment was dismissed. At the conclusion of the hearing of this appeal, this appeal was dismissed with costs to the second defendant. Written reasons were to be handed down in due course.

Background

2.  These proceedings arise out of a claim made by the plaintiff on a promissory note that had been executed by the defendants in favour of Abbeydale Investments Limited. That promissory note was dated 5 November 1997 with a maturity date of 5 December 1997. The principal sum was US$195,387.27.

3.  That sum was not repaid and, by what has been termed the Settlement Agreement dated 29 September 1998, the second defendant agreed to provide cheques payable to Lai Sun Hotels International Ltd, first of all, in the amounts of US$25,687.27 dated 30 September 1998 and, secondly, US$12,800 by a cheque dated 30 November 1998. There were then to be a series of 15 cheques each of US$10,460 payable monthly from 31 October 1998 up until 31 December 1999. The Settlement Agreement stated that the claim for the expenses would be waived. Clearly since the amount of the various cheques totalled the same as the capital amount there would thus be no interest payable. By a deed of assignment Abbeydale Investments Ltd assigned the debt that remained due to the plaintiff on 30 June 2001.

4.  The writ in the action, with the statement of claim endorsed thereon, was issued on 29 July 2002 and, on 2 September 2002, the second defendant issued a third party notice against the third party. The second defendant’s statement of claim in the third party proceedings was filed on 18 December 2002. The material part of paragraph 1 of that statement of claim read:

“1. In consideration of the 2^nd Defendant entering into a Settlement Agreement with Lai Sun Hotels International Limited (“Lai Sun”) dated 29^th September 1998, the 2^nd Defendant and the Third Party entered into a Memorandum of Agreement dated 9^th October 1998 (“the Memorandum of Agreement”). Pursuant to the Memorandum of Agreement, the Third Party agreed, inter alia, to be liable for ¾ of the loan advanced by Abbeydale Investments Ltd (“the Company”) in the sum of US$195,387.27(“the Loan”) to the 1^st and 2^nd Defendants under a Promissory Note dated 5^th November 1997 (“the Promissory Note”) as working funds to enable the 1^st Defendant to proceed with the Beijing project of which the Third Party and the 2^nd Defendant were interested in. The Third Party’s ¾ liability in the Loan amounts to HK$1,465,402.70.”

5.  The defence then filed on behalf of the third party relied upon the fact that the 2 cheques of US$25,687.27 and US$12,800 had not been delivered. The second defendant then proceeded to issue Order 14 proceedings against the third party. The third party then raised in his affirmation dated 19 February 2003 the defence that the Memorandum of Agreement was not supported by any valid consideration because at the time it was executed the Settlement Agreement had already been executed by the second defendant. In his reply affirmation dated 5 March 2003 the second defendant set out the history of how the Settlement Agreement had come into existence and it was averred that the third party had requested the second defendant to enter the Settlement Agreement and in return the third party would enter the Memorandum of Agreement.

6.  On 30 April 2003 the third party was given unconditional leave to defend. In the following month the plaintiff obtained judgment against the second defendant in default of defence. In May the following year the second defendant’s witness statement was filed and in the following month the witness statement on behalf of the third party was also filed. The second defendant’s witness statement repeated what had been said in his second affirmation. The third party, on the other hand, raised new issues. It was said that the third party had increased the finder’s fee payable to the second defendant and that, in that way, he had relieved the second defendant’s financial burden. The third party went on to say in his witness statement that he had signed the Memorandum of Agreement for the purpose of satisfying the plaintiff’s auditors and that the second defendant had been in breach by not using the monies received in respect of the finder’s fees to satisfy his obligations under the loan.

7.  In December 2005 the third party's solicitors ceased to be on the record and the third party did not instruct any other solicitors in their place.

8.  In September 2006 the second defendant amended the statement of claim in the third party proceedings in the following way as regards paragraph 1 thereof:

“1. In consideration of the 2^nd Defendant (“Tse”) entering into a Settlement Agreement with Lai Sun Hotels International Limited (“Lai Sun”) dated 29^th September 1998, the 2^nd Defendant and the Third Party (“Chau”) entered into an agreement (“the Agreement”) as evidenced by a Memorandum of Agreement dated 9^th October 1998 (‘the Memorandum of Agreement’). Pursuant to the Memorandum of Agreement, the Third Party agreed, inter alia, to be liable for the repayment of ¾ of the loan advanced by Abbeydale Investments Limited (“the Company”) in the sum of US$195,387.27 (“the Loan”) to the 1^st and 2^nd Defendants under a Promissory Note dated 5^th November 1997 (“the Promissory Note”) as working funds to enable the 1^st Defendant to proceed with the Beijing project of which the Third Party and the 2^nd Defendant were interested in. The Third Party’s ¾ liability in the Loan amounts to HK$1,465,402.70.”

9.  The matter came on for trial on 24 July 2007 and judgment was given on 1 August 2007. The third party did not attend and was not represented at the trial. It was not until 26 September 2008 that an application was made for extension of time to apply to set aside that judgment.

10.  The judge held that the judgment in 2007 had been properly obtained and that all documents had been duly and properly served but observed that the third party had maintained that he had not actually received various documents. In those circumstances, it was for the third party to show that he had a real prospect of success and the judge concluded that he had not shown that.

11.  The third party’s case in the court below, namely, that given the chronology, the Settlement Agreement had been reached at least 8 days prior to the Memorandum of Agreement and, in those circumstances, on the face of the Memorandum of Agreement any consideration was past consideration. Hence it was said that on the face of the Memorandum of Agreement two points arose. First, that there was no offer and acceptance and, second, there was no valid consideration.

12.  In my view the judge came to the correct conclusion. In view of the amendment to the statement of claim and the contents of the second defendant’s witness statement and second affirmation, of which the third party was at all times aware, I consider that the judge was fully entitled to enter judgment for the second defendant. Clearly what was being alleged by the second defendant was that the whole matter was one complete series of transactions. Mr Remedios, who appeared for the third party, relied heavily on the argument that the second defendant could not obtain judgment without an amendment to the statement of claim. In my view that point is, at best, a minor technicality. The judge would have been entitled to permit any necessary amendment at the trial had the point been taken there. As it is, the best that could be said in the third party’s favour is that the pleading does not specify exactly when and how the agreement was made; that in the circumstances could have been rectified had the point been pursued at trial. In my view the judge was quite correct in approaching the matter in a robust way, particularly given the admitted inordinate and, to a large extent, unexplained delay in making the application to set aside the judgment.

Hon Le Pichon JA:

13.  I agree.

Hon Sakhrani J:

14.  I also agree.