TSUI YUK FUK v. CHAN SIU PING

1995, No. A4907

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This is an appeal against the learned Master's Order entering judgment in favour of the Plaintiff against the Defendant for the sum of $18,705,225.30 with interest thereon in the sum of $3,197,824.82 for the period from 9 July 1994 to 17 May 1995; and further interest on the sum of $18,705,225.30 at the rate of 20% p.a. from 17 May 1995 until the date of payment. The learned Master also awarded interest on the sum of $3,197,824.82 at the judgment rate from 17 May 1995 until the date of payment.

2. The Plaintiff's case is founded on a Deed of Settlement dated 15 April 1993 made between the Plaintiff and the Defendant in which it was agreed, inter alia, that the Defendant shall pay to the Plaintiff a sum of $26,827,525.00. It is the Plaintiff's case that the Defendant had failed to make payment pursuant to that Deed of Settlement and had only made payment in the total amount of $7,922,299.70, leaving the balance, the subject matter of the claim herein.

3. The Defendant's defence is that the Deed of Settlement was entered into by the Defendant under economic duress and threats made by the Plaintiff. The Defendant had invested substantially in projects in his home village in the Lung Kong County in mainland China. The Plaintiff was at the material time in charge of the Defendant's offices in Beijing and Shanghai. The success of the Defendant's investment depended heavily on a close friend of his, one certain Mr Lee, the Party Secretary of the County then. It is the Defendant's case that the Plaintiff demanded $30,000,000.00 from him with the threat that unless he made that payment to her, she would, firstly close down the Beijing and Shanghai office of the Defendant; and secondly, to report to the relevant authorities in China that there were illegitimate dealings between the Defendant and Mr Lee over his investments in Mr Lee's County.

4. I was referred to voluminous documents and evidence placed by the parties before the Court. I agree with Mr Chan's submission that it is inapt for a court to embark on a mini-trial in an application for summary judgment. The principle has been well settled, if not earlier on then recently by the Court of Appeal in Hong Kong. If authority is required, one only needs to look at Man Earn Limited v. Wing Ting Fong [1996] 1 HKC 225, per the judgment of Litton, V.-P. and Ng Shou Tsing v. Hung Chun San [1994] 1 HKC 155, per the judgment of Godfrey, J.A.

5. The bundles of documents before me totalled well over 600 pages. I do not propose to go through or analyse the evidence in detail as if I am conducting a mini-trial. I have come to the conclusion, after looking at the materials placed before me, that the Defendant has sufficiently raised an issue for trial. His case cannot be described as unbelievable. It may very well be the case that the evidence adduced by the Defendant at this stage would not be able to withstand final scrutiny at the trial. It may very well be the case that the trial judge may find against the Defendant on the alleged commercial duress or threats. However, it is not encumbered upon the Defendant to satisfy any higher burden than the threshold burden as set out by the authorities.

6. I have also come to the view that the case required further investigation at a trial in open court where there can be cross-examination of witnesses on both sides. I am not satisfied that everything that ought to be placed before the Court to justify final judgment has so been placed. I am satisfied that probably the Court is looking at the tip of the iceberg insofar as the truth is concerned. I am satisfied that this case comes within the principle as set out on p.156 of the 1995 Supreme Court Practice:

"Where there are unexplained features of both the claim and the defence which are disturbing because they bear the appearance of falsity and disreputable business dealings and questionable conduct, the court should not make tentative assessments of the respective chances of success of the parties or the relative strengths or the good of that thing, and should not on such an examination grant the defendant conditional leave to defend, but should give unconditional leave to defend (Extrktionstechnik Gesellschaft Fúr Anlagenvau Nvh v. Oskar (1984) 128 Solicitors Journal 417)".

7. I have concluded that both sides' evidence are not satisfactory and I shall give the reasons why. As far as the Defendant is concerned, as Mr Chan had rightly conceded that if one wishes to attack his client's evidence, one can always do it. He readily conceded that his client's evidence is not perfect, so I do not really need to go in depth into it. I now turn to the Plaintiff's evidence. The defence case is that the shares are not worth $30,000,000.00, and this agreed amount cannot be justified by any stretch of imagination on commercial basis. The Plaintiff's answer to this, as far as her affidavit goes, is rather simple. Her case is that she did not really know the basis for the particular sum agreed between the parties. As far as she was concerned, it was an amount offered by the Defendant and she found it acceptable and agreed to it. Her case is that the amount of money she was to receive for the shares, i.e. $30,000,000.00 had nothing to do with the intimate relationship she had with the Defendant. It was a pure commercial transaction. In the premises, any excess over the true value of the shares could not be justified by personal affection between the parties.

8. However, in other parts of her affidavits, when she was dealing specifically with the value of the shares. Her case is that the Defendant had falsified the accounts by understating the true worth of the company. She believed the company to be truly worth $100,000,000.00; and, therefore, her shares to be worth $30,000,000.00. She alleged that the Defendant had a practice of not bringing profits back from China to Hong Kong to be accounted for in the company accounts. That, she said, explains the undervalue of the shares. However, when one looks at the evidence surrounding the circumstances when the parties were negotiating for the finalization of the Deed of Settlement in question, quite a different picture emerges. The Defendant's solicitors had alleged during the negotiation that the value of the shares was far below the $30,000,000.00 and that the excess cannot be justified by the value of the service or remunerations due to the Plaintiff. It was on that basis that solicitors for the Defendant insisted that the excess be called ex gratia payment. To this, the Plaintiff, under legal advice, made no objection. The inconsistency in the stance of the Plaintiff over this issue has not been explained on the materials before me.

9. For the reasons given, the Order of the learned Master must be set aside and the appeal allowed. This is not a case for which conditional leave should be granted. In the premises, unconditional leave is granted to the Defendant to defend the Plaintiff's claim.

(J. Chan)

Judge of the High Court