MEE TICK HANGERS INTERNATIONAL LTD v. PETER GREENING (ALSO KNOWN AS PETER CAVE GREENING)

HCA 1787/2023

[2025] HKCFI 549

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1787 OF 2023

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J U D G M E N T

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Introduction and Procedural Background

1.  By Summons dated 19 September 2024 (“the Summons”), the Plaintiff (“P”) applies for summary judgment against the Defendant (“D”) for the sum of HK$4,000,000 with interest under O.14, r.1 of Rules of the High Court (“RHC”), and alternatively, interim payment under O.29, r.12 of RHC.

2.  There was also an application by Summons dated 14 January 2025 by D for leave to adduce the 2^nd Affidavit of D (“D 2^nd”) and to rely on the same to oppose the Summons. Mr Evans, solicitors who appeared before me on behalf of P, did not strongly object to that application but he wished for an explanation be given as to why those matters were not contained in the 1^st Affidavit of D (“D 1^st”). Mr Poon, counsel on behalf of D, explained that D 2^nd mainly responded to matters only raised by P in the 2^nd Affirmation of Cheung Wai Kuen Emily, an affirmation filed in reply to D 1^st, and concerned matters within the knowledge of P. With that explanation and given that there was no real prejudice suffered by P, having been given a copy of D 2^nd well in advance of the hearing and before the filing of P’s skeleton, which did object to the filing of D 2^nd therein, I allowed D’s application at the beginning of the hearing. The costs of that application should be in the cause of the Summons. For the avoidance of doubt, I would also grant retrospective leave for D 1^st to be filed notwithstanding the time for doing so had expired.

3.  P’s claim is based on a personal guarantee dated 15 July 2015 signed by D in favour of P (“the Guarantee”). The Guarantee was for a maximum amount of HK$4,000,000.

4.  It is not disputed that D signed the Guarantee at the request of P, at a time when Global Hangar Solutions Limited (“GHS”), a company of which at all material times D was its director, was indebted to P for unpaid invoices at about HK$3,760,000. By the Guarantee, D undertook to repay P in the event that GHS failed to settle all the outstanding indebtedness to P. The Guarantee also stated that it has no expiry date and remained in force as long as the debts due to P remain outstanding.

5.  Although pleaded in the Defence and raised in D 1^st, by the time of Mr Poon’s skeleton submissions, D no longer relied on the defence that: (1) there was no valid or sufficient consideration for the Guarantee; and (2) the wording of the Guarantee is ambiguous. The only defence relied upon is an alleged profit offset arrangement reached in late 2016 whereby it was verbally agreed by P and D that any profits that P gained from actions directly attributable to D and GHS would be used to offset the debt GHS owed to P (“the Arrangement”). It is D’s case that the profit attributed to D’s actions exceeded HK$4,000,000 and therefore no sum is due from D to P under the Guarantee. P does not accept the Arrangement was agreed or there were any such arrangement for the offset of debts owed by GHS to P.

Applicable principles for Summary Judgment

6.  The applicable principles for summary judgment are well-established. In Guanghua SS Holdings Limited v Lim Yew Cheng & Another [2022] HKCFI 1052 at §13, Ng J set out a helpful and succinct summary of the proper approach to such application as follows:

(1)  The Order 14 machinery works on the basis that if the plaintiff’s application is properly constituted, it is prima facie entitled to judgment unless the defendant shows cause to the contrary;

(2)  The mere assertion in an affidavit of a given situation by the defendant responding to an application for summary judgment does not, ipso facto, ground leave to defend;

(3)  The burden is on the defendant to show a real or bona fide defence or some other reason for a trial. The defendant must satisfy the Court that his evidence is capable of being believed and that on the basis of such evidence, there is a fair or reasonable probability of the defendant having a real or bona fide defence;

(4)  In deciding whether there is a fair or reasonable probability of the defendant having a real or bona fide defence, the Court does not isolate each factual issue and consider whether it is possible that the defendant’s story on that issue is credible. Rather, the Court must look at the whole situation;

(5)  In assessing the credibility of the defendant’s factual case, while the Court will not embark upon a mini-trial on affidavit evidence, the Court is not obliged to suspend its critical faculties and assume that the defendant’s evidence is accurate;

(6)  If having regard to inherent plausibility, inconsistency with contemporaneous documents and other compelling evidence, the defence is not credible, the Court must say so; and

(7)  If the defendant’s evidence is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence.

Analysis

7.  Applying the above approach to the present case, I am satisfied that P’s application for summary judgment was properly constituted. The present action, commenced by writ, is one which O. 14 applies. The Statement of Claim was served on D and D has given notice of intention as required under O.14, r.1 of RHC. The affirmation in support of the application also complies with the requirements under O.14, r.2 of RHC. Thus P is prima facie entitled to judgment unless D shows cause to the contrary.

8.  Having heard the submissions of Mr Evans and Mr Poon, and fully reflected on their submissions after the hearing, on the evidence before me and having regard to the inherent probabilities in all the circumstances of this case, I am of the view that D’s defence is incredible and is not capable of belief.

9.  Notwithstanding that D has alleged that the Arrangement was reached in late 2016, it was accepted by Mr Poon that there is no contemporaneous record of such agreement at the time.

10.  On the other hand, the existence of the Arrangement is inconsistent with the contemporaneous correspondence.

11.  In D’s email dated 8 March 2018 to Philip Sum (“Philip”), the personal assistant to David Cheung (“David”), the director and indirect majority shareholder of P, he stated inter alia:

“To start the discussion, here are some initial thoughts:

5% commission – I would suggest at the start we split this so 2.5% pays the debt & 2.5% comes to me, as you can imagine I have a very low income currently.

Negotiating a price about the base price – if I manage to negotiate a better ‘sell price’ than you have quoted as the ‘base price’ then it makes sense that it is rewarded, otherwise there’s no incentive for me to try & increase the best possible longterm profit. This could also be offset against the GHS debt as it is all additional profit that you wouldn’t normally realise. I would also propose that, even after the full GHS debt is repaid, any hangers/profits negotiated in this way continue to be kept by [P].

…

GHS business transferred over to GHL …

… The profits to [P] from this ongoing business since Summer of 2016 should therefore also be used to offset against the GHS debt. As with the previous point I would also propose that, even after the full GHS debt is repaid, any outgoing profits from this existing business continue to be kept by [P].

In essence, what I’m proposing is that until the GHS debt is paid I receive 2.5% commission on any new business but once it is repaid it reverts to 5%. Other profits that [P] derive from action directly attributable to myself and GHS are also used to offset the GHS debt.

What do you think? Please let me know your thoughts, but there’s absolutely no rush”. [my emphasis in bold]

12.  This email directly contradicts D’s case that there had already been an agreement reached in late 2016. If according to D, the Arrangement which had been entered into in late 2016 and was recorded in the above email, he would not have written that email using words such as those highlighted by me in bold above.

13.  Although Mr Poon further placed great reliance on the email from Philip on 8 March 2018 in response, in particular the words, “all points look good”, as P’s acceptance of the Arrangement, it is clear from reading the email as a whole that it was a holding response whilst Philip sought a response to the proposal from David. Following “all points look good”, it was stated:

“However, we do want to review them further as David treats you as a strategic partner and wants you to have what you deserve. For example, you ‘also propose that, even after the full GHS debt is repaid, any hangers profits negotiated in this way continue to be kept by [P]’. David is thinking you should keep some of the margin. But then please let us sleep on it and we will get back to you early next week.”

14.  Had the Arrangement been entered into in late 2016, there would be no need the review “your suggestion” and to sleep on D’s proposal. Again this email contradicts D’s case that the Arrangement was entered into in late 2006.

15.  The substantive response to D’s email of 8 March 2018 was contained in Philip’s email of 14 March 2018 which relayed that “the management had a discussion earlier on the topic and I am pleased write you their decision”. The email only responded to commission rates and that the commission will be based on P’s sales report which will be released quarterly. Although Mr Poon submitted that this email “did not vary or reject the essence of the Profit Offset Agreement, in particular the essential term that all P’s profits attributed to D’s efforts could be used to set-off against [GHS]”, nowhere is there recorded agreement to that essential term.

16.  If it was an essential term of the parties’ agreement that P’s profits attributed to D’s effort could be used to set-off against GHS’s outstanding debt, it is surprising no express confirmation of the same was given in that email or any other document. This is particularly so given the substantial amount at stake and the evident concerns of P over the failure to settle the outstanding sums owed by GHS to P.

17.  Although Mr Poon made a number of other submissions on why the Arrangement was inherently probable and consistent with commercial reality, placing great reliance on the factual matrix or the context giving rise to the Guarantee and the Arrangement, with respect, I am unable to agree.

18.  Firstly, Mr Poon submitted that the Arrangement is inherently probable and consistent with commercial sense because, by late 2016 as a winding-up petition had been presented against GHS, P knew that GHS could not repay the outstanding sums. He submitted that there was a clear and eminently sensible rational for GHS’s debt to be “repaid” through the Arrangement.

19.  However, it was precisely because of the concerns over GHS’s solvency, even back in 2015, which led to the Guarantee being required to be given from D personally. See Affirmation of Cheung Wai Yuen at paragraph 13 and email from Philip to D on 20 July 2015. On the other hand, having been provided the Guarantee, to enable future profits of P to set-off the debts incurred and owed to P by GHS, even bearing in mind the close and long-standing relationship between David and D, does not make business and commercial sense and would not be in best interest of P.

20.  Mr Poon also relied upon a remark by Philip in an email he wrote on 8 September 2021, when he was no longer employed by P and clearly had no authority to speak on behalf of P, that “as you and they know that you are the ONLY person who can really bring in business in the UK, they can’t/won’t do anything drastic to you!” With respect, that remark made by Philip in 2021 as to the business that D can bring to P is neither here nor there as to the inherent probabilities of having reached the Arrangement at the end of 2016.

21.  Secondly, Mr Poon submitted that without the Arrangement, D would not have actively procured the transfer of clients from GHS to P (or its UK subsidiary), assisted with designing garment hangers for P’s customers, negotiated the sale prices with the clients on behalf of P. He also submitted that P would not have shared details of its pricing and other information of P with D. However, it is undisputed that P agreed to pay to D and D received commission for doing so. Furthermore, by that time, GHS was under liquidation, had ceased trading and could not have kept those clients for itself.

22.  In so far as Mr Poon raised the motivation for D to do so, this is clearly answered by D’s own letter of 26 November 2021 responding to P’s demand letter dated 16 November 2021 seeking to enforce the Guarantee:

“… By 23^rd July 2015 I fully understood that the contract between [P] and myself was both invalid from the outset and subsequently breached. However when [GHS] collapsed I decided because of the long and close relationship I had had with David Cheung and Philip Shum at [P], I would do all that I could to help [P] regain its losses from the collapse. I understood that I had done everything possible to prevent the collapse at considerable personal cost to myself and that there was no legal requirement to do this but on a point of honour I felt it was something I wanted to do. I intended to do this by winning as much business with the maximum profit for [P] as possible.”

23.  It is notable that there is no mention therein of the Arrangement reached in late 2016 but only that in March 2018 he had sent an email confirming how P and he would work together on future work and that on 14 March 2018 P sent an email in reply confirming this. If there had been the Arrangement or some other binding agreement reached to set-off GHS’s debts with the profits P was able to earn through D’s efforts, D would not have stated that there was “no legal requirement” to win business for P but rather did this “at considerable personal costs” to himself.

24.  Thirdly, Mr Poon submitted that the existence of the Arrangement is consistent with P not enforcing the Guarantee until August 2021, long after GHS was wound up (31 October 2016) and the liquidator was appointed (May 2017). However, in the Affirmation of Cheung Wai Yuen Emily, it was explained that it was towards the end of 2021 that David decided that the Guarantee should be enforced. It was further mentioned therein that in September 2021 when P stopped making monthly ex gratia allowance for living expense to D and D commenced two sets of legal proceedings against the English subsidiary of P, that the relationship between P and GHS deteriorated. Mr Poon submitted that there is no commercial rationale for P to sit on its rights for 5 years. However, the Guarantee had no expiry date. P had already lodged a proof of debt with the liquidators of GHS and dividend was only declared and paid to P on 2 July 2024. In these circumstances, I do not regard the enforcement of the Guarantee in 2021 as compatible or consistent with the Arrangement.

25.  Fourthly, Mr Poon relied on the correspondence between August and October 2021 to demonstrate that the Arrangement was not a recent invention or afterthought. In particular, he relied on two emails of Eric Cheng, P’s risk controller, on 10 September 2021 and 15 September 2021. He submitted that Eric Cheng did not deny the existence of the Arrangement but instead questioned the parameters and calculations of D. Reading those emails, there was no clear admission of the Arrangement.

26.  In the email of 10 September 2021, in response to what had been discussed back in May 2018, rather cryptically, he stated, “David is fully aware of our discussion. He got a good memory too.” He further stated, “Finally, I didn’t mean to be demanding, but I hope we can reach a preliminary agreement with how to settle the debts before October.” Plainly, there was no acceptance of the Arrangement, which on D’s case would have offset the debts owed to P by GHS. He was clearly insisting on settlement of GHS’s debts.

27.  As for the email of 15 September 2021, again, there is no clear admission of the Arrangement but rather he provided the sales volume and mentioned P’s practice for commission calculation: “David recalls his past commission offers. NO change with those NAMES like Tesco/Primark. He is considering a higher commission of 3% flat out during your debt repayment period. We shall discuss who else are included and what new rate (5% or more) after debt settlement.” Eric then specifically responded about Panache, which D says he had developed new hangers on behalf of P, saying that David “is open for discussion, but your profit indication 50% is way off his limit.” Again, there was no clear admission of the Arrangement. Eric was still pressing for the debts owed by GHS although it seems that David was open to discuss some profit sharing.

28.  I also bear in mind that the Arrangement as alleged is inconsistent with the other defences initially raised by D challenging the validity of the Guarantee.

29.  In all the circumstances, I am of the view that D’s evidence on the Arrangement is incredible. D raises no triable issues on liability.

30.  As for the quantum, in D 1^st (see paragraph 43) D admitted that as of 10 August 2016, HK$4,098,175.19 was the debt which GHS owed to P. Given my rejection that the Arrangement is credible and there was never any suggestion that there were other payments by GHS to P since then to reduce that sum, D is clearly liable under the Guarantee for HK$4,000,000 together with interest.

Disposition and costs

31.  Accordingly, I would order summary judgment against D for the sum of HK$4,000,000 within interest at 7% p.a. from the date of the Writ to the date of Judgment and thereafter at judgment rate until full payment.

32.  I see no reason why costs should not follow the event. I will make a costs order nisi that D pays to P the costs of the Summons, including the costs of this action, to be taxed if not agreed. If no application to vary within 14 days from the date of handing down of this Judgment, the costs order nisi shall become absolute.