MAYAR (HK) LTD v. NAROTAM SAYAL

HCCL 4/2007
(formerly HCA 2801/2002)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 4 OF 2007

(formerly HCA 2801/2002)

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BETWEEN

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J U D G M E N T

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This action

1.  This is a claim brought by the plaintiff, a Hong Kong company, against the defendant in respect of monies allegedly due under a Profit-Sharing Agreement (‘PSA’) dated 12 October 1999 which was entered into between these two parties.

2.  The action is of some age: it started life as a High Court action, HCA 2801 of 2002, before being transferred to the Commercial List.

3.  Whilst formally the claim is between the parties to the PSA, the action itself has turned into resolution of the direct evidential conflict between the two Indian businessmen involved in this transaction, namely Mr Narotam Sayal, the defendant, and Mr Ajit Kumar Sud, a director of the plaintiff and also Managing Director of Mayar India; the plaintiff company is a subsidiary of Mayar India, and is part of the Mayar Group of companies, which I understand is a substantial group in India with diverse commercial interests.

4.  Mr Sud and Mr Sayal, who were the only two persons to give viva voce evidence in this case, are experienced international commercial businessmen; for present purposes I refer to them simply by their surnames.

The factual background

5.  The parties’ commercial relationship had its origin in the mutual wish to become involved in the timber trade; Mr Sayal is and at the material time was heavily involved in this trade in India and throughout Asia, and Mr Sud was receptive to the idea of participation of his group in this particular area of business.

6.  Accordingly, Mayar HK, the plaintiff, was to facilitate the involvement of the Mayar Group in a joint enterprise, with Mr Sayal, in this trade: hence the execution of the PSA.

7.  By virtue of this document, Mayar HK and Mr Sayal agreed to share any profits or losses arising out of the timber trading division of Mayar HK; they further agreed each to contribute capital in order to fund the operation of this timber division, which was to be carried out via a Singaporean company, Mayar Resources (Singapore) Ptd Ltd (‘Mayar Singapore’), which at that time was a wholly-owned subsidiary of Mayar HK.

8.  The PSA was signed by Mr Sud, acting on behalf of Mayar HK, and by Mr Sayal, on 1 November 1999, although by consent it was backdated to 12 October 1999; in this document the plaintiff is referred to as ‘MHK’ whilst Mr Sayal is referred to as ‘NS’.

9.  This document was in the following terms:

“PREAMBLE

This agreement is entered into … by and between [MHK] and Mr Narotam Sayal … solely for the purpose of sharing the profits or losses of the recently commenced Timber division of MHK.”

Clause I of the MSA reads, in salient part:

SHARING OF PROFITS OR LOSSES

It is agreed by and between the parties as aforesaid that the profits or losses of the Timber division shall be shared between MHK and NS in the ration of 51:49. The profit or loss of the Timber division for the purposes of shall be ascertained in the sharing following manner:-

(A) Net sales realization (sale proceeds realized and received)

DEDUCT THEREFROM

(B) All costs of whatever nature and description relating to procurement and purchase of timber…[differing categories of costs itemized]

(C) Balance: Profit or Loss

Clause II is entitled ‘REMITTANCE OF PROFITS OR REIMBURSEMENT OF LOSSES’, and dealt with the machinery for the remittance to the parties to the PSA of the annual profits or losses thus arising.

Clause III refers to the CONTRIBUTION OF CAPITAL by the parties to this joint venture; it reads:

The parties hereto agree that Mayar Resources (Singapore) Pte Ltd shall have an initial paid up equity share capital of US Dollars One million and contribute the same on or before March 31, 2000 and the parties hereto further agree to increase and contribute the paid up share capital to US Dollars Two million by September 30, 2000. This equity capital, as aforesaid, shall be contributed by MHK and NS in the ratio of 51:49 respectively within the above mentioned time frame.

The practical effect of this clause was that MHK and Mr Sayal were obliged respectively to contribute the sums of US$1.02 million and US$980,000 as share capital in the joint business, operated through Mayar Singapore.

Clause IV is an arbitration clause, the somewhat unusual content of which appears to have no relevance to the present dispute, whilst Clause V is a proper law clause, providing that any dispute or difference between the parties shall be governed by the laws of Hong Kong.

10.  Subsequent to the signing of the PSA, it appears clear that Mayar Singapore set up an office in or around November 1999, and an operational timber trading business with office and staff by February 2000; both Mr Sud and Mr Sayal were appointed directors of Mayar Singapore on 1 February 2000.

11.  It also is clear – and is not in substance disputed – that this business was not a success; the reasons for this do not greatly matter in the context of this claim, although I should record that on MHK’s version of events this was due to the mismanagement of Mr Sayal, who was responsible for day-to-day management, eventually leading to a breakdown in communications between the parties; for his part Mr Sayal suggests that the Mayer Group never was serious about co-operating with him, and in effect shut him out from the management of the joint business.

12.  Be that as it may. The court does not have to decide the rights and wrongs behind the failure of this joint enterprise, and as a matter of fact the joint venture quickly ground to a halt; by around October 2000 Mayar Singapore no longer was trading, and indeed Mr Sayal resigned as a director of that company on 4 April 2001.

13.  On the plaintiff’s calculations, the total operating loss suffered by its timber division for the financial years ending March 2000 and March 2001 amounted to a total of US$4,630,148.56.

14.   This represented a loss for the financial year ending 31 March 2000 of US$686,690.34 and for the financial year ending 31 March 2001 of US$2,528,012.22; in addition, accumulated losses for Mayar Singapore – which, it will be recalled, was to be the vehicle for the anticipated timber trading – are said to be S$2,431.846, equivalent to US$1,417,446 at exchange rate prevailing at that time.

15.  The thrust of this case is that the plaintiff says that Mr Sayal has not made good his share of the losses, nor has paid his full capital contribution pursuant to the provisions of the PSA; thus the plaintiff now seeks to recover the monies now alleged to be owing.

16.  It was these failures to pay for his share of the losses and to make full payment of his capital contribution that were regarded by the plaintiff as repudiatory breaches of the PSA, the plaintiff accepting such breaches, and thereby terminating the PSA, on 8 June 2001 by means of a letter from its former solicitors.

17.  Hence this suit.

The details of the plaintiff’s claim

18.  The plaintiff puts its monetary claim against Mr Sayal in the following manner:

(1) a claim for 49% of the aggregate operating loss of Mayar HK, that is 49% of US$4,630,148.56, which amounts to US$2,268,772.79;

(2) a claim for a shortfall in the capital contribution which Mr Sayal was obliged to pay under the PSA, namely an initial capital injection of US$490,000 by 31 March 2000, and a further injection of the like amount by 30 September 2000, making a total of US$980,000, but with credit to be given for a sum of US$358,000, which was received from a company known as Ashita Impex Ptd Ltd (‘Ashita’) – which was and is Mr Sayal’s corporate vehicle, and of which he is Managing Director – on 28 July 2000, and which the plaintiff has treated as part-payment of Mr Sayal’s capital contribution under the PSA. This then produces a claim of US$980,000 – US$358,000 = US$622,000;

(3) finally, there is an entirely unconnected claim by the plaintiff against Mr Sayal for the sum of US$18,515, which it is said was a personal loan granted to Mr Sayal at or around 2 November 1999, and which has not been repaid.

Accordingly, the total claim as now mounted by the plaintiff against Mr Sayal is in the sum of US$2,909,287.79, together with interest thereon.

The issues arising for decision

19.  Counsel for the parties are agreed that in this case the task of this court is to sound to four specific issues:

(a) Whether the PSA was a complete, unconditional and binding contract between Mayar HK and Mr Sayal, or was it a lesser instrument importing no binding contractual obligation?

(b) Whether the PSA was cancelled by oral agreement between Mr Sayal and Mr Sud in early 2000?

Depending upon the answers to these primary questions:

(c) The issue of quantum: namely, whether Mr Sayal is liable to MHK for the outstanding part of his capital contribution and his share of the losses of MHK’s timber division?;

and lastly,

(d) The discrete issue of whether Mr Sayal is liable to repay the sum of US$18,515?

The viva voce evidence

20.  As noted at the outset, two witnesses only were called: the main protagonists in this dispute, Mr Sud for the plaintiff, and Mr Sayal.

21.  Both men are international businessmen, doubtless of considerable competence in their fields. Both are highly educated, fluent and precise in their use of English, and in terms of manner in the witness box both gave their evidence tolerably well.

22.  It is fair to observe, however, that the style of each man was that of a different generation.

23.  Mr Sud will forgive me, I hope, if I venture to characterize him as ‘old school’. A patriarch of his family and of the Mayar Group of which he is head, and of which he had taken charge after his father had laid the successful corporate foundation, Mr Sud was, perhaps, slightly dismayed that someone whom hitherto he had regarded as of his own social standing – prior to meeting Mr Sayal he had discovered that their families were known to the other, and that they moved in the same strata of Indian society – should in effect have ‘turned tail’ on him, and disavowed that which Mr Sud clearly regarded as being a binding agreement.

24.  For his part Mr Sayal was younger, linguistically extremely fluent – he had studied for a Masters degree in English – confident and quick thinking, he doubtless represents a newer breed of thrusting entrepreneur; his own company, Ashita, although nowhere near the size of the Mayar Group, appeared to be prospering, and I formed the impression that Mr Sayal was very much a self-made man.

25.  Each took his turn in the witness box with some aplomb, and from a pure credibility viewpoint it was not an easy task to divine from the manner in which they presented who was, or was not, telling the truth.

26.  At the end of the day, however, I was, and indeed remain, strongly inclined to favour the evidence given by Mr Sud.

27.  In addition to his own obvious personal qualities, Mr Sud had the advantage of certain of the contemporary documents as buttressing his account of events, and also in my view he had the inherent probabilities on his side.

28.  To the contrary, notwithstanding the verbal plausibility of Mr Sayal, he was unable convincingly to respond to certain questions posed by Mr Jat in cross-examination – “I cannot answer that” was the response on several occasions to penetrating questions – and at bottom I took the view, and indeed so find, that all the significant events in the relationship between Mr Sayal and Mr Sud broadly had played out in the manner as had been described by Mr Sud.

29.  That is not to say that I accepted all that Mr Sud had said and nothing of Mr Sayal’s account. Clearly there were some mistakes and memory lapses in Mr Sud’s recollection. Clearly also there was a strong common factual matrix in their dealings, so that there was a common evidential foundation for each version of events; at the same time, however, I formed the decided view that Mr Sayal had taken certain events which undoubtedly had occurred – for example, the application which had been made by Ashita to the Reserve Bank of India for permission to obtain and remit US dollars out of India, leading to the subsequent payment through Ashita of US$358,000 – and thereafter had sought to mischaracterize the significance of such event in favour of his alternative (and post-facto) explanation, the better to match the version of events he wished to impart, and thus serving potentially to negate any liability accruing personally to him.

30.  I also, for example, found his account of where, when and how the PSA had been signed, infused as it was with an alleged discussion of the necessity for RBI approval, to be riddled with inconsistency, unbelievable and entirely improbable, and I further reject his alleged lack of involvement with the operations of Mayar Singapore, which tends to be contradicted by contemporary documents; I further found wholly implausible his account leading to the creation and disputed status of the so-called ‘equitable mortgage’, wherein he had deposited the title deeds of one of his properties with Mr Sud.

31.  Be that as it may. As I have indicated, my findings in this case remain a function not merely of my views of the inherent credibility of the witnesses, but also, and perhaps of more significance, of my views on the probabilities as themselves reflected by such contemporary documentation as remains available after a lapse of a decade since the events of this case actually occurred.

32.  I turn now to consider the specific issues raised.

(a) The first issue: the nature/status of the PSA

33.  This is the benchmark point in this case; as Mr Jat SC expressed the position: “this case begins and ends with the PSA”.

34.  Was this document, as the plaintiff contends, an unconditional and binding enforceable agreement, or was it, as Mr Sayal contends, unenforceable against him for a number of reasons?

35.  It is pleaded on Mr Sayal’s behalf that the PSA never was intended to be a binding and legally enforceable agreement, and simply was meant to be a non-binding memorandum of understanding. If this contention be correct, of course, the case ends at this stage, and the court must find in Mr Sayal’s favour.

36.  For its part the plaintiff, through Mr Sud, says that this is arrant nonsense, and that it was clear throughout that, albeit in short-form and to an extent home-made – Mr Sud gave evidence that he had dictated this document in his office from a template which he then had to hand – both parties clearly had regarded this as binding.

37.  On this fundamental issue, I reject the contention that the PSA is nothing more than an unenforceable memorandum.

38.  It seems to me that the legally binding status of the PSA is tolerably clear from the face of the document itself; the language used – as Mr Jat has pointed out, the words “agreement” and “agree” appear no less than 8 times in the PSA – underpins the contention that this is a binding agreement concerned with the parties’ immediate legal rights and liabilities, and there is no indication on its face that this merely was a preliminary ‘memorandum of understanding’ which, for example, was intended to be the precursor of a further (and binding) document to be subsequently drawn at some future stage.

39.  In this context, I should have thought that the attestation clause puts the matter beyond doubt; it reads:

IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THIS DAY AND YEAR FIRST ABOVE WRITTEN

a legend which thereafter this is followed by the signatures of the parties and the signature of the witness, an employee of Mayar India, Mr Amit Jain.

40.  So I do not think that this element of the argument gets off the ground.

41.  Next, it is said that the PSA was subject to a condition precedent regarding the obtaining of RBI approval; in fact, Mr Sayal says that this was the subject of express agreement with Mr Sud.

42.  I think more accurately that that which is meant is that the PSA was subject to a condition subsequent, but no matter: I do not accept this contention either, in whatever form it be put.

43.  I accept Mr Sud’s evidence that the provenance of the funds to be put in by way of Mr Sayal’s capital contribution never was the subject of discussion at the time of the execution of the agreement; so far as he was concerned, Mr Sud said, and I accept, Mr Sayal was a prominent international businessman with operations outside India, and so far as Mr Sud was concerned where Mr Sayal was to source his funds to remit into the joint venture was entirely a matter for him: Mr Sud simply had assumed that such funds would be made available upon Mr Sayal’s assurance that this would be so.

44.  In any event, the PSA makes no mention of any such condition, be it ‘precedent’ or ‘subsequent’, and in my view it is highly improbable that so potentially critical a term should have been omitted; in the PSA the manner of discharge of their financial obligations of the parties was left entirely open.

45.  Nor do I accept Mr Sayal’s evidence, which first emerged under cross-examination, to the effect that when he had received a draft of the PSA, and had yet to sign it, he had returned to talk with Mr Sud about the issue of RBI approval, and then had returned to his office to speak with his accountant about this issue, before signing the draft in the form in which it was executed, yet without ensuring that any specific reference was made to this RBI issue in the document. With respect, I find this version of events well‑nigh unbelievable coming from a sophisticated and well‑educated international businessman, and I have no hesitation in rejecting it.

46.  It also would follow from this revised version of events (which I do not accept as a matter of fact) that far from being a condition precedent (or subsequent) to the PSA, the issue of RBI approval had not been resolved at the time of execution of the PSA, so that in no sense could it be regarded as forming part of the PSA nor as part of any express collateral agreement: plainly it was not. Nor, for that matter, is there any pleading (or evidence) to the effect that there was any concluded agreement on the issue after execution of the PSA, so that this agreement then could become subject, by variation or collateral agreement, to RBI approval.

47.  The argument further is unsustainable because – whilst Mr Jat did not see fit to stress this point – it strikes me that this whole debate is irrelevant and/or inadmissible given that the assertion of an operative condition precedent which is not part of the written agreement must be regarded as constituting a clear violation of the parol evidence rule.

48.  For my own part I do not consider that the issue of RBI approval is likely to have reared its head until well after the execution of the PSA, when – as is clearly the case on the documents – Mr Sayal used his family company, Ashita, to approach the RBI, which approach resulted in the remittance of US$358,000, an arbitrary figure on any basis, but one which Mr Sayal explained was simply the amount of US dollars which Ashita then had to-hand.

49.  I do not know whether this explanation as to the availability of funds is right or wrong, but at the end of the day I do not have to decide whether this aspect of the story is true, because in the event the plaintiff is prepared to give credit for the precise sum as thus was received.

Decision on the first issue

50.  Having carefully considered all the circumstances, I do not think that Mr Sayal’s contentions on this first, and fundamental issue, get off the ground.

51.  Accordingly, I hold that in its form as executed the PSA was an unconditional and binding contract between the parties thereto, and was not – as Mr Sayal contended – a non-binding Memorandum of Understanding or document of similar ilk which in itself imported no binding contractual obligation.

(b) The second issue: cancellation of the PSA?

52.  Mr Sayal advances the further or alternative contention that, consequent upon his failing to obtain RBI funding approval, whatever had been discussed and agreed between himself and Mr Sud under the PSA thereafter was superceded by oral agreement between himself and Mr Sud whereby, at Mr Sud’s suggestion, Ashita would subscribe for MRS shares and hence the PSA should be cancelled or ‘torn up’.

53.  Once again, after reviewing the available evidence I am unable to accept this bald contention, which on the probabilities I simply do not believe.

54.  The hard fact is that there is no documentary evidence relating to such alleged ‘cancellation’ of the PSA, which in the circumstances is something which reasonably could have been anticipated should any such ‘cancellation’ have occurred.

55.  The absence of any such document is consistent with Mr Sud’s evidence, which once again I accept, to the effect that cancellation of the PSA itself never at any time had been discussed between himself and Mr Sayal, and, as Mr Jat commented, it would be wholly surprising if so fundamental a change in the relations of these parties was not recorded, or at the very least specifically referred to in some cursory written form.

56.  The supposed rationale for Ashita’s introduction into the factual matrix as a subscriber for MRS capital was Mr Sayal’s personal inability to obtain RBI approval.

57.  Yet Mr Sayal admitted under cross-examination that he never personally had applied to the RBI, notwithstanding the clear inference from the Defence filed on his behalf (vide paragraphs 4(5) and 4(7) thereof) to the effect that he personally had made application, but that it had been unsuccessful; in this connection his witness statement is the more explicit: “In the event, no approval was granted to me by RBI and therefore the PSA could never come to fruition”. I reject this version of events, and the conclusion sought to be drawn therefrom.

58.  A further difficulty facing Mr Sayal is that not only is there no document evidencing such alleged cancellation of the PSA, but the alleged resultant agreement whereby Ashita was to come into the picture as a replacement for the original (and allegedly unworkable) PSA was said by Mr Sayal to be entirely oral; had there been any variation or novation of this type, in my view the overwhelming probability is that there would have been some attempt to record this fact.

59.  Mr Sayal’s reliance upon a draft Shareholders Agreement as ‘evidence’ of the alleged Ashita agreement similarly does not seem to me to assist. The relevance of this draft within the matrix of facts was far from clear, but in any event this document, for what it be worth, hardly supports Mr Sayal’s argument, since it is dated 24 October 1999, thus pre‑dating the PSA; it contains no reference to Ashita or any Mayar company, and appears to be in standard form and contemplating partnership between two Indian companies.

60.  As Mr Jat submitted, the alleged ‘Ashita agreement’ as described by Mr Sayal dealt only with the respective shareholdings of the parties in MRS, whereas the PSA was concerned with both the shareholdings and the sharing of profits and losses of the timber division, and that, if Mr Sayal is to be believed – and I am unable to accept any such contention – the operational partnership arrangement as contemplated by the PSA had “simply evaporated”, leaving only what was in essence a share subscription arrangement between MRS and Ashita.

61.  Nor does the fact that the plaintiff apparently had been prepared to assist with Ashita’s application for RBI approval strike me as supporting Mr Sayal’s ‘cancellation case’ either.

62.  Mr Sud made it clear in his evidence, which I accept, that MHK considered Ashita to be the alter ego of Mr Sayal, given the undisputed fact that that company beneficially was owned by Mr Sayal’s family and was under his direct operation and control; doubtless so far as MHK/Mr Sud was concerned, for all practical purposes Mr Sayal and Ashita commercially were interchangeable.

63.  In this connection I also agree with Mr Jat’s submission that the “letter of invitation” dated 28 January 2000 from MRS to Ashita is perfectly explicable when viewed in this light. This letter came into being in or around March 2000 and was backdated for the purpose of assisting Ashita’s application to the RBI, and there is no reason in the circumstances why MHK should not have assisted; clearly it had a keen interest in receiving the outstanding capital contribution, whether from Mr Sayal himself or from Ashita, his corporate vehicle.

64.  Likewise, I agree that the ‘Memorandum of Entry Recording Past Transaction of Equitable Mortgage By Deposit of Title Deeds’, which internally makes reference to the “commitment of AIL to participate in the equity of Mayar Resources (Singapore) Ptd Ltd”, in my view does little to assist the defendant’s alternative case.

65.  As Mr Jat pointed out, this Memorandum is dated 9 February 2000, very shortly after Ashita had made its application to RBI on 2 February 2000, and the terms of this Memorandum – entered into by Mayar India as opposed to MHK or MRS – plainly was not intended to reflect the participating parties in the timber trading business of MRS, whilst the reference to Ashita’s ‘commitment’ may well reflect the fact that Ashita, which apparently was able to access funds from the RBI, now was to be the intended financial conduit for Mr Sayal’s participation in the MRS business.

66.  For his part Mr Sud was, I think unsure why this particular document had been drawn in quite this manner, or even whom had drawn it, but in any event in my view this is not probative of Mr Sayal’s ‘cancellation case’; as a matter of practical politics it seems to me that it scarcely mattered to Mr Sud whether the monies for Mr Sayal’s capital contribution under the PSA came from Mr Sayal personally, or from and through his company, and in fact it is common ground that the US$358,000 as indeed was received was forwarded from Ashita.

67.  In his helpful closing submissions Mr Maurellet made a good deal of the fact that Ashita, Mr Sayal’s company, apparently was to subscribe for Mayar Singapore shares in late 1999 or early 2000, and, he said, thus buttressed the case now alternatively being advanced that it was Ashita which was to step into the picture upon the alleged cancellation of the PSA: the allegation made (and which as a matter of fact I reject) was that Mr Sud had said that this was a “bad document” and should be “torn up”.

68.  On the evidence before the court, and on the intrinsic probabilities I do not think that Mr Sud said any such thing, and I so find.

69.  It is eminently clear on the facts that Mr Sayal was in financial difficulty – a situation which Mr Sud clearly never had anticipated – in raising funds for his capital contribution, and equally that such funds as in fact did materialize came from and through his company subsequent to Ashita’s RBI application, but I fail to see why this fact, and indeed the fact that Mr Sud asked Mr Sayal to pledge his title deeds to a property (which clearly he did, and which led to the Memorandum of early 2000), should suggest that the original PSA had been cancelled, notwithstanding the signal importance placed on this Memorandum by Mr Maurellet.

70.  Accordingly, I reject Mr Sayal’s case that in early 2000 the PSA was cancelled and effectively replaced by an unwritten agreement that it was Ashita which would step in and subscribe for 49% of the shareholding in Mayar Singapore with a capital contribution of US$490,000. True it is that, as a matter of record, Ashita obtained RBI approval on 19 July 2000, and on 28 July 2000 the sum of US$358,000 was transferred from Ashita to Mayar Singapore, but I decline to invest these events with the significance which Mr Sayal now wishes to accord them.

71.  Nor do I consider that the fax dated 31 July 2000 from a Michael Finucan, a nominee director of Mr Sayal, to MHK, adds to the sum of knowledge on this point. It seems to me that Mr Jat is correct in his submission that read in the context of MHK’s consent for Ashita to provide the capital contribution funds required of Mr Sayal under the PSA, the letter is consistent with that position in its reference to the US$358,000 as constituting Ashita’s subscription money towards the application of shares in MRS.

72.  There is one final point under this head which, perhaps, is relevant to mention. My attention has been drawn to the audited financial statements of MRS for the year ended 31 March 2001, which record in clear terms that the commitment to invest US$490,000 into equity of the company was made by “a prospective shareholder who is also a director of the company…the prospective shareholder has committed to invest US$490,000 as his contribution of equity into the company…” There can be no question but that this was a reference to Mr Sayal.

73.  Moreover, as Mr Jat also has emphasized, the plaintiff’s case that its US$510,000 share of capital contribution to MRS came from capitalizing shareholders’ loans made to MRS in respect of its operational expenses has not been challenged during this trial, and indeed this capitalization exercise has been recorded in the audited accounts of MRS. In fact, on the face of these accounts the amount of capital contribution by MHK was in or about US$516,500, and it is the plaintiff’s case that Mr Sayal’s breach of the PSA in failing to provide the rest of the agreed capital funding caused MHK substantial loss – which raises the issue of quantum, to which I shortly turn.

Decision on the second issue

74.  It follows from the foregoing that I hold that the PSA was not cancelled by oral agreement between Mr Sayal and Mr Sud in early 2000.

75.  The short point is that whatever may have been the alternative method employed, via Ashita’s RBI application, for obtaining the relevant funds pursuant to the requirements of the PSA, in my judgment it is clear on the probabilities that the PSA never was cancelled, in the manner as suggested by Mr Sayal, or at all, and that at all times Mr Sayal remained an operative party with consequent rights and obligations thereunder.

(c) The third issue: quantum of loss

76.  Upon this aspect Mr Jat puts his case thus. He first says that in terms of Mr Sayal’s failure to pay his agreed capital contribution under Clause III of the PSA, the relevant amount is US$622,000, this figure being the result of the subtraction of the sum actually received for and on behalf of Mr Sayal, namely US$358,000, from the sum due under this head, namely US$980,000.

77.  He then says that the plaintiff’s timber division losses, as relevant to Clause I of the PSA, and as divined from the audited accounts for the financial years respectively ending 31 March 2000 and 31 March 2001, show a total operating loss of suffered by the timber division of US$4,630,148.56; he further submitted that there was no overlap between the identified losses of MRS and those of MHK’s timber division, that the loss of MRS is directly derived from audited financial statements, and that the records of MHK’s timber division losses was produced by accountants based on information in MHK’s audited accounts. He also noted that to‑date Mr Sayal never had raised any challenge as to the accuracy of these various accounts.

78.  Thus, leading counsel argued, since under Clause 1 of the PSA Mr Sayal was liable for 49% of any losses suffered by MHK’s timber division, his contribution under this head thus amounted to US$2,268,772.79, this sum being 49% of the cumulative loss figure of US$4,630,148.56.

79.  For his part Mr Maurellet was, I think, in some difficulty when it came to quantum, because it is quite clear that this case throughout predominantly had been contested by Mr Sayal upon the primary issue of liability.

80.  However, he did make the fair forensic point, which I confess also concerned this court, that in the figures as put forward by Mr Jat there appeared to be an elision, or, at the least, the possibility of an effective elision, between the MHK Profit and Loss accounts for the financial years ending 31 March 2000/2001, and the audited financial statements for MRS for the year ended 31 March 2001 showing an accumulated loss for MRS as at that date of US$1,417,446 (the then equivalent of S$2,431,846).

81.  What has happened in this claim is that this latter figure has been added to the undisputed and audited Profit and Loss figures for the plaintiff, MHK, for the 2000/2001 financial years, thus to produce the sum of US$4,630,148.56, and I remain unsure of the precise basis for such addition.

82.  True it is that the defendant never had queried the source figures, although, as Mr Maurellet pointed out, the burden of demonstrating loss and damage at all times remained on the plaintiff; in this regard I did not consider Mr Sud’s evidence particularly illuminating – indeed, on this aspect I formed the view that (perhaps entirely understandably) he had left this aspect to his accountants, and the fact remains that no accounting evidence of any kind was called on quantum, although Mr Jat did his best to supplement the overall picture from the bar table.

83.  At the end of the day, however, I am not comfortable in proceeding on the basis of Mr Jat’s cumulative figure of US$4.63 million, and consider that the appropriate course solely is to work on the basis of the audited Profit and Loss figures for the financial years 2000/2001 which indicate clearly – and, I have no doubt, accurately – that the loss of MHK’s timber division for those 2 years was US$686,690.34 and US$2,528,012.22 respectively, thus producing a total of US$3,214,702.56.

84.  On the basis of 49% of this latter figure, therefore, the sum attributable to Mr Sayal’s share of the loss is US$1,575,204.25.

85.  To this sum is to be added the deficit in capital contribution, that is, US$622,000, which produced an overall figure of US$2,197,204.25.

86.  Accordingly, it is this latter figure which I am minded to award to the plaintiff on the basis of the obligations within the PSA. Whilst I appreciate that Mr Jat put his quantum case higher, I do not consider that in this regard the burden of proof upon the plaintiff has been satisfactorily discharged.

Decision on the third issue

87.  It follows from the foregoing, that on the available evidence I assess the quantum payable at the sum of US$2,197,204.25.

(d) The fourth issue: the discrete debt

88.  This now leaves the fourth and final issue identified for resolution in this case, namely that of the claim by the plaintiff that Mr Sayal is liable to repay the discrete sum of US$18,515, which Mr Sud says was paid by MHK to Mr Sayal at his request.

89.  I can, I think, dispense with this issue in short form.

90.  This is an claim which is strongly disputed by Mr Sayal, and is, moreover, an undocumented claim which is of some age.

91.  Mr Jat submitted that it is inherently unlikely that Mr Sud was mistaken about the true position, and that the 10 year gap between the payment and the present is largely irrelevant given that in early 2001 this sum of US$18,515 was being referred to by MRS as monies withdrawn from and owed to it by Mr Sayal.

92.  This is a relatively small amount of money, and is something to which I very much doubt a man of the considerable wealth of Mr Sud had, or has, paid a great deal of attention. Putting to one side the forensically inconvenient fact that it is MHK and not MRS which is the plaintiff in this action, after considering all the relevant evidence, I have taken the view that in this regard the plaintiff has not proved its case and discharged the burden upon it in terms of this element of the claim.

Decision on the fourth issue

93.  The plaintiff’s claim for the sum of US$18,515 is, as a consequence, dismissed.

Order

94.  It follows from the foregoing that the Order of this court in this case is as follows:

(i) There is to be judgment for the plaintiff against the defendant in the sum of US$2,197,204.25;

(ii) There is to be simple interest payable upon such principal sum for the period between the date of the writ and the date of judgment herein at the rate of 1% of US prime rate from time to time prevailing, and thereafter upon the principal sum at the judgment rate from time to time prevailing, until payment;

(iii) There is to be an order nisi as to costs, such order to become absolute unless within 28 days from the date hereof that application be made to vary the same, that the defendant do pay to the plaintiff 90% of the costs of the action herein, such costs to be taxed if not agreed.