XCHRX 上海海泰克貿易發展公司 AND ANOTHER v. CHOI SAI LEUNG

HCA 1767/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1767 OF 1999

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REASONS FOR DECISION

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1. This is an application by the plaintiffs for summary judgment against the defendant on an action on a guarantee, and a cheque for $27,998,759.20 given as additional security for sums secured by the guarantee. At the hearing of this matter I gave judgment as sought, albeit for a lesser sum, a prepayment having been conceded by the plaintiff, and now give my reasons for so doing.

2. The background to the action concerns two agreements made between the 1st plaintiff and a company called Bonnie International Trading (Shanghai) Co Ltd also known by its romanised Chinese name of Ying Huei. The 1st plaintiff is in the business of trade finance and is principally concerned with the provision of letters of credit for purchasers of goods who do not wish to, or cannot, use their own bank facilities. In his first affidavit, Mr Zhang Yuhong of the 2nd plaintiff, the agent of the 1st plaintiff in Hong Kong, sets out somewhat complicated arrangements for these transactions, but there is no suggestion that the arrangements themselves are improper or illegal. In May 1998 the 1st plaintiff and Ying Huei signed an agreement pursuant to which the former entered into two sales contracts and arranged for the issue of letters of credit in respect of the sale and purchase of a number of Toshiba cathode ray tubes. As a result of this transaction Ying Huei became indebted to the 1st plaintiff in the sum of US$2,832,512.00 which was not paid. In the course of negotiations as to how the debt was to be paid, the plaintiffs' representatives met the defendant, the circumstances of which I will look at again shortly, and the defendant signed the guarantee the subject of these proceedings on 30 September 1998, the consideration for which is stated therein as inter alia the 1st plaintiff allowing Ying Huei until 11 October 1998 to pay the debt.

3. Ying Huei did not pay the debt by 11 October 1998, and on 28 December 1998 the 2nd plaintiff presented the cheque received from the defendant, which had been postdated to 30 November 1998, but this was returned with a notification that it had been countermanded. These proceedings were commenced on 30 January 1999.

4. The defendant puts forward two defences to the claim: the first is that the agreement between the 1st plaintiff and Ying Huei is void and unenforceable for illegality, and consequently the guarantee and the cheque are similarly unenforceable; the second is that he was induced to sign the guarantee and provide the cheque by misrepresentation and the plaintiffs are estopped from enforcing them.

Illegality

5. The basis of the defendant's claim as to illegality is that the agreement between the 1st plaintiff and Ying Huei was not a mere trade finance agreement, but an agreement to co-operate in an export, or re-export, scheme for the purpose of smuggling goods into the PRC from Hong Kong. The defendant makes this allegation in his first affidavit and says that his information came from a Mr Yeung Yip, a director of Ying Huei, the defendant denying any relationship with Ying Huei himself. No further details are given by him as to how, when or by whom the smuggling was to take place. The evidence as to the alleged illegality is supported by a further affidavit by a Mr Chan Kin, which I gave the defendant leave to rely on at the commencement of this hearing, despite the fact that it had only been sworn on 11 July this year. He describes himself as a "substantial shareholder" of National Privilege Investments Ltd, which holds 450,000 of the 1,000,000 shares in Bonnie International Development Ltd, a Hong Kong company which in turn owns the entire equity on Bonnie International Trading (Shanghai) Co Ltd (Ying Huei). He does not say whether he takes any part in the management or affairs of Ying Huei, except that he says that he worked with Mr Yeung Yip in relation to the agreement, and a Mr Mao Leung the deputy general manager of Ying Huei and repeats what he says he has been told by them. He claims no personal knowledge of the matters alleged.

6. He also alleges smuggling, but explains that he means by that making false statements in the import declarations to the China customs "regarding the quantity of the goods or the value of the goods or other matters relating to the goods". There are no particulars as to what the false declarations were, or which of the quantity, value or other matters were falsely stated, or by whom such statements were made. As these statements are said to have been made in declarations, one might expect copies to have been retained by Ying Huei, or those with whom they are said to co-operate, yet no documentary evidence of such false statements has been produced.

7. In short this is nothing more than a vague allegation unsupported by any particulars. In an application under Order 14 the defendant is under an obligation to condescend upon particulars in respect of any defence put forward. If fraud or illegality is alleged, the onus is even greater to give as precise particulars as possible as to what is alleged. Here, not only are there no particulars at all, the evidence, such as it is, is entirely hearsay, with no-one with any direct knowledge of events giving any evidence on oath, and no explanation as to why this is so, or why no better particulars are forthcoming. This does not even get to the level of a bare allegation, it is little more than a suspicion, and as such, cannot be the basis for any arguable defence.

Misrepresentation and estoppel

8. The plaintiff's representatives have given a full description in their affidavits as to how they became acquainted with the defendant, Mr Zhang saying that he was approached by the defendant, saying he was a friend of Mr Yeung Yip of Ying Huei, and the circumstances of the signing of the guarantee. The defendant denies this and says that he was requested to attend a meeting with Mr Zhang and a Mr Li Jian of the 1st plaintiff. He says that he has no connection at all with Ying Huei. He goes on to say that he was told at the meeting that the 1st plaintiff would take no legal proceedings against Ying Huei if they could get a guarantee from someone like him "solely for "record" purposes", and said that they represented to him that this meant they would not in any event enforce it against him. He says that it was only on reliance on this representation that he signed the guarantee and provided the cheque.

9. I find this explanation totally inexplicable and lacking in any credibility. If the defendant has no connection with Ying Huei, he offers no explanation as to why he should sign such a guarantee or provide a cheque. He does not dispute the plaintiffs' witnesses statements that they did not know him prior to this. He does not explain what he understood them to mean by "record" purposes; record for whom? On his account he apparently signed a carefully drafted and detailed guarantee for complete strangers, to allow a company, with which he had no connection, time to pay a debt, for which he had no liability. To accept this, I would need a far better explanation for his conduct.

10. It is unlikely in any event that he had no connection at all with Ying Huei, as the first cheque he provided to the plaintiffs was one payable to him by Bonnie International Development Ltd, Ying Huei's parent company. I also find it unbelievable that he did not think he was liable under the guarantee or the cheque, as, upon the plaintiffs realising that the cheque was not from him, insisted through their solicitors for a personal cheque from him against the threat of legal proceedings, which he provided. This is not the behaviour of a man who believes that he has signed a guarantee and provided a cheque as a formality only, with no prospect of their enforcement.

11. I am accordingly satisfied that this too is no more than a bare allegation, unsupported by believable particulars, and does not provide the defendant with any arguable defence.

Conclusion

12. I accordingly find that the defendant has put forward no arguable defendant, or any capable of belief, and the plaintiffs are entitled to their judgment. This was for a sum of US$2,832,512.00 or its Hong Kong dollar equivalent at the time of payment, with interest thereon at 14% over the HSBC prime rate from 9 December 1998 to date hereof. The plaintiffs are, of course, entitled to judgment rate thereafter. I also ordered that the defendant pay the plaintiffs' costs to be taxed of this application and the action.