XCHRX CHINA EVERBRIGHT FINANCE LTD. AND ANOTHER v. FOREVER LTD. AND ANOTHER

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS.18676 AND 18677 OF 1999

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HCA18676/1999

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J U D G M E N T

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1. The two actions are identical in nature, involving two different 1st defendants' limited companies. The 2nd defendant in both actions applied before Master Poon below to strike out the Statement of Claim against him. Master Poon dismissed the application and hence this appeal.

2. The 2nd defendant acted as agent for the two 1st defendants, both being BVI companies. The 1st defendant dealt with the 1st plaintiff and its associated company, China Everbright Securities (HK) Limited ("CES"). These dealings included the opening of a margin loan agreement with the 1st plaintiff.

3. The cause of action against the 2nd defendant is on the ground of breach of warranties of authorities. These warranties are summarized as follows :-

1. First Warranty. The plaintiffs alleged that the 2nd defendant warranted that he had the authority to enter into the contract for and on behalf of the 1st defendant on the expressed terms as pleaded. The 2nd defendant, in his defence, contended that he only delivered the papers to the plaintiffs which should not be regarded as "entering into" any contract on behalf of the 1st defendants.

2. Second Warranty. The plaintiffs alleged that the 2nd defendant had authority to present the documents referred to in paragraph 2 of the Statement of Claim to the 1st plaintiff for and on behalf of the 1st defendants. This is the only warranty that the 2nd defendant admitted in his defence.

However, the 1st plaintiff, in his alternative claim, alleged that the 2nd defendant in fact did not have such authority and he was therefore in breach of this second warranty.

3. Third Warranty. The 1st plaintiff alleged that the 2nd defendant and one Janet Lau had authority to place order with CES for and on behalf of the 1st defendants. The 2nd defendant, in his defence, denies that he had made any such representation or warranty of authority to the 1st plaintiff regarding his own authority to place order. Further, he denies that there was any warranty of authority at all in respect of Janet Lau in placing orders.

4. The 2nd defendant, in the present appeal, conceded to assume that the first element in respect of a claim for breach of warranty of authority, i.e. whether there was any warranty of authority, should be resolved in the plaintiffs' favour. He is only concerned with whether there was any breach of such warranty, i.e. the second element.

5. Mr Lam, counsel for the 2nd defendant, submitted that there was no solid basis of foundation capable of proof that the 2nd defendant did commit a breach of such warranty. However, Mr Wong, counsel for the plaintiff, pointed out that the entire affirmation of the 2nd defendant only deposed that he was duly authorised by the 1st defendants to do the following two acts, namely :-

(a) to place orders with CES on the 1st defendants' behalf; and

(b) to deliver account opening documents to the 1st plaintiff and CES for the 1st defendants.

6. Apart from the aforesaid two items, the 2nd defendant did not assert that he had actually be authorised by the 1st defendants to do the matters pleaded in paragraph 5 of the Statement of Claim. I agree with counsel for the plaintiffs that it is plain that there is a real issue to be tried as to whether or not the 2nd defendant in fact had the authority, which he warranted he had (i.e. the second element). With the concession in respect of making of the warranties (i.e. the first element), one cannot see how the 2nd defendant can argue that there is no "solid basis of foundation" for the plaintiffs' alternative claim, i.e. against the 2nd defendant for breach of warranties of authorities.

7. It is only in plain and obvious case that the Statement of Claim should be summarily struck out under Order 18, rule 19. Having read the Statement of Claim, the 2nd defendant's defence and affirmation, I cannot come to the conclusion that all the issues involved are unarguable against the plaintiffs and that, on the trial of the action, the 1st plaintiff is bound to fail on those issues against the 2nd defendant.

8. For the aforesaid reasons, this appeal of the 2nd defendant must be dismissed with costs to the plaintiffs.