HI-WATT INTERNATIONAL ENTERPRISES LTD. v. MULTI-LUCK DEVELOPMENT LTD. AND ANOTHER

HCA 4305/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4305 OF 2001

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J U D G M E N T

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1. The Plaintiff and the 1st Defendant are companies registered in Hong Kong. The 2nd Defendant is a director of the 1st Defendant.

2. The Plaintiff and the 1st Defendant have a history of business association and co-operation.

3. The Plaintiff's claim against the 1st Defendant is based upon an account stated in an agreement dated 3 April 1996 ("the Acknowledgement Agreement") and a letter from the 1st Defendant to the Plaintiff dated 19 May 2001 ("the Acknowledgement Letter"), both of which were executed by the 2nd Defendant.

4. It is not disputed that the Plaintiff and the 1st Defendant had inter-mingled business transactions and a shared management team over several years up to about 1995 to 1996. The Plaintiff had the use, inter alia, of the 1st Defendant's banking facilities.

5. It is the Plaintiff's case that in 1996 the financial affairs of the two companies were separated and to achieve that purpose their credits and liabilities to each other were calculated to leave a net sum of HK$1,256,603.59 due from the 1st Defendant to the Plaintiff. That is the amount set out in the Acknowledgement Agreement and the Acknowledgement Letter.

6. It is the case of the 1st and 2nd Defendants that inter alia :

(a) they had no prior knowledge or sight of the accounts and calculations from which the figure of HK$1,256,603.59 was reached and such figure was only conditionally or tentatively accepted subject to a full accounting, as evidenced by the 2nd Defendant's request that the words "on the face of the account" be added to the Acknowledgement Agreement;

(b) the Plaintiff misrepresented to them the actual indebtedness of the 1st Defendant and further included for the purposes of calculation sums representing interest to which the Plaintiff was not entitled.

7. The 1st Defendant further says that the 2nd Defendant had no authority to execute the Acknowledgement Agreement or the Acknowledgement Letter on behalf of the 1st Defendant.

8. The matter came before the Master for summary judgment under Order 14. An order for Judgment in favour of the Plaintiff was entered. The 1st Defendant now appeals against that Order.

9. At the hearing before me the 1st Defendant was given leave to file an affirmation by the 2nd Defendant. This affirmation, which was not before the Master, sets out in some detail the history of the relationship between the Plaintiff and the 1st Defendant.

10. Most of the sum of HK$1,256,603.59, the subject of the Judgment, is attributable to interest charged by the Plaintiff upon amounts that it says are due to it by the 1st Defendant. It is the case of the 1st and 2nd Defendants that:

(i) there was no agreement between the parties entitling the Plaintiff to interest; and

(ii) the interest is calculated in respect of an amount that was in fact not a liability of the 1st Defendant.

11. Considerable time was spent in argument trying to establish the accuracy of the amounts of indebtedness of the 1st Defendant to the Plaintiff. The issue is a matter of conflict between the parties and is not capable of resolution on affidavit evidence. Of more fundamental importance is the question of the validity of the alleged indebtedness and whether there was any right or agreement to charge interest.

12. These are issues that go to the root of the dispute and I am unable to say on the basis of the affidavit evidence either that the Plaintiff has established a clear case on the same or that the 1st Defendant's case is not credible. These fundamental matters require resolution to properly found any judgment in the Plaintiff's favour. In my view I am not satisfied that there is sufficient evidence to found them for the purposes of summary judgment.

13. The appeal is therefore allowed and the Order of Master Shum of 5 November 2002 is hereby set aside. The 1st Defendant shall have leave to defend.

14. I make an Order nisi of costs to the 1st Defendant against the Plaintiff of this application and of the hearing before the Master.