GREAT BILL LTD v. JFK HOLDING COMPANY LTD AND ANOTHER

HCA 1609/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1609 OF 2008

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J U D G M E N T

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INTRODUCTION

1.  The plaintiff (“Great Bill”) commenced this action in August 2008.  In November 2008, the writ was amended to include both defendants (respectively “JFK Holding” and “Goh”) seeking the sum of $3.4 million (alternatively, damages), interest and costs.  It is common ground Great Bill has been the alter ego of Mr Chow Kee, James (“Chow”), or a company under the control of Chow.

2.  JFK Holding and Goh deny the claim.  Further, JFK Holding counterclaims for the total sum of $4.2 million against Great Bill and Chow (and for related relief).  The counterclaim was provisionally struck out by the master at the case management conference in November 2010.

THE PLEADED CASE

3.  According to the pleadings, Chow and Goh used to be friends.  Goh owed personal loans to Great Bill.  Subsequently, it was agreed between Great Bill and Goh that Great Bill would enter into a joint venture for a chain store business in India.  Great Bill was to become a 30% shareholder of the joint venture.  The shares were priced at $6 million.  

4.  It was a condition of the joint venture agreement Goh was to produce to Great Bill the purchasing agency agreement relating to the chain store business.

5.  Because Goh failed to do so, another agreement was reached between him and Great Bill whereby Goh was to repay $6 million, and Great Bill was to withdraw from the joint venture.  An extension agreement was then reached; consequently, JFK Holding delivered post-dated cheques to Great Bill but not all of them were honoured.  Other similar agreements were also reached later.  At the end, $3.4 million remains unpaid (the subject-matter of this action).  These will collectively be called “the extension agreements” below.

6.  The defendants deny the above.  According to the pleadings, all agreements reached were between Great Bill and JFK Holding, and not between any individuals.

7.  The so-called joint venture agreement was in fact Chow’s willingness to take the risk of obtaining only an opportunity to take part in a highly profitable joint venture business at a greatly discounted price of $6 million.  In other words, the said sum was payable irrespective of whether the joint venture business should materialise.

8.  Although that agreement stipulated Chow could pay the price by instalments, Chow failed to fully pay up by the agreed deadline (1 April 2007, but ultimately postponed to 1 June 2007).  Accordingly, the sums already paid ($4.2 million) were forfeited.

9.  From about the end of June 2007 onwards, Chow threatened (and caused others to threaten) Goh to make repayment.  As a result, JFK Holding paid a total of $4.2 million ($1.6 million + $1.5 million + $850,000 + $250,000).

10.  Because the above repayments were made under duress, JFK Holding counterclaims for the return of those sums.

WITNESSES’ CREDIBILITY AND FINDINGS OF FACT

11.  The main factual disputes are:-

(a)  when the joint venture agreement was made (in about February or March 2007 according to Great Bill; in about October 2006 according to the defence);

(b) the terms of the joint venture agreement (to purchase 30% of the joint venture business according to Great Bill; to obtain an opportunity to take part in that business according to the defence);

(c)  who were the contracting parties (Great Bill on the one side and JFK Holding and Goh on the other according to Great Bill; Great Bill and JFK Holding according to the defence);

(d) who was in breach of the joint venture agreement (JFK Holding and Goh according to Great Bill; Great Bill according to the defence); and

(e) did the defendants pay the sums under duress.

12.  Chow testified for Great Bill while Goh testified for the defence.  The witness statement of a Mr Poa was included in the trial bundle but he was not called to testify.  JFK Holding did not call any witness.

13.  For the reasons set out below, I find Chow to be a truthful witness and accept his testimony.  On the contrary, I do not find Goh to be truthful and I therefore reject his testimony.

14.  Because credibility (and reliability) of the witnesses is important to the determination of this action, I should repeat the approach I adopted in earlier decisions when deciding this aspect:-

“The assessment of a witness’s credibility and/or reliability is a task frequently undertaken by the court in litigation (in fact, very often an essential task). I consider the following to be the appropriate test to adopt:-

‘There are two objective tests for assessing a witness’s credibility regarding a matter to which he has testified:-

(a) whether that part of his testimony is inherently plausible or implausible;

(b) whether that part of his testimony is, in a material way, contradicted by other evidence which is undisputed or indisputable (an example often given of such evidence is contemporaneous documents).

Further, where it is shown that a witness has been discredited over one or more matters to which he has testified (using the above tests), this fact is relevant to the assessment of his overall credibility. Likewise, regard may be had to a witness’s motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest’.

(See, for example, the decisions in Chiu Chi Tong v. Lau Chong Sai & Another, HCA 765/2002 (para. 28) and Yu Ming Investment Ltd. v. Pang Ru Chuan, Richard, HCA 814/2002 (para. 13))”

(Star Glory Investment Ltd v Kai Tuo (HK) Technology Co Ltd and Others, HCA 3523/2002 (13 August 2005), para 12).

(a)     The alleged threats/duress

15.  Several matters render inherently implausible the defence case that the sums were paid under threats/duress.

16.  First, Goh testified he never reported the alleged threats to the police.  Those threats concerned the safety not only of himself, but also that of his daughter.  His testimony to the effect they might have been dealt with by the management or staff of JFK Holding makes no sense, is vague and unsupported by independent evidence or other witness(es) (the witness statement purportedly made by Poa (a debt collector) has not been verified by Poa’s court testimony and is thus inadmissible evidence).

17.  Secondly, Goh admitted a purchase agreement was drafted on JFK Holding’s letterhead, signed by him (purportedly for JFK Holding) and sent from the e-mail account of his assistant Ms Ida Chan in October 2007 (“the Oct 2007 document”).  It is never alleged the debt collectors ever demanded for such a (or a similar) document; the threat was allegedly put forth to seek the payment of money.

18.  The Oct 2007 document records that JFK Holding will purchase 30% of the shares of the joint venture business (in return for the payment of $6 million by instalments).  It also records that, since October 2007, Great Bill will have no control over the joint venture business or any interest in its profit and loss.

19.  Further to the Oct 2007 document, the defence disclosed several documents (apparently prepared in February 2008) which appear to be JFK Holding’s internal payment vouchers (“the Feb 2008 vouchers”). The Feb 2008 vouchers record (among other things) the cheques concerned were for the “buy back of [the joint venture business’] shares”.  Similar to the Oct 2007 document, no credible explanation has been given for the Feb 2008 vouchers.

20.  Thirdly, various post-dated cheques have not been met and new ones have been given to replace them.  I agree with Great Bill that this is more consistent with the behaviour of a debtor with payment difficulties rather than a person who is compelled to pay by threats of personal safety.

(b)     Nature of the joint venture agreement

21.  I also agree with Great Bill it is inherently implausible it had effectively agreed to pay $6 million only to buy a chance to earn big profits.  Goh claims in his witness statement the joint venture business’ anticipated gross profit was US$3 million per annum (Great Bill’s 30% share would thus return a gross income of US$1 million per annum (a return on capital of more than 100% per annum)).  There is no evidence showing the reliability of this claim.

22.  On the other hand, Great Bill’s case that the price of $6 million was the consideration for the acquisition of a 30% shareholding in the joint venture business makes commercial sense and is inherently plausible.

(c)  Goh’s personal liability

23.  Chow testified to the effect Great Bill contracted with both JFK Holding and Goh.  Goh denies this and claims he always acted for JFK Holding (which he says was run by his siblings).

24.  Some of the contemporaneous documents are consistent with Great Bill’s case while others are consistent with Goh’s case.

25.  Goh relies on an e-mail sent by Chow to him on 14 June 2007.  Goh placed emphasis on how Chow addressed him:-

“Mr. Goh Ming Woei

Representative of [JFK Holding]

…

Representative of Valuegate Limited

…”

The e-mail also describes Chow as “Representative of Uniway Group Holdings Co. Ltd” (“Uniway”) and Great Bill.  It is common ground Uniway was another company controlled by Chow and Valuegate was controlled by Goh and/or his family.

26.  Goh contends the e-mail shows that Chow and Great Bill treated the joint venture agreement as having been made by JFK Holding and not him personally.

27.  On the other hand, the body of the e-mail reads:-

“[Uniway] and [the joint venture business] have mutually agreed that Uniway would withdraw from the India retail chain store market project and [Goh] has agreed to refund [$6 million] to Uniway (The said amount had been paid by Uniway to [Goh] and/or his appointed company namely [JFK Holding] for acquiring 30% of shares of [the joint venture business]) … ”

Except for a matter irrelevant to this issue, Goh has denied the above in his own e-mail dated 14 June 2007 to Chow.

28.  Thus, Chow has narrated in the passage quoted above that the $6 million was paid to Goh (or to a corporate vehicle which he appointed).  Bearing in mind the part of the e-mail relied on by Goh (see para 25 above), it is unlikely this was created by Chow for later purposes (such as for litigation purpose).

29.  Great Bill’s case in this regard is supported by another contemporaneous document: an e-mail sent by Chow on 23 June 2007 (that is, about 9 days after the 14 June e-mail).  This e-mail attached a draft agreement which states (among other things) Goh agreed to repay to Chow $6 million which Goh earlier borrowed from Chow.

30.  Finally, the Oct 2007 document (see paras 17 and 18 above) can be viewed as supportive of this part of Goh’s case.

31.  Several payments tip the balance in Great Bill’s favour in relation to credibility.  Great Bill says they were agreed to be treated as part-payments of its capital contribution to the joint venture business:-

(1) personal loans totalling $1 million advanced by Chow to Goh respectively in December 2006 and February 2007;

(2) $300,000 was paid by Great Bill in April and May 2007 on Goh’s behalf.  The sum was for Goh’s half share of working capital (the payment is supported by an accounting sheet of another joint-venture company between Chow and Goh); and

(3) $1 million was paid by one of Chow’s companies to Goh’s sister in May 2007 (the payment is supported by a bank receipt).

In his supplemental witness statement, Goh denies the above sums were loans advanced to him, or were agreed to be treated as Great Bill’s capital contribution.  But Goh failed to account for the sums referred to in para 31(2) and (3) above (see also para 10, Goh’s witness statement).

32.  That the above sums were advanced to Goh or to his benefit supports Great Bill’s case that JFK Holding was regarded by Great Bill and Goh as a mere corporate vehicle of Goh.

(c)  Findings of fact

33.  Having considered the totality of the admissible evidence, I find as facts that:-

(a)  personal loans were advanced by Great Bill to Goh prior to the parties entering into the joint venture agreement;

(b)  after Goh’s repeated invitations to do so, Great Bill finally agreed in February or March 2007 to enter into the joint venture agreement;

(c)  the essential terms of the joint venture agreement were that Great Bill would become a 30% shareholder of the joint venture business; the price payable by Great Bill was $6 million (by instalments before the joint venture business started its operation);

(d)  it was a condition of the joint venture agreement Goh has to show to Great Bill the purchasing agency agreement;

(e)  Goh failed to show the purchasing agency agreement to Great Bill;

(f)  Great Bill did not fail to make payment as agreed;

(g)  in June 2007, Great Bill and Goh (and JFK Holding) agreed that Great Bill would withdraw from the joint venture business and Goh (and JFK Holding) would refund Great Bill’s earlier payments;

(h)  the extension agreements were entered into between Great Bill on the one side and Goh and JFK Holding on the other regarding the said refund; and

(i)  despite the extension agreements, $3.4 million remains outstanding and due and owing to Great Bill.

34.  However, I accept that the debt collectors engaged by Great Bill might have exerted pressure on Goh.  But that did not amount to either threats or duress.

35.  The defence produces a Chinese document headed “退資協議書” which purports to be a settlement agreement signed by Great Bill and Goh (not JFK Holding).  I agree with Great Bill that no weight should be placed on it because:-

(1)  no original has been produced (despite being asked for specifically);

(2)  Goh said he did not sign this of his own free will; and

(3)  Chow testified he had not seen the document before this action.

CONCLUSION

36.  Judgment as prayed for in the re-amended statement of claim should be entered in Great Bill’s favour against JFK Holding and Goh.

37.  To avoid any doubt, JFK Holding’s counterclaim is formally dismissed.

OTHER MATTERS

38.  As stated above, JFK Holding did not call any witness to testify on its behalf (although parts of Goh’s testimony can be regarded as supportive of its case).

39.  In its written closing submission, JFK Holding contends that it was a family business company and used to be solely controlled by Goh.  It also claims that Goh was acting without the board’s approval, nor was anyone else of the Goh family involved in Goh’s dealings with Great Bill.

40.  I have taken the above into account and consider this not a valid cause of defence.

COSTS ORDER

41.  The parties agree costs of this action should follow the event.  There will accordingly be a costs order that the costs of this action (including any reserved costs) be paid by the defendants to Great Bill to be taxed if not agreed.