AOF IMAGING TECHNOLOGY LTD v. GLOBAL INDUSTRIAL SERVICES (HK) LTD AND ANOTHER

HCA 953/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 953 OF 2012

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D E C I S I O N

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1.  It is clear that striking out is only for plain and obvious cases. There should be no trial upon affidavit. Disputed facts are to be taken in favor of the party sought to be struck out. The claim must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out. Where the legal viability of a cause of action is sensitive to the facts, an order to strike out should not be made. In a case where it is sought to be argued that there is no reasonable cause of action disclosed, Order 19 rule (2) expressly provides that no evidence shall be admissible.

2.  In this case, the plaintiff’s pleaded cause of action against the 2^nd defendant is based on an alleged personal assurance or guarantee that the outstanding price for goods ordered by the 1^st defendant from the plaintiff would be paid.  The plaintiff relies on 2 emails said to constitute the 2^nd defendant’s alleged guarantee.

3.  The 2^nd defendant seeks to strike out the plaintiff’s claim under Order 18 rule 19(1)(a), (b) and (d), on the basis that:

(1)   no claim of guarantee is pleaded;

(2)   on construction of the 2 emails relied upon by the plaintiff, the claim that the 2^nd defendant would be personally liable cannot be established;

(3)   the alleged guarantee or assurance is vague, and there is no evidence of any intention to create legal obligations between the plaintiff and the 2^nd defendant personally ;

(4)   the alleged guarantee is unsupported by consideration; and

(5)   the alleged guarantee cannot be enforced as it fails to meet the conditions set out in section 13 of LARCO.

4.  The 2^nd defendant also seeks summary determination under Order 14A of points of law as to the 2^nd defendant’s liability under the alleged guarantee or assurance.

5.  First, I consider that the plaintiff has sufficiently pleaded the material facts on which it relies to support its claim, as required under Order 18 rule 7.  It is clear from paragraph 21A of the Amended Statement of Claim that the plaintiff relies on the fact of the 2^nd defendant having given his “personal assurance” in his email of 1 November 2010 to the plaintiff that the outstanding balance under the 2^nd Replacement Purchase Order referred to in paragraph 16 of the Amended Statement of Claim would be paid.  The legal effect of the alleged personal assurance need not be pleaded. The plaintiff goes on to claim in paragraph 34 of the Amended Statement of Claim that, in breach of his alleged personal assurance, the 2^nd defendant failed to pay, and/or procure the 1^st defendant to pay the sums due. 

6.  The construction of the emails has to be made in the context of the factual matrix surrounding the email exchange.  Even if the court should review the emails at this stage, the nature of the alleged personal assurance given, and whether the parties can be said to have intended the emails to create legal relations between the plaintiff and the 2^nd defendant personally, are matters which call for cross-examination of the relevant parties. 

7.  On the face of the pleadings alone, it cannot be said that it is plain and obvious that there is no pleaded cause of action against the 2^nd defendant. Whether the plaintiff will eventually succeed on its claim as pleaded, will be determined at trial.

8.  As to whether the alleged guarantee is supported by consideration, it is clear from paragraph 21 of the Amended Statement of Claim that the plaintiff’s claim is that there was a breach of the so-called Agreed Arrangement made between the plaintiff and the 1^st defendant on 29 October 2010 for payment and shipment, in that the latter failed to set up the Lockbox Arrangement referred to in paragraph 19 (c) of the Amended Statement of Claim. It is clear from the pleading in paragraph 22 of the Amended Statement of Claim that it was in consideration of the 2^nd defendant’s personal assurance of payment that the plaintiff made the shipment on 3 November 2010, despite the 1^st defendant’s breach of the Agreed Arrangement.  I do not agree that there is no arguable cause of action on the alleged guarantee, for lack of consideration.  Whether or not there was in fact a breach of the Agreed Arrangement, which is a disputed fact between the parties, and whether this was known to the Plaintiff at the time of the shipment on 1 November 2010, will have to be resolved at trial, and not at this stage.  For striking out purposes, it will have to be taken in favour of the plaintiff.  As Counsel for the plaintiff has highlighted, the breach of the Lockbox Arrangement is actually admitted in the Defence filed.

9.  Nor do I consider that the plaintiff’s cause of action is impossible to succeed, by virtue only of the provisions of section 13 of LARCO.  Counsel for the plaintiff relies on the decision in Global Breach Assets Limited v Sun Hung Kai Securities Limited [2009] 3 HKC 445.

10.  The questions of law sought to be summarily determined by the 2^nd defendant, relating to the construction, enforceability and legal effect of the oral personal assurance made by the 2^nd defendant are interwoven with the disputed allegations of fact forming the factual matrix of the dispute, and in my judgment, the Order 14A procedure is clearly not appropriate.

11.  For the above reasons, and it bearing in mind the legal principles applicable to a striking out application, I dismiss the 2^nd defendant’s appeal on his failed application for striking out and summary determination before the Master, and order that the 2^nd defendant is to pay to the plaintiff the costs of the appeal, with certificate for counsel.