JET WIN ELECTRICAL CO LTD v. WAH HIP (E&M) ENGINEERING CO LTD AND OTHERS

HCA 5102/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5102 OF 2001

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REASONS FOR JUDGMENT

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1. On 22 July 2004, after Mr William G. Allan, counsel for the plaintiff, had concluded his submissions, I said that the plaintiff's action against the 2nd - 4th defendants was a frivolous action which should never have been initiated or pursued. After hearing the parties on costs, I ordered that the plaintiff's action against the 2nd, 3rd and 4th defendants be dismissed with costs of the action of the 2nd, 3rd and 4th defendants to be taxed on indemnity basis and paid by the plaintiff to the 2nd, 3rd and 4th defendants. I told the parties that my reasons would be handed down on 5 August 2004. Here they are.

The parties

2. The plaintiff is a limited company registered under the Companies Ordinance, Cap. 32, on 7 February 1992. It supplied and sold electrical appliances and goods.

3. The 1st defendant is a limited company registered under the Companies Ordinance. Its date of incorporation, as pleaded by the plaintiff and admitted by the 2nd - 4th defendants, is 23 July 2001.

4. At the material times, the 1st defendant had 4 shareholders and 3 directors. The shareholders were Wise Tech Engineering Limited ("Wise Tech") (30%), Wellbo Engineering Limited ("Wellbo") (30%), Mr To Hip Ming (30%) and Win Tak Engineering Limited (10%). The directors were Mr To Hip Ming, Mr Kwan Chiu Hung and the 3rd defendant. Thus, neither the 2nd nor the 4th defendants was a shareholder or director of the 1st defendant, and the 3rd defendant was a director, but not a shareholder, of the 1st defendant.

5. The plaintiff's claim against the 1st defendant is for the price of electrical appliances sold and delivered from July to September 2001 totally $2,364,240.10, made up as follows:-

(a) July 2001	$918,416.90
(b) August 2001	$1,096,302.50
(c) September 2001	$349,520.70

6. On 15 January 2002, the plaintiff obtained judgment in default of notice of intention to defend against the 1st defendant.

The pleaded claim against the 2nd - 4th defendants

7. The Statement of Claim endorsed on the Writ was signed by Messrs Simon Ho & Co. Paragraph 7, as written by the pleader and exactly as it appears in the Statement of Claim, read as follows:-

"7. In or about the beginning of July 2001 but immediate before the first order was placed to the Plaintiff by the 1st Defendant, the 2nd, 3rd and 4th Defendants orally presented to the Plaintiff that they would guaranty payment of all goods ordered by the 1st Defendant from the Plaintiff and should the 1st Defendant default in payment the 2nd, 3rd and 4th Defendant would be personally liable. In order to show their sincerity, the 2nd and the 3rd Defendants gave a true copy of their Hong Kong Identity Cards to the Plaintiff for reference."

8. On 8 July 2002, the plaintiff retained Messrs Joseph P.K. Pang & Co. in place of Messrs Simon Ho & Co. as its solicitors. The Statement of Claim was amended on 13 November 2002. Paragraph 7 of the Statement of Claim was re-numbered paragraph 6 and, as amended and signed in the name of Ms Lorinda Chih Wai Lau, counsel for the plaintiff, reads as follows:-

"6.7. In or about the beginning of July 2001 but immediately before the first order was placed to with the Plaintiff by the 1st Defendant, the 2nd and the 3rd Defendants introduced to the Plaintiff the 4th Defendant and the 2nd, the 3rd and the 4th Defendants jointly and severally orally represented to the Plaintiff that they would guaranty jointly and severally guarantee payment of all goods ordered by the 1st Defendant from the Plaintiff and should the 1st Defendant default in payment the 2nd, the 3rd and the 4th Defendants would jointly and severally be personally liable to pay the Plaintiff of the same. In order to show their sincerity and intention to create a guarantee of payment for the 1st Defendant for goods ordered from the Plaintiff, the 2nd, the 3rd and the 3rd 4th Defendants gave a true copy of their Hong Kong Identity Cards to the Plaintiff for reference as evidence of such guarantee (the Guarantee)."

9. Ms Lau succeed to some extent in improving on the original sloppy pleading. Be that as it may, what Ms Lau pleaded in paragraph 6 of the amended pleading was a representation, not a guarantee. She pleaded that the 2nd - 4th defendants represented that they would guarantee, not that they guaranteed payment. Calling it "the Guarantee" does not make it a guarantee. There is no allegation of any misrepresentation. The Amended Statement of Claim discloses no cause of action in misrepresentation and no cause of action in guarantee. At the trial, the plaintiff was represented by Mr Allan and Ms Lydia Lee-Ko Sun on the instructions of Messrs Huen & Partners who took over the case from Messrs Joseph P.K. Pang & Co. on 24 May 2004 as solicitors for the plaintiff. Neither Mr Allan nor Ms Sun applied for leave to amend the pleading.

10. I shall nevertheless continue to consider the claim on the footing that an oral guarantee has been alleged.

11. Paragraph 6 of the Amended Statement of Claim is noteworthy for the following reasons:-

(a) The oral guarantee was in or about the beginning of July 2001.

(b) The 4th defendant was "introduced" to the plaintiff by the 2nd and 3rd defendants in or about the beginning of July 2001.

(c) The 2nd - 4th defendants "jointly and severally" guaranteed payment.

(d) The 2nd - 4th defendants gave the plaintiff a copy of their identity cards "to show their sincerity and intention to create a guarantee of payment" and "as evidence of such guarantee".

12. In answer to a request for particulars, the plaintiff furnished the following particulars dated 19 February 2003 signed by Ms Lau:-

"(a) the guarantee was made to Mr. Sin Cheung Shing ('Mr. Sin') at a cafe opposite to the Plaintiff's shop at Jaffe Road, Wanchai in the presence of the 2nd and 3rd Defendants. The 2nd and 3rd Defendants orally represented to Mr. Sin that they including the 4th Defendant who would also be the boss and/or officer-in-charge of the 1st Defendant and the 4th Defendant would guarantee payment of all the price of the goods ordered by the 1st Defendant from the Plaintiff and should the 1st Defendant default in payment the 2nd, the 3rd and the 4th Defendants would be personally liable to repay the Plaintiff of the same.

(b) In order to show their sincerity and intention to guarantee payment by the 1st Defendant to the Plaintiff for goods ordered, the 2nd and the 3rd Defendants gave a true copy of their Hong Kong Identity Cards to Mr. Sin on behalf of the Plaintiff as evidence and record of the said guarantee ('the Guarantee'). In or about July 2002, the required documents including copy of identity card of the 4th Defendant and a filled in customer registration form were faxed over to the Plaintiff. Mr. Sin telephoned the 1st Defendant and asked for original document instead of fax copy. Mr. Sin spoke to the 4th Defendant who also reiterated his willingness to guarantee the payment of the price of the goods and arranged the documents to be hand-delivered to the Plaintiff's shop at Wanchai."

13. Although the first sentence in (a) alleged the making of a guarantee, the plaintiff went on to allege a representation. In any event, particulars are particulars of a pleading, not amendment of a pleading.

14. It is not clear what the word "they" in (a) meant. It is said to include the 4th defendant but then "they and the 4th Defendant" "would guarantee payment".

15. On the first day of trial, Ms Sun sought and obtained my leave to amend the year in (b) from "2002" to "2001". The fax referred to was not disclosed in the plaintiff's 2 lists of documents, whether as a document in its possession, custody or control or as a document which has at any time been but is no longer in its possession, custody or control.

2nd - 4th defendants' case

16. The 2nd - 4th defendant denied having given any guarantee.

17. The 2nd defendant's case was that his copy identity card was given to the plaintiff in about June 1998 when his sole proprietorship business, Excellence Electrical and Water Engineering Company, filled in the plaintiff's Customer Registration Form.

18. The 3rd defendant's case was that his copy identity card was given to the plaintiff in about November 2000 when Very Lucky International Company Limited ("Very Lucky"), a company which he and the 4th defendant had an interest in, filled in a customer registration form and that the 4th defendant wrote the words "THIS COPY IS ONLY USED FOR THE JET WIN ELECTRICAL CO. LTD PURCHASE MATERIAL ACCOUNT ONLY" on his copy identity card.

19. The 4th defendant's case was that his copy identity card was given to the plaintiff in about February 2001 when Alpha-Tech Services & Services Company Limited ("Alpha-Tech"), a company which he and the 3rd defendant had an interest in, filled in a customer registration form and that he wrote the words "COPY ONLY FOR JET-WIN ELECTRICAL CO., LTD CREDIT ACCOUNT ONLY" on his copy identity card.

Oral evidence-in-chief

20. As much turned on the credibility and reliability of the witnesses, all the witnesses gave their evidence-in-chief orally and their witness statements did not stand as evidence-in-chief.

Plaintiff's oral evidence

21. The plaintiff called 2 witnesses, Mr Chan Hon Pan, a former foreman of the 1st defendant, and Mr Sin Cheung Shing, a director of the plaintiff. Mr Chan gave evidence first while Mr Sin remained in Court.

22. Mr Chan said that in mid-July 2001, he went with the 2nd defendant to the plaintiff's shop. It was about 11 a.m. It was the 2nd defendant's idea to go there for a chat. They and Mr Sin went to the backdoor of the shop which was at the back of the shop where there was a light well. He smoked. Mr Sin said to the 2nd defendant that the project was growing bigger and bigger. Mr Chan testified that:-

"It was such a long time ago. As far as I can remember what he was trying to say was that the money involved in the project was growing more substantial and the project was growing bigger because it was during the summer time. Well the amount was growing bigger and Mr Cheng said words to the effect that are you afraid? And he said words to the effect that if Wah Hip didn't pay up, he will."

The meeting on this occasion shall be referred to as "the light well meeting".

23. Mr Sin said that in June 2001, the 2nd and 3rd defendants came to the plaintiff's shop in Wanchai and the 3 of them went to a nearby coffee shop. The 2nd and 3rd defendants told him that they intended to set up a new company to take up a project which they were about to get and asked the plaintiff to supply goods to them on credit. Continuing his evidence, Mr Sin said that:-

"I told him that if it was a company, I must require the personal guarantee of the director, shareholder or the person-in-charge. And it was said that there would be no problem at all.

...

And they also introduced D4 K.P. to me and one other, and who was responsible for the ordering of goods. I said there would be no problem if you gave your personal guarantee. Because previously their repayment abilities had all along been very good. I have absolutely no doubt that they had the ability to pay up. And I told them that I would go back to my shop to get a form for them to fill in and I requested them to give me their ID cards. They followed me back to the shop where photocopies were made and I gave them a form"

24. Mr Sin said that the hand-written words on the 3rd defendant's copy identity card were written by the 3rd defendant. The meeting on this occasion shall be referred to as "the coffee shop meeting".

25. On the 4th defendant's copy identity card and the customer registration form of the 1st defendant, Mr Sin said that:-

"A Sometime after 11 a.m. on the 20th of July it was faxed to my company ... Then I called him up and told him that a fax would not do.

Q Who did you call?

A Ng Kwok Bun, D4, the person who filled in the form

... He said he would have it brought to me afterwards. I also added that it was our company's policy that as far as a new company was concerned there must be personal guarantee of the company's director or the person-in-charge. He said there would not be any problem.

Q. Who was he?

A. The person who filled in the form, D4. And that was said over the phone.

Q. So he was willing to be the guarantor? Did the 4th defendant agree?

A. Agree. Absolutely agree."

26. Mr Sin said that by June 2001, the 4th defendant had been known to him for at least a few months.

27. Mr Sin gave evidence more or less in line with Mr Chan's evidence on the light well meeting.

2nd - 4th defendant's evidence

28. The 2nd - 4th defendants gave evidence. The 2nd and 3rd defendants denied there was any coffee shop meeting. The 2nd defendant denied there was any light well meeting. The 4th defendant denied there was any telephone conversation on about 20 July 2001. They all denied having given any guarantee.

Assumption

29. On the question of whether an oral guarantee is enforceable, I told the parties that I intended to assume, without deciding, that an oral guarantee was enforceable. Both parties were content that I proceeded on this basis.

Oral guarantee in June 2001/coffee shop meeting

30. There is a head-on clash on whether oral guarantees had been given.

31. I started by looking around to see if there was any objective fact and contemporary document which might assist me in resolving the factual dispute.

32. On the plaintiff's case, it was the 3rd defendant who wrote words on the 3rd defendant's copy identity card. On the defendants' case, it was the 4th defendant who wrote the words on the 3rd defendant's copy identity card. If the words were in fact written by the 4th defendant, then what the plaintiff told me about the coffee shop meeting is untrue because on the plaintiff's case, the 4th defendant was not there on that occasion.

33. Mr Sin's witness statement dated 28 January 2003 was silent on words written on any copy identity card and was also silent about the light well meeting.

34. Paragraph 3 of the 3rd defendant's witness statement dated 3 March 2003 stated that the 4th defendant wrote the words on the 3rd defendant's copy identity card provided in connection with the account of Very Lucky. Paragraph 2 of the 4th defendant's witness statement dated 3 March 2003 stated that he wrote the words on his copy identity card provided in connection with the account of Alph-Tech and paragraph 5 stated that he wrote the words on the 3rd defendant's copy identity card provided in connection with the account of Very Lucky. The Plaintiff had over 1 year and 4 months to ask the 3rd and 4th defendant to provide their specimen hand-writings but had not done so.

35. I looked carefully at the hand-writings on the copy identity cards of the 3rd and 4th defendants, the hand-writings on the 1st defendant's customer registration form and the hand-writings on the customer registration form of Alpha-Tech. In the absence of any expert evidence on hand-writing to the contrary, I find as a fact that they were all written by the same person.

36. The 4th defendant testified that the 1st defendant's customer registration form was written by him. Mr Sin said at least twice in his testimony that this form was filled in by the 4th defendant. Mr Allan submitted at one stage that the form was written by the 4th defendant, at another stage that it was written by somebody else, and at yet another stage that there was no evidence on who filled in the form. I find such approach unhelpful and asked him if there was any reason why I should not find that it was written by the 4th defendant. His reply was that it was consistent with the plaintiff's case that the form was written by the 4th defendant and it was probably the 4th defendant who wrote that out.

37. The particulars filled in included the 4th defendant's name in Chinese and in English, his identity card number, his home and mobile telephone numbers and his residential address.

38. I find as a fact that the 1st defendant's registration form was written by the 4th defendant.

39. I also asked Mr Allan if there was any reason why I should not find that Alpha-Tech's customer registration (a document produced by the defendants) was written by the 4th defendant. His reply was that there was nothing to support that it was not the 4th defendant. Again, the particulars filled in included the 4th defendant's name in Chinese and in English, his identity card number, his mobile telephone number and his residential address. I find as a fact that Alpha-Tech's registration form was written by the 4th defendant.

40. It follows that I find as a fact that the words on the copy identity card of the 3rd defendant were written by the 4th defendant and that what Mr Sin told me about the coffee shop meeting is untrue. I reject the whole of his evidence on the coffee shop meeting. I categorically reject his assertion that any guarantee was given in June 2001.

Telephone conversation on 20 July 2001

41. In the particulars, the customer registration form and other documents were said to have been faxed in about July 2002, followed by a telephone conversation between Mr Sin and the 4th defendant. In paragraph 11 of his witness statement, Mr Sin said that the fax and the telephone conversation took place in about July 2002.

42. When Mr Sin gave evidence, he said he received the fax after 11 a.m. on 20 July 2001. He did not explain how he was able to volunteer a specific date. He did not have any document to refresh his memory. He claimed to have destroy the fax.

43. When asked whether the light well meeting took place before or after the 20 July 2001 fax and conversation, he said that it was before. He then changed it to after. He reiterated that it was after. He changed it back to before. He reiterated that it was before. He re-confirmed that it was before.

44. In my judgment, he told me a pack of lies and made up his story as he went along. He had no respect for truth.

45. The 1st defendant's customer registration form which he claimed to have received on 20 July 2001 had the 1st defendant's limited company registration number and its business registration number filled in. The date of incorporation of the 1st defendant is an objective fact. There was no evidence and Mr Allan was not able to explain why these numbers could have been filled in before the incorporation of the 1st defendant, which on the plaintiff's pleaded case was on 23 July 2001.

46. I reject the whole of Mr Sin's evidence on the 20 July 2001 telephone conversation. I categorically reject his assertion of any guarantee by the 4th defendant.

The light well meeting

47. I have not been able to find any reason why the 2nd defendant would wish to go with Mr Chan to the plaintiff's shop to "chit-chat". If the meeting did take place, there is no reason why Mr Sin should change his story so many times on the sequence of this meeting and the 20 July 2001 fax. There was no mention of it in Mr Sin's witness statement. I reject his explanation that he did not refer to it because he had not obtained Mr Chan's agreement to give evidence. Mr Sin's evidence on the coffee shop meeting was "uncorroborated" but that did not discourage him from including the coffee shop meeting in his witness statement.

48. On the evidence before me, there was no reason for the plaintiff to be concerned about the credit facilities to the 1st defendant. The amounts were quite modest. If there was reason for concern, then Mr Sin should and would have chased the 2nd defendant for the customer registration form and other documents. Mr Sin claimed that he was busy. That contradicts his earlier testimony that he found time to talk to the 2nd defendant because the project was growing bigger.

49. Mr Chan was no more impressive than Mr Sin as a witness of truth. I reject his testimony.

50. I reject the whole of the evidence of Mr Sin and Mr Chan on the light well meeting.

Other reasons for rejecting the plaintiff's claim

51. The allegation in paragraph 6 of the Statement of Claim is that the 2nd - 4th defendants "jointly and severally orally represented to the Plaintiff that they would jointly and severally guarantee". It takes a lot of convincing that 2 contractors would "jointly and severally" represent to an electrical appliances supplier in a coffee shop in Wanchai that they would "jointly and severally guarantee" and I am not at all convinced.

52. If, contrary to my finding above, it was the 3rd defendant who wrote on his own copy identity card, then, in my judgment, it was more probable than not that he would have written similar words on the copy identity card of the 2nd defendant. No words were written on the copy identify card of the 2nd defendant.

53. I asked to see the original copy of the identity cards of the 2nd, 3rd and 4th defendants given by them to the plaintiff.

54. The plaintiff did not produce the original copy of the 2nd defendant's identity card. I then asked to see the original copy from which the copies in the bundles were made. The explanation put forward was that the original copy found its way into my bundle. I know not why all the copy documents in my bundle were copied from other documents with the apparent exception of the identity card of the 2nd defendant.

55. The original copy of the identity card of the 3rd defendant had the upper part/half of the page torn off. Since the identity cards of the 2nd and 3rd defendants were said to have been photocopied at the plaintiff's shop on different sheets of paper and since these copies were said to be evidence of the guarantee, there was no reason why a part of the document should have been torn off. There should be an explanation but there was none.

56. The plaintiff made no attempt to comply with its discovery obligations. Despite an order for specific discovery made by Deputy Judge Poon and despite asserting that the plaintiff had had customer registration forms of Excellence Electrical and Water Engineering Company, Excellence Electrical Engineering Co. Limited, Very Lucky and Alpha-Tech and had had identity cards of "the directors and/or officers in charge and/or the boss" of these companies, the plaintiff did not produce any of these documents. The garbled explanation given by Mr Sin reads as follows:-

"4(3) The Plaintiff could not now recall if it have had at any time in its possession, custody, or power other documents mentioned in paragraph 2 of Schedule 1 of the Order.

5. Due to long lapse of time, dinger search and proper inquiries have failed to locate any documents stated in paragraph 2 of Schedule I of the Order.

6. Further, due to long lapse of time, the Plaintiff could not now recall when it parted with the documents hereinabove mentioned had have in its possession, custody or prove the documents in paragraph 2 of Schedule I of the Order.

7. For other documents stated in paragraph 2 of Schedule I of the Order that the Plaintiff could not now ascertain if the Plaintiff had have at any stage had have in its possession, custody or power, the Plaintiff could not now recall when it parted with these other documents if the Plaintiff did at some stage had have in its possession, custody or power."

57. The pleaded version was that the 4th defendant was "introduced" to the plaintiff in about the beginning of July 2001. On Mr Sin's version, the 4th defendant was known to the plaintiff for at least a few months by that time.

58. The pleaded version was that the guarantee was in about the beginning of July 2001. Mr Sin's version was that this was in June 2001.

59. The pleaded version was that a copy of the identity cards of the 2nd - 4th defendants was given "to show their sincerity and intention a guarantee of payment" and "as evidence of such guarantee". Mr Sin's version was that he requested the 2nd and 3rd defendants to give him a copy of their identity cards after they had followed him back to his shop.

60. Mr Sin claimed that the plaintiff's policy was to require the personal guarantee of "the director, shareholder or the person-in-charge". He did not explain the meaning of "person-in-charge" or how the "or" in the policy was to operate. A site foreman may be a person-in-charge. The office manager may be a person-in-charge. A night watchman may also be a person-in-charge. The 2nd and the 4th defendants were neither directors nor shareholders of the 1st defendant. The 3rd defendant was a director but not a shareholder of the 1st defendant.

61. According to an organisation chart of the 1st defendant prepared by the plaintiff:

(a) the 3rd and 4th defendant together with another person had at most an indirect 30% interest in the shares of the 1st defendant through Wise Tech; and

(b) the 2nd defendant and 4 others had at most an indirect 30% interest in the shares of the 1st defendant through Wellbo.

62. No explanation has been offered why only these 3 but not any of the others were required to give or gave personal guarantees. Perhaps the only thing in common is that each of them had previously given a copy of their identity cards to the plaintiff.

Conclusion

63. The burden was on the plaintiff to prove the 2nd - 4th defendants' oral guarantees on the balance of probabilities. The plaintiff had not begun to discharge this burden. The plaintiff's claim against the 2nd - 4th defendants failed and failed miserably and must be dismissed.