XCHRX KADESY DEVELOPMENT LTD. AND OTHERS v. CHINA HARVEST PROPERTIES LTD. AND ANOTHER

HCA 6123/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 6123 OF 2000

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REASONS FOR DECISION

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Introduction

1. This is the appeal of the 1st- and 2nd-named 2nd Defendants (collectively "the 2nd Defendants" and respectively " the 1st D2" and "the 2nd D2") against the decision of the Master given on 20 October 2000 whereby she entered summary judgment against the 2nd Defendants for part of the Plaintiffs' claim. The issues raised in this appeal are related to the 2nd Defendants' liability and no issue is raised as regards quantum save as to the rate of interest.

2. At the end of the hearing on 28 December 2000 I dismissed the appeal (with the rate of interest varied) with costs to the Plaintiffs indicating that reasons would be given later. These are the reasons.

3. By way of background, I shall mention that summary judgment was also entered against D1 whereas the 3rd-named D2 was given unconditional leave to defend.

4. The Plaintiffs are the registered owners of certain commercial premises ("the suit property"). The suit property was let to D1 for office use for commercial purposes. It is the Defendants' case that the suit property was sub-let to the solicitors firm Messrs Livasiri & Co. ("the firm"). For present purposes, whether this is in fact the case is immaterial. Further, it is undisputed that up to and including 15 September 1999 (the date when the firm paid the second instalment payment referred to below) the firm was a partnership the membership of which included at least the 2nd Defendants.

5. The Statement of Claim pleads that D1 defaulted in paying rent, management fee and rates since 1 July 1998. The Plaintiffs' case against the 2nd Defendants is set out in paragraphs 11, 12 and 14 of the Statement of Claim which read:-

"In requesting the Plaintiffs to accept payment of the said sum by instalments and to forbear from taking any action against [D1], on 20 August 1999, the 2nd Defendants promised and agreed in writing to

(i) pay the sum of $1,446,988.76 (being the balance of the said sum of $1,976,670.00 less a sum of $529,681.24 being a sum of money payable by the Plaintiffs' associated companies to the 2nd Defendants, the transaction of which does not concern the action herein) by 12 equal consecutive monthly instalments in the sum of $120,582.40 per instalment, the first of which was payable in September 1999; and

(ii) pay the rent, management fee and rates under the Tenancy Agreement from August 1999 punctually as and when the same fell due.

12. The 2nd Defendants' proposal as evidenced in a letter from the 2nd Defendants to the Plaintiffs' agent China Merchants Properties Holdings Company Limited dated 20 August 1999 was accepted by the Plaintiffs ("the Settlement Agreement").

14. In breach of the Settlement Agreement, the 2nd Defendants failed and/or refused to pay the third and subsequent instalments. Up to the date hereof, the 2nd Defendants have failed to pay the 3rd to 10th instalments in the total sum of $964,659.20. The said sum is still due and owing. The 11th and 12th instalments will be due and payable in July and August 2000 respectively."

The Issues in this Appeal

6. In their defence filed on 17 July 2000, the 2nd Defendants avered that:-

(1) the alleged agreement between them and the Plaintiffs is denied;

(2) if there was such an agreement, it is denied that it was binding on, or enforceable against, the 2nd Defendants by reason of lack of consideration.

7. In this appeal, Mr Wong for the 2nd Defendants raised the following issues:-

(a) there was no due verification by the Plaintiffs of the alleged agreement;

(b) the letter of 20 August 1999 from Messrs Livasiri & Co. was only an offer and there was no acceptance of this offer;

(c) the 2nd Defendants only acted as D1's agent and thus even if there was an agreement it was only binding on D1.

No argument was raised at the appeal hearing regarding the alleged lack of consideration for the alleged agreement and this is not considered in this Decision.

8. Mr Wong also argued that the Plaintiffs have put forward 3 inconsistent cases regarding the alleged agreement:

(1) the Plaintiffs' first case was that the alleged agreement was made on 20 August 1999;

(2) the Plaintiffs' second case was that the alleged agreement was made after 20 August 1999;

(3) the Plaintiffs' third case was that the alleged agreement was made before 20 August 1999.

I shall deal with each issue in turn.

The Relevant Contemporaneous Documents

9. Before doing so, the relevant history leading to the letter dated 20 August 1999 should be set out.

10. As stated in paragraph 9 of the 2nd Defendants' skeleton arguments, as at 31 July 1999, the outstanding arrears of rent, management fee and rates amounted to $1,976,670.00. By a letter dated 19 July 1999, the Plaintiffs' alleged agent wrote to the firm proposing to the firm to reduce this amount by the amount of legal fees payable by it for legal services rendered to members of the China Merchants Group (that is the balance of $1,446,988.76). Further, that letter purported to refer to the firm's proposal to repay that sum by instalments and the Plaintiffs agreed to that proposal. The letter put forward the arrangement that the sum was to be repaid by 5 monthly instalments and the firm was to pay $147,436 as monthly rental and management fee as well.

11. The letter dated 20 August 1999 was written in Chinese and bears the letterhead of the firm. The certified English translation of the relevant part of that letter reads:

"In respect of the proposed payment of the rental difference of [the suit premises], we propose to make the following arrangement according to our actual situation:

1. Commencing August 1999 we shall make punctual payment of the monthly rental, management fees and rates.

2. The rental difference of July 1998 to July 1999 in the total sum of $1,446,988.76, we shall pay by 12 instalments, i.e. HK$120,582.40 every month. Such payment shall be payable by instalments from September 1999.

...

Yours sincerely,

[Signed by the 1st named D2]

Livasiri & Co.

20 August 1999"

12. The following points are to be noted:

(a) the letter bears the firm's letterhead;

(b) it is undisputed that the letter was signed by the 1st D2;

(c) the letter was signed in the firm's name;

(d) there is no indication that the firm or the 1st D2 signed the letter as agent. On the contrary, the word "we" was used in relation to the proposal to pay the amount in arrears and the amount to be due in future.

13. Subsequent to the letter dated 20 August 1999, the Plaintiffs issued 2 debit notes to the firm respectively on 10 September 1999 and 27 September 1999. Both debit notes were in the sum of $120,582.40 being the first 2 of the 12 instalments referred to in paragraph numbered 2 of the 20 August 1999 letter. The earlier debit note was paid for by D1's cheque dated 15 September 1999 whereas the later debit note was paid for by a cheque dated 15 October 1999 drawn on the office account of the firm.

The Plaintiffs' Case against the 2nd Defendants

14. Mr Wong's so-called Plaintiffs' first case is to be found in a letter dated 17 May 2000 from the Plaintiffs' solicitors to D1 and the firm. Sub-paragraph (4) of the second paragraph of this letter reads:

"On 20 August 1999, an agreement was reached whereby Messrs Livasiri & Co. agreed to pay the outstanding indebtedness by 12 consecutive monthly instalments of $120,582.40 each, the first of such instalment payment to be made in September 1999. Messrs Livasiri & Co. further agreed that as from August 1999, they shall promptly pay all rent, rates and management fee payable under the Lease."

15. The so-called Plaintiffs' second case, that is, the alleged agreement was made after 20 August 1999, can be found in paragraphs 11, 12 and 14 of the Statement of Claim (set out above).

16. The so-called Plaintiffs' third case, that is, the alleged agreement was made before 20 August 1999, is set out in paragraph 7 of the affirmation of Lee Kin Tat dated 28 July 2000 which reads:

"By an agreement .... made between the Plaintiffs and the 2nd Defendants, it was agreed that the 2nd Defendants would pay the balance of the said arrears .... after set off of a sum ... being money payable by the Plaintiffs' associated companies to the 2nd Defendants, by 12 equal monthly instalments ... the ... Agreement is evidenced by a letter from the 2nd Defendants to China Merchants Properties Holdings dated 20 August 1999."

17. These statements were reinforced by paragraph 19 of the 2nd affirmation of Lee Kin Tat dated 19 September 2000; the relevant part reads:

"The [20 August 1999] letter is a document evidencing the Settlement Agreement (as defined in paragraph 7 of my first Affirmation) made orally between the Plaintiffs and the Defendants in August 1999 between Mrs Ankana Livasiri and two representatives of the Plaintiffs ... in fact, Livasiri & Co. did comply with the settlement agreement by paying the first two instalments (see exhibit LKT5 to my 1st affirmation)."

18. The fact that different cases had been advanced is relevant to at least 2 matters in the context of an Order 14 application:

(a) this may show that the issues or questions in dispute are not straight forward and therefore ought to be dealt with at the time of trial;

(b) this may affect the credibility of the evidence put forward by the Plaintiffs.

However, whether or not this is so depends on the circumstances of the case.

In the circumstances of this case, neither:

(a) the letter from the Plaintiffs' solicitors dated 17 May 2000; nor

(b) the Plaintiffs' so-called third case that the agreement was reached before 20 August 1999,

should affect the outcome of this appeal.

This is because the contemporaneous documents in this action are crucial to the determination of this aspect of the appeal:

(1) neither party has alleged that the contemporaneous documents were either fabricated or inaccurate;

(2) the 2nd Defendants were practising solicitors and should have the necessary knowledge, ability and articulation to state their position accurately in writing;

(3) the contemporaneous documents themselves were clearly worded and (on their face) self-explanatory;

(4) judging from the number of contemporaneous documents produced for the purpose of this appeal, both parties must have chosen to record all the important matters in writing at the material time.

Was the Offer of 20 August 1999 Accepted by the Plaintiffs?

19. Mr Wong also argued that there is a triable issue as to whether or not the offer contained in the 2nd Defendants' letter of 20 August 1999 had been accepted by the Plaintiffs. His argument over this point can be summarised as follows.

20. The letter of 20 August 1999 made an offer as regards 2 matters:

(1) payment of the rent, management fee and rates payable from August 1999 onwards;

(2) payment by instalments of the sums in arrears for July 1998 to July 1999.

21. It is undisputed that in order for there to be a binding contract, there must be an unconditional acceptance of the offer. Mr Wong accepts that the 2 debit notes from the Plaintiffs to the firm regarding the 2 instalments amounted to an acceptance of the second matter proposed in the 20 August 1999 letter. He argued, however, that there was no acceptance of the first matter proposed in that letter. He further argued that not only was there no acceptance of the first matter, by issuing debit notes demanding for rent from D1, the Plaintiffs have evinced an intention not to accept the offer regarding the first matter because this act was inconsistent with this part of the 2nd Defendants' offer.

22. However, in order for the 2nd Defendants to be able to validly argue that the Plaintiffs have acted in a manner inconsistent with the first matter proposed in the 20 August 1999 letter, the 2nd Defendants would have to show that there is a triable issue as to the following matter: namely, the 2nd Defendants' proposal was that as from 20 August 1999, liability to make payment for both the amount in arrears as well as the amounts which would fall due since August 1999 only lied with the firm to the exclusion of D1. Looking at the totality of the evidence before me, I do not find that this is a matter which ought to be tried. Rather, I conclude from the evidence that the offer of 20 August 1999 (which was accepted by the Plaintiffs) was that the firm was willing to make the payment referred to in that letter, in addition to D1's liability to do so.

23. The Plaintiffs' evidence was that the Plaintiffs issued debit notes for the amounts payable after August 1999 to D1 because D1 was still the tenant of the suit property pursuant to the tenancy agreement: see paragraph 20 the second affirmation of Lee Kin Tat. I find this to be truthful and believable. Nothing in the evidence shows that there is any triable issue regarding this point.

24. I also conclude that there is no triable issue that the offer contained in the 20 August 1999 letter from the firm was not unconditionally accepted by the Plaintiffs. The evidence adduced in this appeal shows that the Plaintiffs must have done so.

Whether the 2nd Defendants acted as Agents?

25. The 2nd Defendants also argued that whether or not the offer contained in the letter dated 20 August 1999 resulted in a binding contract, it was made by them as agents for D1: see in particular paragraphs 8 to 12 of the affirmation of Ankana Livasiri dated 22 December 2000.

26. With the terms of the contemporaneous documents in mind (in particular, the terms of the letter of 20 August 1999), I conclude that this argument should fail. In so far as the said paragraphs of the affirmation of Ms Livasiri should contradict with the terms of the relevant contemporaneous documents, I am afraid I have to find that her statements in the affirmation are unbelievable.

27. Ms Livasiri also deposed at paragraph 11 of her affirmation that she did not have any authority to bind the 2nd named D2. The question of the power of a partner to bind the firm and/or the other partners of the firm has been clearly stated in the provisions of the Partnership Ordinance, Cap. 38: see in particular sections 7, 8 and 11 thereof. In so far as paragraph 11 of Ms Livasiri's affirmation puts forward a statement of law, I find that it is incorrect. In so far as that paragraph puts forward a statement of fact, I find it to be unbelievable.

28. For the above reasons, I find that there is no triable issue as to the 2nd Defendants' argument that the offer (which I found to have been accepted) was not made by the 2nd Defendants as principals.

Other matters

29. Paragraph 14 of the 2nd Defendants' skeleton submissions stated "there is no due verification by the 2nd Defendants". Mr Wong clarified at the hearing that "the 2nd Defendants" should read "the Plaintiffs". This argument is related to paragraph 4 of the affirmation of Lee Kin Tat which reads:

"I have read the statement of claim filed herein on 17 June 2000 and I hereby confirm the veracity of the matters pleaded therein."

The 2nd Defendants' argument over this point is that this statement does not comply with Order 14 Rule 2 which states "an application .... must be made by summons supported by an affidavit verifying the facts on which the claim ... to which the application relates is based". While paragraph 4 of Lee's affirmation may not be the best example of a verifying affidavit for the purpose of an Order 14 application, I do not find that there is any substance in this argument and only mention it in order to dispose of it.

Conclusion

30. For the above reasons, I do not find that there are any matters which ought to be left to trial or that there is any reason why the matter ought otherwise to be tried.

31. The parties agreed at the end of the hearing that the rate of interest set out in the Master's order should be varied such that the rate of interest should be at judgment rate. Subject to that variation, the appeal is dismissed.